THE STANDING SENATE COMMITTEE ON INDIGENOUS PEOPLES
EVIDENCE
OTTAWA, Wednesday, May 29, 2024
The Standing Senate Committee on Indigenous Peoples met with videoconference this day at 6:45 p.m. [ET] to examine the subject matter of those elements contained in Divisions 25 and 26 of Part 4 of Bill C-69, An Act to implement certain provisions of the budget tabled in Parliament on April 16, 2024.
Senator Brian Francis (Chair) in the chair.
[English]
The Chair: Honourable senators, before we begin, I would like to ask all senators and other in-person participants to consult the cards on the table for guidelines to prevent audio feedback incidents. Please take note of the following preventative measures in place to protect the health and safety of all participants, including the interpreters. If possible, ensure that you are seated in a manner that increases the distance between microphones. Only use a black approved earpiece. The former grey earpieces must no longer be used. Keep your earpiece away from all microphones at all times. When you are not using your earpiece, place it face down on the sticker placed on the table for this purpose. Thank you all for your cooperation.
I would like to begin by acknowledging that the land on which we gather is the traditional, ancestral and unceded territory of the Anishinaabe Algonquin Nation and is now home to many other First Nations, Métis and Inuit peoples from across Turtle Island.
I am Mi’kmaw Senator Brian Francis from Epekwitk, also known as Prince Edward Island, and I am the chair of the Committee on Indigenous Peoples.
I will now ask committee members in attendance to introduce themselves by stating their names and province or territory.
Senator Arnot: Senator David Arnot from Saskatchewan.
Senator Hartling: Senator Nancy Hartling from New Brunswick, from the unceded territory of the Mi’kmaq people.
Senator Sorensen: Karen Sorensen, Banff National Park, Alberta, Treaty 7 territory.
Senator Coyle: Mary Coyle, Antigonish, Nova Scotia, Mi’kma’ki.
Senator Greenwood: Margo Greenwood, British Columbia, originally from Treaty 6 territory.
Senator Prosper: P. J. Prosper, Nova Scotia, Mi’kma’ki territory.
The Chair: Today, we will begin by resuming our study on the subject matter of those elements contained in Divisions 25 and 26 of Part 4 of Bill C-69, An Act to implement certain provisions of the budget tabled in Parliament on April 16, 2024.
With that, I would now like to introduce our witnesses: from the First Nations Major Projects Coalition, Chief Sharleen Gale, Chair of the Board of Directors; and Shaun Fantauzzo, Vice-President, Policy. Thank you both for joining us today. Chief Gale will provide opening remarks of approximately five minutes, to be followed by a question-and-answer session with the senators. I now invite Chief Gale to provide her opening remarks.
Sharleen Gale, Chief and Chair of the Board of Directors, First Nations Major Projects Coalition: Good evening, honourable senators.
I want to begin by recognizing that we are on the land of the unceded territory of the Algonquin Anishinabek, and I thank them for allowing me to conduct my business here this week.
My name is Sharleen Gale, and I am Chief of Fort Nelson First Nation and Chair of the First Nations Major Projects Coalition. I’m appearing today with the First Nations Major Projects Coalition, or FNMPC’s, vice-president of policy, Shaun Fantauzzo.
I feel like I have come full circle, appearing before this committee to offer my perspective on how the Indigenous Loan Guarantee Program can be structured and how it can be successful.
In 2017, I first appeared before the committee to explain the business case on why our nations require government loan guarantees to help facilitate our access to capital. Even before then, the use of government loan guarantees was cited by this committee in a 2008 report on economic development entitled, “Sharing Canada’s prosperity: a hand up, not a handout,” which was led by former Senator St. Germain and former Senator Sibbeston.
A federal Indigenous loan guarantee program — one that is sector agnostic — was something for which our national membership of 165 First Nations across Canada advocated. We are supportive of the steps the Government of Canada has taken in Budget 2024 to establish the program.
This program is a concrete step to supporting our nations in overcoming the barriers the Indian Act has placed on our people, preventing us from becoming major participants in the economy of Canada. Positioning Indigenous nations as co-investors and co-proponents provides greater assurance that consent for a project has been granted, which will help de-risk major projects and strengthen our economy in Canada.
The concept of loan guarantee programs is not new. The Ontario Aboriginal Loan Guarantee Program was established in 2009, and the Alberta Indigenous Opportunities Corporation followed in 2019. Similar programs have been established in British Columbia and Saskatchewan. Together, these programs have provided hundreds of millions of dollars in economic benefit to Indigenous nations, without default.
Our own estimates, and those of others in the financial sector, show that the impact of loan guarantees can reduce the cost of Indigenous borrowing by 1.5% to 4%, depending on the structure of the opportunity. The financial impact of loan guarantees can be hundreds of millions of dollars over the lifetime of the equity investment.
Over the next decade, our research shows us that 473 major projects are planned to cross Indigenous lands, representing over $525 billion of investment. Using normal business structures, it is reasonable to estimate that over $50 billion could be issued as Indigenous equity participation that will require financing.
Within FNMPC’s membership alone, First Nations have $500 million in equity options to be financed on four projects. Each project represents agreements with highly credited, worthy partners on rate-regulated assets. These are good deals for our members and sound structures on which Canada can apply its financial guarantee.
As the federal government works on implementing the Indigenous loan guarantee program, FNMPC urges the government to prioritize four issues.
First, capacity development must continue to be supported. Enabling First Nations to make free, prior and informed decisions on project participation requires both external and internal capacity. The government and private sector must step up to provide the funding for this capacity. The $3.5 million allocated for due diligence is a start, but it must be noted that $3.5 million for $5 billion in equity loan guarantees just won’t be enough. Canada must make a direct investment in the business preparedness of First Nations to support them from the deal start to financial close, not just the last mile.
Second, the federal government must stand up the program and deploy guarantees as quickly as possible. First Nations have lost too many opportunities for meaningful project participation. The status quo today will be worse than the status quo tomorrow if the Indigenous loan guarantee program is not ready to launch. Prior to the budget, FNMPC surveyed our national membership. Over 70% of respondents identified slow delivery of the program as their top concern, followed by program design not matching the needs of First Nations.
