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Natural resource projects: The challenge and the opportunity for First Nations

A proactive federal strategy could help close the First Nation well-being gap

by John Graham

No relationship is more important to me and to Canada than the one with Indigenous Peoples.

— Prime Minister Trudeau, in his mandate letters
to all of his ministers, November 2015

Projected resource exploration and development over the next several decades in Canada, estimated at some $650 billion, represents an unprecedented opportunity for First Nation communities, some of which are the worst off of any communities in this country. Moreover, with a string of recent Supreme Court rulings, these communities have significant legal clout to delay projects or perhaps stop them altogether.

This is less likely to happen if First Nation communities believe they can derive significant benefits from these projects – such as the Ring of Fire chromite mining project in northern Ontario and the Victor diamond mine in the same region – while preserving what they value the most: their lands and activities related to these lands. But to optimize benefits and avoid negative fallout from these projects, First Nation communities need a wide array of expertise buttressed by sound relationships within and among their communities, with industry and with governments.

As I show here, for a large minority of First Nations – perhaps as high as 30 per cent of the total – acquiring this expertise and forging the required relationships are too much of a hurdle within the usual timeframes of a natural resource project. Therefore, what is needed is a more proactive federal strategy, one that comes into play well before natural resource projects are even on the horizon. I describe the principal elements of such a strategy further on in this article. It includes measures that can help First Nation communities acquire the capacity to participate on their terms, without which these projects may be stalled or even abandoned. The stakes are high for all of us.

The nature of the challenge

12_table_1Table 1 provides an overview of the types of expertise and relationships that a First Nation would likely need over the course of several years or even decades to participate effectively in the development and then operation of a major resource project. This large array of expertise requirements is driven in part by the range of possible benefits that a community might derive from these projects, which go beyond the obvious financial and economic domain. The range includes social, health and cultural benefits; environmental protection and monitoring; housing and infrastructure benefits; and new education opportunities.

Some of the expertise requirements to realize these benefits can be purchased – for example, legal, financial and capital-sourcing expertise. Nonetheless, the community must have enough expertise to contract with the appropriate entity, manage the contractor and engage the community in assessing the results of these assignments. Furthermore, many critical capacities – good governance, for example – must come from within the community. New wealth pouring into a community can have unintended consequences. Increased crime, added stress on families dealing with an absentee parent on a job site, resentment caused by widening income disparities within the community and greater addiction issues are just some examples of potential problems to be anticipated and mitigated where possible.

The conclusion is unassailable: to maximize benefits while managing the risks of negative impacts posed by large resource projects, First Nations face an enormous array of complex challenges.

The current state of First Nations

How ready are First Nations to meet these challenges? The short answer is that a large minority are nowhere near ready and cannot become ready even if the project startup period is over an extended period. Here is some of the evidence.

12_Figure_1The starting point is the Community Well-Being index (CWB), without doubt the best existing measure of the overall social situation in First Nation communities across Canada. Relying on census data, researchers at Indigenous and Northern Affairs Canada (INAC), have developed the CWB, based on four factors: education (percentage of adults with high school and university); housing (quantity and quality); labour force (participation and employment rates); and income (average per capita). Based on special census runs, the index is updated following each census. Results from the National Household Survey (which accompanied the 2011 census) are summarized in figure 1.

The litany of socioeconomic problems facing those First Nations at the lower end of the CWB scale is well known and does not need repetition here. Suffice to say, 98 of the 100 lowest-scoring communities are First Nation communities. To expect these communities to deal with the myriad challenges posed by large resource projects in the short to medium term is simply unrealistic.

Alvin Fiddler, Grand Chief of the Nishnawbe Aski Nation that represents 49 First Nations in northern Ontario, agrees. Noting that nearly half of those communities are under some type of water advisory and that at the same time they face pressures from resource companies and governments to allow development in their regions, he had this to say:

How can these communities be expected to meaningfully engage in these processes, trying to engage with multibillion-dollar companies or government, when they are worried about whether their children will be able to access clean water? … They need to take care of these things first, before they can be expected to come to these tables and have negotiations with government and companies. We need to have that happen.1

In making these remarks, Mr. Fiddler may well have had in mind the nine First Nation communities most affected by the Ring of Fire, the name given to an area of high mineral deposits in the James Bay lowlands, roughly 500 kilometres northeast of Thunder Bay. The potential economic benefits are enormous: according to the Ontario Chamber of Commerce, within the first 10 years of development the Ring of Fire will generate $9.4 billion in economic activity and sustain 5,500 jobs annually.2 But the nine First Nation communities are woefully unprepared to take advantage of this opportunity. Among other things, they have very low high school completion rates, alarmingly high drug dependency rates, severe housing shortages and very little business activity. Further, five of the nine communities have no all-weather road access and face a geographic reality that finds them remote not only from the rest of the province but from one another.

