Indigenous and Northern Affairs Committee on March 3rd, 2009

[The Chair, Conservative, Bruce Stanton]

I would like to welcome committee members, the minister and officials, as well as witnesses and guests.

This is the seventh meeting of the Standing Committee on Aboriginal Affairs and Northern Development.

In orders of the day, this morning we have the Minister of Indian Affairs and Northern Development. Today's hearings and our next meeting, on Thursday, will be in consideration of Bill C-5.

We'll proceed with the minister for approximately 10 minutes.

Minister, if you wish to introduce the officials you have with you today, that would be wonderful. Thank you.

Please proceed. You have 10 minutes.

[Chuck Strahl, Conservative, Minister of Indian Affairs and Northern Development]

Thank you very much.

Perhaps I will start by introducing the officials with me today. Sara Filbee is the assistant deputy minister of lands and economic development at Indian and Northern Affairs Canada. Strater Crowfoot is the chief executive officer and executive director of Indian Oil and Gas Canada. Karl Jacques is senior counsel with the Department of Justice.

They'll be here to answer all the difficult questions. I've promised them that I'm prepared to hand off anything that gets too technical to them, so they're ready for that, and they're ready, of course, to answer any questions you may have.

Thank you, Mr. Chairman and committee, for inviting me here today to outline both the necessity and the many benefits of Bill C-5, legislation that is needed so that first nations oil and gas resources will be managed using the most modern and effective tools available. This will ensure that first nations have the efficient regulations necessary to fully capitalize on the economic development opportunities created by oil and gas industries on their territory.

As committee members know, Bill C-5 has been a long time coming. As the 130 first nations with petroleum production or the potential for production on their lands will tell you, it's long overdue. The Indian Oil and Gas Act came into force back in 1974, so it's been around a long time. To say that things have changed since then is an understatement. The world has changed since then and the oil and gas industry has changed. There's a new generation of workers. There are new ways of working and better ways to protect the environment while increasing profitability. A lot of things have changed since that act was first written back in the 1970s.

Provincial laws and regulations governing the sector have kept pace with these changes in the intervening years, but federal legislation remains seriously out of date, and that's a real problem for first nations. Even though provincial governments have no jurisdiction over first nations for either oil or gas development or leasing of oil and gas rights on reserve lands, they do have authority over oil and gas companies operating on these lands. Federal laws governing oil and gas projects on reserve lands need to be better harmonized with provincial oil and gas regulatory regimes.

Cooperation with provincial authorities is essential. So, too, is the need to bring this outdated Indian Oil and Gas Act into the 21st century.

Bill C-5 responds to the needs of first nations and the oil and gas industry alike. It will do the following.

It will modernize and clarify the oil and gas regulatory process. For example, it will clarify ministerial and judicial review powers.

It will increase certainty and strengthen the accountability of Indian Oil and Gas Canada, which acts on behalf of first nations, such as providing Indian Oil and Gas Canada with new powers to audit operators.

It will also enhance protection for first nations environmental, cultural, and natural resources. For instance, as minister, I will have the authority to suspend operations that damage or threaten the environment or first nations sites of cultural, ceremonial, or spiritual significance.

I am confident that this is the right legislation, right for the times, because it is the result of extensive consultations and cooperation with the key players with a stake in this issue. And because it responds to what First Nations have been telling us needs to be done.

Over the past decade, Indian Oil and Gas Canada, working in partnership with the Indian Resource Council, a first nations organization advocating on behalf of some 130 oil and gas producing first nations, or potentially producing first nations, has held sessions with most of those oil and gas producing first nations and numerous tribal councils. And thanks to the longstanding and mutual relationship between Indian Oil and Gas Canada and the Indian Resource Council, first nations played an active role in the development of Bill C-5. Many of their suggestions for improvements have been incorporated in the bill before us.

We also worked with the Indian Resource Council and the Federation of Saskatchewan Indian Nations on the National Energy Business Centre of Excellence. This centre provides first nations with oil and gas expertise, things like legal advice, oil and gas business advice, and operations advice. It also helps them in identifying and coordinating programs, such as training and information sharing for first nations oil and gas managers. This will assist first nations in moving from being passive recipients of royalties to being actively involved in the business side of oil and gas, something I know there's increasing interest in. This will generate opportunities for wealth creation, and it could increase the number of oil and gas permits and leases held by first-nations-owned oil and gas companies, which currently are at approximately 40%.

I want to reiterate that first nations have told us time and time again that capacity development is very important to them. Many first nations are not ready to take advantage of the First Nations Oil and Gas and Moneys Management Act, the legislation that came into force in 2006, which enables development-ready first nations to assume full control of their oil and gas resources and moneys.

My department recognizes that the First Nations Oil and Gas and Monies Management Act may not be the right fit for every First Nation—First Nations may not yet have the necessary experience and capacity to take that major step. But this is an option for those who wish to take advantage of it.

