Ottawa in talks with Indigenous groups for Trans Mountain pipeline ownership

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Indigenous ownership of the Trans Mountain pipeline system is still on the table, with federal officials holding in-person talks with prospective ownership groups as recently as February, according to people involved in the discussions.

But uncertainty over how a deal would be structured – as well as the soaring costs – has resulted in fatigue, with some First Nations essentially dropping out of a process they see as stalled.

“The Indigenous communities at this point have basically gone tone deaf, because it’s gone nowhere,” said Paul Poscente, chief executive officer of Axxcelus Capital Advisory, a Calgary-based company that has advised First Nations on potential ownership stakes in the pipeline.

“There’s never been a concrete proposal put in front of the Indigenous communities by the government that owns the asset. And that’s obviously a necessary first step.”

The Trans Mountain pipeline system, in operation since the 1950s, ships oil products from near Edmonton to the B.C. coast. The Trans Mountain expansion project, TMX, is a new pipeline along the existing route that would roughly triple the capacity of the existing system.

Mr. Poscente said he met with federal government representatives in February in Calgary to discuss TMX. Stephen Mason, managing director of Project Reconciliation, also said he met last month with government officials to discuss the pipeline. His group has put together a proposal in which the 129 First Nations along the pipeline route would acquire an equity stake in the project.

Those meetings took place before a March update in which Trans Mountain Corp. announced that the estimated costs for the project had climbed to $30.9-billion, an increase of more than 300 per cent from the initial $7.4-billion that former owner Kinder Morgan Canada forecast in 2017.

Even before that update came out, independent analyses, including one last June from the Parliamentary Budget Officer, had shown Ottawa would lose money on the project.

Because of existing contractual agreements with oil shippers, only 20 per cent to 25 per cent of the rising capital costs of the project can be passed on to oil companies in the form of increased tolls. (Tolls are the rates oil companies pay to shift product on a pipeline, and they are how the pipeline company makes money).

In 2018, the federal government bought the existing pipeline and the expansion project from Kinder Morgan Canada Inc. for $4.5-billion, after Kinder Morgan KMI-N threatened to scrap it in the face of opposition from First Nations and environmental groups.

The federal government has talked about selling a stake in TMX to Indigenous groups since at least 2019.

Several groups have expressed interest, including Project Reconciliation; Nesika Services, a Calgary-based group that describes itself as an Indigenous-led not-for-profit; and Chinook Pathways, a partnership between Western Indigenous Pipeline Group and Pembina Pipeline Corp.

In its recent update, Trans Mountain said the project is 80-per-cent complete and expected to be in service in the first quarter of 2024.

During the time that the federal government has been talking about Indigenous ownership of TMX, there have been multiple transactions in the energy sector involving Indigenous investors, reflecting increased capacity among lenders, legal experts and First Nations to craft complex deals, Mr. Poscente said.

Last year, for example, 23 First Nations and Métis groups acquired an 11.57-per-cent interest in seven Enbridge-operated pipelines in the Athabasca region of northern Alberta for $1.12-billion.

“There’s a successful playbook that has been developed on how to proceed with complex equity transactions with multiple communities – and they need to roll out that playbook,” Mr. Poscente said.

A stake in TMX – despite its hefty price – could become a platform for greater Indigenous participation in Canada’s evolving energy sector, said Mr. Mason of Project Reconciliation.

“Indigenous peoples then have the capital to get into other infrastructure projects, like transmission assets or partnerships with municipalities in energy transition,” Mr. Mason said.

Asked for an update, Department of Finance official Benoit Mayrand said in an e-mail that the federal government will launch a divestment process in due course.

With a report from The Canadian Press