We have been reviewing the unanimous decision of Canada’s Highest Court on the constitutionally-imbedded rights of members of First Nations tribes as they affect resource companies’ operations.
Reaction in the media range from panic to concern to joy, depending on the writers’ biases. The financial community has generally refrained from comment. Some investment dealers have published legal opinions from lawyers with expertise in native rights issues. Stock market reaction has, to date, been well-contained, even though the implications of the decision are potentially vast.
We have read the judgment, which raises immediate concerns for developments by mining and oil companies—not just in British Columbia, where the plaintiffs’ claims were adjudicated, but across Canada. The provinces were interested parties in the application to the Supreme Court, and are all, in differing ways, affected by the remarkable scope and fervor of the Chief Justice’s decision.
What is clear is that companies contemplating opening of new mines or pipelines in territories that have historically been used by natives for hunting, fishing or residences or that have special cultural or religious significance will have to gain agreements with all tribes that claim such rights. Note that Canada’s Supreme Court has previously affirmed that First Nations representatives claiming ownership rights to lands and waterways can succeed in their applications based on oral recollections without any written evidence. Many of the languages of the tribes were never reduced to writing, so oral evidence has to be accepted.
At the very least, the decision means that no new oil and gas pipelines can proceed without consent of any and all tribes claiming past association with lands subject to the development. A complicating factor is that, in British Columbia, tribes claims overlap each other in many regions. It has often been alleged that the tribes collectively claim 110% of British Columbia.
A complicating factor is that US tax-exempt environmental advocacy funds have long been funding Canadian tribes’ claims to block specific pipelines or new mines. The moneys go to finance protests, rallies, and litigation, and have been very effective in influencing public opinion against some projects—most notably oil pipelines. This new Court decision gives aboriginals far more power to delay or to kill new pipelines, should they choose to do so.
We view this development as one that may trigger more concerns than are warranted, but we do feel that the decision raises issues that will probably take years to resolve. At the moment, the big winners are the members of the native tribe which brought the case—and BC lawyers. Doubtless, many other tribes are already discussing how they bring lawsuits to assert their claims.
The most immediate concern for investors relates to the rapid development of natural gas properties to supply gas for pipelines to the West Coast to ship LNG abroad. Already, share prices of some of the most-levered Canadian gas developers have been affected. albeit modestly. The sellers may have over-reacted, but there is no way at this point to estimate how sustained the selling may be. Stock markets hate uncertainty, and many of the sellers may be switching into shares of US companies lining up reserves for shipping to the Gulf for the long list of applicants to ship LNG abroad.
In particular, there is ambiguity as to whether existing deals with native tribes along the proposed gas pipeline route to Kitimat are bound by agreements made at a time that Canadian and provincial laws decreed that a deal was a deal.
We suggest clients use caution in appraising this new risk and consult with experts as to their exposure.
There is no appeal from this decision, which is final, no matter how upset Ottawa and some provincial governments may be.
As for existing operating mines with pre-existing treaties, investors should probably have few concerns. All new proposed mines, particularly in British Columbia, are most certainly going to have to be negotiated with native groups, even where some existing deals suggest the mining company has clear title obtained at a time when provincial legislation recognized the companies’ titles and granted permission to develop the properties.
There was never a good time for such Court-created confusion.
But this comes at a crucial time for some truly important resource developments.