ONE RELATIONSHIP AT A TIME: THE PATH TO PROJECT SUCCESS
Infrastructure development is full of risks, which are managed in a number of ways. Risk management might sound cold and impersonal, but it has the potential to incent real human connections and build genuine relationships. Key risks may have leading practice on how best to mitigate, transfer, ignore or hold those risks, but when it comes to energy development across Canada, meaningful consultation and accommodation is non- negotiable. As most are well aware at this point, the Crown must consult and accommodate where Aboriginal or Treaty rights are impacted. Far from being a mandatory ‘checkbox’ in the process of project development, the undertaking of engagement and relationship-building holds the potential for mutual benefits for both the project and the impacted First Nations, Inuit, or Métis community.
Genuine relationship-building is a solid foundation for partnership on energy projects, to the benefit of both parties. This partnership can take the form of Impact Benefit Agreements (IBA) Mutual Benefit Agreements (MBA) or equity participation arrangements, among others. Both IBAs and equity arrangements have the potential to grow economic and social prosperity, but determining which approach is the best fit will be influenced by the priorities and capacity of both the developer and the Indigenous community.
In both these common approaches there are similar objectives:
- Compensation for and mitigation of potential impact
- Influence or control over project design and development
- Securing benefits for the community
- Securing social license
- Working towards consent and support of the project
- Reduced risk of opposition or disruption
- Improved financing as a result of managed risks
Both also reflect an underlying premise that it is no longer acceptable to develop resources or energy infrastructure in a manner where impacts fall to one party, and benefits to the other.
When comparing and contrasting IBAs and equity arrangements, some key considerations are the degree of potential impact, the capacity and interest of the community in the project’s development and management, the project’s term, risk tolerance of either party, and financing and funding opportunities.
Impact Benefit Agreements between a project developer and impacted Indigenous community formalize project benefits sharing. Often, these IBAs will provide some employment, training, and contracting opportunities, but the economic benefits will often be tied to the project’s degree of impact to traditional lands and lifestyle (e.g., land impacts, hunting and gathering impacts, etc.). Regardless of how well the project is performing, the IBAs will guarantee a steady revenue stream to the Indigenous community. This can be a safe bet for risk adverse councils but holds the potential for serious revenue inequity in the case where the project is successful and very profitable.
Pivoting from partnership to ownership, equity participation agreements clearly scale the revenue sharing between the project developer and community as the project success and profitability increases. If the energy project does well, the First Nation, Inuit, or Métis equity partner is also going to do well and see greater revenues. The inverse is also true. In these equity arrangements, which are becoming more prevalent in the eastern provinces, the Indigenous partner has a greater say in project operations, as they are a shareholder. It also arguably provides more security to the developers, as the Indigenous partner is a proponent of the project, and no longer a potential opponent. Both partners would look to maximize the economic benefits of the project, while minimizing the adverse economic, environmental and social consequences flowing from the project. Without focusing too much on the direct revenue arrangement, equity arrangements will often also include guaranteed or preferential opportunities for contracting, procurement, employment and training.
To be clear, in either an IBA or equity arrangement model, the duty to consult and accommodate is neither negated nor automatically fulfilled. But the relationship between developer and community becomes formalized and clearer, adding transparency and certainty to an otherwise risk-filled process.
Managing project risk is a mandatory part of project development. But the means of managing risk holds so much potential for empowerment, leadership, and benefit. Project success and economic development are not an end in themselves, but rather a means to an end – the end being healthier and more prosperous First Nations, Inuit, and Métis communities, and Canada as a whole. All the while moving the dial on reconciliation through real connections, business developments, and cultural education – one relationship at a time.
Robyn Budd was a 2019 member of the Energy Council of Canada’s Young Energy Professionals program and was a Manager in KPMG’s Global Infrastructure Advisory practice, based in the unceded territory of the Musqueam, Squamish, and Tsleil-Waututh nations (Vancouver). She was also the Leader of KPMG’s National Indigenous Network.
Zachary McCue is Founder of The Waabgaag Group, with expertise in renewable, infrastructure, and resource development, specializing in equity participation and impact benefit agreements. He is a proud member of Curve Lake First Nation and is based in Ontario.
Thanks to Todayville for helping us bring our members’ stories of collaboration and innovation to the public.
