Area First Nations are poised to earn millions of dollars from the LNG Canada project thanks to a series of agreements with the provincial government providing cash now, title to lands and a form of ongoing royalty payments once super-cooled natural gas begins to be shipped to customers overseas.
The agreements were negotiated between five First Nations and an umbrella First Nation group called the Coastal First Nation between 2016 and 2017.
In each agreement, lump sums were paid once the agreements were signed with more lump sums to be paid annually based on LNG Canada’s Oct. 2 announcement it was proceeding with its $40 billion Kitimat project.
The latter payments are one-time cash transfers, triggered by any one of nine LNG projects listed in the agreements being the first to make a final investments decision which in this case is the LNG Canada project.
The cash and property transfers recognize the territorial and marine aboriginal interests of the First Nations based on the location of LNG plants and the transport routes of LNG-carrying tankers.
To receive the benefits, the First Nations have had to signal their support of a northwestern LNG industry and have promised not to interfere with the development of any LNG project.
Revenue to finance the agreements will come from the provincial government’s coffers supported through its own taxation measures arising from the LNG Canada project.
Area First Nations governments are not the only local governments to benefit from LNG Canada. Because the plant is within the District of Kitimat boundaries it is subject to municipal property taxation amounting to nearly $10 million a year once the plant is in full production.
As well, the majority of First Nations along the Coastal GasLink pipeline route also negotiated lump sum agreements with the province and they can share $10 million a year beginning when the pipeline is under construction.
There are also inflationary increases built into the agreements.
These agreements with the province are over and above economic agreements signed between First Nations and Coastal GasLink and LNG Canada.
Coastal GasLink has signed 20 agreements along its pipeline route and LNG Canada has negotiated seven.
Kitselas First Nation
To date the Kitselas First Nation has negotiated the largest of the LNG benefits deals with the provincial government.
In support of the Coastal GasLink pipeline, the one that will feed the LNG Canada plant at Kitimat, the Kitselas signed a deal in 2014 providing a first payment of $575,000 once construction begins, a further $575,000 when the line goes into service and a share of $10 million a year for First Nations along the pipeline route for every year the pipeline is in service.
A more lucrative deal was signed just last year tied to either LNG Canada or Kitimat LNG, the other major LNG project planned at Kitimat, providing 25 hectares of provincial land at the corner of Hwy16 and the entrance road to the Northwest Regional Airport, $350,000 as a legacy payment for either LNG Canada or Kitimat LNG, $250,000 to plan a new community hall to replace the aging one at its Queensway reserve, and $500,000 as a legacy payment in recognition of other LNG projects.
When LNG Canada announced its final investment decision in early October, the Kitselas received an additional $1 million and $2 million toward construction of a community hall.
Based on the start of LNG Canada construction, a further $1 million is now due to the Kitselas and $6.5 million regarded as a legacy or capacity payment in recognition of other LNG projects.
In addition to the land at the airport, when LNG Canada announced its final investment decision, the Kitselas are eligible for a further 62 hectares of provincial Crown land in lower Thornhill, a mostly forested section bounded by Paquette to the south, Century St. to the west, the Pacific Northern Gas pipeline to the east and north to behind the old Lomak depot location.
The Kitselas also have the opportunity to acquire more land, 1,140 hectares, based on LNG Canada’s construction start. This land, in two sections, is located in the Dubose Flats area to the right of Hwy37 South toward Kitimat from Terrace and just south of Lakelse Lake.
The Dubose area has figured over the decades in a variety of development proposals ranging from an aluminum smelter by Alcan (now Rio Tinto) to a pulp mill.
The provincial government, in response to a query, says the Kitselas have formally asked for the airport land but that the transfer has yet to be completed.
“Significant work is required, including consultations with First Nations, prior to the transfer being complete,” said the province.
The Kitsumkalum First Nation at Terrace and the Metlakatla and Lax Kw’alaams on the North Coast also have territorial interests in the Terrace area, the province added.
In addition to the specific benefits tied to LNG Canada, the Kitselas are also signatories to a broader agreement, also signed in 2017.
It calls for $500,000 a year for a guaranteed three years and, because LNG Canada was announced before March 31, 2019, a payment of $250,000. This latter amount is a one-time only payment based on the first LNG project to be announced in the region which, in this case, was LNG Canada.
The agreement also provides $500,000 a year indexed to inflation as long as LNG is shipped in the area.
There’s also a form of an annual royalty payment based on LNG Canada’s final investment decision — .33 cents a tonne for the plant’s 14 million tonnes of LNG designed capacity — or $46,200 a year during construction.
This jumps to 2 cents per tonne once LNG begins to be shipped which, at a full capacity of 14 million tonnes a year, amounts to $280,000 a year.
Gitga’at First Nation
As with other First Nations in the region, the Gitga’at, whose home village is at Hartley Bay at the mouth of the Douglas Channel, have an LNG benefits agreement providing cash and land.
It provided $500,000 upon signing in March 2017 and another $500,000 this past March and will provide a further $500,000 next March.
And because LNG Canada made its final investment decision before March 31, 2019, the Gitga’at will now receive a payment of $250,000 and ongoing annual payments of $500,000 a year as of the third anniversary of the agreement.
This lump sum and the ongoing payments were triggered by the first LNG project to be announced, which in this case is LNG Canada. This is a one-time provision, which won’t be repeated for any other LNG projects.
The Gitga’at have also now told the province they support the project, a formal notice that provides them with $105,000 a year based on .0075 cents for each tonne of the 14 million tonne production capacity of LNG Canada during construction of the plant and .02 cents for each tonne shipped once the plant is in operation. At full capacity, that could work out to $280,000 a year.
Support of the project has also kicked in another payment, this one being $500,000 for space for community events in Prince Rupert.