Third, there must be an appetite for appropriate risk tolerance within the loan guarantee program if the program is going to assist Canada in meeting its net-zero targets through the building of critical mineral mines and supporting emerging sectors such as hydrogen. This request is also consistent with Budget 2024’s direction to the Business Development Bank of Canada, or BDC, and Export Development Canada, or EDC, to take on more risk to attract more investment into the economy.
Fourth, the mission of the program should be to support the advancement of economic reconciliation with Indigenous nations by guaranteeing deals on a strictly commercial basis. My nation and other nations within the membership of FNMPC have established practices of negotiating accommodations for impacts to our rights separate from a commercial business opportunity like equity investment in a mine, pipeline or transmission line. The Indigenous loan guarantee program should focus on assessing the need for access to capital on the strength of the commercial business case.
Thank you for the opportunity to share the coalition’s thoughts. My colleague and I are available to answer your questions.
The Chair: Thank you for that, Chief Gale. We will now move on to questions from the senators.
Senator Sorensen: First of all, it is nice to see you again, and yes, you have been full circle on this.
Can you repeat for me what number three was?
Ms. Gale: Third, there must be an appetite for appropriate risk tolerance within the loan guarantee program if the program is going to assist Canada in meeting its net-zero targets.
Senator Sorensen: This more of a process question for me to understand as we bring in witnesses to talk about this. I appreciate those four comments, and I think they’re very important. To the chair, how do those comments go on record so that they will be seen and acknowledged as part of our feedback from bringing witnesses in?
The Chair: It’s part of the evidence. It’s public information.
Senator Sorensen: The government sees them?
The Chair: Yes.
Senator Sorensen: I don’t have a question, but could you confirm for me that overall you’re happy with the loan guarantee program? The concerns come from the future in terms of speed and follow-up and actually starting to implement it?
Ms. Gale: One of the concerns that I have is to ensure that this process is Indigenous-led by our people so that it meets the needs of our communities and we can exercise the program so that we can make commercial deals at the speed of business.
One thing that I’m worried about is attaching accommodation to this process. In our view, those are two separate processes. I think that’s important to acknowledge and to ensure that that doesn’t happen.
Senator Sorensen: This will be a reiteration of other meetings that we’ve had about this process coming into play. Can you just elaborate for the record what barriers exist for First Nations who are seeking investment capital that would be different than non-Indigenous people? I’d also like to hear about some of the projects that you know that this will help immediately, whether it’s in your own community or others. Maybe Mr. Fantauzzo knows of some, more nationally.
Ms. Gale: First Nations face two primary challenges, which are access to affordable capital and capacity. Within our nations, through section 89, it’s been hard for us to be able to be involved the economy due to not being able to borrow money at low interest rates and not being able to put up our assets as collateral. Most nations do not have strong balance sheets. We have some bad deal history. Many things have been put in place through the Indian Act that have excluded us from this process. I would say those are definitely the two main challenges.
Not being able to fully participate in these projects and the capacity to have technical, commercial, legal and financial capacity to make informed decisions has been very challenging. By working with the FNMPC, we’ve been able to get that information before our members to make an informed decision.
Senator Sorensen: Are there any comments on projects that you know that are shovel ready, as we say?
Shaun Fantauzzo, Vice-President, Policy, First Nations Major Projects Coalition: Thank you, senator.
We do have, as Chief Gale said, about $500 million in equity opportunities that will be ready to go in the next 12 to 18 months. The most notable of those is the Coastal GasLink project that was negotiated a few years ago with 12 of our members. That project is almost complete and is nearing a financing need. The other projects that are ready to go are transmission lines. There is a wind project as well.
At the beginning of this year, we had about 10 projects. Now we have about 17 projects in our portfolio that are beginning to emerge and mature. We say three or four today. It could be five, six or seven in the next nine or ten months as well.
Senator Sorensen: Thank you, Chief.
Senator Coyle: Thank you to our witnesses for being with us.
I get the impression that you’re in favour of this element of the budget, as I think we all should be, but your concern is getting it right, and also that it doesn’t stand alone, from what I’m understanding.
This new subsidiary of the Canada Development Investment Corporation, which is being created to accommodate this Indigenous loan guarantee program under Division 25 of the budget, as you’ve said, is good, but it needs more, and you have a concern about its implementation and that the implementation itself be Indigenous-led. Are there other things on your mind about the implementation of this particular element of the budget that you think should be in place? Were you or others feeding into the process of the development of this? How did this come about? Were you consulted? What did that look like? If you were consulted, does what came out look like what you thought was going to come out? If not, how different is it? This looks good on paper, but now how do we set it up for success?
Ms. Gale: Thank you, senator, for the question. We have had several discussions with federal officials prior to the launch of the guarantee program.
Just so the committee is aware, we’ve been really advocating for such a program for over a decade with our members. Many of our founding members had lost an opportunity to have ownership in a pipeline, and it was due to not being able to raise the capital at low interest rates. They actually came in at credit card rates. I do have to say it’s challenging, and we all know that, to be able to move forward, we all have to work in partnership and find a solution together so that Indigenous people can own these projects and manage their lands and resources.
As a result of our discussions, they’ve been positive and they have been very supportive on the sector agnostic, which was really great to see. Risk tolerance and a commercially focused loan guarantee program is what we desire.
One of the pieces that I’m really concerned about is the capacity piece. That’s going to be very challenging. One of the things that the First Nations Major Projects wishes to do is to ensure that when we work with a nation, there is a huge knowledge transfer so that they have the information to be able to do these processes on their own for their next project. That’s also really important. We’ll continue to monitor the progress of the program and support its deployment and its future iterations going forward, and we’ll always be here to provide feedback.
Senator Coyle: Going back to the projects and the pipeline — not the pipeline that people didn’t get to buy into — but the pipeline of projects, I’m just curious about the geographic spread across the various territories in Canada.
