Should LNG Canada take a final investment decision on a Phase 2 expansion, it will attract $33 billion in investments, according to the federal Major Projects Office.
Roughly 3 percent of that investment could come from First Nations.
On July 14, LNG Canada announced a new equity option that will allow five First Nations in the Kitimat region to invest up to $1 billion in a key piece of infrastructure for the Phase 2 expansion: a second large LNG storage tank.
This marks the third such Indigenous equity agreement to be signed on major energy projects in B.C. since 2022, and Aaron Sinclair, a former commercial banker in Prince George, has been involved in putting together all three of them through his business consulting firm, PNL Consulting.
Sinclair is president of MNT Investments–the limited partnership of the economic development arms of the five participating nations–the Haisla, Gitxaała, Gitga’at, Kitselas and Kitsumkalum.
Through this partnership, the nations have the option of taking up to $1 billion in equity in the LNG Canada expansion. This would give them up to 51 per cent ownership of a new LNG storage tank that will need to be built as part of the Phase 2 expansion.
They would then lease back their portion of the tank to LNG Canada, giving them a long-term revenue source.
Other First Nations, meanwhile, could own 10 per cent of the pipeline that feeds LNG Canada: the Coastal GasLink (CGL) pipeline.
LNG Canada described the recent equity option agreement announcement as “historic.” But it wasn’t the first such agreement for First Nations on major energy projects in B.C.
That would actually be the Stonlasec8 agreement, in which three dozen First Nations took a $715 million 12.5 per cent equity position in Enbridge’s West Coast natural gas pipeline system.
Sinclair was involved in that agreement too. He also had a hand in the CGL agreement. He is director and treasurer of Stonlasec8 Indigenous Alliance Limited Partnership, as well as director for the FN CGL Pipeline Limited Partnership.
Equity is next stage in evolving economic reconciliation
I spoke with Sinclair recently about economic reconciliation and the growing trend of First Nations becoming owners in major energy and resource projects. He was eager to address some misperceptions on First Nations involvement in resource development in B.C.
“A lot of the nations that I work with are trying to become involved in commercial activity because they want to generate own-source revenue,” he said.
“Every major project needs capital. Why can’t some of those people at the table be First Nations communities who are buying a position in those projects and then benefitting, purely on a commercial basis?”
Born and raised in Langley, Sinclair moved to Prince George in 2002 for a two-year stint as a commercial banker for the Royal Bank and never left.
“I moved for two years and stayed,” said Sinclair, who is married and raised a son and daughter in Prince George.
Sinclair earned an MBA from the University of Northern BC while working as a commercial banker, and then struck out on his own as a business consultant.
“By background, I’m a finance guy,” he said. “I started out helping people get access to capital.”
As a consultant, he worked with a variety of businesses, including a growing number of entrepreneurial First Nation entities. In 2008, he formed PNL Consulting, which now employs a team of 15 people.
One of his clients is the Gitxaała. Sinclair notes that the nation has become one of Prince Rupert’s biggest commercial taxpayers through their investments in the city.
“They bought the Crest Hotel, they bought a convention centre, they bought a casino, they own a Rona franchise, they’ve started a bakery, they have their own environmental services business, their own forestry company,” Sinclair said.
“They’ve invested tens of millions of dollars into the Prince Rupert economy. And they employ 250 people in Prince Rupert. They’re one of the largest commercial property taxpayers in Prince Rupert.”
In addition to being managing partner of PNL Consulting, Sinclair is president and CEO of MNT Investments (the First Nation partnership taking equity in LNG Canada Phase 2), director and treasurer of Stonlasec8 Indigenous Alliance Limited Partnership, and director for the FN CGL Pipeline Limited Partnership.
Misperceptions on Indigenous equity
“There’s two main misperceptions that bother me a lot,” Sinclair said. “One is that First Nations are an impediment to economic activity.
“Just like any part of society, there’s always individuals or groups that can be impediments to anything. But I think, by and large, the vast majority of First Nations want a lot of the same things everybody else does, which is opportunity and the ability to not live in poverty, and the ability to have a bright future for their children and future generations.”
The other misperception is that First Nation equity agreements in major projects are some form of ransom or handout–that First Nations are demanding a piece of the action in exchange for their support.
In fact, buying into major projects means First Nations are putting their own skin in the game: assuming financial risk on multi-billion-dollar investments, and raising capital from financial markets like any other business.
“They’re going out and borrowing the money, in one form or another, from private markets,” Sinclair said.
“In some cases, some of the transactions are getting either provincial or federal government guarantees attached to their financing, but that’s not the government providing the money.”
Government backstopping means First Nations are able to borrow at lower rates.
“Either way, the money is coming from capital markets somehow, or private capital somehow,” Sinclair said. “It’s not coming from public capital through the government writing a cheque to do the financing.”
In the case of LNG Canada Phase 2, the plan is to raise up to $1 billion through a corporate bond offering. Typically, it would be pension funds and other institutional investors buying the bonds.
“Our target is to raise the $1 billion and to be a 51 per cent owner,” Sinclair said. “We’d be needing 25 or 30-year debt, so bonds are the most likely pathway of raising it.”
The five nations own MNT through their respective economic development arms. It’s up to the individual First Nation how to use any profits made from their ownership in LNG Canada infrastructure.
The first Indigenous equity agreement of this kind in B.C. was struck between TC Energy and 16 First Nations along the CGL pipeline route.
That agreement, signed in 2022, gave First Nations the option of buying a 10 per cent equity stake in the CGL pipeline. That option has yet to be exercised.
“It hasn’t closed mainly because we want to continue to de-risk the opportunity as much as possible,” Sinclair explained.
Having ownership stakes in major energy enterprises helps to de-risk the projects themselves, and provides participating nations with long-term revenue sources. These projects are expected to operate for decades–up to 40 years in the case of LNG Canada and CGL.
“This is far more than a commercial transaction,” Linda Innes, chief councillor for the Gitxaała Nation, said at the July 14 announcement of the equity agreement with LNG Canada.
“It marks a fundamental shift in how development can occur in our traditional territory: one where Indigenous nations are not expected to accept impacts but instead participate as equity owners and true partners.”
Ultimately, having First Nations involved in projects as part owners just makes good business sense, Sinclair said.
“Engaging with First Nations and having them as real partners in projects, instead of just token partners, provides a huge amount of certainty to projects.”
Nelson Bennett’s column appears weekly at Resource Works News. Contact him at [email protected].
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