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Construction at the Fort McKay First Nation outdoor amphitheatre, which will seat 1,800 people at completion next year. (Kelly Cryderman/The Globe and Mail)
Construction at the Fort McKay First Nation outdoor amphitheatre, which will seat 1,800 people at completion next year. (Kelly Cryderman/The Globe and Mail)

The dispute the entire oil industry is watching Add to ...

‘Beverly Hills” is the pride of Fort McKay.

A building boom is under way on this street of stylish new houses, nicknamed after one of America’s wealthiest cities. It’s a required stop for every visitor to this First Nation reserve smack-dab in the middle of Alberta’s oil sands region.

Cobblestone driveways, stainless steel appliances and spacious decks are standard features of the roomy homes. One street over, painting crews are finishing the interiors of another set of new houses as heavy-duty vehicles pack dirt at the next building site. The goal is to get Fort McKay First Nation residents out of the hamlet’s old trailers and houses and into 100 new homes in the next four years.

“People come to McKay, and they say it doesn’t even look like a reserve,” boasts Fort McKay Councillor Gerald Gladue.

The burgeoning prosperity in Fort McKay is a direct result of the community’s embrace of the nearby oil sands industry. A host of First Nations-owned businesses that work with energy companies create over $100-million of annual revenue for the 700-person community located 65 kilometres north of Fort McMurray. Unemployment is negligible.

In recent years, Fort McKay has built an indoor hockey arena, and with the help of Royal Dutch Shell PLC, a large building for daycare and the reserve’s elders. Future building plans include water and sewer upgrades, stone paths and a 1,800-person amphitheater. Fort McKay has few signs of the poverty that besets other Canadian First Nations.

But the economic progress has come at an environmental cost. Dene and Cree Fort McKay members say the Athabasca River that flows next to their community is too polluted to drink from, the fish are too contaminated to eat and the surrounding boreal forest has too many oil sands mines, roads and gates to hunt freely.

“Every direction you look, you see industry,” says long-serving Fort McKay Chief Jim Boucher.

Now the Fort McKay First Nation has drawn a line in the oil sands. The band is taking legal action to block development of a key part of the proposed Dover oil sands project adjacent to an expanse of reserve land called Moose Lake used for hunting and trapping. The land is sacred territory, Chief Boucher says, part of the band’s last areas not hemmed in by oil sands developments.

Taking its fight to the Alberta Court of Appeal, the Fort McKay First Nation wants to create a 20-kilometre buffer zone on property leased by the Dover project, controlled by global energy giant PetroChina Co. Ltd., and approved for development by Alberta’s energy regulator.

A ruling in Fort McKay’s favour could block development of a rich segment of Dover’s bitumen reserves. And it could force the province’s energy regulator to consider how oil sands projects affect constitutionally protected First Nations’ rights to hunt and fish in their traditional territories, on and off reserve land – and tip the scales in favour of First Nations when it comes to Canadian land-use disputes in Alberta and beyond.

For the energy industry, the widely watched case is pivotal. The legal proceedings initiated by Fort McKay threaten to spill out into the wider world of energy development, and serve as a risk to the oil industry’s growth plans for years to come.

Energy companies have invested hundreds of billions of dollars to unlock the 168 billion barrels of reserves in Alberta’s oil sands, and are increasingly pushing into vast stretches of frontier territory to do it. Such new projects are essential for the industry to meet its ambitious objective of doubling daily oil sands production to more than four million barrels of crude a day over the next 10 years.

And that rising output is key for the Canadian economy, which relies on a vibrant western energy industry to create jobs and wealth as the country strives to be a fast-growing energy power.

To many, Fort McKay’s opposition is a wake-up call to the oil and gas industry, as well as federal and provincial governments, that First Nations’ concerns must be resolved for the industry to progress.

“If we can’t work things out with Fort McKay, it’s going to be much more difficult to find accommodation with the next batters up. And there’s a long list of those First Nations,” said Bill Gallagher, a lawyer who examines conflicts between First Nations and energy developers.

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