Bands take resource development into 21st century

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A celebration to launch the inaugural gas development project of Keyano Pimee Exploration Co. Ltd., owned jointly by Saddle Lake and Whitefish Lake 128 (Goodfish Lake) First Nations in Treaty 6, took place on the Saddle Lake reserve Oct. 21. The ribbon cutting is an early milestone in what promises to be a beneficial relationship for the First Nations and their business partner, Auburn Energy Ltd. of Calgary, Alta. The project ties in two gas wells and a three-well exploration and drilling program.

Keyano Pimee and Auburn's joint venture, announced Oct. 1, differs from the standard royalty share agreement usually entered into by First Nations, in that Saddle Lake and Whitefish are full partners that put up risk money dollar-for-dollar with Auburn. The project price tag is in the range of half a million dollars. Wells cost about $150,000 each; cost of the pipeline, Keyano Pimee Vice President Sandy Jackson says, "depends on the drilling activity. It can range from $130,000 to $150,000." The two nations operate a joint council, insofar as resource development and management are concerned, and they will share revenues.

A pipe ceremony and later a traditional feast at the Saddle Lake Cultural Centre lent dignity to the commercial enterprise, which puts Keyano Pimee - translated by the principals as "our resources" - among the front-runners in First Nation owned and operated enterprises in Alberta. The first rig was moved on to a well Oct. 10, so a rig tour was conducted during the ceremonies.

Dignitaries and First Nation members present for the occasion included Chief John Shirt of Saddle Lake; Acting Chief Alan Makokis of Whitefish Lake; Elton Stamp (Saddle Lake), president of Keyano Pimee; Dave Clements and Gary Freeman, co-owners of Auburn Energy; Brian K. Cardinal, Keyano Pimee co-chair and manager of oil field construction for Saddle Lake Oil and Gas; Sandy Jackson (Whitefish Lake); joint council members Carl Bull (Whitefish Lake); Leonard Jackson (Saddle Lake); Louis Lapatack (Saddle Lake); Eric Large (Saddle Lake); Finlay Moses (Saddle Lake); Senator Thelma Chalifoux; Hon. Pearl Calahasen, Alberta's associate minister of Aboriginal Affairs and MLA for Lesser Slave Lake; and Indian Affairs' representatives Victor Houle, director of First Nations relations for Treaty 6; Warren Cootenay, field services officer, and Eugene Houle, who attended on behalf of the department's economic development manager. Joe A. Cardinal, the other Keyano Pimee co-chair, was unable to attend.

The gas exploration deal was two years in the making. The First Nations see it as a chance to capitalize on a unique opportunity to make money for other broader-based development initiatives later.

"The fact that we're dealing with a non-renewable resource, a depleting resource, and this is an opportunity for us to maximize that benefit, " Sandy Jackson said; "I think that's the point in all of this."

In the early 1990s, Saddle Lake, through Brian K. Cardinal, initiated talks with Freeman and Clements, both geologists, who previously were president and vice president, respectively, of other oil companies. Cardinal says what the First Nations are really doing is speculating that the two men have got the expertise to find gas. But they also hired independent engineers and completed an economic analysis that points to minimal risk.

"A lot of First Nations are in a comfort level where there is no risk involved . . . a lot of First Nations have never really taken that initiative to start looking at not only being the receiver of a royalty," Cardinal said.

When the deal was finally hammered out, Auburn's Dave Clements said, "the [First Nations'] council decided that they wanted to treat the available mineral rights in a different manner than had been done historically, which is just by public sale and they would just get a royalty and they would not have any right of public participation.

"It's resulted in inactivity ... on most of the Indian reserves n Alberta. There's just a few that are active and not through agreements like this. It is the only agreement that I am aware of where the First Nation has directly participated," Clements concluded.

By partnering with Auburn, Keyano Pimee avoids heavy start-up fees associated with qualifying as a producer. Auburn, in turn, gets access to 87 sections of land that otherwise would not be available to them.

"There's a lot of spin-offs," said Brian K. Cardinal. All the work is guaranteed to the nation, in terms of well site preparation and stuff like that. Typically oil companies . . . offer to produce or do some activity on tribal lands based on a royalty concession that would be equivalent to the Crown, which is about 20 per cent. Existing regulation royalty is around 50 per cent right now," he said.

Operating within Indian Act restrictions on retrieving the First Nations' money from their capital accounts has stymied many other First Nations' development initiatives. Keyano Pimee will have more flexibility in managing its own money through this arrangement by administering funds through its board of directors, Cardinal further explained.

"With oil exploration," Sandy Jackson added, ". . . it's a calculated risk. We're developing existing wells; we're drilling three wells that are near very productive wells and we know that the zones we're going into are of economics and we're not jumping into something on simple geophysical data. They have been proven up.

"The underlying thing is here, we've got a company that now is seen as a player in the gas industry, and it goes back to the risk involved. We're developing our known resources, as opposed to going somewhere else and trying to put all this effort and costs together and not hitting something, where we've taken over wells in our communities where companies have capped and have abandoned because they weren't economical at the time. But now they are."

What's made them viable now is rising gas prices and the demand for ntural gas. Jackson says the Alliance pipeline under construction now from northern British Columbia through Alberta, part of Saskatchewan and on to Chicago and the eastern seaboard is also a factor.