Barry Vickers discusses a groundbreaking development: 16 First Nation communities in B.C. have negotiated the option to purchase a 10% equity stake in the Coastal GasLink pipeline.
Vickers is director of project development with the First Nations Major Projects Coalition, and a member of Saik’uz First Nation. He discusses the challenges and sometimes tough negotiations to get the deal done, and what it means to Indigenous communities to be owners of major projects that go through their territories: helping to bring about change, prosperity and economic reconciliation.
Leighton: Hello and welcome to another edition of the Energy Examined podcast, the podcast that discusses the issues facing Canada’s oil and natural gas sector with the insiders in the know, I’m Leighton Klassen. Today, I’m joined by Barry Vickers. He’s the director of project development for the First Nations Major Projects Coalition, also referred to as the FNMPC, a group that is working to advance opportunities for First Nations to obtain ownership stakes in major projects that run through their territories. Mr. Vickers is also a member of the Saik’uz First Nation. His nation is one of 11, along with five band councils that recently signed a historic agreement for 10 per cent equity in the Coastal GasLink pipeline. This pipeline will carry natural gas across northern B.C. and to the LNG Canada facility in Kitimat, where it will be prepared to be shipped to global markets. Barry, welcome to the show.
Barry: Good morning, [Leighton] Klassen.
Leighton: Thanks. Well, can you first summarize what exactly happened on March 9, when 16 First Nations signed on to the agreement? What does it mean for them?
Barry: First of all, I want to congratulate the First Nations that have signed on to that — to the 10 per cent equity option with the Coastal GasLink project. And what does it mean? Well, it means once the Coastal GasLink Natural Gas Pipeline Project has completed construction, First Nations will have an option to purchase a 10 per cent ownership stake in the pipeline.
Now, I think the important thing to understand and something that you know, I think would really were to help First Nations with, is to understand that this is only an option. The requirement to have the financing to actually acquire that 10 per cent equity interest doesn’t actually occur until the construction of the pipeline is complete. And I’ll get into that later on in our call here why that is. But it is only an option at this stage.
And you know, we have until the project is completed construction a whole bunch of time to do a whole bunch more due diligence around the project. And when I say due diligence, I mean, really, you know, making sure that we understand all the risks, the costs and all of the variables that will ultimately affect or go into making a decision, whether or not First Nations wish to become equity partners in the project. It again, was an option.
As it is an option, Nations will have the opportunity to withdraw if they decide that maybe the risk profile of the project or the return on investment is not as attractive in two years from now as it is today. Then they may decide, ‘I don’t want to be a part of this,’ so they can withdraw. Again, we have a two-year window here to raise the financing. We’re going to be working really here a lot over the next two years to work on raising the financing so that First Nations can exercise that option two years from now.
And when I say two years, I mean, really once construction is complete and that’s what I estimate will be the timeframe when that will be completed. Now, I think it really gives an opportunity for Nations, First Nations to get to know their partners, specifically TC Energy, KKR and AIMCo, who are the other major equity holders in Coastal GasLink. And to ensure, again, like I’ve said, to ensure that we have the financing in place when we have to exercise that option in around two years.
Leighton: I think a lot of our listeners would be like, ‘well, you know, you obviously painted a picture where this could all go ahead,’ but there could be some that back out of it. Are you optimistic at this point? And I know there’s like you said, there’s a lot to be done yet. But at this point, are you quite optimistic?
Barry: Yes. You know, we’ve done a whole bunch of due diligence to date and really understand all of the economics and risks around the project to date. Currently, there are and we’ve seen it in the media, I think reference to some of the cost overruns that are happening on the project and what the magnitude of those are, we’re not, has not been public information yet, but we expect they will be, and it’s been publicly stated, that they will be significant, so, you know, capital increase, capital costs or cost overruns can affect the outlook on a project.
But there are certain protection mechanisms, I think that will ensure that those cost overruns do not impact, hopefully the economics too much. And really right now and all the due diligence we’ve done to date, this project looks very attractive from an investment point of view, from a risk point of view. So, we’re very optimistic.
Leighton: Okay. I just wanted to back up for a second to talk about the group that you’re involved with. What is the First Nations Major Projects Coalition and what are you trying to achieve?
Barry: Now, so the First Nations Projects Coalition is an organization that really provides capacity support to First Nations in major projects and we are an organization that really looks to establish equity participation for First Nations and major projects. So, in this case, of course, Nations were looking to establish that 10 per cent equity option or equity participation.
