The Haisla are a First Nation of about 1,500 members, whose traditional territory encompasses 13,000 square kilometres on BC’s North Coast. Roughly half of the members live in Kitamaat Village at the head of the Douglas Channel, 10 kms from Kitimat and about 45 kms from the airport at Terrace.
For more than 9,000 years, the land and waters of the region have sustained the Haisla people and their traditional activities of hunting, berry picking, gathering, and fishing. Today, that land continues to sustain the Haisla Nation not just through the rich bounty of its natural resources, but through the potential of north end of the Douglas Channel to become a key export hub for British Columbia’s growing liquefied natural gas (LNG) industry.
In less than a decade, the Haisla Nation has leveraged the strategic location of its traditional territory to go from a Nation on the verge or remedial management to an eagerly sought after partner and key stakeholder in several multi-billion dollar LNG projects. In addition to helping the Nation take great strides towards economic self-determination, the Nation’s recent economic development experience has provided important lessons for companies seeking to develop resources projects in First Nations territory.
Liquefied natural gas
Liquefied natural gas is an in-demand commodity created when natural gas is cooled to around -160ºC. Cooling the natural gas shrinks it to 1/600th of its original volume, making it easier to store and transport to markets around the world. Once the gas arrives at its destination, it is regasified and piped to homes, businesses and industries.
In the Asia-Pacific region, countries are increasingly turning to natural gas to produce the power they need. In BC, the Provincial government has touted liquefied natural gas as the industry that will make BC debt free by triggering $1 trillion in cumulative GDP within British Columbia over the next 30 years.
The Haisla Nation is ideally positioned to take to advantage of this potential for a couple of reasons. First, the Douglas Channel provides a protected deepwater port that is ice-free year-round and has been used for deepwater vessels for decades. Secondly, the proposed LNG facilities in the Douglas Channel are relatively close to the BC-Alberta gas fields and existing natural gas transmission infrastructure.
The Haisla are currently involved in several major LNG projects that are at various stages of development. They include:
- Kitimat LNG (KLNG) (with Apache Canada and Chevron Canada)
- Pacific Trail Pipeline (with Apache, Chevron and 14 other BC First Nations)
- Douglas Channel Energy Project (with LNG partners)
- LNG Canada (with Shell, Mitsubishi, Korean Gas and PetroChina)
Kitimat LNG (KLNG) is a $4-billion project that will see natural gas liquefaction, LNG storage and marine on-loading facilities built on the Haisla First Nation’s unoccupied Bees Indian Reserve No. 6 at Bish Cove (about 10 kms from Kitamaat Village on the west side of Douglas Channel.) From there, the LNG will be shipped through the Douglas Channel to customers in the Asia-Pacific region.
The original KLNG project description was filed with the Province of BC’s Environmental Assessment Office in 2004. A project description is the first step in the regulatory process leading to a full environmental assessment of a project.
Following two-years of negotiations, the Haisla signed an impact benefits agreement with the original proponents, which included an option to purchase 35 per cent construction equity in the project. When the original group sold the project to the Houston, Texas-based Apache Corporation, Haisla sold its option back to the company for $50 million as part of the sale. Today, KLNG is jointly owned by Apache Canada Ltd. and Chevron Canada Ltd..
The sale of its option provided immediate and long-term benefits for the Haisla Nation. Roughly two-thirds of the $50 million was placed in a long-term investments and the remainging third was distributed equally to 1,700 band members.
The lease of the Bish Cove site to KLNG was approved by 93% of band members in a referendum late in 2010. As landlords for the project, the Haisla generate annual revenues of $4 million in rent and taxes and are also exploring contracting and employment opportunities.
An early works program has been underway at the KLNG site since 2011. This includes clearing and tiering the site, creating land and water access to it and upgrading the local forest service road. KLNG is currently carrying out a Front End Engineering and Design study, which will provide certainty around project design, construction timelines and costs and labour force requirements.
In October 2011, the National Energy Board granted the KLNG project a 20-year licence to export 10 million metric tonnes of LNG per year.
To create certainty and maximize the chances that the KLNG project will be completed, the Haisla signed an agreement with Canada and the Province of BC in January 2013 to create The Haisla Natural Gas Facility Regulations. The regulations were created under the First Nations Commercial and Industrial Development Act, which provides for the creation of regulations for complex commercial and industrial development projects on reserve land.
The agreement ensures that administrative, monitoring and compliance activities for the LNG facility will be performed and enforced by provincial officials, and gives the provincial government the authority to administer and enforce federal regulations. It also allows the KLNG proponents to proceed in a predictable way with clear regulatory oversight.
Once constructed, the KLNG facility will be the most valuable on-reserve industrial facility in Canada.