Mr. Fantauzzo: Thank you, senator, for the question.
FNMPC started in 2017, mostly focused on B.C. A good chunk the projects that are in our project pipeline are in B.C., but we have started to have projects emerge in Ontario, in Quebec and on the East Coast as we have become more of a national organization. That’s within FNMPC alone. We’re starting to see projects emerge in Newfoundland, Nova Scotia, Quebec, Ontario — so of east of B.C. as well. We could confidently say that there is a large geographic spread of projects that First Nations could benefit from.
Senator Arnot: Thank you, witnesses.
As I understand it, the First Nations Major Projects Coalition has a number of First Nations in the organization, but totally, members of your organization have $45 billion in total capital assets. That’s a lot of money. This program will be capped at $5 billion, so 10% of that. First Nations corporations or contributions will require significant capital because of the nature of the investment required. Is this cap realistic, in your opinion?
Some or all of the First Nations in your organization are very successful by definition already, and you’re ready to go on a number of projects. How do you help the other First Nations that maybe aren’t at that stage? Is there any policy advice for that? You’re going to be ready to go, but there are several that won’t be. I’m just wondering what your thoughts are on any of those ideas that I put on the table.
Ms. Gale: That’s a very good question, senator. Thank you.
I was involved in the coalition in the early stages, and through the processes, I’ve been able to speak to many leaders across the country, and it’s the knowledge transfer of all of us coming together and sharing our lived experiences and the challenges we had to overcome. Through our nation, we’ve been able to separate the business from the politics, set up our corporation and put a really good board of directors in place. I’m very proud of the work that we’ve been able to do through the expertise of other members of the coalition in just coming together and sharing knowledge and transferring that knowledge over.
Mr. Fantauzzo: Thank you for the question.
Being able to participate in the deal-making process, interacting with industry and financial institutions, having a voice at the table, building that longer-term capacity — these are all positive externalities of learning by doing in the program.
We’ve seen examples in Alberta with the Alberta Indigenous Opportunities Corporation of, as you might say, quite successful First Nations that are involved in these transactions bringing along other First Nations in these transactions, lending expertise, leadership and legal and financial teams, and the outcome of this effect is, of course, the knowledge transfer that Chief Gale is referring to.
On the question about the scale of this program, the Minister of Finance has been on the record saying that she would be happy to see this limit be raised above $5 billion. The number that Chief Gale referenced earlier from our internal estimates is that there is around $50 billion available. We certainly see the opportunity as being larger than the $5 billion that the government has wished to start with, but we acknowledge that the government wishes to start somewhere.
Ms. Gale: We have an annual conference every year. Last year, we focused on the different deals that different First Nations were negotiating and the deal structures. We also share that not only with our own members but with the government and industry.
Senator Arnot: Are you anticipating getting a kind of partnership or working together to ensure success from the federal government?
Ms. Gale: Yes, absolutely. Coming together, whether it’s First Nations working with industry or working with government, I think that it’s really beneficial, even in my own experience, when I have a company that I’m working with. We have a couple that we are currently working with, and just from the process of having that partnership and being before our community, having a community meeting, talking about the project and having our partner there so that our community can answer questions, it goes into the point where industry, our partner, our government and our board of directors are sitting at the table talking to the government about our project and the path that we want to explore together.
The Chair: I’ll jump in with a question for you, Chief Gale. Since the bill is silent on how the program will be Indigenous-led, what advice would you give to the government about the governance and operation of the new corporation?
Ms. Gale: In my eyes, I believe that the board of directors should be very diverse. I think there should be an independent, merit-based approach with special attention given to increasing and retaining diverse representation, especially Indigenous representation. I think both boards have to be at a senior level. There are existing models that we could refer to, whether that’s the First Nations Major Projects Coalition or the Alberta Indigenous Opportunities Corporation. There are definitely models out there that we could explore to look at how those boards are set up.
The Chair: Thank you.
Senator Prosper: Thank you for coming to our committee and sharing your expertise, both of you.
I will attempt to do three questions quickly. I’ll just direct them to you, Chief Gale, and certainly to Mr. Fantauzzo.
First, relating to procurement within the AFN to Aboriginal businesses, there are two AFN resolutions dealing with procurement along the lines of verification and certification just to ensure that funds actually flow to First Nations companies and, indirectly, within community levels themselves. I’m curious if you have any thoughts with respect to identity and verification.
Second, you spoke of capacity development and the transfer of knowledge, internal and external capacity, with respect to $5 billion. I think you suggested that $3.5 million doesn’t hit the mark. Is there a particular percentage you think would be comparable to $5 billion?
Third, you mentioned separate issues with respect to accommodation to allow the deal to be based on the merits of the deal. I want you to expand upon why you would like to carve out issues around accommodation. I think it was related to the need to move money quickly to seize opportunities. I hope that is clear enough to either of you.
Ms. Gale: Thank you.
It’s really up to Indigenous communities to decide who their partners are and determine who will and will not be participating in the commercial deal. Procurement is a huge aspect to any commercial deal, and I think it is very important, and the First Nation should be directly involved in that process also.
Within FNMPC, we have seen commercial deals advance with the majority-impacted First Nation not participating at all. Some of the First Nations exercise their right to not participate for a variety of reasons, and it is their right to do so. Duty to consult and other section 35 issues must be treated separately and distinctly.
The federal government should support project participation on a strictly commercial basis, independent of government or industry negotiations around accommodations, rights and legal obligations. If the federal government prioritizes these objectives, the loan guarantee program will be a substantial step towards advancing economic reconciliation with Canada.
Going to your third question about capacity, capacity is a huge issue. There has to be at least 1.5% to 2% involved in that. Through my own experience through Tu Deh-Kah, we received a $40 million grant, and part of that was $1.2 million of capacity, which could have been a little more, which would help tremendously.
I’m proud to say that we have many of our own people that have moved home to lead that project. When a community has opportunities, you see your people that have left for university or for other opportunities come back, and they start leading and building these projects.
Mr. Fantauzzo: Senator Prosper, thank you for the question.
