Background Content

Call to Action # 92: Business and Reconciliation (92)

First Nations increasingly moving from accommodation to equity and shared ownership

October 5, 2022

On energy projects, courts are putting new spin on the duty to consult

Lexpert: Business of Law: Indigenous involvement in Canadian energy projects has evolved from consultation and accommodation to partnership, as Indigenous groups are increasingly taking equity stakes and steering projects as proponents. Courts also demand that governments consider First Nation’s economic interests when deciding whether to approve or deny projects in their territory. 

“Indigenous consultation in the energy sector has been important for decades,” says Laura Estep, a partner in Dentons’ energy regulatory practice group in Calgary. “The mantra for project development is to engage early and often.” 

There is clear direction from the courts going back more than 30 years, says Chris Roine, counsel in Borden Ladner Gervais LLP’s corporate commercial group in Vancouver. The Crown must consult for any major Crown-approved project that could adversely affect constitutionally protected Indigenous rights.  

“The scale of consultation is proportionate to the strength of the claim and the degree of the adverse effect,” says Roine, who has a practice focused on Indigenous law and is also the former director general for the western negotiations branch of Crown-Indigenous relations. 

“At the low end of the scale, it could be notice and an opportunity to raise concerns. At the high end of the scale, it requires deep engagement – probably accommodation – to avoid, reduce, or offset potential impacts of the Crown decision upon the Aboriginal rights.” 

In the last 20 years, he says that one method of addressing accommodation has been negotiating impact benefit agreements, which could include compensation, a share of revenues, and commitments around employment, procurements, or contract opportunities.  “What’s really expanded is the notion that Indigenous groups may also have equity and shared ownership. To take it a level further, you’re then seeing more cases where Indigenous groups are coming into energy projects as proponents – where they found a partner in the industry and the Indigenous group has, in some cases, even a majority ownership stake in the energy project.” 

According to Sam Adkins, a corporate lawyer at Blake Cassels & Graydon LLP with clients in the resource sector, project developers are moving from a consultation to a consensus-seeking approach. Increasingly, developers are seeking consent as a starting point. This approach helps companies achieve ESG goals, a growing focus among investors. He says that Indigenous ownership can also help address some inevitable regulatory issues. 

The “big advantage” to First Nations taking an equity interest is that it changes the relationship with developers to a “regular business relationship,” says Robert Freedman, a partner in Gowling WLG’s Vancouver office. In exchange for assuming some risk, they are more likely to gain employment, contracting, and other economic benefits, and, he says, “usually more money [is] on the table.”  

As First Nations take a partnership role on more projects in their territories, two recent court rulings have highlighted the government’s duty to consider and promote Indigenous economic interests when deciding whether to approve projects. 

In Ermineskin Cree Nation v. Canada, the Alberta First Nation, located between Red Deer and Edmonton, had executed impact benefit agreements with Coalspur Mines on two of its coal projects. The federal Minister of Environment and Climate Change initially opted not to designate the mines for review under the Impact Assessment Act but later changed his mind following requests from other Indigenous and environmental groups. In designating the mines for review, the minister failed to consult Ermineskin, and gave no consideration to the economic benefits the Nation would lose if the project did not proceed, says Estep. 

“The court found that the Crown had failed to fulfill its duty to consult in this case. And in doing so, the court really adopted a broader and more progressive approach to consultation,” she says. “The case clarifies that the Crown must consult with Indigenous groups that will benefit from the project before it makes a decision to deny a project. 

Usually, the duty to consult is triggered by an adverse impact to an Indigenous right – for example, hunting, fishing, or trapping, says Deirdre Sheehan, head of the energy regulatory practice and co-head of the Aboriginal Law Practice at Bennett Jones LLP. Here the basis upon which the court found the Crown had a duty to consult was impact on the First Nation’s agreement with the developer. 

“The other side of the coin,” she says, “which makes it an interesting decision, but also highlights the importance of the economic benefits to the ongoing reconciliation and consultation obligations with Indigenous communities.”  “The case also demonstrates the value of creating alignment between project developers’ interests and Aboriginal rights by building relationships and reaching agreements,” says Estep. “And it challenges old assumptions about these interests necessarily being in conflict.”  