Pacific Trails pipeline – First Nations (PTP) Group Limited Partnership
A critical component of the KLNG project is the transmission of natural gas from the Horn and Liard River basins in northeastern BC to the liquefaction facilities on the North Coast. The Pacific Trails Pipeline (PTP) is a 463-kilometre natural gas pipeline that will connect the KLNG terminal near Kitimat to natural gas supplies in British Columbia and Alberta via the Spectra transmission system at Summit Lake, 55 kilometres north of Prince George. The $1-billion pipeline is being developed by the Pacific Trail Pipelines Limited Partnership (PTPLP), which, like the KLNG project, is also jointly owned by Apache Canada Ltd. and Chevron Canada Limited.
Between Summit Lake and Kitimat, the pipeline will travel through the traditional territories of 15 First Nations: the Haisla Nation, Kitselas First Nation, Lax Kw’alaams Band, Lheidli T’enneh First Nation, McLeod Lake Indian Band, Metlakatla First Nation, Nadleh Whut’en First Nation, Nak’azdli Band, Nee Tahi Buhn Indian Band, Saik’uz First Nation, Skin Tyee First Nation, Stellat’en First Nation, Ts’il Kaz Koh First Nation, West Moberly First Nations and Wet’suwet’en First Nation.
At the outset of the project, the Haisla recognized the inevitable challenges and delays that would occur if PTPLP carried out 15 separate negotiations with First Nations that each had their own set of environmental, cultural and financial issues they wanted addressed. The issues of rights and title issues where traditional territories overlapped would also need to be addressed by all parties.
As one of the key First Nation stakeholder in the KLNG project, the Haisla were instrumental in bringing the 15 First Nations together to form the First Nations (PTP) Group Limited Partnership (FNLP). The goal was to negotiate a commercial deal and secure significant, reliable and long term benefits from the Pacific Trails Pipeline project.
By negotiating early and as a collective body, FNLP would be able to create greater value for Apache and Chevron, and a better settlement for themselves, by reducing the project owners’ risks and helping them get and earlier return on their investment by facilitating and speeding up the negotiation process.
In February 2013, the Province of BC, PTPLP and FNLP signed a benefits agreement that will provide the First Nations with $200 million in financial benefits over the life of the project. The agreement is also expected to provide the First Nations with business and training opportunities, along with an option for FNLP to acquire an equity interest in the project.
That same month, the Province of BC announced a benefits agreement that will provide
First Nations Limited Partnership with an additional $32 million for non-equity investment in the pipeline.
Douglas Channel Energy Project
The Douglas Channel Energy Project (DCEP) is a partnership between the Haisla Nation and Houston, Texas-based LNG Partners, a private equity firm that focuses on investment and development within the LNG industry. DCEP will feature a small-scale facility that includes a barge-based liquefaction plant to convert natural gas to liquefied natural gas. The facility will have a new jetty and berth with loading facilities, along with an LNG buffer tank, electrical substation, and other support facilities on land adjacent to the LNG barge.
Before it filed a project description with the Province of BC, LNG Partners approached the Haisla Nation, said they recognized that the Haisla had rights and tile that needed to be accommodated and suggested a 50/50 partnership.
The Haisla Nation agreed, and its contribution to the partnership was the purchase of fee simple land for the project on the west bank of the Douglas Channel. The Haisla Nation has a pre-existing agreement with the owners giving the first rights to purchase of the land. As co-owners of the project, the Haisla will share in all future revenues from the project with their only financial risk being the value of the property.
This $400-600 million project will use the existing Pacific Northern Gas pipeline to bring gas from independent producers in BC and Alberta, liquefy it at the project site, and export it to international gas markets. In February 2012, the National Energy Board granted DCEP a 20-year licence for the export of liquefied natural gas. Initial production will be approximately 700,000 tonnes of LNG per year.
LNG Canada is a partnership between Mitsubishi Corporation, Korean Gas, PetroChina and Shell, the world’s largest LNG supplier. In April 2013, the proponents filed a project description with federal and provincial environmental assessment agencies for a multibillion-dollar liquefied natural gas plant, storage facilities and marine terminal, located in Haisla territory. Natural gas for the LNG Canada facility will be transmitted through a new 700-kilometre pipeline that will be built between Kitimat and northeastern BC.
While the project proponents did not need to address the issue or rights and title, because the site land already owned by Shell, like LNG Partners, they addressed economic and environmental issues with the Haisla Nation before filing their project description.
In February 2013, LNG Canada received a 25-year natural gas export licence from the National Energy Board. Project construction is expected to start in 2015 with a completion in 2019 or 2020. The facility is expected to have a life of 25 years.
HAISLA BUSINESS OPERATIONS
For the Haisla Nation, one of its challenges when negotiating its first LNG partnership was capacity.
“We needed financial expertise,” said Ellis Ross, Chief Councillor. “Financing, we quickly understood, is a totally different language, and it’s a totally different world from what were used to.”