If I may just add one point on the capacity to link with Senator Arnot’s question as well, this depends on what the quantum is, of course, for the program. 1.5% of $5 billion, of course, is in the range of $75 million to $100 million for capacity. As Chief Gale just alluded to, on one single project, for the Tu Deh-Kah Geothermal project, $1.5 million was spent on capacity, which is what is allocated in the first year for capacity for this program. You can imagine how quickly the legal, financial and commercial due diligence adds up.
With respect to Senator Arnot’s question about the quantum, that 1.5% really matters if it’s applied to $5 billion, $50 billion or $100 billion, of course. We see a much larger equity investment opportunity for First Nations, and, correspondingly, there would need to be a larger capacity angle as well.
Senator Tannas: Welcome. It’s nice to see you again.
I have to say that I love when these great new initiatives and institutions come before us. The work that you are doing to provide capacity, expertise and facilitate the exchange of important information is how we get where we all want to be, so thanks for that.
I am struggling to understand and catch up on loan guarantees, which have to be paid back and usually involve a process by which everybody loses everything and then the loan guarantee kicks in. In my own experience with borrowing money to put equity in, there is a mismatch there that’s inherent in that practice.
I am hoping that you are going to tell me that there is a carried interest, a value that is created beyond the $1 that goes in against the $1 of your partner, that there is some other value that is created preferential to the community that is quantifiable, if you know what I mean, so that you are disproportionately gaining equity against another partner’s dollar of cash. Is that happening, or are we really borrowing money to put equity in, which would be the first one swept off the table if there is trouble and the loan can’t be paid back?
Maybe I’m not understanding how the loan guarantee program is going to work in this world, but in my world, in a business world, that’s what would happen. Over to you.
Mr. Fantauzzo: Thank you, Senator Tannas. It’s a great question.
I’ll preface this by saying that it depends ultimately on how the program is designed, whether this is a guarantee of collection, for instance, which you have referred to as kind of all needs to go wrong before the guarantee is called, or if this is a guarantee of payment, which may look like the Lower Churchill guarantee where the wind may blow in the wrong direction and the payment may be called. It depends on how the government structures this.
The existing guarantees that are on the books in the provinces of Ontario and Alberta are generally guarantees of collection. Much needs to go wrong before a guarantee is called. This is what has led to there being no default in the past 15 years for the 20 or so deals that have happened.
On your question about whether there is incremental value that comes associated with the First Nation participating in their project, this also depends on the type of project. For example, if you look at projects that are existing assets in the ground, the existing owners are simply selling their stake in a project. There may not be incremental economic value if there is a transfer of value. The function of the loan guarantee in that scenario is to substitute for an equity investment — for the down payment, if you will — to go out and raise additional capital.
Secondly, though, for new projects, having a First Nations partner, we firmly believe, increases the value of projects and increases the size of the pie. We have heard, for instance, from Penny Favel at Hydro One that their returns on hydro projects are better when they have First Nations partners. In that case, in new projects where there is incremental investment, having a First Nations partner results in getting a project built faster, in a better way, and of course, there could be incremental value that is generated.
Senator Tannas: You are sharing that with the partner, right?
Mr. Fantauzzo: That’s right.
Senator Tannas: Thank you.
Ms. Gale: What I think you will see is that once a project is successful and the nations start generating their own source of revenue, they will be able to invest that money into the second phase, and the wish is that that nation will be able to move on and another nation will be able to step up for a project that they need the Indigenous loan guarantee program for.
The Chair: Thank you, Chief Gale.
Senator Hartling: Thank you for being here today.
Congratulations to you for your many successful projects already and for your tenacity. It takes a lot of patience to go through all of this, and I feel sometimes that you are always holding your breath, “Well, are they going to come through? Is this going to work?”
We have heard a lot about the term “economic reconciliation.” We hear that all the time. I want you to just think a little bit and maybe dream into the future over the next decade or so. What would that look like if things were to go the way you outlined with those points that should happen?
Ms. Gale: I think it is important to start off by saying we’re in a crisis right now with climate change. I see the many challenges that we face on the ground through climate change. I just came out of evacuation with my community for 17 days, and I wouldn’t be here right now if my community didn’t get to go home on Monday. These are real-life issues that we need to solve together as a country.
I feel like going forward, people acknowledge that all projects going forward are going to be built on Indigenous lands, and what better partners to have in this country than people like us. I look at how our people have really come together to revolutionize the North through the Tu Deh-Kah Geothermal project, by repurposing an old oil and gas well and providing reliable energy. Throughout these fires, we have had many blackouts, and it’s been very challenging with no power and we need a reliable source. Indigenous nations across the country are demonstrating that we’re leaders in this space and that we have the ability and the capability to build these programs, build these projects and to really embrace our people. One thing I have always said is, never underestimate the ability of our people. They surprise me every day with the solutions that they bring forward.
Looking into the future, I feel like I’m going to be very proud to see each project get lifted off the ground. When these projects are built from the ground up, it means that our children are involved and our people are involved. We have great partnerships with the municipalities. The money flows through the nations 10 times before it hits a municipality and so forth and is really changing the narrative on how we build projects in Canada and how meaningful it is to have economic reconciliation and working with Indigenous nations. We have seen many success stories over the years with some of our Indigenous communities, and I look forward to being able to help serve and help other communities get off the ground and see their dreams come true.
Senator Hartling: Do you have anything to add?
Mr. Fantauzzo: I would add, senator, a link to Chief Gale’s remarks about the conference that we put on every year. The conference that we are putting on next year in April 2025 is about value and economic reconciliation.
Senator Tannas, this is kind of linked to your question as well. The knowledge transfer that Chief Gale has referred to between First Nations we think also exists between industry and government and First Nations as well. We hope to see the value of reconciliation begin to be baked into these projects to create value for First Nations participating in those projects so that there isn’t kind of a last-mile effort to incorporate a First Nation into a project. We would prefer to see them at the table right at the beginning, creating value together, identifying value in the project together and then reaping the rewards of that value together as well.
