Want richer First Nations? Say “yes” to pipelines

Mark Milke and Lennie Kaplan, Financial Post, July 1, 2020

According to the 2016 census, 380,000 Indigenous Canadians live on reserve, many of them far from the economic opportunities that cities provide. Given concerns about economic conditions on many reserves, one of this era‘s most pressing policy problems is how to provide economic opportunity to First Nations far from urban centers.

One answer: Allow the natural resource economy on or near First Nations to flourish. A perfect example is underway in British Columbia, with the construction of the Coastal GasLink pipeline. This is the 670-kilometre project that, when complete, will transport natural gas from Chetwynd in northeast British Columbia to Kitimat on the coast, where it will be processed into liquefied natural gas (LNG) and exported mainly to Asia.

This $6.6 billion pipeline project is owned by a consortium that includes TC Energy, KKR, and Alberta Investment Management Corporation. The consortium has also offered a 10 per cent ownership stake in the project to the 20 First Nations living along the route that have signed benefit agreements with the project partners.

At its peak, construction of Coastal GasLink will employ 2,500 people, including many members of local First Nations. Returns from the 10 per cent ownership stake will outlast the immediate benefits of the construction jobs, but both matter. To understand why, consider some 2016 census data on how the affected First Nations are faring vis-a-vis other British Columbians.

Statistics are not available for all First Nations along the pipeline route but among the 15 for which data are available, 14 have an employment rate—the percentage of their working-age populations that is employed—lower than British Columbia as a whole. Rates range from just 23 per cent at the Cheslatta Carrier First Nation to 53 per cent at West Moberly. By comparison, the employment rate is 60 per cent for all British Columbians and 58 per cent for those who self-identified as off-reserve Aboriginal in the 2016 census. (One First Nation along the pipeline route, McLeod Lake, which has been entreprenurial for decades, had an employment rate of 77 per cent, which beat others along the route and the avergae for BC as a whole.)

The unemployment numbers are similar. Among the First Nations with benefit agreements and where census data are available, unemployment rates ranged from 18 per cent (West Moberly) to 50 per cent (Yekooche). For all British Columbians the census unemployment rate was 6.7 per cent. For off-reserve “Aboriginals,” as the census referred to that cohort in 2016, it was 12 per cent. Across all B.C. First Nations reserves it averaged 22 per cent. The census data make clear that the jobs that will come with the Coastal GasLink project and other such resource opportunities in the future have the potential to boost employment and lower unemployment rates where both badly need to happen.

As for incomes, the census provides data on median employment incomes for full-year, full-time workers for just five of the reserves that have agreements with Coastal Gas Link. Incomes for these five reserves were generated mainly in oil and gas and forestry and ranged from $30,336 per year on the Saik’uz reserve to $42,624 on the Saulteau. By comparison, Indigenous British Columbians off-reserve reported $47,133 in median employment income while for the population at large the median was $53,940.

Further evidence illustrating the potential to boost incomes on rural First Nations reserves comes from industry participation rates and salaries by sector. Nationwide, Indigenous Canadians constitute five per cent of those employed across all industries. The figure is slightly lower (4.4 per cent) for pipeline transportation, slightly higher in construction (6.2 per cent) and much higher in oil and gas extraction (8.6 per cent).

The distribution of salaries across industries suggests that allowing the resource industries to flourish would boost First Nations incomes dramatically. Median employment income (full-year, full-time) across all industries for indigenous Canadians was just $44,855 in 2016. But in construction it was $49,262, in oil and gas extraction, $117,831, and in pipeline transportation, $142,883. 

There is no easy way to spur economic opportunity for every remote reserve—not all have nearby oil and natural gas extraction or pipeline possibilities. Still, be it pipelines, oil and gas development, mining, forestry, other resource projects, or other rural economic drivers, such as agriculture—all economic development has the potential to provide work, employment income and tax revenues for those living on reserve.

And most of this activity requires little from governments, only that politicians and others allow these industries to flourish—including by not standing in the way of pipelines—for the benefit of all Canadians, but especially of rural First Nations.      

Mark Milke is executive director of research and Lennie Kaplan chief research analyst at the Canadian Energy Centre. Image credit: Pixabay.