Bloomberg News

Harper Collides With Native Canadians' Natural Resources Claims

January 27, 2014

Alberta Oil Sands Site

Heavy equipment at work at an oil sands site in Alberta. The Fort McKay native reserve is nearby. Photographer: Kevin Cooley/Redux

Back in the spring of 2012, while walking in the deep woods of northern Ontario, Sonny Gagnon stumbled across a collection of surveying equipment among the towering spruce trees. Gagnon is chief of the Aroland aboriginal tribe, a band of 450 people living in a village of ramshackle houses surrounded by swampy muskeg. He tracks everything that goes on in his community. And the surveying tools weren’t supposed to be there.

“I was ticked off,” he says, after learning that the equipment belonged to a subcontractor of Cleveland-based mining company Cliffs Natural Resources Inc. (CLF:US)

It turned out Cliffs had plans to mine for chromite to the north of the Aroland reserve and to build a road through the territory to transport truckloads of the mineral to a railhead, Bloomberg Markets magazine will report in its March issue.

“They weren’t consulting us on what they were doing on the land,” Gagnon says. “I told them to leave and that we didn’t want them back.”

Gagnon and his native band then set up a roadblock to monitor traffic. Cliffs suspended plans for the mine in November, citing in a statement the “risks” associated with its ability to transport the ore for processing.

Cliffs officials didn’t respond to repeated requests for comment.

Aboriginal Canadians from Quebec to British Columbia are asserting their rights. Energized by a 2004 Supreme Court decision that requires governments to “consult and accommodate” aboriginal groups before miners and oil and gas drillers encroach on their lands, the natives have blocked half a dozen major projects since the court ruling.

Harper’s Dilemma

That includes a proposed C$6.5 billion ($6 billion) oil pipeline from Alberta to the Pacific Ocean and a shale gas project in the eastern province of New Brunswick.

The natives’ activism complicates Prime Minister Stephen Harper’s grand plan to boost the Canadian economy with C$650 billion worth of natural resource projects over the next decade in a quest to make the nation an “energy superpower.” Among the government’s priorities are mining projects in the so-called Ring of Fire region of northern Ontario, stepped-up oil extraction from Alberta’s tar sands and natural gas exploration in British Columbia.

Native Canadians are demanding a say in how these projects proceed, and the 2004 court decision forces the government to give them one.

’Huge Issues’

“These are huge issues, which have enormous implications for the economy of the country,” says Bob Rae, a former Ontario premier who, until April 2013, led Canada’s federal Liberal Party. “They’re right at the center of Canada’s economic life.”

The natives have a powerful political ally in Rae, who has agreed to negotiate with mining companies and the provincial and federal governments on behalf of the nine chiefs of the Matawa First Nations, including Gagnon. The council holds sway over northern Ontario lands where major mineral discoveries were made as recently as 2008. Mining companies, including Cliffs and Toronto-based Noront Resources Ltd., estimate the region contains C$50 billion worth of copper, zinc and chromite.

The aboriginals’ latest show of power came in New Brunswick in October and November, when demonstrators gathered in opposition to Houston-based Southwestern Energy Co (SWN:US).’s plans to drill for natural gas on native lands. The protesters clashed violently with police, at one point throwing Molotov cocktails that incinerated six police vehicles.

The company says the disruption in its operations cost it $60,000 a day. It got a court injunction that stopped the protests and proceeded with exploratory drilling in December.

‘Begin by Listening’

Confrontations such as the one in New Brunswick are proof that the Canadian federal government has mishandled its mandate to consult with the First Nations over such projects, says Paul Martin, an aboriginal rights advocate who led Canada as prime minister from December 2003 to February 2006.

“If you want to have a relationship, begin by listening,” Martin says. “And the federal government seems incapable of doing so.”

Prime Minister Harper has pledged to “reset the relationship” between government and Canada’s indigenous people. “Certainly, in the past, lack of trust on both sides has held us back,” he said in 2012.