Senator Hartling: It’s very hopeful. Thank you.
Senator Greenwood: Welcome, and it’s really nice to see you here, especially from B.C.
I have a really short question. Economics is not my area, so forgive me if it is naive. In the past, we have heard from the First Nations Finance Authority that operates out of British Columbia, as you know. What is your relationship with that organization? As I listened to you talk about the two main things, it was affordable capital and capacity. We heard those items as well. I wondered if there was a relationship with this organization. I recall them talking a lot about capacity building and education and all those sorts of things. Is there a relationship there?
Ms. Gale: Absolutely there is a relationship there. It’s important for all of us organizations to really work together. We are trying to achieve the same thing and provide different financial opportunities for nations. We have a variety of different venues to be able to get the monies from, to be able to finance projects, whether that is community infrastructure, major projects and so forth. Definitely there is a link there. In my community, personally as a chief, I work with them, and they go before our council, and we call upon them, and we’re also a part of the First Nations Financial Management Board process. Those are all important institutions, and we all have to work together.
Senator Greenwood: Thank you for that. I was just wondering because I have heard from them too.
In reading the documents that we have around the Indigenous loan guarantee program, it talks about a subsidiary of this program that would be a Crown corporation and would administer the loan guarantees for the program. Do you have any advice around who or what that Crown corporation should look like? Who would that be? Maybe not just the who but the criteria or elements or characteristics you would like to see of such a corporation that you might work with.
Ms. Gale: We talked about the board structure, ensuring that there is Indigenous inclusion in the board, and also how the government could work with executive recruiters with expertise and lived experience in the Indigenous leadership recruitment. Importantly, the government should really focus on not just attracting but retaining Indigenous talent. We have amazing people across Canada who could help lead this process. That is really important going forward in anything that is being decided for us. It kind of goes into the projects when we say a lot of them were built for us without us, and this institution really needs to be Indigenous-led. I can’t stress that enough.
Senator Greenwood: Thank you.
Senator Coyle: Thanks so much. You have really clarified a lot here.
These questions are coming from my own curiosities now about this. You have major projects, and you have talked about First Nations participating in a project, either an existing one or one that a proponent is trying to put together, a deal. I’m curious whether you see First Nations coming forward as the proponent of the project, taking the lead on a First Nation project themselves. So that’s the first question.
My second question — I think you have started to answer this without actually being asked — is about this loan guarantee fund as an enabler, greasing the wheels of participation in the new green economy, which is where things are moving, and how you see this as facilitating that.
My third question has to do with the value added for your people in addition to the money that you are going to make — employment generated, small business spin-offs. Has that been quantified? What do you see there?
Ms. Gale: That’s a really great question, senator.
I’m proud to say that Tu Deh-Kah Geothermal project is 100% owned by Fort Nelson First Nation, and we’re very proud of that work. The opportunities are going to be tremendous. You talked about the spin-off opportunities. Food security is really expensive and something we need to resolve within the North. I can go see my cousins in the Northwest Territories and the Yukon, and walking in the grocery store, you wouldn’t believe your eyes on the cost of some items there. With that, we are looking at building 100 greenhouses and providing fresh produce at affordable rates for all of us. When you buy fresh produce in the grocery stores, you literally have to go the day before.
Another opportunity that comes with it is tourism. If this is built in time, we’ll be one of the first in Canada and the first in British Columbia, so I think there will be a lot of interest for tourism and people to come see the site. Recently up in the Yukon they built a Japanese spa and repurposed the hot springs up there. We met with the individual who did that, and we have tested the water. It comes back as having the possibility of having a blue lagoon.
There are other opportunities. We’re looking at in the brine. When we drilled the well, we also have a brine well to see what possibilities are there for critical minerals. There are just so many opportunities, like being able to use the heat for roadways and heating our homes.
One of the things that I’m really proud of is our people’s ability to look forward into the future to really support the project and how it’s brought some of our people who went to university home to lead it. It makes you proud. I feel that when you have more opportunities, you’re going to be able to get the attention of your people, and they’re going to be not only leading on the board of directors but they’re going to be in management positions and they’re going to have good retirement plans. We’ll be able to provide clean energy in a region that hasn’t been for many decades. That renewable source is going to be tremendous, as is being able to sell power to Alberta and back and forth. In the next few decades, it’s really going to open up a lot of eyes and a lot of opportunities not only for our people but for the people who choose to live among us and raise their families.
Senator Coyle: Thank you so much.
The Chair: The time for this panel is complete. I wish to thank you both again for appearing this evening. If you wish to make any subsequent submissions, please submit them by email to our clerk within seven days.
I would now like to introduce our next panel of witnesses. From the Department of Finance Canada, we have Anne David, Senior Director, Asset Management, Crown Investment and Asset Management. From Natural Resources Canada, we have Mary McKay, Director General, Regulatory Coordination, Consultation and Economic Inclusion, Nòkwewashk. Thank you both for joining us today.
As Finance Canada is the lead on this topic, Ms. David will provide opening remarks of approximately five minutes, which will be followed by a question-and-answer session with senators. Ms. McKay will also be available to answer any questions senators may have. I now invite Ms. David to give her opening remarks.
Anne David, Senior Director, Asset Management, Crown Investment and Asset Management, Department of Finance Canada: Thank you very much, chair.
I would like to acknowledge that the land on which we gather is the traditional, ancestral and unceded territory of the Anishinaabeg Algonquin Nation and is now home to many other First Nations, Métis and Inuit peoples.
Good evening. My name is Anne David, and I am the Senior Director of Crown Investment and Asset Management at the Department of Finance Canada. I’m here to provide remarks about Division 25 of Part 4 of Bill C-69, the budget implementation act, number 1 of 2024. This legislation has portions that will enable the Indigenous loan guarantee program.
Budget 2024 announced the government’s commitment to launch the Indigenous loan guarantee program. It has the following parameters:
It will be a program of up to $5 billion in loan guarantees to unlock access to capital for Indigenous communities. This will create economic opportunities and support their economic development priorities.