Indigenous groups’ economic interests in energy projects were also the focus of the Alberta Court of Appeal’s decision in AltaLink Management Ltd v. Alberta (Utilities Commission). The Alberta Utilities Commission (formerly the Alberta Energy and Utilities Board) approved an electrical transmission system expansion in 2005. AltaLink’s chosen transmission line route from Pincher Creek to North Lethbridge crossed through the Piikani Nation’s and Blood Tribe’s reserves. In 2007 and 2008, the chief and council of both groups passed resolutions approving the route. Later, they approved the transmission permit and consented to its issuance by the then Minister of Indian Affairs and Northern Development.  

In 2009, the Alberta Utilities Commission approved the transmission line’s construction and operation. The Piikani Nation and the Blood Tribe agreed to the construction in exchange for the right to purchase a 51-percent interest in the project. 

But transferring the transmission assets to the Piikani Nation and the Blood Tribe would entail an additional $60,000 per year for external auditing and hearing costs. The commission applied its no-harm test to determine whether the transaction was in the public interest. The test weighed the transaction’s impact on ratepayers to ensure the change served as a benefit or left them no worse off. The commission approved the transaction with the condition that the partnership could not pass along the additional costs to ratepayers.  

The Alberta Court of Appeal allowed the appeal, finding the commission erred in its exclusively forward-looking approach to assessing the project’s benefits. The court said a broader view of the no-harm test and the public interest was appropriate. The court says that projects that increase the likelihood of economic activity on reserves are in the public interest and should be encouraged. They will provide residents with potential employment opportunities, likely leading them to pursue education on and off reserve.  

“In concurring reasons, Justice [Kevin] Feehan went even further,” says Estep. “He found that administrative tribunals with a broad public interest mandate must address reconciliation as a social concept of rebuilding the relationship between Indigenous peoples and the Crown. This specifically includes Indigenous interests in participating freely in the economy and having sufficient resources to self-govern effectively.” 

“I’ve been a proponent of this idea of economic reconciliation for quite a while,” says Bernie Roth, a partner in Dentons’ energy regulatory practice group in Calgary. “It appears to be coming to fruition.” 

Since 1982, when s. 35 was put into the Constitution to protect Indigenous rights, governments have been unable to react with policy and approaches quickly enough, he says. The government’s attitude tends to be “as long as we don’t do anything on your land, we’re OK. We owe you no obligation.” But what Ermineskin and AltaLink signify is that the obligation can be to allow development, says Roth. 

“There’s this balancing of traditional rights and exercises of treaty rights. But if industry and First Nations can come up with a good way of coming to that balance, then governments have an obligation to actually approve these projects. 

“Industry is seeing that the stakes are: come in with the Aboriginal support, equity interest, advancing economic reconciliation, and you have a way to deal with government resistance to project development,” says Roth. 

Freedman says that, because of its overuse, the word “reconciliation” has “in a lot of ways, become meaningless.”  “I have clients who really dislike the use of the word, and the reason that they dislike it, from what I’ve heard, is it’s often hijacked by government officials and others to basically do a few little things, then somehow say that they’ve achieved reconciliation.” 

When it comes to equity deals, he says, “if you have real negotiations – not ones where the Indigenous organization feels they have no choice but to cut a deal – but where there’s real discussion … benefiting in economic development, in a real way, is, in my view, one aspect of reconciliation. For sure, I would say one. There’s lots of others.”  “I’ve been doing this work for over 28 years. And from where I started, in terms of Indigenous organizations having more of an economic role in projects, it’s certainly better than where I started,” Freedman says. 

But he adds, “There are a lot of companies who still don’t think they should be doing anything at all. Or that somehow, they’re sort of being hijacked to do something. Until you get more and more companies understanding that it’s not just a good thing to do, it’s legally necessary, it’s going to be slow. But it’s certainly getting better. But it’s very slow.”