Feds open to First Nations ownership of new LNG

The federal government is open to helping First Nations buy into the Ksi Lisims LNG export terminal or its related infrastructure as opposition to the projects grows.

While announcing the new LNG project will be referred to the Major Projects Office for potential fast-tracking last week, Prime Minister Mark Carney said the three elements of the project — a floating LNG terminal, the Prince Rupert Gas Transmission (PRGT) pipeline stretching from northeast BC to Pearse Island on BC’s coast and a new transmission line to power the terminal — each have different ownership structures. 

Carney did not elaborate on what financial assistance Ottawa may provide, but in May the federal government doubled the funding available in its Indigenous Loan Guarantee Program from $5 billion to $10 billion to help Indigenous groups access capital to buy into projects. A spokesperson for the Major Projects Office confirmed the government is “open to looking at changes in ownership structures” to use the program for that purpose — but declined to comment on whether it would be used for any of the Ksi Lisims infrastructure.

Collectively, the Ksi Lisims terminal, the PRGT and the proposed North Coast Transmission Line are expected to cost more than $26 billion — with the bulk of the capital expected to come from fossil fuel companies and US private equity. 

In July, the Indigenous Loan Guarantee Program issued its first loan guarantee (worth $400 million) to 38 First Nations to purchase a 12.5 per cent stake in Enbridge’s Westcoast pipeline system. 

The program has been touted by federal officials as a way to support economic reconciliation and self-determination, but some critics say in practice it’s designed to launder fossil fuel subsidies through Indigenous nations. 

 Ottawa is “essentially using First Nations as a front man” for taxpayer investments in oil and gas, said Tara Marsden, Gitanyow Wilp sustainability director, in an interview with Canada’s National Observer. 

Marsden said the program is akin to “predatory lending … where you are targeting vulnerable people, people who likely won't have the means to repay significant loans, and may have inexperience in certain sectors where they're borrowing.”

In September, nearly 100 oil and gas company executives wrote to Carney demanding the federal government boost support for the sector, including by incentivizing Indigenous investment opportunities by providing loan guarantees at scale for equity ownership. 

In the past, one way companies compensated nations for resource projects on their territory was to sign impact and benefit agreements (IBAs), which spell out payments, job opportunities, environmental stewardship and other terms to secure a deal. 

But unlike IBAs, equity ownership is a riskier proposition. If a project does not generate expected returns, or defaults, the equity owners receive lower payouts. Moreover, lenders are paid before equity owners, further upping the risk for any nation that buys in. 

In July, the Yellowhead Institute identified four separate risks Indigenous nations buying into Ksi Lisims and the PRGT would face. They include:

• Market volatility;
• Construction complications;
• Project bankruptcy, cancellation or the ‘death spiral’;
• Global LNG supply gluts

Between few long-term contracts for LNG exports, an unclear price for the gas in an oversupplied market, likely cost overruns on the projects due to court challenges, potential blockades and the threat of fires, floods and storms damaging infrastructure or setting back construction schedules, the Yellowhead Institute argues First Nations purchasing equity in Ksi Lisims or the PRGT will face substantial risks. 

“In the case of Coastal GasLink and [the Trans Mountain expansion project], their budget estimates soared once major construction started, doubling and tripling, respectively,” the report notes. “PRGT’s initial budget has already more than doubled (140 per cent) before major construction, so further cost jumps seem very likely.”

If the PRGT were to see further cost increases, it could trigger a “toll-death spiral” where higher tolls on the gas shipped through the pipeline would be required to recoup costs, discouraging demand from shippers. Lower demand from shippers would then require higher tolls on remaining customers. 

“The higher tolls and subsequent losses of gas to market become self-fulfilling until the project is unviable and becomes a stranded asset,” according to the report.

At this stage it is unclear which parts of the project could come under First Nations equity ownership, but there are broadly three opportunities for ownership with the terminal itself, the pipeline to feed it and the proposed transmission line to power the terminal. 

At an estimated cost of $10 billion, the Ksi Lisims LNG terminal is a partnership between the Nisga'a Nation, Rockies LNG (a consortium of 11 major oil and gas companies) and Texas-based Western LNG (financed by US private equity firms Blackstone and Apollo Global Management). Blackstone CEO Stephen Schwarzman was a major donor to US President Donald Trump and Apollo’s founder Leon Black, who resigned in 2021, is facing a US Senate investigation over allegations he paid $170 million to Jeffrey Epstein. 

With an estimated price tag of between $10 billion and $12 billion, the PRGT is owned by the Nisga'a Nation and Western LNG.

The proposed North Coast Transmission Line is estimated to cost $6 billion and would be owned by BC Hydro. 

Western LNG has no track record of building any projects, let alone a major pipeline and LNG terminal. 

“These are US based vulture private equity firms run by billionaires, who are very close to the Trump administration,” said Richard Brooks, climate finance director with Stand.earth. “It should raise alarm bells right across the government, that these are not the companies they should be doing business with. 

“I'm concerned for the communities who will be left holding the bag at the end of this.”

The Union of British Columbia Indian Chiefs (UBCIC) said in a statement they are very concerned about the potential fast-tracking of new LNG infrastructure because of the threat it poses to First Nations’ inherent title and rights. 

“Canada is sending a clear message that corporate interests outweigh the climate, Indigenous rights, and the health of future generations,” said Chief Marilyn Slett, UBCIC secretary-treasurer, in a statement. “Projects like Ksi Lisims and PRGT are not consistent with the principles of reconciliation or with the urgent need to transition away from fossil fuels.”