Applicant eligibility would recognize Indigenous governments and their wholly owned and controlled entities.
The program would be sector-agnostic for natural resource and energy projects. This will prioritize economic reconciliation and self-determination.
The program would support projects across the country and a range of different project types. This will ensure that Indigenous communities across the country benefit from the program.
Natural Resources Canada would be responsible for the intake and capacity building within the program.
The Canada Development Investment Corporation, or CDEV, is a Crown corporation within the portfolio of the Department of Finance Canada. It would create a new subsidiary Crown corporation that would provide due diligence on the applications and administer the portfolio of loan guarantees.
Division 25 of Part 4 proposes legislative measures that would implement portions of the program. It authorizes a newly created subsidiary of CDEV to issue the loan guarantees and administer them. It also authorizes the Minister of Finance to requisition and pay out of the Consolidated Revenue Fund to the subsidiary any amounts that are necessary in respect of the guarantees.
The legislation also provides that the subsidiary will be an agent of His Majesty in right of Canada for all purposes. This is necessary to ensure that the guarantees would benefit from the government’s credit. This will help deliver a lower interest rate than would otherwise be available to borrowers.
The legislation provides authorities that are needed to enable the new subsidiary of CDEV that will be created to deliver loan guarantees under the program. This will help meet the government’s goal of advancing economic reconciliation with Indigenous communities across Canada.
Thank you very much. I’m happy to take any questions on this topic.
The Chair: Thank you for your remarks, Ms. David. We’ll now move on to questions from senators. Mary McKay, Director General, Regulatory Coordination, Consultation and Economic Inclusion, Nòkwewashk from Natural Resources Canada is also present to answer any relevant questions.
Senator Sorensen: I have one question. You were present for the last witnesses. Everybody seems happy about this. This is good news. But I was intrigued by the experience that the chief has had, and I think she articulated her concerns quite clearly. Do you have any comments on those concerns? Capacity development, the speed at which this will happen, risk tolerance, and we are acknowledging the advancement of reconciliation through this fund.
Ms. David: I’m happy to take portions of that question, and if there is anything left unanswered, I am happy to turn it over to my colleagues.
Recognizing one of the primary concerns is to get this program off the ground and running, to have some partnership with Indigenous communities and also to get it off the ground and running very quickly. To that end, I will attest that the government has been working and consulting with Indigenous communities for almost two years now on this program, and we are very committed to getting it off the ground, up and running as soon as possible with the objective of issuing the first loan guarantee before the end of this year.
Senator Sorensen: Thank you. Anything to add on any of the others? I agree with you. I think that’s the most important thing.
Mary McKay, Director General, Regulatory Coordination, Consultation and Economic Inclusion, Nòkwewashk, Natural Resources Canada: Thank you for the question.
To Ms. David’s point, I think we have been working diligently over the past couple of years to listen and learn from Indigenous groups across the country on their interests and needs, largely informed by the work under the national benefit-sharing framework, which is attributed to Minister Wilkinson under his mandate letter in 2019. Certainly, capacity is at the top of the list, in addition to a more affordable access to capital.
We’re pleased that the government took this step, understanding that at a federal level, this is the first time we’ve done it in a programmatic approach, and we’ve been honest with Indigenous groups, saying that this is a learning process for all of us. We’re also very interested in speed, and we want to get it done right. We know it will improve over time. I’ll leave it at that, but thank you for the question.
Senator Sorensen: Thank you for the comments.
Senator Arnot: Thank you, witnesses.
Ms. David, you have an expertise and a background in financial management and strategic planning policy development, which are critical to administering and guiding federal investments in various sectors, including natural resources and energy projects. I’m interested to know how the Crown investment in asset management division plans to monitor and evaluate the effectiveness of this Indigenous loans program. What will be measured? What are the metrics? What will define success? What financial mechanisms, including transparency and accountability, will be employed to support the program? I think all Canadians have a vested interest in the success of this good initiative, so I’m wondering how that will be measured and how you will be reporting on it and building on the success that we hope you create in partnership with First Nations.
Ms. David: Thank you very much, senator, for the question.
I will preface my answer with the statement that not all decisions have been made with respect to the program. We’re still in the process of getting certain implementation decisions. However, I can say that, as is noted in this piece of legislation, the program and the portfolio would be overseen by a newly created subsidiary Crown corporation of the Canada Development Investment Corporation. This is a Crown corporation that is within the portfolio of the Minister of Finance. As the responsible department with the responsibility of the oversight over the corporation, we ensure that the corporation does regular business planning through things such as corporate plans. These are detailed plans that set out the corporation’s objectives, targets, performance metrics, key performance indicators as well as how we will be communicating its success to Canadians and parliamentarians. When that corporate plan is approved by the Treasury Board, which is a board of ministers, it will then table the summary of that corporate plan to parliamentarians and make it available publicly to all Canadians.
In terms of its business planning and the metrics that it will use to measure success, that is one of the tools. Another tool is regular reporting. Again, it will be a Crown corporation, so it will have regular reporting on both financial as well as qualitative measures, such as its successes, its experience and the types of loan guarantees that its issuing under the program. It will do so in regular quarterly reporting as well as its annual report, which is tabled in Parliament and made available to the public on its website and to all Canadians.
Senator Arnot: Thank you.
Senator Greenwood: Thank you for being here this evening.
I have similar questions that I asked the previous panel. I’ll start with my second question first. I would like to elaborate on the establishment of the Crown corporation. I know it’s made up of a board. I know there is probably a CEO. I’ve never been part of one, so I don’t know, but I’m assuming. How will that new subsidiary be established? How will you choose who is on that board? Those are the decision makers, but you can correct me if I am wrong. How will that happen? Can you tell me what that would look like?
Ms. David: Thank you very much, senator, for your question.
