Varcoe: Budget’s $5 billion Indigenous loan guarantee program draws praise

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Less than five years ago, Alberta established a loan guarantee program that has allowed Indigenous communities to invest more than $1.5 billion and buy stakes in major energy projects across the province.

Ottawa is about to join him.

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In Tuesday’s federal budget, Finance Minister Chrystia Freeland revealed details of a new Indigenous Loan Guarantee Programme, which was first discussed by the Liberal government last year.

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The federal program will provide up to $5 billion in loan guarantee capacity to “unlock access to capital for Indigenous communities, creating economic opportunities and supporting their economic development priorities,” according to the budget.

Oil and natural gas projects and other natural resource developments will be eligible.

It’s something Indigenous leaders and business groups had lobbied the Trudeau government to include, as many wondered whether Ottawa would exclude fossil fuel developments from the mix.

However, the program will be “sector agnostic for natural resources and energy projects to prioritize economic reconciliation and self-determination,” the budget states.

“We are committed to ensuring that Indigenous people share in Canada’s economic prosperity, including the energy industry,” said Freeland spokesperson Katherine Cuplinskas.

The announcement was well received by groups across Western Canada, and even gained approval from the UCP government in Alberta.

Niilo Edwards, executive director of the First Nations Major Projects Coalition, welcomed the news, calling Tuesday “a good day.”

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“We are clearly pleased with the sector’s independent approach,” Edwards said in an interview from Ottawa.

“It empowers the self-determination of indigenous nations to decide which project is right for them.”

The coalition, made up of more than 150 Indigenous communities, has estimated that Indigenous equity participation could potentially reach $525 billion in capital investments over the next decade.

Edwards said there is strong interest from First Nations and Indigenous communities in acquiring an ownership stake in a range of projects, from traditional energy developments to emerging sectors such as small modular reactors, hydrogen and critical minerals.

LNG terminals, mining developments and even a stake in the federal Trans Mountain pipeline could be on the table in the future.

“We have about $500 million of indigenous capital that needs to be funded in the next 12 months or so,” Edwards added.

“We have projects that are ready to be examined by this program.”

The Alberta government, which was largely critical of the budget, gave credit to the feds, with Finance Minister Nate Horner noting that it reflects Alberta’s program.

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The Alberta Indigenous Opportunities Corporation (AOIC), created in 2020, has the capacity to provide loan guarantees totaling $3 billion.

To date, it has provided more than $680 million in guarantees, supporting more than $1.5 billion in investments.

These investments have included equity positions in gas-fired electricity generation projects, midstream energy assets (such as tar sands pipelines), and cogeneration facilities.

AIOC president Stephen Buffalo said the program can spread across the country with Ottawa’s involvement and could eventually lead to collaboration and unionization agreements between federal and provincial entities.

“Indigenous communities have to find ways to really take advantage of business opportunities,” said Buffalo, who is also executive director of the Indian Resources Council of Canada.

“To be able to generate your own income by participating in a program like this is imperative.”

The federal budget noted that Indigenous communities have had fewer options to raise capital or use existing assets as collateral, due to the Indian Act, resulting in higher borrowing costs that have created barriers to capital investments.

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Government-backed loan guarantees can close that gap, helping communities access third-party capital at a lower cost (backed by the government’s credit rating) to become owners of important projects.

These investments can provide a revenue stream, new economic development opportunities, and give communities a direct voice in decision-making about projects.

Business groups also welcomed the news, with the head of the Canadian Association of Petroleum Producers calling it “significant progress.”

“The Alberta Indigenous Opportunities Corporation is a perfect example of what is possible when done right,” added Deborah Yedlin, CEO of the Calgary Chamber of Commerce.

“It should be nationwide.”

In Alberta, one of AIOC’s biggest deals came in 2022, when Enbridge sold a nearly 12 per cent stake in seven oil sands pipelines for $1.12 billion to Athabasca Indigenous Investments, which represents nearly two dozen First Nations and Métis communities in Alberta.

AIOC provided a $250 million loan guarantee.

Enbridge spokesman Jesse Semko applauded the new federal initiative, saying a “robust loan guarantee program… advance Canada’s energy future and Indigenous economic reconciliation.”

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CEO of AIOC Chana Martineau said bringing the program across Canada will have a monumental impact.

“Different nations and communities have different opportunities,” he said.

“Indigenous economic reconciliation is about supporting Indigenous communities to participate in today’s economy; today’s economy includes resources.”

The First Nations Major Projects Coalition, established by several British Columbia First Nations to help them examine ownership of resource developments, says access to affordable capital was one of the issues that initially led to the group’s creation .

And having a national program will cover the funding gap.

“We’ve been working on this on behalf of our members for over 10 years,” Edwards added.

“In the end, you just hope the system does the right thing. And today he did the right thing.”

Chris Varcoe is a columnist for the Calgary Herald.

[email protected]

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