Projects More Geared To Success When Industry And Indigenous Investments Align: Fogarassy
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The fact is: In 2022, companies must have “exceptionally-solid relationships” with those Indigenous communities in whose backyards they are proposing major energy projects, says Tony Fogarassy, newly-appointed vice-president of business development and Indigenous affairs, Petrel Robertson Consulting Ltd.
“It’s not dissimilar to what landmen have done for decades in Western Canada with farmers, the difference being a number of Indigenous peoples have fairly significant rights and titles to the lands upon which you’d want to explore. They’re above and beyond what we’d categorize as the ‘traditional folks’ we’d reach out to in the oil and gas sector. Indigenous peoples really are governments in their own right. As such, they must be respected as being governments.”
Many energy firms hope to leverage their relationships with Indigenous peoples to obtain better positioning for projects in the future, he told the Bulletin, and that is where Petrel Robertson sees an opportunity.
“We’re in a tremendous era of flux and change — all for positive. Change is an opportunity, from my perspective. Having worked with Indigenous peoples for the better part of two decades, there are just so many opportunities for the right-minded client or corporate partner. There are some really fantastic projects that could move forward. In general, they can move forward a little quicker if you have that Indigenous partner in your tent or onside.”
He added: “Clearly, the law has evolved significantly in terms of recognizing Indigenous rights and title, and those must be considered when developing projects. Whether it’s gathering information of a seismic program or bidding into a land sale, you must understand what are the Indigenous interests in the area where you’re pursuing a project.”
What will not work is for a company to ignore clear Indigenous interests in a project, whether it be exploration, development or production, suggested the VP. That is a sure way to see a project die in the contemporary context.
“You might find the capital to bring in $10-$30 million to get an exploration program off the ground, but as soon as you start planning for a raise of $100-$400 million to start bringing in production facilities and to produce oil, the serious investors will look at you and say, ‘You have First Nations here that you haven’t cemented a relationship with? They’re angry with your project? For us, as a lender or significant equity investor, we won’t touch it.’”
Indigenous project drivers
Certainly, there are a number of examples where Indigenous groups are pushing for partnerships on major energy projects, according to Fogarassy. He highlighted the case of the Trans Mountain pipeline expansion.
“You have a couple of big Indigenous groups, a consortium, who want to take an equity piece on that,” he said. For example, Nesika Services, a grassroots, community-led non-profit, has been formed to support Indigenous communities in maximizing economic opportunity through ownership of the TMX pipeline.
“For some of our clients, we have worked with Indigenous governments and business groups, and so we will be working both sides of the table depending on the project. We understand the Indigenous perspective, and we obviously understand the corporate traditional company perspective that doesn’t have, if you will, Indigenous partnerships.”
He added: “The projects [Petrel Robertson] is looking at being involved with are very traditional upstream oil and gas projects, as you can appreciate. They’re not midstream or downstream. They’re not involved with LNG production facilities, for example, or for gas plants in Alberta or Saskatchewan, or anything like that. Far from it. But you see more and more Indigenous equity involvement in projects like those.”
Petrel Robertson does receive First Nation clients who would like to position themselves to entice the right partners for development of oil and gas on their traditional territories, and as such they require technical work to understand the resource potential, and they may want help finding the right partners, Fogarassy told the DOB.
“How does that work? Is it Indigenous peoples who run with the project where they’re sort of in the ‘driver’s seat’, or is it the other way around? Generally, it’s the other way around, but we’re working with clients with significant areas of land where they have surface and subsurface rights and they see tremendous development opportunities, but it must be development consistent with where we are in 2022. And so, we’re not back in 1992.”
Benefits to industry
For First Nations and Indigenous communities, part of their issue often is finding the money, the equity, to put into projects, noted Fogarassy. “That’s what they always struggle with. This is why you’ll see smaller percentages, and you might have a group of nations coming in to grab a small percentage of a project that they may support.”
However, for any Indigenous government or Indigenous investment entity that has the money to invest in a project on or around traditional territories, he suggested, a firm would be wise to consider pursuing a deal with that partner.
“If you have the ability to get 30 per cent of your capital financed for a gas plant project from a New York bank, fair enough. But if you can get the same money from an Indigenous government and Indigenous group, which might not have the money but might be able to access it from other sources, then I’d take the Indigenous money every time.
“That’s where I see the movement going towards, down the road. It’ll take decades for it to unfold like this, but that to me is where we’re going to be at, say, by 2050 when we’ll all be at net-zero. You’ll see several announcements of significant Indigenous investment into resource projects.”
For many investors, the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) — currently recognized by the federal and B.C. governments — is the sort of legal structure they want to see, he said. They do not want to invest money into countries that “stomp on Indigenous rights” and have little regard for the environment.
“If you’re going to do things right, then you’re going to do things right in terms of Indigenous peoples and what’s required with regards to protecting the environment.”
Firms must be bonafide with respect to environmental, social and governmental (ESG) matters on any new projects in Canada, Fogarassy added. If there is Indigenous investment in a resource development, then it adds legitimacy in the current era that demands attention to these ESG concerns, which makes a project more viable.
“We want to see the curve going up to see more Indigenous investment. I don’t want to say we’ll hit bumps on the road, but we will hit bumps in the road. That’s the challenge, because there are a lot of naysayers out there who suggest this will never happen. But it is happening. The more progressive companies out there are the ones that’ll benefit.”
The right advice
An oil and gas company must build relationships tailored to the particular aspects of the First Nation or Indigenous community in which a project is being considered, said Fogarassy. Understanding what the Indigenous party can offer, and what is its legal rights, would be “absolutely critical” to such a project progressing.
“To me, it’s an opportunity. I don’t view it as a challenge. If companies get the right advice, then they’ll be in a position where they won’t spend money if they don’t need to spend money, in the end of the day, on consultants, et cetera. They can get the right advice out of the gate.”
Petrel Robertson, for its part, will work with companies and Indigenous partners, helping to “develop a strategy to create the relationship” from a grassroots perspective, he told the DOB. “Depending on the client and the client’s needs, and what they’re dealing with, we could provide some tangible, valuable services in that regard of helping to sketch out a pathway, depending on what’s required when dealing with Indigenous peoples.”
He added: “The Indigenous component to these projects have been generally not serviced by geoscience companies such as Petrel Robertson, and there are dozens of good geoscience firms such as Petrel Robertson in countries around the world. We saw the lack of service with respect to Indigenous peoples where Indigenous peoples have significant suasion when it comes to projects in terms of exploration and development and production moving forward.”