Canada is facing more challenges to resource-extraction projects from aboriginals than any other nation in the world, according to an October report by Fredericksburg, Virginia–based First Peoples Worldwide, which provides grants and services to native tribes. The activists are divided into two groups. The so-called traditionalists want to shut out development and preserve native lands for hunting and fishing. “Progressives” want to share in the enormous wealth being produced by the country’s resource companies.

Idle No More

Often both points of view are represented in the same native band, creating conflict. Both can be found in a national movement called Idle No More, which has staged protests around the world -- including in Stockholm and London -- demanding jobs, education and economic development for Canada’s indigenous communities.

Idle No More made headlines in January 2013, when it staged protests that blocked train traffic between Montreal and Toronto.

Canada is home to 1.4 million natives, who make up 4.3 percent of the population, compared with the U.S.’s 2 percent, according to the most-current census data. More than half of Canada’s First Nations peoples, as they are known, live and work in cities; the rest are scattered across six time zones on more than 600 reserves.

Income Disparity

Unemployment is as high as 90 percent in native communities such as Aroland, and the median per capita income was C$14,000 in 2005, the latest year for which figures are available. The per capita income of all Canadians today is C$40,650, according to Statistics Canada.

Canadian resource companies say they’re eager to accommodate the First Nations -- so long as they don’t make unreasonable demands. In August, Calgary-based Athabasca Oil Corp. won approval from Alberta’s energy regulator to start up an oil sands project in northeastern Alberta over the protests of the Fort McKay First Nation, whose traditional hunting grounds are adjacent to the proposed site.

The Fort McKay group wants a 20-kilometer (12-mile) buffer around the bitumen drilling operation. Athabasca rejected the idea, but on Dec. 17, Sveinung Svarte, its chief executive officer, said, “It is our view that a mutually acceptable solution is achievable.”

Angry Impasse

Athabasca’s shares sank 38 percent in 2013 amid uncertainty about the project, which could produce 250,000 barrels of oil a day at full capacity.

On the Pacific coast, Calgary-based pipeline builder Enbridge Inc. has reached an angry impasse with the natives. The company wants to lay a 1,178-kilometer line called Northern Gateway to connect Alberta’s oil sands with the Pacific port of Kitimat, where the oil would be loaded onto tankers and shipped to petroleum-thirsty Asian markets. The pipeline would traverse British Columbia’s mountains and salmon streams.

The pipeline is opposed by native groups along much of its proposed route because they say oil spills and leaks would destroy their hunting and fishing grounds. The Yinka Dene Alliance, a group of six tribes whose lands span the pipeline’s proposed route to the sea, have banned any Northern Gateway contractors from setting foot on their lands.

Pipeline Politics

The Coastal First Nations, an alliance of nine aboriginal groups on the British Columbia seashore, is equally determined to block Enbridge’s pipeline, and joined dozens of First Nations that voiced their opposition to the pipeline during 2012 regulatory hearings by Canada’s National Energy Board.

The board gave the project a green light in a December ruling, placing 209 conditions on the pipeline, many of them designed to protect the environment -- and, by implication, native lands. Enbridge says it will spend an extra C$500 million to boost the thickness of its pipes, will install dual leak detection systems and will post permanent staff at remote pumping stations to minimize the risk of a spill.

“I’ve been in a number of locations in B.C. trying to talk to people about the project, but, more importantly, listening to what they are saying,” Enbridge CEO Al Monaco says. “I don’t say a heck of a lot. I basically listen to what the concerns are.”

The natives aren’t persuaded. Art Sterritt, executive director of Coastal First Nations, stands aboard a 20-meter (70-foot) boat plying the waters near Prince Rupert and points across the Hecate Strait at a string of buoys marking the spots where the seabed was seeded with juvenile scallops in 2012.

Shellfish Economy

The fragile shellfish beds are part of an effort to rebuild a traditional aboriginal economy based on aquaculture.

“The real foundation of who we are is shellfish,” Sterritt says, as a pod of whales surfaces within view of the boat. He adds that he doesn’t want to take a chance that an oil spill will destroy the pristine bay.

“We are still hopeful that they will see the merit of stopping this project,” says Arnold Clifton, chief councilor of the Gitga’at First Nation. “The recommendation is by no means the final say. All options are on the table.”