Bill C-5 will ensure that Indian Oil and Gas Canada becomes, and continues to be, a modern regulator for those first nations whose oil and gas resources will continue to be managed under the Indian Oil and Gas Act. I also want to point out that this bill is not the end but merely a continuation of an ongoing consultation process with first nations. We will continue to work in partnership with the Indian Resource Council on the development of the regulations, and to develop mechanisms to deal with issues of concern to first nations.

Now, Mr. Chairman, there are a few other critical features of this legislation that I would like to briefly note before I take members' questions. During second reading debate, we heard the recurring themes of first nations consultation, economic development, and the environment. I have already touched upon the first two a little bit, but just to continue, one important issue addressed by Bill C-5 is providing assurance that the environment on first nations land will be protected, not only for today's generations but also for the generations that will follow. Bill C-5 provides for the authority to replicate appropriate provincial legislation and regulations. Harmonizing the environmental regime governing oil and gas activities on reserve with that of the same activities off reserve within a particular province is a good example of replicating a provincial regime into federal law to protect the environment.

Through this act, it will become possible to continually update environmental protection regulation without further regulation. In cases where there is a violation, as minister, I will have the authority to suspend a company's operations if those are damaging to the environment, or if areas of cultural, ceremonial, or spiritual importance are at risk. As well, the bill will give me the authority to impose hefty penalties for trespassing on first nations land, or the failure to submit forms, reports, or other required information. For more serious offences, the bill establishes a process to directly access the courts, and further establishes significant fines, which can be levied per day.

First nations are also protected in cases of non-compliance. For example, the bill provides for compensation to be paid to a first nation for loss of oil and gas, or reduction in the value of their lands resulting from trespassing.

Bill C-5 will give the Indian Oil and Gas Act real teeth, unlike the outdated version in place today.

I think it is very important that Bill C-5 will allow federal regulations to incorporate provincial laws as they relate to environmental protection, exploration, and equitable production or conservation. I want to clarify, however, that Bill C-5 does not give over any jurisdictional authority whatsoever to the provinces, nor will Bill C-5 have any impact whatsoever on the crown's fiduciary responsibilities, or on aboriginal or treaty rights. In fact, the proposed changes will strengthen Indian Oil and Gas Canada's legislative and regulatory capacity. This will actually increase its ability to fulfill the crown's fiduciary and statutory obligations related to the management of oil and gas resources on first nations lands.

Mr. Chairman, the fact that First Nations have been asking for these changes reinforces just how necessary they are. This is maybe the strongest argument for speedy passage of this legislation.

Mr. Chairman, the fact that first nations have been asking for these changes reinforces just how necessary they are. This is maybe the strongest argument for speedy passage of this legislation. The more than 130 oil and gas producing, or potentially producing, first nations across the country have waited long enough. It's time to act. I know I can count on this committee's support to move this legislation forward as quickly as possible.

I'd be pleased to respond to questions from committee members, and I look forward to hearing the results of your deliberations over the days to come.

Thank you.

[The Chair, Conservative, Bruce Stanton]

Thank you, Minister.

We'll now proceed to questions from members, beginning with Mr. Russell for the Liberal Party.

[Todd Russell, Liberal, Labrador, NL]

Good morning, and thank you, Mr. Chair.

Good morning, Minister, Ms. Filbee, Mr. Jacques, and Mr. Crowfoot. It's good to have you with us.

I want to go back to the IRC's mandate and to ask the minister if he agrees with this particular provision in their mandate:

To support First Nations in their efforts to attain greater management and control of their oil and natural gas resources.

I believe that's something we all probably agree with conceptually or in principle. If you're in agreement with that particular statement, how does Bill C-5 move us in that particular direction?

I ask this because I don't see many powers vested with the first nation in this particular bill; they're all vested with the minister or the governor-in-council to make certain regulations respecting oil and gas on reserves. How does that complement or play into the First Nations Oil and Gas and Moneys Management Act?

I would also like to know how many first nations have opted into the latter, that is, the First Nations Oil and Gas and Moneys Management Act? How many are effectively under that particular piece of legislation, and how many remain under the auspices of the forerunner of this particular bill, Bill C-5, which will probably now become new law?

So I'd just like to have a sense of that.

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

Thank you.

Those are good questions, I think, and I'm sure you'll ask similar questions of some of the first nations that are covered under this act during their testimony.

I have a couple of things to say.

One is that a strong regulatory regime that can keep pace with provincial regulations, I believe, allows maximum benefits for the first nations. For example, the Alberta oil and gas regulations have been changed dozens and dozens of times since our bill has been brought in. Everything from environmental protection to how drilling is done, how cleanup takes place, and how royalties are paid, all of that stuff, is regularly updated to reflect modern reality, but that hasn't been the case here.

You may hear some horror stories of what has gone on, where companies have come in and offered to do slap-dash drilling operations such that, “If you get me in here, I can do something for you.” It has not been good for the environment, it's not been good for the first nations, because it's not been done properly or under sufficient regulatory oversight, and first nations haven't benefited to the maximum they should from the royalties due them.

