A new report sheds light on the benefits and risks of Indigenous equity ownership in Canadian energy development
A new report from the Macdonald-Laurier Institute, Indigenous Equity and Its Growing Role in Canadian Energy and Resource Development, sheds light on the increasing significance of Indigenous equity ownership within Canada’s resource sector.
Heather Exner-Pirot, Director of the Institute’s Natural Resources, Energy, and Environment program and the report’s author, evaluates the phenomenon of Indigenous equity ownership. The report assesses its benefits and risks, financing models, asset types, and the potential impact of government-backed loans.
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According to Exner-Pirot, Indigenous equity ownership serves several vital purposes. She noted in her report, “When an Indigenous community has equity in a project, they have skin in the game. The project’s success is their success. This is what makes equity such a powerful tool from a proponent perspective: it helps align interests and incentives.”
The report outlines that Indigenous equity ownership achieves a number of objectives, including delivering tangible economic benefits to Indigenous communities from developments on their territories, gauging community consent for projects, expediting complex regulatory processes for resource and Canadian energy development, and enhancing Canada’s international prominence in resource and energy initiatives.
Over the last two decades, Indigenous Canadians have seen substantial improvements in their legal rights, leading to the development of strategies to increase their involvement in the resource sector. Traditionally, these strategies revolved around revenue-sharing mechanisms like payments, royalties, employment quotas, infrastructure development, and support for Indigenous-owned businesses. However, a more recent approach, equity participation – where Indigenous nations become stakeholders in projects conducted on their ancestral lands – has gained prominence.
In her report, Exner-Pirot explores the multifaceted benefits of Indigenous equity ownership. She emphasizes that when Indigenous communities hold equity in a project, their success becomes linked with the project’s proponents, aligning interests and incentives. This dynamic, she writes, makes equity a potent tool for fostering Indigenous engagement and economic growth.
Indigenous equity ownership, writes Exner-Pirot, serves several vital purposes, including delivering tangible economic benefits to Indigenous nations, gauging community consent for projects, simplifying regulatory processes for resource and energy development, and enhancing Canada’s international reputation as a leader in resource initiatives.
However, challenges persist. The report highlights the limitations of solely relying on government-backed loan guarantee programs, which, while aimed at minimizing risks for taxpayers and Indigenous borrowers, may only consider a limited range of projects. Exner-Pirot suggests that Indigenous investors and their partners should explore various alternative financial tools, such as payments, royalties, investment tax credits, royalty credits and trusts, and corporate shares.
“While equity is a valuable tool for Indigenous engagement, it is not a one-size-fits-all solution,” notes Exner-Pirot. “To achieve the best outcomes, we should expand our toolbox and consider a range of options.”
The report concludes by underscoring the transformative potential of Indigenous equity ownership in the Canadian resource sector and calls for ongoing dialogue and exploration of innovative approaches to further Indigenous participation and prosperity.
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