And so, we wanted that. So as an organization, we were really set up to provide that capacity support to Nations as they work through the more complex processes of first determining whether they want to do that or not, and how they will organize themselves to participate in the project. So, there’s a lot that goes into all of that and we really want to — and of course, there was ongoing negotiations with the proponent, TC Energy to really define these precise terms around that equity participation. And so, we provided negotiation support in that project.
But we as an organization want to do that to all major projects we’re involved in. We are an independent, nonpolitical, business-focused organization. So, we really try to instill in Nations that you know and try to set up the structures that really take or create the conditions so that politics is taken out of decision making, it’s taken out of business development, really, and so that there can be that business focus. And so, we set up, you know, limited partnership structures, for instance, and really trying to bring that business focus.
We also work to help bring First Nations together. So, in this case, there were 20 First Nations impacted. Now, a number of First Nations may decide they just don’t want to participate. I think it was publicly announced that 16 of the 20 have signed to date. Others may still sign. There’s still a little bit of time to do that, but some may decide they don’t want to participate. But those that do, we’ve been involved in bringing 13 of the ultimately the 16 together or sorry, of the 20 together to work together as a collective in the project. So, so that’s a lot of work we do is really bringing First Nations together to work as a collective.
Well, I think the last thing we’ve done a whole bunch of work in helping First Nations to navigate capital markets and to identify financing for the equity participation they are seeking now. And in the case of major projects, sometimes you know, those capital raises or the need for capital financing is in the hundreds of millions of dollars. So, it’s very substantial and we want to and we’ve developed quite a bit of experience in that and help First Nations support First Nations in their pursuit of that financing.
Leighton: And how did you get involved with the FNMPC? And why is this important to you?
Barry: Well, that’s a good question. And so, I guess the first thing when I think about that is I was a private business owner myself, so I ran a very, you know, substantial business in merchandizing of timber here in northern B.C. and it was a successful, very successful business. So, I was in that case, I had a partner, but I was a 50 per cent equity owner in that business. Again, it became very substantial and I know what it’s like to be an equity owner. I know what the benefits of equity ownership is as it was a very successful business. And so, I think, you know, seeing that the major projects coalition was, you know, really wanted to assist First Nations in that endeavor for equity and participation. It appealed to me again being a private business owner.
I’ve also been involved with First Nations, you know, in economic and business development for over 20, probably closer to 30 years in all and many natural resources sectors, including mining, commercial infrastructure, forestry, electrical infrastructure so, so been involved with Nations for a lot of years. And so, this was somewhat of a natural fit for me.
I was also involved prior to the Major Projects Coalition; I was a lead negotiator in the Pacific Trails Pipeline project. Now that’s a pipeline project that would feed another, I guess the competing LNG facility in Kitimat, B.C., I called Kitimat LNG. You know, that project has never, really hasn’t gotten off the ground, unfortunately, but it’s still, you know, somewhat active and there is still the potential that it could move forward at some point. But again, prior to the coalition, probably more like seven or eight years ago, I was involved with that project. And was a lead negotiator in fact, in that project for the 16 First Nations that were impacted by that project, and I was able to negotiate a 33 per cent equity position for First Nations in that project. And you know, that’s a very interesting project in that it was sort-of one of the first projects out of the gate and it was somewhat of a, you know, just really new to northern B.C. or this part of northern B.C., you know, a natural gas pipeline. So, you know, once we negotiated 33 per cent equity, you know, we then went to look for financing and First Nations realized how hard it was to raise financing.
And I just don’t think Nations were prepared at that stage. And ultimately, Nations decided that, you know, that they weren’t going to be able to raise the equity or equity financing and ultimately decided that they would really sell that 33 per cent equity option back to the company and just take other benefits instead of the 33 per cent equity. And so, then the deal was renegotiated at that stage. But really, I think, you know, that project showed how access to capital for First Nations in major projects is a challenge and continues to be a challenge. And it’s something that needs to be addressed if First Nations are to become equity owners of major projects across Canada. I think again, that was sort-of prior to the First Nations Major Projects Coalition. But with that experience, I think they reached out to me and asked if I would get involved. I was happy to get involved.
Leighton: OK. You know, you touched on, you know, the fact that the, you know, the benefits of having an equity stake from your own personal experiences, which kind-of led you into this role. But you know, I’ll just ask what does it mean for Nations to take an equity stake in a project like Coastal GasLink? And how will they benefit First Nation communities over the long term?