Attawapiskat First Nation: A missed opportunity

Located on the western shore of James Bay, the Attawapiskat First Nation – again in the news in the spring of 2016 as a result of a rash of attempted suicides – provides a graphic case study of how a First Nation’s lack of readiness can blunt any benefits from large resource projects in its traditional territories. Since 1995, Attawapiskat has been dealing with governments and the private sector on the Victor diamond mine, located some 90 kilometres west of the community. Despite multimillion-dollar funding on the part of the company (DeBeers) and provincial and federal governments over the decades spanning the regulatory process for approving the mine and its subsequent construction and operation, the results have been disappointing for the First Nation. As one study concludes,

First Nation participants in the engagement and consultation by DeBeers interviewed by the author admitted that their communities were unprepared in almost every sense of the word to participate in either engagement by DeBeers prior to the regulatory process, consultation during the regulatory process, negotiation of IBAs [Impact and Benefit Agreements] and other agreements, or to take advantage of the opportunities presented by the project and at the same time manage the negative socioeconomic impacts that arose.3

It is little wonder that the potential for realizing a significant “lift” from the Victor diamond mine eluded Attawapiskat. Media reports several years ago described five families living in tent frames and another 17 in sheds. A 2012 audit noted that the community had 316 housing units of which only 46 (14.6 per cent) were considered adequate, 148 (46.8 per cent) required major renovations and 122 (38.6 per cent) required replacement.4 School outcomes have been abysmal and water and wastewater treatment is an ongoing issue in the community despite a significant investment in a new water treatment plant in 2000.5

The experience of the Attawapiskat First Nation with a large resource development opportunity illustrates how a lack of readiness can lead to a missed opportunity to close the well-being gap with other Canadian communities. Indeed a case might be made that, for this community, the negatives from the project have outweighed the positives.

So we have to do better. The federal government needs a more proactive strategy for building expertise among these critically challenged communities, a strategy that includes a series of elements being put into effect before any resource project is even on the horizon.

A proposed federal strategy

In crafting a more proactive strategy, the federal government faces a well-known developmental dilemma: those communities most in need are the least capable of helping themselves. And yet the evidence is overwhelming that communities themselves and not governments must lead the way to transformative change. As the African-American writer Shelby Steele notes in reflecting on the experience of blacks in the United States,

It is only the initiative of human beings – individually and collectively – that can redeem a people from a trying past and deliver them to a better future. Only human initiative is transformative, and it is an eternal arrogance … to assume that government can somehow engineer or inspire or manipulate transformation. You cannot help people who have not already taken initiative – meaning total responsibility for their future. And it takes very little to help those who have actually taken such responsibility.6

To some, this may be tantamount to “blaming the victim” for their current distressed state. But as the talented Canadian writer Irshad Manji has noted in her wonderfully cogent aphorism, “The language of victimhood seduces then paralyzes.”7 Victimhood seduces because at first blush looking to the perpetrators or former perpetrators to take action seems so just, so morally right. Non-Aboriginals created the problem, and it is up to them to fix it. But waiting for others leads to paralysis.8 As Steele notes, “No group in human history has been lifted into excellence or competiveness by another group.”9

With this underlying principle in mind, what follows is a sampling of some of the elements of a more proactive strategy.

A Tailored Approach to Empower Communities to Help Themselves: A widely accepted observation about Indigenous communities in general and First Nation communities in particular is that they are very different from one another – different languages and cultures, different styles of governance, different priorities, widely different levels of expertise, different approaches to housing and other social services, different relationships with the external world. What this observation suggests is the need for a more differentiated, more tailored approach to First Nation communities, especially those experiencing high levels of distress.