As I mentioned and as you noted in your question, this will be set up as a subsidiary Crown corporation of the Canada Development Investment Corporation. As a Crown corporation, as you noted, it will have a CEO and also a board of directors. The specific details on who that CEO will be and who will be on the board have yet to be determined. However, given that it’s a subsidiary corporation, CDEV as the parent will have some role in making recommendations to the government on who will be on the subsidiary’s board, and the government will also employ metrics such as open, merit-based and representative opportunities in terms of representation of the CEO position and also on the board.
Senator Greenwood: Since this is an Indigenous loans guarantee program and we are in a time of reconciliation, it would be extraordinarily important to have Indigenous people make up that Crown corporation as well as the staff or the support that goes with that. I understand clearer now that it is a subsidiary, so there is Finance, a corporation and this subsidiary.
I guess one of the things that comes to mind — I don’t want you to answer this right now — is the amount of flexibility that may be needed. As you said, we’re all learning in this process, and in all development there is always the need for flexibility and recognition of what happens on the ground and where we are at in a policy structure. Just let me say that.
My second question is, what happens — this is not my area, so forgive me if I’m being naive — if somebody defaults?
Ms. David: Thank you again for the question.
I recognize the advice that we are receiving both from the appearances before us and from you, senator. We will take that advice back to decision makers. As I noted, decisions are not final yet. We’re still in the development phase.
In terms of your question about what happens if there is a default, as Mr. Fantauzzo was alluding to before in the previous panel, this will depend on the form of the guarantee that is provided. Under most of the provincial programs, it’s a guarantee where there must be exhausting of all measures before the guarantee is actually called upon. Many mechanisms kick in before the guarantee is actually called. This is because it’s a loan, as Mr. Fantauzzo alluded to, versus the Lower Churchill example with bonds. On bonds, the payment is basically quasi-automatic. In this type of loan scenario, there are more measures to ensure that all measures are taken to ensure that the loan to the extent possible can be repaid before the loan guarantee would kick in. Again, these are just examples. The final decisions on the program have not been made, but based on the provincial examples, this is how they would operate.
Senator Greenwood: Thank you.
Senator Coyle: Many of our questions will be ones that are under development, which is natural because this budget hasn’t been passed yet, and that’s part of our job here today. I’m curious more about intent and where it fits with a variety of other pieces. We certainly know from our last panel that this is something that the major projects group has been advocating for for some time from the government’s perspective and its role in reconciliation and also getting Canada moving on the green economy. We bring those two things together. I’m assuming this loan guarantee program is something that will grease both of those wheels and bring them together nicely.
I believe you may have mentioned or someone mentioned Minister Wilkinson’s letter. You may have mentioned critical minerals. Did you mention critical minerals? No. I just want to know if there is any particular bias, sectoral bias, good or bad, built into this in terms of what the government is hoping to accomplish on multiple fronts.
Ms. David: I can take a portion of that question and then turn a portion of that question over to my colleague. I’ll take the portion on how this fits within some of the government’s economic objectives.
This is one of many programs that this government has launched to achieve both economic reconciliation objectives as well as to build out major projects within Canada. This program’s objective is primarily focused on economic reconciliation. To your question about the sectors, whether there would be bias, the objective of the program is to be administered on a sector-agnostic basis within natural resources and energy projects. This means they must be in the space. It’s natural resources and energy, but within that sector, it is agnostic as to whether we’re talking about oil and gas or transmission or other types of projects. It is sector-agnostic.
Again, the goal is to really get this part of the program off the ground, up and running quickly, get some loan guarantees done on projects that are already in a long pipeline that Mr. Fantauzzo alluded to, things like that, so that we can demonstrate success and start working quickly towards the government’s objectives of economic reconciliation.
Senator Coyle: So not for anything outside of energy then.
Ms. David: Correct. The current scope of the program is based on natural resources and energy.
Senator Coyle: Okay, great. So some of the tourism stuff we were hearing about in that last panel is a no. That’s what I thought I was hearing, so that’s helpful to know that. Thank you.
Ms. McKay: I might add quickly to that that the parameters of the program were informed by a two-year engagement that was held under the benefit sharing framework. We listened to Indigenous groups across the country about what their interests were. Very rarely did things come up outside of the natural resources sector, given the impacts to land and where so much of the development is currently occurring or has already occurred historically. Things like aquaculture, agriculture, telecommunications, sometimes housing, were not raised frequently enough because we need those things to be revenue generating. You have to be able to get a loan that you can pay back from the project you wish to invest in. From a commercial perspective, it works best in the natural resources sectors, and that’s where we’ve seen most of the provincial programs advance as well.
Senator Coyle: That’s good to know, because it hadn’t really come up until now, or maybe I missed it. I think I heard some hint of that, so that’s good to know.
Transmission lines, for example, would fit in there, the geothermal that was mentioned, the big wind stuff happening in my part of the country on the East Coast, oil and gas or the natural gas pipeline, those things we’ve heard about, buying into critical minerals, mining opportunities, that’s what we’re talking about here.
Ms. McKay: A broad swath of the energy and natural resources sectors, yes.
Senator Tannas: We will be watching this, or I certainly will, with great interest to see how it develops. You heard my comments about loan guarantees. It’s great to have a loan guarantee. If it goes bad, it’s especially great for the people who aren’t getting paid, so the structuring of this loan guarantee to meet up with the vision that says, “It’s very rare; it’s the last thing that would happen would be that the loan guarantee would be looked to,” I don’t know how that would work. I did a turn as a banker. I don’t know how that works, that the bank would say, “Oh, well, we won’t get any cash or any payments. They’re in default, but we’re not going to look to the loan guarantee.” I’ll be interested to see how the structure of the loan works to deal with that.
The second issue that I would leave you with are two items that I think would go a long way to building some confidence from communities and maybe even from industry.
Number one, being energy and natural resources, it should not be headquartered in Ottawa. There are no other energy and natural resources companies headquartered in Ottawa. Winnipeg or Calgary or Halifax or St. John’s or Saskatoon or Prince George would be something, and I would be disappointed if it was headquartered in Ottawa. The point is I hope this will not be something headquartered in the bowels of some building here in Ottawa with faceless people administering it. That’s number one for you to think about. This is supposed to be something different. It is supposed to be a piece of reconciliation, and it is not a government program in the same sense as everything else. I will leave you with that.