His advice to other First Nations in the same position is, “Get good advisors that are already in the game,” which the Haisla Nation did by hiring a rights and title corporate lawyer and securing the financial advisory services of a private investment bank.”
In response to the increasing number and growing complexity of its economic opportunities, the Haisla Nation Council (the Band’s elected governing body) also created Haisla Business Operations (HBO) in 2010, an arms-length economic development arm to separate economic development and business opportunities from political concerns and issues.
HBO’s role is to identify and assess economic opportunities, conduct negotiations with proponents, implement any agreements that are reached, and manage the operational side of arrangements for the benefit of the Haisla people.
HBO is incorporated with its own Board of Directors. One branch of HBO negotiates benefit agreements on behalf of the Nation, which are usually carried out at the provincial, national and international levels. The other branch manages the logistics of business development and roll-out, which occur at the regional and local level.
Among the benefits of HBO are its ability to objectively assess all the potential projects coming through Haisla territory and to act quickly on projects that can create employment and entrepreneurial opportunities for Haisla people.
“When it comes down to a decision that has to be made in a short time frame, it is better to have a corporation that actually takes your direction, takes your vision and makes a decision maybe within a week,” said Ross. “[As a Council] we’re stuck on Robert’s Rules of Order, the Indian Act, rights and titles and all that stuff, so it’s really nice to have these corporate structures there to make quick efficient decision-making.”
The Haisla business philosophy is as follows:
- We support environmentally responsible development, and every proposal must consider its cumulative land water impact.
- We recognize that including First Nations peoples does not mean excluding non-First Nations.
- We understand that economic reward means accepting an element of risk.
- We prefer to get things done, such as signing agreements with governments and proponents, away from the Treaty table.
And whereas consultation with First Nations regarding industrial projects on their territory typically occurs during the end of the environmental review process, HBO advises proponents that through early and respectful engagement with the Haisla, HBO “can accelerate the timeline for major projects beyond what standard processes that involve rights and title consultation and other legalistic procedures can achieve.”
As Ross told “Business in Vancouver” newspaper in 2012, “If there is one piece of advice I could give to the business community, it’s that approach [is] everything, first impressions is everything. And if you don’t listen to what a First Nation community is telling, then your project is probably not going to go anywhere.”
Speaking to an Indigenous business sypmosium in December 2012, he added:
“There are two approaches to come talk about business in our territory. You can use a traditional approach where you apply to the government, and the government takes your project proposal puts it into a formal referral, sends it to our Council, and then we start establishing our relationship with the Province on rights and title, consultation, accommodation, environmental stewardship, all those principles.
“For the companies that are sincere about including First Nations, you can come and make contact with us first before you make your application. If you do that and we address the fundamental principles of what Haisla is looking for, then we go to the provincial government together, and we can file an application together with Haisla’s interest in that application. What we’re trying to do is streamline the permitting process and make sure the project gets off in an efficient and timely manner.”
In addition to its involvement in LNG megaprojects, the Haisla Nation is aggressively pursuing numerous other business opportunities in the Kitimat area in sectors that will support or benefit from or the construction and operation of LNG facilities. Through HBO, the Haisla Nation has established several joint ventures, which are typically Limited Partnership Agreements (LPA) where the Nation owns 51% of the business. Most of its joint ventures are financed by the managing partner, with the Haisla not putting up any money.
“We don’t really focus on revenues at this point, we’re just getting out of the gates, “said Ross. “We had a choice to make: Do we put all of our resources into teaching our people how to become business owners and go after contracts, which is a whole different world, or do we just establish joint ventures and use the expertise that’s out there already to provide the training the revenues and the contracting opportunities.
“That’s where we put our focus, but every one of our agreements, whether it be joint venture or contract opportunities, we build into it the option of our band members actually taking over that opportunity at some point.”
Haisla Nations’ joint ventures includes limited partnerships with companies involved in reforestation, waste management, heavy transportation, civil construction, electrical contracting, engineering, food service, modular structure and marine services, among others.
One example is HaiSea Marine Services Ltd., a joint venture between Washington Canadian and the Haisla First Nation. The marine transportation will provide tug and barge towing services, vessel docking/escort services and marine workers where needed along the over 200 km of waterways in the Douglas Channel.
Through its participation in the liquefied natural gas sector, the Haisla Nation has already generated millions in revenue and investment for its members, along with the potential for hundreds of millions more.
A key component of the Haisla Nation success and the industry’s progress to date has been the Nation’s ability to create certainty for LNG proponents through mutually beneficial partnerships based on respect for Haisla values. It’s an approach that is clearly benefitting the Haisla Nation, the Province of BC, Canada and other First Nations, as the only three LNG projects in BC with national export permits are on the Douglas Channel on Haisla land.