In recent years a number of pilot projects have experimented with a tailored approach that among other things has the federal government reengaging with these communities in a holistic, collaborative manner with the objective of empowering communities to help themselves. One such pilot has focused on the 700-member Inuit community of Pangnirtung on Baffin Island. Key characteristics of this pilot included:

a partnership board made up of federal, territorial, hamlet and regional Inuit officials to oversee the project;

an initial focus on youth and crime reduction, which then widened to deal with other community priorities;

a community-development, empowering approach, based on a carefully chosen youth facilitator;

some incremental funding (in the range of $400,000 to $600,000 per year);

a long-term time frame;

a federal commitment to develop a single-window funding regime whereby all federal departments would pool their resources into one funding arrangement.

Other pilots along similar lines have stressed the development of community-wide plans with a high degree of community engagement. The Canadian Northern Economic Development Agency (CanNor) has initiated a multiparty community-development approach in Canada’s north to develop community readiness plans for communities that may be affected by resource development projects. Once again, a facilitator with community development expertise working with a community-appointed steering committee is a key element of this initiative.

In summary, a combination of four elements over a sustained period could provide a powerful means to develop this tailored, community-empowering approach: the CanNor approach to assisting communities to produce a comprehensive community readiness plan; the partnership board governance innovation of the Pangnirtung pilot to break down silos among and within governments; the availability of modest levels of new funding to support priorities identified by the community; and the development of a single-window funding mechanism.

Scaling Up to Build Capacity: Devolving program responsibilities and then lawmaking jurisdiction to individual First Nations – which began in the early 1960s – may go down as one of the major federal policy blunders of the late 20th century. On the basis of decades of experience with this policy, a now common observation about First Nations, beginning with the Royal Commission on Aboriginal Peoples in the mid 1990s, is that they are simply too small to manage their many functions effectively.10 No countries assign such small communities responsibilities in the “big three” areas of education, health and social assistance, let alone in other complex areas such as policing, natural resource management, economic development, environmental management and so on.11

There are other “good governance” rationales for supporting aggregation at the regional, provincial and even national levels in a First Nation context. One major reason, as the Royal Commission and numerous others have pointed out, concerns the provision of certain services by governments in small communities where family connections are a major fact of life and where discretionary powers of officials and political leaders can exacerbate tensions within the community based on family lines. Another governance issue concerns regulatory functions. In transferring jurisdiction to First Nations, for example in the environment, little thought appears to have been given to how small communities can be both program operators and regulators.12

More experimentation is clearly needed in this area. One example has occurred in building community readiness among the nine First Nations affected by the Ring of Fire in northern Ontario, referred to above. A significant achievement has been the establishment of Four Rivers Environmental under the Matawa Tribal Council umbrella. This organization provides the nine communities with needed expertise in preparing for environmental assessments, environmental protection issues and the potential for ongoing environmental monitoring once elements of the project begin.

Building Governance Expertise: There is near-universal agreement that good governance is a significant contributor to achieving positive socioeconomic outcomes. What is far less clear is how to improve governance. Evidence from abroad is not encouraging. The World Bank tracks governance indicators across 213 countries and reports that there is no strong evidence of a significant trend of improvement in governance worldwide despite investments in the billions of dollars.

On the basis of national and international experience, sustained governance improvements depend on three factors: political leadership, managerial and technical expertise and community support. Thus, outside parties can assist with advice, funding and technical assistance but cannot lead efforts to improve governance. Moreover, without solid community support, governance reforms are not sustainable. When new political actors take charge, successful programs can be reversed.

If governance improvements have to be driven by the community and its leaders, what then might be effective strategies for building this support? A certification system for First Nation governance, specifically designed by and for First Nation communities, might be part of the answer. In Canada, certification (sometimes called accreditation) is becoming an increasingly common instrument in many fields of public administration, including health.

Not surprisingly, the idea of applying third-party certification or accreditation in a First Nation context has also gathered increased currency. Accreditation Canada has established an accreditation program for certain First Nation health organizations. At least two First Nations – Membertou in Nova Scotia and Sagamok in Ontario – have succeeded in obtaining ISO 9001:2000 accreditations. And the First Nations Financial Management Board has developed a financial management–focused accreditation system for First Nations that wish to borrow money for much-needed infrastructure in their communities through securitizing their own source revenues. Using the pooled borrowing facility of the First Nations Finance Authority, about 30 accredited First Nations have accessed $270 million in long-term debt at interest rates just above prime.

