Indigenous groups line up for Trans Mountain pipeline stakes; B.C. leaders call it ‘economic version of a smallpox blanket’

Pipeline pipes are seen at a Trans Mountain facility near Hope, B.C., on Aug. 22, 2019. THE CANADIAN PRESS/Jonathan Hayward

A prominent Indigenous leaders’ group has urged First Nations to not buy into the Trans Mountain pipeline expansion, saying the project poses significant financial risks and could become the “modern-day economic version of a smallpox blanket.”

In an open letter released March 15, the Union of British Columbia Indian Chiefs (UBCIC) cites rising costs and opposition from some First Nations as reasons to steer clear of the pipeline expansion, known as TMX.

“Opposition remains fierce among many of the First Nations whose territories are crossed by TMX,” says the letter, which was addressed to “First Nations Leadership” and signed by UBCIC’s three-person executive committee, including Grand Chief Stewart Phillip.

“We would remind you that it would only take opposition from a single Nation to cause significant delays and further cost overruns.”

Several groups are preparing to pursue Indigenous ownership of TMX. The federal government bought the existing Trans Mountain pipeline and the expansion project for $4.5-billion in 2018 after Kinder Morgan Canada Inc. threatened to scrap the project over legal and regulatory delays.

For Ottawa, striking a deal to sell part or all of the contentious pipeline to Indigenous owners could help temper opposition to a project that opponents decry as expensive, outdated and out of line with the government’s public commitments to achieve net-zero emissions and to reconciliation with Indigenous peoples. For First Nations mulling an ownership stake, the appeal lies in potential long-term cash flows and the prospect of greater control over projects that cross their traditional territories, through measures that include environmental monitoring and remediation. But the price, structure and financing details of a potential deal remain open questions.

Groups formed to pursue Indigenous ownership of TMX say they are still interested, even though estimated costs for the expansion have climbed to $21.4-billion from a 2020 estimate of $12.6-billion.

Trans Mountain Corp., the Crown corporation building the expansion, announced those updated costs last month, along with a targeted completion date of late 2023, almost a year later than planned.

TMX remains viable despite those higher costs, said Dennis Cornelson, the managing director of Project Reconciliation, a Calgary-based group proposing a model in which First Nations would own 100 per cent of the project.

“The underpinnings of the viability of this venture have not changed,” Mr. Cornelson said Thursday in an interview.

“All of the capacity on Trans Mountain, or most of it, has been contracted for 20 years by credit-worthy shippers. And that means that you have an assured cash flow from this pipeline … for 20 years. That’s what you’re buying,” he said, adding that the tolls include an annual escalator of 2.5 per cent to cover cost increases.

Oil companies pay tolls to move product through a pipeline.

In its open letter, the UBCIC says “it is almost certain” that some of the fixed toll costs will exceed that escalator and that the project’s toll structure means the owners will not be able to recover all cost overruns through tolls.

TMX has confirmed that existing contractual agreements mean only 20 per cent to 25 per cent of increased capital costs can be passed on to oil companies in the form of increased tolls.

Prospective buyers say the project can still turn a profit.

Indigenous ownership of the pipeline has been on the table since at least March, 2019, when former federal finance minister Bill Morneau announced a process to look at Indigenous economic opportunities in the project, including equity and revenue sharing.

The expansion project would almost triple the capacity of the existing Trans Mountain pipeline, which runs from near Edmonton to a terminal in Burnaby, B.C. There are 129 First Nations along the route.

Environmental groups and several First Nations, including the Tsleil-Waututh Nation, based in the Lower Mainland, oppose TMX over concerns such as potential spills. They have also challenged the economic rationale for the project.

Other First Nations are mulling whether and how to pursue an ownership stake.

Western Indigenous Pipeline Group last year teamed up with Calgary-based Pembina Pipeline Corp. to form Chinook Pathways and pursue ownership of TMX.

Pembina remains committed to the opportunity, a spokesperson said Thursday in an e-mail.

Other groups that have expressed interest include Nesika Services, a non-profit launched in January. Nesika says it wants to work with as many communities as possible along the pipeline route to maximize economic benefits from the project.

Natural Law Energy is also considering a stake. NLE describes itself as a coalition of First Nations with members in Alberta and other provinces. In November, 2020, it reached an agreement with Calgary-based TC Energy Corp. to make an equity investment of as much as $1-billion in the proposed Keystone XL pipeline project, with the transaction contingent on NLE securing financing. But those plans fell apart in January, 2021, when U.S. President Joe Biden revoked a key permit for Keystone XL, which would have carried oil from Alberta to the U.S.

In an interview Thursday, NLE chief executive officer Travis Meguinis said his group remains interested in TMX.

“We need to start taking back these major projects that have happened without us,” he said.

“These companies have built their empires on projects through our traditional territories, and what have they ever given back?”

Federal Finance Minister Chrystia Freeland said last month that the next steps in Indigenous participation in TMX will be announced this year.

With files from The Canadian Press

This story was originally published at globeandmail.com. Read it here.

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