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'Game changer': Gas company offers $1-billion to First Nations band in B.C.

Pacific NorthWest LNG is proposing to build an LNG export terminal on Lelu Island.

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The proponent of a liquefied natural gas plant on British Columbia's north coast is offering more than $1-billion to obtain the consent of a First Nations community, a groundbreaking proposal that could establish the new price for natural resource development in traditional aboriginal territories.

In a province where resource projects have stalled and sometimes foundered over aboriginal opposition, the tentative deal between the Prince Rupert-based Lax Kw'alaams band and a joint venture led by Malaysia's state-owned Petronas sets a new benchmark for sharing the wealth from energy extraction.

If approved by band members, the agreement will transfer roughly $1-billion in cash to the Lax Kw'alaams band over the span of the 40-year deal, while the B.C. government is putting more than $100-million worth of Crown lands on the table. For the 3,600 members of the Lax Kw'alaams community, the total package works out to a value of roughly $320,000 per person.

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"This will be a real game-changer for many First Nations in terms of how they can build their future," B.C. Aboriginal Relations and Reconciliation Minister John Rustad said in an interview Thursday.

The proposed pact hinges on federal environmental approval of the Petronas-led Pacific NorthWest LNG project, to be built on the traditional territory of the Lax Kw'alaams.

In British Columbia, most of the land base is still subject to native claims, but recent court rulings have firmly established the existence of aboriginal title.

"It's a significant deal, a serious deal," Mr. Rustad said. He said LNG projects have the prospect to be transformative for communities where LNG is being developed on B.C.'s coast. "There is no question liquefied natural gas sets the stage for an incredible opportunity for all of British Columbia and especially the First Nations involved in it."

Members of the Lax Kw'alaams will be voting in May on the offer from Pacific NorthWest LNG, TransCanada Corp.'s Prince Rupert Gas Transmission pipeline project and the B.C. government. TransCanada's pipeline would carry natural gas from northeastern British Columbia to Pacific NorthWest LNG's planned $11.4-billion export terminal on Lelu Island, located near Prince Rupert.

"Lax Kw'alaams has been offered benefits, including significant cash payments, job training, and employment for the projects," the aboriginal group said in a bulletin to its members. "Membership will be asked to vote by a show of hands after the presentations."

Other incentives designed to garner aboriginal approval for Pacific NorthWest LNG and TransCanada's pipeline project include funding for paving a local road and creating a fisheries compensation fund.

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Pacific NorthWest LNG said the package is an attractive one, and the project is committed to protecting salmon habitat in Flora Bank – an area near Lelu Island that the Lax Kw'alaams and other First Nations groups have said will be at risk of suffering environmental harm.

"Pacific NorthWest LNG has tabled a substantive offer that, we believe, addresses the fundamental areas of importance as they relate to the Lax Kw'alaams. This offer represents a multigenerational opportunity to the Lax Kw'alaams First Nation," said Spencer Sproule, Pacific NorthWest LNG's senior adviser of corporate affairs.

The deal would provide a number of up-front payments including more than $20-million if the band members approve it. As well, they would be entitled to annual payments that start at $12.9-million and rise, over the life of the 40-year pact, to $50-million annually.

Just a year ago, such an agreement seemed unlikely: "Petronas is aggressive to the point of being offensive to Lax Kw'alaams and seems, as a corporation, to have no idea how to successfully operate in Canada with aboriginal people," the Lax Kw'alaams said in a report in March, 2014. "Petronas does not seem to understand that a social licence to move ahead with their project is not something they give to themselves."

The provincial government has offered to contribute 2,200 hectares of land around the Prince Rupert harbour, which will be private property for the Lax Kw'alaams to use for industrial or residential purposes. An agreement would be a positive sign for the B.C. Liberal government. The Liberals won the 2013 provincial election based on the promise of LNG, but have yet to secure any final investment decisions.

Wood Mackenzie energy analyst Alex Munton said Pacific NorthWest LNG will have access to a larger pool of skilled labour due to layoffs in Alberta's oil sands.

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The Canadian Environmental Assessment Agency is expected to rule on Pacific NorthWest LNG by September. It is possible that Pacific NorthWest LNG will give the preliminary go-ahead for construction before the regulator's ruling, but the project will require environmental approval for a final investment decision, Mr. Munton said.

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About the Authors
B.C. politics reporter

Based in the press gallery of the B.C. Legislature in Victoria, Justine has followed the ups and downs of B.C. premiers since 1988. She has also worked as a business reporter and on Parliament Hill covering national politics. More

Brent Jang is a business reporter in The Globe and Mail’s Vancouver bureau. He joined the Globe in 1995. His former positions include transportation reporter in Toronto, energy correspondent in Calgary and Western columnist for Report on Business. He holds a Bachelor of Commerce degree from the University of Alberta, where he served as Editor-in-Chief of The Gateway student newspaper. Mr. More

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