Clearly defined benefits for achieving accreditation are critical. One such incentive might be accredited First Nations having access to more long-term, flexible funding arrangements with the federal government. Funding is a very important part of this relationship, and an accreditation system holds the promise of eliminating many of the irritants that plague it.13

Building Financial Management Expertise: A 2010 INAC evaluation found among other things that close to 30 per cent of First Nations at any one time were experiencing some sort of financial difficulty severe enough to be brought in under an intervention policy.14 The problem is particularly stark in remote communities where the financial function is very often the responsibility of individuals with little or no accounting background. Thus INAC should partner with organizations such as AFOA Canada (an organization that promotes financial and management skills in Indigenous communities) and the First Nations Financial Management Board to develop a concerted program to improve financial management and literacy through, for example, the use of mentors, distance support for geographically remote communities, the development of one financial organization to serve a group of First Nations and tailored training and community development initiatives.

One initiative that has shown promise was the assistance that the First Nations Financial Management Board provided the St. Theresa Point First Nation, a remote fly-in community in northern Manitoba that had been in third-party management for some dozen years.15 With assistance of Board staff, the First Nation succeeded in getting Board accreditation and subsequently made use of the First Nations Financial Authority’s pooled loan service. Needless to say, it is no longer under third-party management.

Encouraging Entrepreneurship through Microfinance Programs: Observers often note the lack of entrepreneurship in many First Nation communities. The 2006 census found that self-employment in non-Indigenous communities was almost five times as prevalent as in First Nation communities. Given these low levels, to expect communities to take full advantage of business opportunities arising from resource projects is delusional.

One reason for lack of interest in entrepreneurship is fear of failure. In small communities, entrepreneurs do not enjoy the anonymity that their counterparts have in large cities: everyone in such communities would be aware of a business failure. Thus what might be required is a low-cost, low-risk approach to encouraging small business startups. One approach to investigate is the applicability of the kind of microfinancing programs that have worked well in countries like India and Bangladesh.16 With its 150 to 200 million clients, microfinance is one of the most visible and long-lasting antipoverty programs in these countries.

Assisting Clean Energy Projects initiated by Indigenous Communities: Chris Henderson, a leading expert in clean energy production and transmission with substantial experience in working with Indigenous communities in Canada, estimates that within the next eight years there could be more than 120 clean energy projects with significant Indigenous participation.17 In many of these cases the Indigenous community will be driving the project or becoming a significant equity partner.

Such projects, especially those initiated by the Indigenous community, offer an important opportunity to build expertise and relationships across a range of areas. There are also other benefits, less tangible but equally important. Such projects can be transformative, resulting in an increase in community pride for completing a project after many years of hard work. Other communities have benefited from improving their own internal capacity, an outcome that has led to their taking on other economic ventures.

The Pic River First Nation, located on the north shore of Lake Superior in northwestern Ontario, was an early pioneer in deriving benefits from clean energy projects on its traditional territories. It has equity positions in three hydroelectric projects, one where it has a minority interest, a second with a majority interest and a third which it wholly owns.18 The First Nation in all of these projects has had five different financial benefits: ownership; employment; contracting; education and training; and revenue sharing through an Impacts Benefit Agreement. Earnings from these projects have risen to $1 million per year and will continue to increase as the debt accrued from the most recent project is paid down.

To obtain an equity position in resource development projects, many of which entail large capital costs and varying degrees of risk, Indigenous communities need assistance from both the industry proponent and governments. One useful example of government assistance is the Aboriginal Loan Guarantee Program (ALGP), which was announced in September 2009 by the Government of Ontario and subsequently expanded in the 2014 Ontario budget by $250 million to $650 million. One of the key features of the program is that applicants must have agreements in place to sell energy, usually to a provincial electrical utility, or have regulated rates in the case of transmission projects. This condition, by providing certainty over a long-term revenue stream, substantially reduces the risk to the Indigenous community.

Supporting mechanisms for Aboriginal communities to learn from one another: An effective and inexpensive means for assisting First Nation communities to build capacity is for them to learn from one another. In its October 2012 report, the National Aboriginal Economic Development Board (NAEDB) recommended the formation of an independent clearinghouse with a mandate to promote information sharing and awareness among Aboriginal communities participating in resource projects.19 Federal support for such a body or bodies, either on a national or regional scale, could be part of this proactive strategy.

The government cannot afford to wait

In attempting to create an improved relationship with Indigenous communities, the new federal government’s most compelling challenge is with the 100 or so First Nation communities whose living conditions are the worst in Canada by almost any socioeconomic measure. These communities should surely be the top priority in forging any new initiatives.

