Varko: The budget's $5 billion indigenous loan guarantee program has received high praise

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Less than five years ago, Alberta established a loan guarantee program that has now seen Indigenous communities invest more than $1.5 billion and buy ownership stakes in major energy projects across the province.

Ottawa is about to join him.

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Finance Minister Chrystia Freeland in Tuesday's federal budget Last year, the Liberal government unveiled details of a local loan guarantee program first mooted.

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According to the budget, the federal program will provide up to $5 billion in loan guarantee capacity to “open access to capital for local communities, create economic opportunities and support their economic development priorities.”

Oil and natural gas projects and other natural resource developments will be eligible.

It's something local leaders and business groups have been pushing the Trudeau government to include, as many wonder if Ottawa will cut fossil fuel developments out of the mix.

However, the program will be “sector-agnostic for natural resource and energy projects to prioritize economic integration and self-determination,” the budget said.

“We are committed to ensuring that Indigenous peoples participate in Canada's economic prosperity, including in the energy sector,” Freeland spokeswoman Kathryn Kuplinskas said.

The announcement was welcomed by groups across Western Canada and even received the endorsement of the UCP government in Alberta.

First Nations Major Projects Coalition CEO Nilo Edwards welcomed the news, calling Tuesday a “good day.”

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“We're happy with the sector-agnostic approach,” Edwards said in an interview from Ottawa.

“It allows indigenous peoples to decide for themselves what project is right.”

A coalition of more than 150 indigenous communities estimated that indigenous participation could amount to $525 billion over the next decade.

Edwards said there is strong interest from First Nations and local communities in taking ownership stakes in projects ranging from traditional energy developments to emerging sectors such as small modular reactors, hydrogen and essential minerals.

The future could include LNG terminals, mining and even a stake in the federally owned Trans Mountain pipeline.

“We have about $500 million in local capital that we need to fund over the next 12 months or so,” Edwards added.

“We have projects ready to be examined under this program.”

The Alberta government, which has largely criticized the budget, provided the federal loan, and Finance Minister Nate Horner noted that it mirrors Alberta's program.

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Established in 2020, Alberta Indigenous Opportunities Corp. (AOIC) has the ability to guarantee loans totaling $3 billion.

To date, it has supported more than $1.5 billion in investments and extended more than $680 million in guarantees.

These investments include equity positions in gas-fired power generation projects, midstream energy assets such as oil and pipelines, and cogeneration facilities.

IAF chair Stephen Buffalo said the program could expand across the country with Ottawa's involvement and eventually lead to collaboration and syndicated deals between federal and provincial entities.

“Indigenous communities have to find ways to really take advantage of the business opportunities,” said Buffalo, who is the CEO of the Indian Resources Council of Canada.

“It's very important to be able to build your own success by participating in a program like this.”

The federal budget noted that local communities were less able to secure capital or use existing assets as collateral because of the Indian Act, leading to higher borrowing costs that created barriers to equity investment.

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Government credit guarantees can bridge this gap, helping communities gain access to low-cost, third-party capital suspended by the government's credit rating—becoming owners of large projects.

Such investments can provide revenue streams, new opportunities for economic development, and give communities a direct say in project decisions.

The head of the Canadian Association of Petroleum Producers welcomed the news as well as business groups.

“The Local Opportunities Corporation of Alberta is a great example of what's possible when it's done right,” added Deborah Yedlin, CEO of the Calgary Chamber of Commerce.

“It should be across the country.”

In Alberta, one of the largest IAF deals occurred in 2022, when Enbridge sold about 12 percent of seven oil pipelines to Athabasca Indigenous Investments, which represents about two dozen First Nations and Métis communities in Alberta, for $1.12 billion.

IAF provided a loan guarantee of 250 million dollars.

Enbridge spokesman Jesse Semko welcomed the new federal initiative, saying “the loan guarantee program … will be.” Advance Canada's energy future and Indigenous economic reconciliation.”

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Chief Executive Officer of the IAF Chana Martino said bringing the program across Canada would have a monumental impact.

“Different nations and communities have different opportunities,” he said.

“Residential economic reconciliation is about supporting local communities to participate in the current economy – the current economy involves resources.”

The First Nations Major Projects Coalition, formed by several BC First Nations to help verify ownership of resource developments, says access to available capital was one of the issues that led to the group's creation.

And having a national program fills the funding gap.

“We have been working on behalf of our members for over 10 years,” added Edwards.

“At the end of the day, you hope the system does the right thing. And today he did it right.”

Chris Varco is a columnist for the Calgary Herald.

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