Indigenous ownership of Trans Mountain must be 'material,' says prospective bidder

As the federal government begins its efforts to sell the Trans Mountain pipeline, the director of one of the groups seeking to buy a stake says nothing less than "material" ownership by Indigenous people is acceptable if Ottawa is serious about reconciliation.

"It's got to be a minimum of 30 per centin my view, period. Because anything less than that doesn't really [represent]that place at the table," said Stephen Mason, managing director of Project Reconciliation, in a recent interview.

"There's no reason, in my opinion, why it can't be 100 per cent owned by Indigenous people."

• Regulator rules in favour of Trans Mountain route deviation

The Trans Mountain pipeline is Canada's only pipeline system that transports oil from Alberta to the West Coast. It is currently owned by the federal government, which bought the pipeline in 2018 to help ensure a planned expansion would be completed after previous owner Kinder Morgan Canada Inc. threatened to scrap the project.

However, Ottawa has been clear from the start that it does not wish to be the long-term owner of the pipeline. With the expansion project now nearing completion, the federal government has launched the first phase of what is expected to be a two-part divestment process.

The first phase involves talks which have already begun with more than 120 Western Canadian Indigenous communities whose lands are located along the pipeline route, to find out if any of them are interested in acquiring an equity stake.

Ottawa to help communities access capital

While it's not clear what size of stake is available during this first phase of negotiations, Mason whose group is not participating in the first round said he has heard that number could fall between 20 and 40 per cent, and that the federal government will support Indigenous communities with the purchase by helping them to access capital.

The second phase of the divestment process will involve the consideration of commercial offers for the remaining stake in the pipeline.

Mason's Project Reconciliation, an initiative that has lined up its own financing for a Trans Mountain bid in an effort to secure Indigenous economic participation in the pipeline, intends to participate at that stage.

Another group, a partnership formed by Western Indigenous Pipeline Group and its industry partner, Pembina Pipeline Corp., has also expressed interest in the commercial phase of negotiations, but did not respond to an interview request.

Groups with Indigenous involvement are very welcome to participate in the second phase, said a federal source with knowledge of the plan, speaking on condition of anonymity. That won't preclude any major pipeline or infrastructure company from making an offer, though.

But Mason said this must not be a situation where corporate interests acquire the bulk of the pipeline equity and Indigenous people are left with the scraps.

"Can there be room for another partner in this, like another big pipeline company or another major asset management company? Well, sure. This project is big enough," he said.

"The key point is, (Indigenous ownership) needs to be material. And in this case, 30 per cent is too small."

Project Reconciliation's aim is not to own a stake in Trans Mountain directly, but to facilitate the transaction for Indigenous communities and assist in the financial and technical administration of the ownership partnerships.

Once the transaction is completed, Project Reconciliation will operate essentially like a portfolio manager, charging annual management and administrative fees based on the pipeline's projected earnings.

Indigenous communities would also have a governance position through Trans Mountain Corp.'s board of directors, under the Project Reconciliation proposal.

Capital costs have ballooned

Mason declined to speculate publicly on what the present value of the Trans Mountain pipeline actually is. Though bought by the federal government for $4.5 billion, the capital costs of the pipeline's expansion project have ballooned to more than $30 billion due to construction-related challenges.

Mason said any prospective buyer will only offer a price that can be supported by the pipeline tolls the fees oil shippers pay to move oil on the pipeline. Those tolls are the way the pipeline earns revenue, and are currently being negotiated with oil companies.

But Mason said regardless of how the numbers settle out, the sale of Trans Mountain will be one of the largest commercial transactions in Canadian history.

It may also become the largest Indigenous equity ownership purchase this country has ever seen, in financial terms. Currently, a $1.1-billion deal signed last fall that saw Enbridge Inc. sell an 11.57 per cent interest in seven northern Alberta pipelines to 23 First Nation communities holds the record as Canada's largest energy-related partnership between a private company and Indigenous people.

"This is not a conversation, in my view, where the Indigenous ownership (in Trans Mountain) is going to be just 10 per cent," Mason said.

"This is going to be transformative."