Barry: Yeah, yeah. Good question. I think the first thing that comes to mind is that this is and I heard this from Chief Corrina Leween specifically on the Coastal GasLink project. This is the first time many First Nations have participated in an equity in a project of this scale. It’s a strong sign that First Nations can, with the proper advice and support, achieve meaningful participation in major projects. So, so that was, you know, I think, a good insight by Chief Leween.
It also means that they no longer have to view projects operating in their traditional territories as outside of their influence and participation. Historically, that has been the case on a lot of major projects. And so, you know, depending on the level of equity ownership, of course, if it’s, you know, substantial, Nations would be involved in fact, in the governance of those projects. Meaning that they would sit at the boardroom tables and would be involved in the decision-making now and in the future. And so that’s, you know, the ability to influence those projects into the future and to be able to be directly at the boardroom table making decisions really is something that I think is new for First Nations and something that is a new meaning for First Nations, I guess.
It means that they can share in the long-term financial benefits of major projects and by investing returns back into the communities and in housing and social programming and cultural programming. These are areas that are going to help First Nations grow and increase their level of capacity. It means long term investment in First Nations communities that over time promises to increase the quality of living in First Nations communities. Again, by investing in all that programming: cultural, education, skills development, housing.
All of these things lead to increased quality of life for First Nations communities. Over the long term, just to elaborate, it means skills, increased skills, capacity and sophistication that raise the ability of First Nations to be full and equal partners in the mainstream of the Canadian economy. It really levels the playing field that has long been, that has long put First Nations at a disadvantage. And I think finally, it just means, you know, economic reconciliation of the rights of title to the underlying resource. And I think this is a very important point.
Leighton: Now, you mentioned a lot of the benefits, which I can only assume that were communicated to the First Nations that signed on to this. But, you know, it did take a significant amount of time and effort. So, what were some of the biggest challenges in getting this across the finish line? And maybe you already answered the second part of this question, but what ultimately led to everything coming to fruition to date?
Barry: So. Yeah. You know, I think ultimately started, you know, what we’ve experienced in this project dealing with a big company like TC Energy, a very large-scale pipeline company like TC Energy, it really was trying to change the conventional corporate thinking around working or sort-of bringing in new equity investors into a project. So, I think that, you know, I think TC Energy expected that Nations would be organized, that the commercial terms of the deal would be straightforward, that financing, that Nations would be able to raise the necessary financing to participate in the equity offering. It really was not their issue.
And so, we needed that, and I guess really, you know, setting the terms for the deal sort-of on their side and expecting us to sort-of, you know, I guess, really abide by that. I think we determined that if we took that conventional approach, it probably was not going to work well, I shouldn’t say probably. It would not have worked. And so, you know, just changing that conventional corporate thinking that you’re working with First Nations that aren’t necessarily all working together, all have different views of the project and have really, at least in this part of the province, had less experience in working with major corporate interests.
So, we established a level, had to establish a level of collaboration with them. Before we finalize deal terms, let’s collaborate on those and make sure those terms work for First Nations. So, I think that was a very important part. You know, it’s one thing to offer equity, but if we can’t access capital or raise the financing to be able to complete that equity purchase, then really it amounts to an empty promise. And so, I think we really have to work with industry to say, you know, it’s one thing to offer equity, but let’s make sure the deal terms allow us to raise that financing.
So, I think I mentioned earlier that, you know, really allowing us to invest once the project is completed really reduces the risk profile of the project because then it’s completed, costs are known, a lot of the construction risk has been eliminated, if not all. And so that makes it much easier for us to finance the project. So that was something we established throughout negotiations. But originally, Coastal GasLink, in fact, wanted us to invest earlier on in the project, and First Nations were just not equipped to deal with that level of risk.
And I think another part here is really establishing trust with First Nations. I think that was an important piece. And so, I think we did that and that really assisted in bringing this deal to fruition. Yeah. And I think ultimately, First Nations truly wishing to become equity owners in the major project. I mean, once they understood and got more comfortable with the project, with the equity opportunity, and as we are able to explain it in terms that were more familiar to them, they become much more comfortable with it. And by establishing that level of trust, I think really what we did is we really drew out of them that true desire to become equity owners in a major project.
