By Staff Writers
Fort McKay First Nation, home to 500 people of Cree and Dene ancestry, is forming a private oil sands company that will be run as a division within the Fort McKay Group of Companies. Located 65 kilometers northwest of the oil sands hub of Fort McMurray, Alberta, it is the first aboriginal community to join the oil sands booming business as a producer, with plans to develop a $1 billion mining project with Shell Canada Limited.
The Fort McKay Group of Companies is a conglomerate of seven businesses, owned 100% by the Band. The Companies have successfully supported nearby oil sands development for the past ten years. It generated $50 million in revenue in 2005, through land-reclamation services, hauling ore, transportation and camp catering.
On April 19, 2006, Shell Canada Limited and Fort McKay First Nation announced that they have entered into an agreement that outlines an exchange of options to acquire oil sands leases, specifically Shell’s Lease 90 and Fort McKay oil sands lands received as part of its land claim and resources rights settlement with Ottawa in 2003. The 8200 acres of prime oil sands territory could hold 500 million barrels of bitumen.
This innovative agreement recognizes the right and interest of Fort McKay First Nation to commercialize land received under its treaty land claim settlement by leasing it to Shell for potential incorporation into the Athabasca Oil Sands Project, and receiving royalty payments on production. At the same time the agreement facilitates the First Nation’s entry into the oil sands business through an option to acquire and work with Shell on the development of Lease 90.
The Athabasca Oil Sands Project is a joint venture among Shell Canada Limited. (60%); Chevron Canada Limited (20%); and Western Oil Sands L.P. (20%). With the current mine designed to produce 155,000 barrels of bitumen a day, Shell has announced long-term plans to increase the total Athabasca Oil Sands Project production to more than 500 000 barrels a day.
Fort McKay Chief Jim Boucher said in an interview “In terms of a small community like Fort McKay, there’s never been anything seen of this nature anywhere in Canada, in terms of ownership of natural resources and the economic opportunities that will arise from developing this project.”
The enterprising First Nation, once a fur trading and trapping hub, was able to move forward with its plans after royal assent was given late last November to Bill C-71, the First Nations Commercial and Industrial Development Act. Chief Boucher played a prominent role designing the legislation, which in part created a regulatory framework for large scale Aboriginal- backed endeavours, such as this.
“A lease of Fort McKay First Nation’s land will be an excellent addition to our long-term business plan,” said Clive Mather, Shell Canada’s President and CEO. “While additional work with government must yet be done to move forward, this agreement has the potential to return tremendous value to both Shell and Fort McKay for many years to come.”
“As an owner of oil sands lands and several oil sands service businesses, Fort McKay has a strong position in the oil sands today,” said Chief Jim Boucher. “We are currently evaluating our options to participate with Shell in the development of Lease 90, and have agreed to grant Shell an option to lease part of our treaty land for development. We are excited about the possibility of becoming an oil sands developer in our own right and in our own way for the benefit of our community.”
Fort McKay’s Lease 90 development plans will be based on project economics and integration with the existing Muskeg River Mine. SNC Lavalin has been contracted to conduct initial front-end engineering work on which a cost estimate can be made for the mining project, a number Chief Boucher said could be about $1 billion. Lease development models under consideration range from Fort McKay providing mining services, to the First Nation owning Lease 90 and managing the oil sands process from mining, through to bitumen extraction and land reclamation.
“We take a balanced view of development and know the effects development has on the land, and our traditional way of life,” said Chief Boucher. “However, development is occurring and from the mining phase, through the life cycle of the project and environmental reclamation, this is our opportunity to participate fully and build a long term economic vision for Fort McKay.”
Chevron Canada Limited and Western Oil Sands L.P. each have the option to participate with Shell in the development of its Athabasca oil sands leases. This option would extend to Shell’s lease agreement with Fort McKay.
The 8200 acres of oil sands owned by Fort McKay is surrounded by larger companies with larger stakes: Petro Canada’s proposed Fort Hills oil sands mine is to the west; the enormous Muskeg River Mine owned by Shell, Chevron and Western Oil Sands is to the east; and Syncrude Canada’s Aurora mine borders the southeastern edge.