Well-entrenched in oil sands, Fort McKay First Nation eyes even deeper ties

Aerial view of part of Alberta Tar Sands operations.

Aerial view of part of Alberta Tar Sands operations.

Yadullah Hussain, Financial Post, March 13, 2014

With annual revenues of about $700-million and as many as nine joint ventures focused on oil sands services, Fort McKay First Nation resembles more a sprawling Fort McMurray, Alta. business group than an aboriginal band. But the 700-member group is well-entrenched in the oil sands and considers the surrounding industry as its primary customer. The group is even looking to develop oil sands on its territory.

“I think we need to recognize there is a time for everything,” Chief Jim Boucher said from his office in Fort McMurray. “Our people need to be employed, need hope and need opportunities and here is an opportunity for us to get on board.”

Located along the banks of the Athabasca River in the Wood Buffalo municipality north of Fort McMurray, the band is at the heart of the oil sands development. With oil wells sprouting all around its territory, the band decided years ago that it would co-operate in the development of the world’s third-largest oil repository rather than stand opposed to it.

Which is not to say the group has not stared down mighty oil companies when it needed to. Fort McKay was in a two-year legal standoff with Brion Energy Ltd. after the two parties disagreed on the size of a buffer zone between the the group’s land northwest of Fort McMurray reserved for hunting and Brion’s 250,000-barrel-per-day Dover oil sands project.

In February, Fort McKay withdrew its complaint after the company addressed its environmental concerns. The project is of great financial significance to Athabasca Oil Corp., which owns Brion along with a PetroChina Co. Ltd. subsidiary. PetroChina had acquired 60% of the Dover project in 2010, with an agreement that allowed either side to trigger the sale of the remaining 40% after regulatory approvals. On Thursday the Alberta government signed off on the SAGD development, and the project file will now move to the Alberta Energy Regulator for a final decision.

Jim Boucher, chief of the Fort McKay First Nation.

Jim Boucher, chief of the Fort McKay First Nation.

The Dover deal offers hope that First Nations can find a way to co-exist with the hundreds of companies that have lined up to develop natural resources on their lands.

Gordon Nettleton, a partner at law firm McCarthy Tetrault LLP, said that while the deal came through litigation, it is an excellent step forward. “This deal is by no means an aberration.”

But Mr. Nettleton noted that while the project has been touted in the industry as an example of how First Nations can work together with the industry, the deal is not a “boiler plate” that can be applied to resolve other disputes.

Mr. Boucher said he is bound by a non-disclosure clause with Brion not to share commercial considerations, but says each deal would be different depending on the circumstance.

“I don’t think there is one template that fits all…. We are reaching out to other First Nations and are having discussions to see how we can take advantage of the opportunities and manage the risk associated with resource development.”

Lack of transparency means other First Nations or even the industry are none the wiser on resolving disputes.

“We don’t know the specifics of the deal,” said Eriel Deranger, a spokesperson of the Athabasca Chipewyan First Nation (ACFN), which is opposed to oil sands development and recently teamed up with musician Neil Young to rail against Royal Dutch Shell Plc.’s Jackpine development and rapid oil sands growth.

Sam Adkins, partner at McCarthy Tetrault, said First Nations and industry are turning their minds towards transparency, although most deals remain confidential. “From an industry perspective, there is definitely a desire to tell the story more publicly than perhaps they have in the past. And it’s a great story to tell for the industry for successful projects.”

The government is also stepping in and working on new policies to bring more transparency to the deals.

“We are seeing a push towards more transparency and it is coming from government,” Mr Adkins said. “It’s important because ultimately  these deals are being done and relied upon by government to facilitate their obligation of consultation and accommodation.”

Despite the lack of disclosures, ACFN’s Ms. Deranger does not believe For McKay has “sold out” to the industry.

“What McKay has done is, honestly, [make the] the best of a very bad situation,” she said, noting that while the Fort McKay elders took the decision of allowing projects near their territory, her tribe’s elders chose to disallow projects.

ACFN has also often complained about the oil sands’ impact on the environment, animals and drinking water, but Mr. Boucher says the First Nations have been  tackling health concerns issues for the past 40 years. Instead of seeking government help, the group is planning its own study to understand health risks from resource development.

“We have the ability to address the issue ourselves and find out exactly if there is a problem or not,” Mr. Boucher said, noting that the study will be peer-reviewed and funded by the band “to make sure that the job is done right.”

Fort McKay’s ability to fund its health study was possible as it shrewdly pounced on economic opportunities that came its way.

The Fort McKay Group of Companies LP, 100% owned by the band, boasts of nine joint ventures. The group has partnerships with Calgary-based ATCO Ltd. to provide accommodation and lodging facilities to oil sands companies. Two other joint ventures with Compass Group Canada provide lodging and catering services to companies such Suncor Energy Inc. and Canadian Natural Resource Ltd. Other business lines include drilling and service rigs for rentals, long-haul fleet service, cement and gravel products and an industrial park.

“We are probably looking at $600-700 million in revenues a year,” said Mr. Boucher, although previous figures for the group’s revenue estimates stood at $100-million.

The group aims to build on its business platform and is looking to partner with other First Nations to tap other opportunities available, including oil production.

“We have approximately two billion barrels of oil on our land. We are not in a hurry to develop that, but it’s an opportunity for our First Nations to do some type of development in the future. But I think we will wait for the right market conditions.”

Mr. Boucher chuckled when asked about Neil Young’s comments about Fort McMurray, which the famed musician compared to the nuclear-bombed site of Hiroshima in Japan.

“There is no comparison,” Mr. Boucher said, but he gives credit to ACFN and Mr. Young for highlighting an issue that is bigger than Fort McMurray.

“Their ability to communicate the message out to the public is healthy for our people and Canadians. We should have this frank discussion on the environment and the conditions placed or imposed on First Nations.”

And while Mr. Boucher acknowledges the role of environmental groups, he said First Nations need to make up their own mind.

“At the end of the day we got to do what’s best for our people. So let’s make a decision based on the information. In terms of recognition, there are… relationships that we have to establish and maintain and that’s essentially what’s good for our people.


Posted on March 14, 2014, in Oil & Gas and tagged , . Bookmark the permalink. 2 Comments.

  1. So is it a case of money can buy co-operation? And all the protesting is merely to get a better deal and to hec with with the larger issue of the Enviro? As aboriginal Nations get more business savvy will they side with Big Oil and become like them? The Enviro issue is not just about the immediate area near this or that Nation but the cumulative effect on the global lanscape.

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