Leighton: Yeah. Well, and you know, kind-of a broad question here, but I mean, do you think this agreement as it stands and if everyone remains optimistic and everything goes through, you know, will this increase overall support for the pipeline project, do you think?
Barry: Tough question, but yeah, perhaps. The road to attaining the 10 per cent equity, you know, option here in this agreement, I think really raised First Nations understanding of what equity participation means. And there was a lot to it. It’s really first understanding the deal and all the complexities around evaluating risk and level of return and governance and all of the things that go into the commercial analysis of a project.
I think, you know, really and then sort of what that means in terms of financing and being able to ultimately execute the acquisition of that 10 per cent. All of that process has been a long road here. In fact, we started over two years ago and here we are. And it really raised the level of understanding for First Nations. So, I think that helps and gives Nations a much more of an appreciation and how that impacts support for the project, pipeline project –. I think it probably does, yes. I shouldn’t forget that there are benefits agreements here as well. And aside from the equity option, Nations have signed impact benefits agreements. Well, those benefits agreements, I think, as Nations sort-of look back at them now, think that maybe, maybe they were missing certain components and maybe they weren’t, you know, weren’t as rich as they would have liked to have seen. And so, I think they, as future projects come, you know, I think they’re going to be much more savvy and much more experienced and they’re going to approach it differently. And so, their support for future projects I think is going to be much more, I don’t know, cautious, I guess and it’s going to be, they’re going to want to make sure that they achieve the benefits that really help to support their communities. Some Nations are still not supportive, really, we’ve seen in the media. You know that that’s, you know, flared up and specifically in this project and some Nations may not ultimately participate in the equity option because they ultimately just don’t support the project, support pipelines.
So, you know, I would say, though, ultimately the fact we’ve had a vast majority of Nations here sign the equity option and all of the Nations have signed impact benefits agreements, that there has to be some level of support out there or a very strong level of support ultimately. And I think the ability of companies to meet environmental performance commitments will help in terms of that support. So, it’s one thing, you know, building the pipeline and making sure that you meet your environmental commitments in the in the construction of that pipeline. And I think TC Energy’s worked very hard to meet those commitments, but there’s also an ongoing maintenance of that pipeline over many years. And so, you know, making sure that they continue to meet those commitments is going to be important in terms of support.
Leighton: Now, one of the one of the technicalities I want to ask you about is, I understand there is consideration for a 10 per cent stake or a 10 per cent set aside, and obviously this is all based on the 10 per cent stake. So, can you tell me briefly what was the difference between that and why was the stake in the end preferable?
Barry: Yeah, sorry. Let me just clarify that and maybe just sort that out a little bit here. So really, it’s not really a stake or set aside distinction. There was an opportunity to acquire additional, an additional 10 per cent stake. So originally so when TC Energy probably now, what would it have been – 2018, 2019, I think — went out on and put out equity for sale in the project to international investors and worldwide. And that was a competitive process where they put out for sale 65 per cent of the company.
Now, as we now know today, KKR and AIMCo were successful in that, what they call a commercial auction. We participated as well in that competitive international process and were invited to that process. And in fact, we forged a, I guess, a bid and we were part of the KKR, AIMCo bid that ultimately went in for the 65 per cent of which we would have owned 10 per cent. And so, we were successful in that. Unfortunately, you know, being a very sort of mainstream commercial process, you know, Nations were tasked with trying to put together financing within a very short timeframe, under six months, probably more like four months to raise hundreds of millions of dollars to be able to acquire that additional 10 per cent. We were not able to do that in that short timeframe.
And so unfortunately, we had to relinquish that 10 per cent back to KKR and AIMCo, who currently hold it. And while they hold 65 percent in total. And then aside from that, though, TC Energy had set aside 10 per cent. So, we had ultimately an opportunity to acquire 20 per cent of this project. And unfortunately, just with the timeframe involved, we just weren’t able to raise the financing for the initial 10 per cent offer through a competitive process.
Leighton: Okay, I see. OK, well, thanks for clarifying that. It just goes to show how much work was done, you know, in the negotiations and in the last two-plus years on this so really interesting, just all the fine details. We won’t get too much into the weeds, but I did want to ask you one of the narratives out there and you touched on this earlier. You know, in the media is that Indigenous Peoples are universally against resource development. However, this agreement demonstrates Indigenous communities are acting as partners in projects. So, what does that mean for the narrative around Indigenous Peoples in resource development?