Click to read a foreward from JP Gladu, Chief Development and Relations Officer, Steel River Group; Former President and CEO, Canadian Council for Aboriginal Business.
Calfrac says appeal court rejects Wilks Brothers attempt to block recapitalization
CALGARY — Calfrac Well Services Ltd. says the Alberta Court of Appeal has rejected an attempt by Wilks Brothers LLC to block the approval of the company’s recapitalization plan.
The company says it has been advised by the court that the Wilks Brothers’ appeal of the final order approving the plan has been dismissed.
Texas-based Wilks Brothers had opposed Calfrac’s recapitalization plan and offered its own hostile takeover offer as an option.
However, the company’s debtholders and shareholders instead opted for management’s plan that will see holders of Calfrac’s senior unsecured notes swap debt for shares, leaving existing shareholders with a reduced stake in the company.
An Alberta court issued a final order this month approving the company’s plan.
Calfrac says it intends to complete its recapitalization transaction as soon as possible.
This report by The Canadian Press was first published Nov. 27, 2020.
Companies in this story: (TSX:CFW)
The Canadian Press
‘No crying’: Venezuelan refugee Kenney cited says interaction was less dramatic
EDMONTON — The Venezuelan woman who believes she was used as part of Jason Kenney’s argument not to lockdown restaurants in the province remembers her encounter with the premier as less dramatic than he suggested.
Carolina De La Torre says Kenney got her central feelings correct, but she said she did not break down into tears the way Kenney recalled.
“No crying,” the 57-year-old woman said with a laugh during a phone interview Thursday.
She also said it was Kenney who approached her Calgary food court booth called Arepas Ranch for lunch in October, not the other way around as the premier told it.
After weeks of mounting COVID-19 cases, as more than 1,000 new cases and 16 deaths were reported on Tuesday, Kenney announced new rules that included making indoor private social events illegal.
During the news conference, Kenney gave an example of how much a lockdown would hurt businesses by telling the story of a Venezuelan refugee he met.
“A couple of weeks ago, I was in my constituency, at a little food court thing and a new Albertan, a refugee from Venezuela socialism, came up to me,” Kenney said.
“She had just opened a little food kiosk, she recognized me, she came up to me, and she broke down in tears in front of me saying, ‘sir, I put my entire life savings as a refugee into this business, we’re struggling to pay the bills, if you shut me down, I’m going to lose it all, everything, and I’ll be in abject poverty.'”
“For some, perhaps, it is a little bit too easy to say just flick a switch. Shut them down,” Kenney said.
“I would ask people who have people who have the certainty of a pay cheque to think for a moment about those individuals whose entire life savings are tied up in businesses.”
De La Torre and her husband run the booth, which is located a 10-minute drive from Kenney’s constituency office.
Born in Venezuela, De La Torre said she and her husband came to Canada with refugee status in 1989 when it became no longer safe to live there. They settled in Montreal for 25 years before they packed their bags and moved to Calgary to follow their daughter who was starting school at the University of Alberta.
They have been living in Alberta for seven years and have been running Arepas Ranch for two years. They are known for making specialty arepas, which is a cornmeal patty, filled with a choice of shredded beef, chicken salad, black beans, ham, cheese, or other vegan and veggie options.
At first, De La Torre said she didn’t recognize Kenney when he stopped to order food and then someone from another booth told her it was the premier.
De La Torre doesn’t recall exactly what Kenney ordered, but she remembers the “very short” conversation they had when he came back to let them know the meal was “fantastico.” She posted a picture of the premier on her Instagram.
De La Torre said Kenney got her feelings right.
She said it’s true that the couple put their money into the business and closing the economy would be bad for them. But she understands it’s about people’s health, which is what she told Kenney.
“What I said is, ‘There has to be a balance between the economy and the health. There is not only me in this food court, we are more than 40 small businesses in the court that need to be open to make a way of life’.”
No one from Kenney’s office immediately responded to a request for comment.
De La Torre said when she heard Kenney mentioned her during a news conference, she was at first surprised.
But now, “I didn’t know what to think about it,” she said.
“I don’t know. What can I say? It’s OK.”
This report by The Canadian Press was first published Nov. 26, 2020.
This story was produced with the financial assistance of the Facebook and Canadian Press News Fellowship
Fakiha Baig, The Canadian Press
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