Q4 | Torys QuarterlyFall 2023

Indigenous participation in energy transition projects: a key to success

As a result of the urgency and scope of the energy transition, the demand to quickly develop energy projects provides a once-in-a-generation investment opportunity. Given the competitive and rapidly changing investment landscape, the inclusion of Indigenous peoples in the transition will be a key aspect of energy project investment in Canada. Ensuring the inclusion of, and participation by, Indigenous peoples in energy projects will help facilitate a smooth transition while simultaneously advancing economic reconciliation in Canada.

This article explores developments in the following three areas, all of which will impact Indigenous participation in energy projects:

  • recent considerations of the principle of free, prior and informed consent (FPIC); 
  • the use of Indigenous-led impact and environmental assessments (collectively, EAs); and
  • the evolution of Indigenous equity ownership arrangements.

Free, prior and informed consent

FPIC is a principle found in the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP), one of the results of which is the meaningful participation of Indigenous peoples in projects or other measures that may impact them.

FPIC will continue to influence how energy transition projects are pursued in Canada. For example, legislative processes are currently underway to align the laws of Canada and British Columbia with UNDRIP, including FPIC. UNDRIP is being used as an interpretive aid on Indigenous rights matters by some provincial courts, including the recent Gitxaala decision1. However, the outcome of those processes, and the precise requirements of FPIC that will be implemented in the Canadian legal context, are currently uncertain. British Columbia has indicated that FPIC will be implemented within the framework of the duty to consult and accommodate. The federal government has indicated that FPIC requires consultation with the aim of obtaining consent from potentially affected Indigenous groups2.

Equity participation by Indigenous groups is currently being driven both by governmental policy initiatives and, importantly, by project owners who are proactively facilitating these arrangements.

The Truth and Reconciliation Commission’s Call to Action #92 recommended that businesses adopt UNDRIP “as a reconciliation framework” and apply its principles to their policies and operations. Many major financial institutions are signatories to the Equator Principles, which incorporates FPIC. Businesses and Indigenous peoples acting across a variety of sectors in Canada, including but not limited to Indigenous and non-Indigenous project proponents, are considering how FPIC may be implemented into their policies and practices, especially in light of the current ambiguity regarding the evolution of law in this area.

Understanding the continuing evolution of FPIC in Canadian law and practice may help facilitate the energy transition, both through direct project-related engagement with potentially affected Indigenous peoples and more indirect matters (such as reducing hurdles for project-related lending).

Indigenous-led environmental assessments (EAs)

Indigenous-led EAs are increasingly being used as part of the review process for projects in Canada, and such EAs will play an important part in the energy transition. Indigenous-led EAs provide, among other things, Indigenous communities with the opportunity to undertake studies of potential project impacts that may affect their peoples, territories or rights. Indigenous-led EAs may provide the following benefits:

  • more effectively and efficiently identify, assess and determine how to resolve or manage key gating issues;
  • increase the social acceptability of a project that is ultimately approved while advancing reconciliation and developing both local and broader community support for the project; and
  • shorten EA timelines, including by undertaking activities that expedite the Indigenous consultation process as well as any other EA processes.

Indigenous-led EAs are not a panacea and must be carefully designed and implemented to realize such benefits. Indigenous-led EAs are complex and context-specific processes that must address the project’s potential effects in a manner that is consistent with the values and governance of the Indigenous community or communities leading the EA. Indigenous-led EAs are emerging as processes that provide Indigenous communities with meaningful participation in reviewing projects.

Indigenous equity participation

Indigenous groups are increasingly advocating for equity ownership in energy projects that occur on their traditional territories. Equity ownership allows Indigenous groups to share in the commercial benefits of a project, which leads to a myriad of positive results.

Equity participation by Indigenous groups is currently being driven both by governmental policy initiatives and, importantly, by project proponents and owners themselves who are proactively taking initiatives to facilitate these arrangements. Notable and recent examples include the launch of a 50-50 equity model by Hydro One to provide First Nations with the opportunity to invest as equal partners in new large-scale transmission line projects in Ontario. Another example is the $1.12 billion sale by Enbridge of a 11.57% non-operating interest in seven Enbridge-operated pipelines in northern Alberta to Athabasca Indigenous Investments, a consortium of 23 Indigenous communities in northern Alberta—the largest energy-related Indigenous economic partnership transaction in North America to date.

While (i) employment, training and procurement initiatives; (ii) benefits arrangements; and (iii) accommodation measures arising out of the duty to consult process will continue to play a key role in facilitating meaningful engagement with Indigenous groups, we expect that, as the energy transition unfolds, equity ownership will increase both in frequency and in importance as a critical element of both a successful energy transition and advancing economic reconciliation in Canada.

  1. Gitxaala v British Columbia (Chief Gold Commissioner), 2023 BCSC 1680.
  2. https://publications.gc.ca/collections/collection_2018/jus/J2-476-2018-eng.pdf

To discuss these issues, please contact the author(s).

This publication is a general discussion of certain legal and related developments and should not be relied upon as legal advice. If you require legal advice, we would be pleased to discuss the issues in this publication with you, in the context of your particular circumstances.

For permission to republish this or any other publication, contact Janelle Weed.

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