Tony Alexis is Chief of the Alexis Nakota Sioux Nation and co-chair of Iron Coalition. Paul Poscente is CEO of Backwoods Energy Services and the working group lead for Iron Coalition, which is negotiating for ownership of the Trans Mountain Pipeline.
As the future of the Trans Mountain pipeline project unfolds in Canada, the country and the global energy investment community are watching.
We have an opportunity for transformational change in the way major infrastructure projects are conceived and completed. As members of Iron Coalition, an Alberta-based, Indigenous-driven organization with the sole purpose of achieving ownership in the Trans Mountain pipeline (TMX), we are encouraged to know the federal government is open to Indigenous ownership of this major project. We also know that in order for Indigenous ownership to be successful, the process must be methodical, systematic and reasoned.
It is simply premature to present an offer on the TMX project.
Indigenous ownership of the TMX is important for Indigenous communities, the resource sector and Canada. However, an ill-timed or disjointed bid could cause irreparable harm. A successful transaction sends a powerful message to the investment community that is currently firmly on the sidelines pending clarity on the return on capital. We cannot risk losing this message because of a hastened process or a failure to address key imperatives.
For Canada, this is an opportunity to more positively redefine the relationship with Indigenous communities as it relates to major resource development. For Indigenous communities, asset ownership is a significant step along the spectrum from managing poverty to managing wealth. While TMX is working toward getting shovels in the ground for this multibillion-dollar project, we are working with our communities in Alberta and B.C. to form a pragmatic, measured approach in order to make a credible offer when the pipeline investment becomes feasible.
We have completed preliminary financial modelling and sensitivity analysis based on publicly available data from the Kinder Morgan acquisition and have been meeting with multiple financial institutions, as well as several departments within the Alberta government. It is through these negotiations that we can confidently say we are not yet at a point where a proposal to acquire ownership in TMX can be realistically made, nor would it be taken seriously. In fact, a pre-emptive bid risks hurting credibility of the concept of Indigenous ownership itself, creating further uncertainty in the investment community and unnecessarily dividing Indigenous communities.
There are basic and fundamental principles that need to be in place in order to make a realistic offer. Most importantly, making an offer requires a willing seller – which we do not currently have. While we understand the government is open to Indigenous ownership, they have made no concrete steps to engage with the purpose of mapping out a workable structure.
Successful offers also require access to real data. In order to calculate project construction costs and accurate cash flows, clarity on shipper agreements and commission timing (the original commission date was February, 2017) need to be known. Cost of capital is invariably tied to risk. In order to get the best and lowest cost transaction for all communities, these variables need to be addressed along with answering the fundamental question of how the federal government will backstop the non-construction risk.
Greater consolidation and alignment are needed among the communities seeking ownership. It is our view that there will not be a competitive bidding process from different Indigenous groups but rather a single proposal that will be offered and negotiated. Therefore, if we seek broad consensus from communities, we need to offer complete transparency on the intentions of all working groups as well as present specific details on everything from governance, fees, and rights of ownership. If we cannot reach alignment on these matters, we cannot form a united offer.
The negotiation process will likely proceed through the office of the Minister of Finance. We understand a team from the department will be engaging with Indigenous communities to get their input. Concurrently, we will be increasing our engagement with both Ottawa and Indigenous communities in Alberta and B.C.
The right approach to an offer is multifaceted. More work needs to be done consolidating the perspectives of Indigenous communities as well as educating them on the details of the various proposals in the public purview. Continued engagement with the government is also needed in order to not only gain both access to vital data, but to also gain clarity on the government position on structure and timing. And ongoing work with investment partners is necessary to model and refine cash flows, as well as corporate and capital structure, in order to ensure the best possible transaction for all has been secured.
There is too much at stake to seek headlines over substance. This is a historic opportunity on an investable project, but it must be done right.
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