That’s in recognition of the large number of Gitga’at members who live in that city.
Land available for the Gitga’at fall under two categories a small parcel of 2.3 hectares at Yugoslav Bay on Gil Island that became available when the agreement was signed and now that the Gitga’at have given notice of support of LNG Canada, 114 hectares over four parcels around Hartley Bay.
Metlakatla First Nation
The Metlakatla, whose home village is on the Tsimpsean Peninsula, off the coast from Prince Rupert, signed their own LNG benefits deal with the province based on territorial and marine interests and which is now being fully implemented because of the LNG Canada announcement.
Negotiated in 2016, the agreement provided $500,000 upon signing and $500,000 each on the first and second anniversary dates.
But the Metlakatla missed out on a one-time payment of $250,000 had LNG Canada — or any other LNG project — announced a final investment decision before March 31 of this year.
The Metlakatla have, however, provided the provincial government with notice it supports LNG Canada, putting in motion annual payments during construction and payments once LNG begins to be shipped.
During construction, annual payments work out to .0033 cents of LNG Canada’s capacity of 14 million tonnes or $46,200. When LNG Canada does begin shipping LNG the amount per tonne rises to .02 cents, meaning the First Nation stands to receive $280,000 a year based on LNG Canada’s maximum capacity.
There are no land provisions attached to the agreement.
Lax Kw’alaams First Nation
The Lax Kw’alaams home village is also on the Tsimpsean Peninsula, north of Prince Rupert and as with the Metlakatla, its LNG agreement with the province provides for cash but no land.
Upon signing the agreement in 2017, the Lax Kw’alaams received $590,000 and another $590,000 on the first anniversary of the agreement and will receive another $590,000 on its second anniversary.
And because LNG Canada announced its final decision before March 31, 2019, the Lax Kw’alaams are to receive $295,000 and annual payments of $590,000 a year beginning on the third anniversary of the agreement.
Unlike other First Nations, the Lax Kw’alaams have yet to provide notice to the province to trigger annual payments during construction of the LNG Canada project to be replaced by other payments when the plant begins to ship LNG.
During construction, those payments would be $54,600 a year at LNG Canada’s capacity of 14 million tonnes and up to $336,000 a year based on LNG Canada shipping its stated capacity.
Coastal First Nations
Gathered together formally under the Great Bear Initiative Society but known as the Coastal First Nations, its nine member First Nations are focused on “working together to build a strong, conservation-based economy that recognizes our title and rights, and protects our culture and ecosystems.”
Helping finance that is a 2016 LNG benefits deal with the province providing an initial $1.5 million and $1.5 million each on the first and second anniversaries of the agreement signing.
There’s also $1.5 million to be paid because LNG Canada made its final investment decision before March 31, 2019 and an ongoing annual payment of $1.5 million.
Additionally, the society is to receive $31,500 a year during construction of the LNG Canada plant based on its stated capacity of 14 million tonnes and up to $840,000 a year based on production of that amount once shipping begins.
The money is to be distributed by a formula agreed to by the nine members of the Coastal First Nations — Wuikinuxv, Heiltsuk, Kitasoo/Xaixais, Nuxalk, Gitga’at, Metlakatla, Old Massett, Skidegate, and Council of the Haida Nation.
To date the province has provided $5.65 million to the Coastal First Nations.
Two local First Nations lost out when Pacific NorthWest LNG was cancelled
When Pacific NorthWest LNG cancelled its Lelu Island project in July 2017, both the Lax Kw’alaams and the Metlakatla lost out on significant provincial land transfers.
The Lax Kw’alaams stood to gain just under 1,800 hectares from 13 parcels, the largest ones being on Digby Island, Ridley Island, at Port Simpson and what’s called the Shwatlans parcel on the mainland across the water from the east side of Kaien Island.
Transfers would have happened in stages had construction of Pacific NorthWest LNG started.
There was a provision, at signing, for the Lax Kw’alaams to take possession of one of the smaller parcels called the Ridley Island Road Quarry amounting to 37 hectares.
The Metlakatla Pacific NorthWest LNG agreement called for the provincial government to transfer four parcels amounting to just over 1,000 hectares. The largest, 772 hectares, was on North Digby.
There was a provision, at signing, for Metlakatla to take possession of two of those parcels, 10 hectares on the Wolf Creek Road and 164 hectares on South Digby.
Those transfers are in process, said the provincial government in a provided statement.
The Lax Kw’alaams agreement also called for the province to provide $22 million to rest in a law firm’s trust fund accounts.
Had Pacific NorthWest LNG announced its project was proceeding, $7 million, plus interest, would then have been released to the Lax Kw’alaams with the remaining $15 million, plus interest, released once construction started.
With Pacific NorthWest LNG shelved, the money was to be returned to the province.
Yet, in a provided statement, the province says it has “exercised an option to extend the agreement, to allow the money to remain in trust with the law firm while other opportunities in support of reconciliation with Lax Kw’alaams are explored with the nation.”
Other portions of the agreement have the Lax Kw’alaams acknowledging the province provided $3 million for “community engagement and consultation purposes” and that the province “committed to upgrade the Tuck Inlet Road at an approximate cost of $20 million in order to provide Lax Kw’alaams with a direct benefit associated with potential LNG development” around Prince Rupert. That work has already taken place.
And had Pacific NorthWest LNG gone ahead, the province committed itself to “identify and budget the sum of $50 million to be used for the Port Simpson Road Connector Project or other transportation infrastructure ….”
The Metlakatla were also in line for cash payments — including $5 million upon signing of their agreement and a further $17.5 million toward the construction of a seniors facility and $3.5 million for the First Nation’s shellfish aquaculture businesss.
But a further cash injection of $20 million did not take place because of the cancellation of the Pacific NorthWest LNG project.