Prime Minister Harper, who also faces opposition to the pipeline from non-native British Columbians, has until June to decide the project’s fate.

Their recent victories in holding up projects have emboldened the aboriginals.

‘We Own It All’

“We have the authority to enter into any agreement that we want to,” says Gary Allen, chief of the Nigigoonsiminikaaning First Nation, which is negotiating logging rights on its land in northern Ontario with Montreal-based Resolute Forest Products Inc. and other companies. “Whether with the mining sector, whether it’s in forestry, whether it’s water -- we own it all,” he says.

In reality, what the natives own or control is a matter of dispute -- and has been since Canada was founded. Although the 2004 Supreme Court decision forced the government to negotiate with First Nations when a company encroaches on land they occupy, the court did not give aboriginals veto power over government-backed resource projects.

Canada has signed 11 major treaties with natives since 1867, when the country gained independence from Great Britain. The treaties guarantee that the natives can practice their traditional way of life without giving them ownership of any land, says Thomas Isaac, a partner and head of aboriginal law at Toronto-based law firm Osler, Hoskin & Harcourt LLP. The Supreme Court decision clarified Ottawa’s responsibilities, Isaac says.

Fair Treatment

“Government is the centerpiece of the wheel,” he says. “The courts are going back and relying on ancient principles around fairness and equity. This is about government treating its subjects fairly.”

In the Ring of Fire in northern Ontario, the federal government is serving as an intermediary to make sure the new mines include training and jobs for the aboriginals and do no permanent harm to the environment.

“We want to do this right. It has to be inclusive,” says Greg Rickford, the federal minister responsible for the development. “First Nations communities can and will bring important understanding to the environmental assessment processes.”

Former Prime Minister Martin says “Canada’s indigenous peoples are not anti-development. What they want is for it to be done in a sustainable way. That means doing it in full consultation with the people who live near these projects.”

165 Claims

Native claims are mostly addressed in the courts and other government forums. Since 2011, aboriginals have filed 165 complaints against the federal government with the Canadian Human Rights Commission, claiming they receive insufficient funding for education and child welfare. In disputes over resource projects, the mining and drilling companies are caught in the middle.

“The expectations placed on companies in this area over the past 10 years have evolved incredibly quickly,” says Robert Walker, vice president at Vancouver-based NEI Investments, which oversees C$5.5 billion in assets. “First Nations’ power is growing.”

Aroland’s Sonny Gagnon intends to take full advantage of that fact. Conditions in Aroland are typical of rural native communities. Houses stand unfinished or in a state of decay. Clutches of mothers stroll up and down the dirt roads pushing baby carriages. The only business is a corner store selling gasoline and canned food. The biggest of the few employers is the tribal government, which provides paychecks to about 30 people. Most of the rest live on government welfare of about C$400 a month.

‘A Day at a Time’

“Every day is a challenge,” says Robinson Meshake, in charge of social work on the reserve. “We take each day one at a time.”

Gagnon says alleviating his community’s deep poverty is his only goal. Even as he blocks construction of Cliffs’ proposed road through his settlement, he says he has no objection to the mining project.

“I’m pro-development,” he says.

Cliffs would use the road to transport ore from a mine 340 kilometers to the north to a railhead in Aroland. As many as 100 ore-laden trucks a day would pass through the community.

“I want those jobs for my people,” Gagnon says. “I want them to be making $400 a day.”

With the stakes in the tens of billions of dollars for Harper’s government and the resource companies he supports, Gagnon and other native Canadians have never been in a better position to right some of the historic wrongs they believe their people have suffered.

To contact the reporter on this story: Jeremy van Loon in Calgary at jvanloon@bloomberg.net

To contact the editor responsible for this story: Michael Serrill at mserrill@bloomberg.net


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Companies Mentioned

  • CLF
    (Cliffs Natural Resources Inc)
    • $15.32 USD
    • 0.34
    • 2.21%
  • SWN
    (Southwestern Energy Co)
    • $38.01 USD
    • 0.33
    • 0.86%
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