Here I have described the case for and elements of a more proactive strategy directed primarily at this group of distressed communities, one that would increase the odds of their benefiting from resource projects near them. Other elements are possible – specifically related, for example, to health and well-being, policing or housing. The principal point is this: the government cannot afford to wait for the projects to appear before dealing with community readiness issues. Otherwise First Nations and the rest of Canada will all be losers.

Notes

1 Quoted in Gloria Galloway, “Unresolved Water Advisories Creating ‘Health Emergency’ for First Nations,” Toronto Globe and Mail, December 7, 2015, retrieved from http://www.theglobeandmail.com/news/national/unresolved-water-advisories-in-aboriginal-communities-creating-a-health-emergency/article27627801/

2 Ontario Chamber of Commerce, Ring of Fire, retrieved from http://www.occ.ca/issue/ring-of-fire/

3 Donna Cona, Aboriginal Consultation and Regulatory Process Case Study: Victor Diamond Mine, unpublished manuscript, March 31, 2011.

4 Deloitte & Touche, Specified Auditing Procedures Relating to the Attawapiskat First Nation, September 2012.

5 “Intent to Initiate Third Party Management Process – Attawapiskat First Nation,” briefing note prepared for the Minister of Aboriginal Affairs and Northern Development on November 30, 2011, accessed through the Indigenous and Northern Affairs Canada website.

6 Shelby Steele, Shame: How America’s Past Sins Have Polarized Our Country (New York: Basic Books, 2015), E-book location 1887.

7 Irshad Manji, Risking Utopia: On the Edge of a New Democracy (Vancouver and Toronto: Douglas and McIntyre, 1997).

8 The much-lauded Truth and Reconciliation Commission is the latest major study to fall into this ethical cul-de-sac. Of the commission’s 94 recommendations, all but one depend on the actions of non-Indigenous governments and organizations for their implementation.

9 Shelby Steele, White Guilt: How Blacks and Whites Together Destroyed the Promise of the Civil Rights Era (New York: Harper Perennial, 2007), p. 62.

10 Royal Commission on Aboriginal Peoples, Report, Vol. 2, Restructuring the Relationship (Ottawa, 1996), Part One, p. 182.

11 In an earlier essay, “Dysfunctional Governance: Eleven Barriers to Progress among Canada’s First Nations” (Inroads, Summer/Fall 2012, pp. 31–45), I argued that First Nations are the largest local governments in the world on the basis of per capita spending. Nonetheless, limited capacity is only one of a long list of governance challenges facing First Nations.

12 A major irony is that INAC, a department with significant regulatory responsibilities in Canada’s north, could have blundered so badly in fashioning self-government arrangements with First Nations with little regard for the regulatory function.

13 More detail on the case for and development of a governance accreditation system for First Nations is contained in my essay Closing the Well-being Gap through Improved First Nation Governance (Winnipeg: Frontier Centre for Public Policy, 2015), retrieved from https://fcpp.org/sites/default/files/documents/Graham – Closing the Well-Being Gap.pdf

14 Indigenous and Northern Affairs Canada, Evaluation of the Intervention Policy, November 2010, retrieved from https://www.aadnc-aandc.gc.ca/eng/1317314118563/1317314895694

15 See First Nations Financial Management Board, St. Theresa Point First Nation – Community Profile (video), retrieved from http://www.fnfmb.com/outreach/videos/

16 For a comprehensive review of microfinancing see Abhijit Banerjee and Esther Duflo, Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty (Philadelphia: PublicAffairs, 2011).

17 Chris Henderson, Aboriginal Power: Clean Energy and the Future of Canada’s First Peoples (Erin, ON: Rainforest Editions, 2013), p. 41.

18 Ojibways of the Pic River First Nation, Energy > Projects, retrieved from http://www.picriver.com/index.pl?page=130&top=121

19 National Aboriginal Economic Development Board, Increasing Aboriginal Participation in Major Resource Projects (Gatineau, QC: Author, October 2012), retrieved from http://www.naedb-cndea.com/reports/increasing-aboriginal-participation-in-major-resource-projects.pdf

 

John Graham is a governance consultant who has worked extensively with Indigenous communities for more than 30 years. He is also Chair of the Board of Directors of Help Lesotho, an international development charity.



About the Author

John Graham
John Graham is a governance consultant and former Senior Associate with the Institute on Governance.




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