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TC Energy has a deal to potentially sell 10 per cent

TC Energy has a deal to potentially sell 10 per cent
(L to R) Chief Justin Napoleon, Saulteau First Nations which is a member of the FN CGL Pipeline Limited Partnership; Tiffany Murray, Director of Indigenous Relations, Coastal GasLink; Chief Corrina Leween, Cheslatta Carrier Nation which is a member of the CGL First Nations Limited Partnership Management Committee; and Bevin Wirzba, Coastal GasLink President at the signing ceremony held at the Vancouver Convention Centre West on March 8, 2022. (CGL photo/Houston Today)

Last week’s announcement that TC Energy has a deal to potentially sell 10 per cent of the Coastal GasLink natural gas pipeline to First Nations along the pipeline’s route is not the first time this has happened in the north.

Enbridge, when it wanted to build the controversial oil-carrying Northern Gateway pipeline from Alberta to a planned Kitimat export terminal, a project shelved in 2016, also offered a 10 per cent equity buy-in to First Nations.

After one entity of the Gitxsan peoples took up the offer for a portion of that equity, a fierce internal battle erupted which eventually caused the deal to be cancelled by a majority vote of Gitxsan hereditary chiefs. Other First Nations also rejected the idea.

The potential of an ownership stake also surfaced with the Pacific Trail Pipeline, a project that would have pumped natural gas to a proposed LNG facility in Kitimat called Kitimat LNG.

The owners of that project signed what it called major and comprehensive economic benefits deal with 16 First Nations, a package that included equity in the pipeline.

When Kitimat LNG owners Chevron and Australia-based Woodside called off that project last year, the fully-licensed and environmentally-approved Pacific Trail Pipeline didn’t languish long.

It acquired a new life when it was purchased by Enbridge. Enbridge has not revealed what it plans to do with the project but has committed itself to keeping those 16 First Nations benefits agreements in place.

And now, with last week’s announcement, a number of those same First Nations are poised to take an ownership stake in the Coastal GasLink project once the pipeline goes into operation.

In the Bulkley Valley and Burns Lake area, the list includes Witset First Nation (formerly Moricetown), the Skin Tyee, the Wet’suwet’en First Nation (formerly the Broman Lake Band), the Burns Lake Band and the Cheslatta First Nation.

In all, 16 First Nations have signed up for the equity option from the Haisla where the pipeline ends in Kitimat to the Saulteau in the northeast where the pipeline begins.

They are represented by two separate investment entities, 11 under the FN CGL Pipeline Limited Partnership and five under the CGL FN Limited Partnership.

That total of 16 is four fewer First Nations than the number who have negotiated individual benefits agreements with Coastal GasLink.

But, says Roger Harris, a consultant who works for one of the two legal entities, says there is opportunity for those four to sign up later on.

“Each First Nation made their own commercial decision for their own reasons,” he said.

The equity option is structured so that it applies to all 20 First Nations who have existing benefits agreements with Coastal GasLink — each one can purchase 1/20 of that 10 per cent ownership offer.

It’s important to realize that the buy-in option is a strict commercial proposition, no different than any company or individual investing in a company.

And they are also different than those existing CGL benefits agreements with First Nations.

“Those were based on strength of [land] claim,” said Harris of the CGL agreements.

How much the 10 per cent will be worth which then determines how much each First Nation needs to raise to buy in won’t be known until the complete cost of the pipeline is known and gas starts to flow to LNG Canada.

That’s an advantage to the First Nations because it will be cheaper to borrow money once the pipeline is in operation compared to borrowing money during construction.

“Once in operation, there is less risk,” said Harris of how financial institutions determine what interest rate to charge.

Should a First Nation not decide to take up its buy-in option, it will be divided equally between the participating First Nations.

And the 10 per cent ownership option comes from TC Energy’s own 35 per cent ownership stake in the pipeline. It sold the other 65 per cent of the project to a company that manages the majority of Alberta’s public sector pension plans and to KKR, an Amercian multi-national investment company in 2020.

The buy-in options, should all or some come to the point of occurring, do need the consent of natural gas end user LNG Canada.

LNG Canada corporate relations vice-president Denita McKnight called the deal an important part of economic reconciliation.

“We applaud all those involved in this effort,” she said.

About the Author: Rod Link

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