Barry: I think ultimately, environment, the environment is very important to First Nations and is really integral to their way of life or our way of life, and the need to ensure protection of the environment is very important to First Nations. I mean, the fish, the wildlife that First Nations rely on in their diets are very important. And so, when those, when the environment is impacted, sometimes those important resources for Nations can be — well and recreation, the spiritual well-being as well — you know, that can all be impacted by major projects. And so, I think, you know, I think that’s part of the narrative.
I think the balance of economy and environmental impacts so definitely the environment is important to First Nations, integral to their way of life. But I think First Nations are also, you know, cognizant that, you know, there needs to be an economy, that our people need to be a part of that economy. And so, there’s got to be a balance of economy and environmental impact. So, I think that’s an important part of the narrative. And I think ensuring that First Nations are involved, are included in all aspects of a project’s development, ensuring that First Nations’ interests, principles and values are incorporated into resource project development. I think projects have a better chance to succeed. So again, that I think is an important part of the narrative. And lastly, I think establishing strong and lasting relationships. I think those and you know, I think in the case of the Coastal GasLink project, we’ve developed a very strong and I think lasting relationship.
And I just sort of want to say a little bit to that is that, you know, is it a smiling, happy, happy relationship where everybody is, you know, having lunches and dinners and that and getting along? I wouldn’t say that no. In fact, a lot of times we’ve been butting heads at the negotiating table and there’s been hard negotiations. But I think out of that, there’s a much stronger understanding by each side as to each other’s interests and perspectives. And I think that’s helping to lead to a more lasting and a growing and evolving relationship to move forward. So, I think that’s all part of the narrative as well.
Leighton: OK. And last question I want to ask, you know, with this agreement signed, so much has taken place. But with this agreement signed, what are the kind-of immediate next steps or not even immediate, but just, you know, in the next several months?
Barry: Well, again, you know, this is an option. In two years, we need to exercise that option. So, I think we need to do more diligence and see what this project looks like in two years from now. What have been the cost overruns? Because we will by that stage, know what they’ve been. How does that impact the economics of the project? Has the risk profile of this project changed in any significant way? Are there future phases of the project and what does that mean? So, these are and you know, I think we have to do in terms of more due diligence. And in two years from now.
But ultimately, we need to raise that financing in two years. So, we, you know, we really want to work with First Nations over the next two years and make sure that First Nations have in place the financing to be able to exercise their option to be owners in this project. So, there’s going to be a lot of work done in that area and we’ve done like, I think you’ve I’ve sort of alluded to in my previous comments, we’ve done a whole bunch of work in the area of financing. We know the challenges. I think we also know what the solutions are.
And so, we will be working to identify financing solutions for First Nations that work for First Nations. And I think not all First Nations may want to finance this in the same way. So, we’re going to be sensitive to that as well. And we’re going to try and figure out how that works. So that First Nations that have a different approach to financing, then we want to work with them. So, a lot of work to do their own financing. As well, I think, you know, the Nations have created a limited partnership called CGL First Nations Limited Partnership. And I think we’ve got a lot of work to do in terms of governance in that limited partnership.
They have been working together to date, but I think we just want to sort of do more work there so that as you know, there will be increased need for decisions and decision-making as we go on. So, we want to make sure that governance structure within the limited partnership works for First Nations and that everybody understands the protocol and the approach that goes into decision-making. And that it’s fair. Ultimately that that governance structure is fair for everyone. And then I think, you know, the last thing as just keeping First Nations focused on the goal here. You know, we have a few years here, but we want to just keep them focused that, you know, two years goes by fast. And before you know it, First Nations will have to come up with substantial financing and we’ll have to make a very, in some cases for some communities would be a very substantial financial decision and to put up substantial funds or financing to become equity owners.
Leighton: OK, great. Well, you know, we’re, you know, it’s really exciting and think we’ve kind-of talked about, you know, a lot of work has been done on this and a lot more ahead. So, we do thank you for being on the show, Barry, and hope to talk to you again to get an update, you know, before the two-year mark anyway.
Barry: Yes. Thank you, Leighton. And, yeah, good discussion. Thank you so much.
Leighton: No problem. Barry Vickers is the director of project development and a member of the Saik’uz First Nation. Stay tuned for our next Energy Examined podcast, and if you like this one, please share it with a friend and make sure you subscribe on whatever podcast you have. For more stories and interviews on Canada’s energy industry, check out our website, context.capp.ca. See you next time! Thanks.