It’s an unsettling paradox that many of Canada’s First Nations communities are resource-rich yet live in poverty.
A number of today’s most promising resource projects – from Western Canada’s Northern Gateway pipeline to Ontario’s Ring of Fire mineral belt – are located on or near aboriginal lands.
In theory, this should brighten the economic prospects of First Nations peoples. But it has often instead prompted conflict, pitting local communities against developers, and raising a host of thorny legal issues.
The situation is no better for companies whose job it is to explore and extract resources. A recent report by Osler Hoskin & Harcourt LLP concludes that the business price of disputes with First Nations shows no sign of abating in the future.
Might private equity have a positive role to play here?
John Jurrius, president and CEO of Calgary’s PE-funded Native American Resource Partners LLC (NARP), thinks so.
In the second quarter of 2014, Jurrius plans to go to market with a new fund focused on aboriginal economic self-sufficiency, peHUB Canada has learned. Targeted to raise commitments of between $500 million and $1 billion, the fund will invest in parallel with traditional PE firms in natural resource projects that create long-term ownership interests and income streams for First Nations in Canada.
“First Nations peoples have rights, but they often lack the tools needed to lever those rights and create economic opportunity” said Jurrius. “Above all, they lack sufficient capital to finance development of their resource assets. NARP has established a track record for making this happen. Now we think it’s time for a new investment model that builds on that record.”
Jurrius founded NARP in 2008 in collaboration with Quantum Energy Partners, a Houston, Texas-based private equity firm. Encouraged by the success Jurrius had facilitating joint resource ventures with tribal communities in Colorado and Utah, Quantum committed US$100 million in funding to NARP. With this backing, the firm has over the past six years structured, financed and implemented eight resource projects in partnership with First Nations in Canada and Tribal Nations in the U.S.
NARP’s premiere deal led to the Apr. 2011 formation of Kainai Energy, a company that is 50 percent owned by the Blood Tribe, an Alberta community with 350,000 acres of reserve land – one of the largest in Canada. NARP committed $100 million as well as commercial and technical expertise to Kainai, which has allowed the Blood Tribe to capitalize on oil and gas participation rights contained in joint venture agreements with two developers, Bowood Energy and Murphy Oil.
Later that year, NARP completed a partnership with Saskatchewan’s Kawacatoose First Nation, establishing Kawacatoose Energy, a developer of resource projects on lands and minerals granted to the nation through the Saskatchewan Treaty Land Entitlement (TLE) program of 1992. In this instance, NARP helped the Kawacatoose access the funding that was needed to expand on their development rights as spelled out in the TLE – the first time this has ever been done in Canada.
Other NARP deals include Tall Cree Energy, a resource development project established in 2012 with the Tall Cree First Nation in northern Alberta, and Tribal North Energy Services, a business founded in 2013 with the Sucker Creek First Nation and the Whitefish Lake First Nation to provide equipment to the oil and gas industry.
While NARP deals are structured to generate risk-adjusted returns, Jurrius believes the firm’s activity has also given a “new currency” to aboriginal partners. In all cases, this has been accomplished through a careful alignment of interests between the various parties, and by encouraging local communities to switch from passive to active participation in developing resource properties.
NARP’s aboriginal partners appear to see it the same way. At the time of Tall Cree Energy’s launch, Chief Rupert Meneen noted that while development on First Nations’ lands has been occurring for years, First Nations have “rarely been involved in any meaningful way.” The Tall Cree First Nation was able to take this step by working with NARP, which sourced financing and expertise. It was a decision, Meneen said, that will allow his community to secure its future.
While the new fund offering takes its cues from NARP’s experience, it will be more explicitly focused on the principle – expressed in the United Nations’ Declaration on the Rights of Indigenous Peoples (2007) – that resources on aboriginal lands should be controlled by, and be of social benefit to, aboriginal peoples.
“We see this as a necessary evolution,” said Jurrius. “Projects in resource sectors are capital-intensive, and highly subject to boom-and-bust cycles. We want to make sure that the early financial success of First Nations communities goes toward a long-term and diversified growth plan to raise communities out of poverty – permanently.”
To do this, Jurrius emphasizes the importance of private equity.
“Private equity is patient capital,” he said. “It provides the required discipline and can assume risks that are inappropriate for other types of financing. By aligning First Nations’ interests with private equity, and utilizing the same criteria and discipline, we can ensure both solid returns for investors and a strong financial foundation for aboriginal communities.”
Tom Isaac, a Calgary and Vancouver-based aboriginal law expert and partner at Osler, agrees with Jurrius.
“Private equity can play a potentially vital part in giving new opportunity to First Nations that have been historically under-served,” said Isaac. “By addressing the issue of sovereignty, partnership vehicles like NARP empower aboriginal peoples to develop their own lands and resources, and drive economic growth for them and Canada as a whole.”
Prior to founding NARP, the Texas-born Jurrius spent 15 years focused on strategic planning and resource development for the Ute tribes in the U.S. Working with the Southern Utes inspired his revolutionary ideas about aboriginal self-reliance. By supporting their acquisition of Colorado-based natural gas assets, Jurrius has been credited with moving the Southern Utes from a modest revenue base to the status of financial powerhouse. Not surprisingly, he was soon asked to perform the same role on behalf of the Northern Utes.
For his forthcoming fund initiative, Jurrius sees Canada as the point of departure.
“For a number of reasons, Canada far more than the U.S. shows the way,” he said. “By incorporating the Canadian definition of aboriginal territorial rights with development objectives, and effectively aligning incentives in a new investment model, I believe we turn what has been a problem into a solution. In so doing, Canada can set the standard for the world.”
In addition to Jurrius, NARP employs 20 executives, advisors and other professionals. The firm also has offices in Saskatoon and Denver, Colorado.
Photo of totem pole in Stanley Park, Vancouver courtesy of Shutterstock
Photo of John Jurrius courtesy of Native American Resource Partners
Photo of Cowichan People mural courtesy of Shutterstock