I would also leave you with this issue of Indigenous leadership. We had great people here from the oil and gas industry, including a CEO, who said that the future of Canada, its economy and the development of natural resources, will be met when Indigenous people are leading the projects and the industry is supplying the logistics. I’d ask that you guys consider that as you’re developing this and what role you play and how you play it and how you’re seen to be playing it as you develop something new and exciting. We’re at the stage of lots of hope and optimism. I know it’s up to you to deliver the realism. Good luck, and we’ll be watching. Thank you.
The Chair: Thank you, Senator Tannas.
Senator Prosper: Thank you to the witnesses for being here with us this evening.
I have three questions. I’ll try to go through them rather quickly. At least two of them are related to the previous panel.
The first relates to procurement and ensuring that the funds provided to Indigenous companies actually go to Indigenous companies and have a way of flowing into communities as such. I know that different Aboriginal groups like the AFN have, in fact, two resolutions that speak to having some kind of a verification and certification process for Indigenous companies. I believe the National Aboriginal Capital Corporation Association is looking into that as well. How do you intend to approach this, given the timelines that you put forward?
Second, along the lines of capacity, we heard on the previous panel from Chief Gale her considerations around capacity, knowledge transfer and internal and external capacity, and it was sort of linked to the $3.5 million set aside for that to be insufficient. She came up with a figure, roughly, given her experience, of around 1.5% to 2% as being a benchmark. I’m curious what you think about that.
Third, and this is further to Chief Gale’s testimony as well, she provided four matters for consideration to the group. I think the third one was related to risk tolerance and a need to take that into consideration. I’m curious how you view risk tolerance under the guise of economic reconciliation. How do you see those two coming together?
Ms. David: Thank you very much for your questions. If it’s okay, I will take the third question and then defer to my colleague for the first and second questions.
You asked about risk tolerance and how we weigh risk tolerance with the program’s objectives. The program’s objectives are focused on economic reconciliation, and the program is also focused on natural resource and energy projects in a sector-agnostic manner. In order to bring forward these objectives and achieve the program objectives, it will largely be focused on projects that are able to generate stable cash flows so that the loans that are taken out to purchase the equity can be repaid. The program can demonstrate success by having loans taken out and guaranteed and those loans being repaid over time through project cash flows so that the program can demonstrate more success and issue even more guarantees. We’re not thinking about the $5 billion as a one-and-done. It is an envelope that should be recycling itself. As more loans are issued, they are repaid, and more projects get done.
Senator Prosper: Thank you.
Ms. McKay: Senator, thank you for all three of the questions.
On the first, to repeat my colleague’s refrain, program eligibility criteria are still being defined, but the budget was clear in terms of wholly owned entities coming from nations. What we have seen in the provincial programs is that they’ll seek band council resolutions or governance motions from nations for those wholly owned subsidiaries to act on their behalf. We have been watching some of the deals that have been happening across the country over the past couple of years to see how those structures have unfolded. I don’t think we have a definitive answer save to say that we also wish to assure ourselves that the applicant is who they say they are.
On the issue of capacity funding, Chief Gale certainly hit the nail on the head there. We have averaged it out to between $400,000 to $1.5 million per deal, depending on complexity and structure. This is the beginning and not the end of a conversation around how capacity should function. We have some work to do with provincial programs as well as project proponents to see what that ecosystem starts to look like. We’re in the early days, and we need to see how the $3.5 million behaves in the early part of the program to see what we would do with it later, or at least recommend doing something different for decision makers. I’ll terminate there, but thank you so much for the questions.
Senator Hartling: Thank you for being here.
It’s very exciting to listen to this new, unique undertaking, and I can sense your excitement as well and your relationships with the other folks here. Because it is so new and is in development, I am wondering if there have been other countries that you have researched or learned about that are doing similar kinds of things that you can learn from.
Ms. McKay: Thank you for the question, senator.
We haven’t found too many of our partners internationally who have looked to facilitate an access to capital regime like this. Provincially, we have seen great leadership from Alberta, Ontario, Saskatchewan and now B.C. We hope other provincial and territorial governments will join the fray soon. However, from an international perspective, we have been asked by many nations, now that the budget has been released, about what this is and how it might work. We hope it’ll provoke a conversation with partners abroad, including the United States, about where we might learn from one another’s experiences and share a path forward to getting towards reconciliation and figuring out ways that we can co-develop. There might be opportunities for the U.S. at some point in the near future, I would hope, but we’re in the early days.
Yes, you are reading the enthusiasm correctly. Together with our partners at the Department of Finance, we are very excited that the government took this step forward, and we think it is an important one.
Senator Hartling: It’s great for leaders for sure, even though there are bumps in the road.
I also heard you talk about the consultation, cooperation and collaboration, and we don’t often hear that. Sometimes it is led by the government. How did that process develop, or how do you think that went? Was that easy? How was that?
Ms. McKay: The Indigenous leaders across the country have been asking us to act in this space for some time. They were at the table before we could knock on the door. With leaders like Chief Gale and others who have come forward to put their voice to this issue, it really created a dynamic and interesting room. We had sessions right across the country and then bespoke sessions with individual nations and their economic development corporations.
We also had a ton of support from Indigenous business leaders and financial leaders like the First Nations Bank, FNFA, FMB and others who have come to this committee who have given us helpful nudges, advice and a path to follow. I would not say that we led the consultation and engagement so much as they led us through it. We are very pleased with the way that they were so open in sharing what would work and what might not and that we were honest in how we could move forward together. I think we’ll continue to learn from them over the next couple of years while we’re trying to get this off the ground.
Senator Hartling: Well done. Thank you.
The Chair: That brings us to the end of our list of senators. Time for this panel is complete. I wish to again thank you both for joining us this evening. If you wish to make any subsequent submissions, please submit them by email to the clerk within seven days.
We’ll now suspend briefly to allow us to go in camera.
(The committee continued in camera.)