The second thing is that, moving forward, I've promised in my exchange of letters with the Indian Resource Council that on any regulations we develop, I'll work hand in glove with them. There is further regulatory work to be done, and one of the assurances I want to give—and this is important for first nations—is that the hand-in-glove relationship will be developed and be ongoing. So on the regulations that will benefit first nations oil and gas, or potential oil and gas revenues and production on their lands, we'll work closely with those first nations to make sure we cover the bases. So if they identify gaps, or if there's specific language we need to use, we're prepared to do that while working with them.

[Todd Russell, Liberal, Labrador, NL]

I'm just wondering how this allows first nations to have greater management and control. Do you feel this particular bill moves in that direction at all?

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

I think Strater has a comment on that.

[Strater Crowfoot, Executive Director, Indian Oil and Gas Canada, Department of Indian Affairs and Northern Development]

Thank you, Mr. Chair.

To respond to Mr. Russell's questions, the bill itself does not directly help first nations in gaining more control. It helps us better manage the resources on their behalf.

Our process is a two-key process. We work with chiefs and councils in approving deals. We both have to approve them to have them go forward. For us, then, this really clarifies the rules we operate under. It enhances our tools. It helps first nations to better jointly manage the resource.

With respect to the First Nations Oil and Gas and Moneys Management Act, or FNOGMMA, that bill is intended for first nations to take direct control of those resources. FNOGMMA was passed in 2006.

Currently we're working with three first nations. This year we're hoping to have them move to a vote. These are the Alberta first nations Blackfoot, or Siksika, and Blood, and White Bear in Saskatchewan. These first nations are moving along to gain full control of their oil and gas resources. They'll be having a vote before September 30 to ask their membership if they would like that to go ahead, and that the first nation gains full control.

We are currently working with two other first nations looking at FNOGMMA. The act has two parts--the oil and gas operations and the moneys management. You can opt in to just moneys management. We have currently two first nations looking at the moneys management side.

[Todd Russell, Liberal, Labrador, NL]

The only criticism I have heard or have been written about, Minister, is that the department has been reluctant to pull a lease, for instance, granted to a company if they have not complied with certain current regulations or haven't provided the royalties.

Is that a fact? And if that's a fact, why is that the case?

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

I don't know of the individual case, but I can see that Mr. Crowfoot has some comment.

[Strater Crowfoot]

Thank you, Minister.

Our tools allow us to pull a lease, but that is an extreme case. We work with the company--because they have a permit and a lease for the land--to try to comply with the terms of the lease.

That's our last option. By doing so, we take away the flow of royalties to the first nation. We work very closely with the first nation and the company to ensure that the company complies with the full terms of the lease.

Again, that's our last option. We're reluctant to do that. As I mentioned, it takes away the royalties flowing to the first nation. But we're not opposed to doing it: if that's the last option, we will do it.

[Todd Russell, Liberal, Labrador, NL]

Thank you.

[The Chair, Conservative, Bruce Stanton]

Thank you, Mr. Russell.

Mr. Lemay, you have seven minutes.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

Minister, I've carefully studied this bill, which I find interesting.

I find it interesting that the Indian Resource Council, the IRC, still exists, but especially that it mostly consists of aboriginals who know the file.

Can we be sure that will be the case if Bill C-5 comes into force?

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

Most certainly the Indian Resource Council continues to exist. I agree with your analysis; they've offered not only a good sounding board for the government but also a good mechanism for oil and gas producing first nations to have a board with the expertise to engage with both companies and governments to talk about the needs of first nations.

The Indian Resource Council has proven to be very useful, and it should and will continue.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

I imagine you read the Ermineskin decision rendered by the Supreme Court on February 13. I know it's taken 20 years to settle that case. It concerns gas, oil and the Crown's trustship role that the minister must play.

I would like to know whether the Supreme Court decision of February 13 will have an impact on Bill C-5 or whether that's a thing of the past.

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

The decision the Supreme Court brought down in February dealt with how the federal government handled moneys that came in through Indian oil and gas revenue and whether we did a proper and good job of investing and looking after that money.

As you can imagine, it went through all the stages of a court process to get to the Supreme Court. It was a 20-year process, and it was a very expensive one, unfortunately, for both the first nations and the federal government, because it dragged on for so long. The Federal Court ruled seven to zero that the federal government had behaved properly in handling these moneys. They dismissed the case totally.

That being said, that ruling doesn't change anything in this act. This act will still allow those first nations that want to, to handle their money. Mr. Crowfoot mentioned the first nations that preferred to handle their own money. There is some expertise involved, but some first nations are ready and want to do that. Nothing prevents them from proceeding with that. Nothing will prevent Ermineskin or Victor Buffalo from proceeding with that if that's what they'd like to do. Certainly that's an option available to them. It's a decision for an individual first nation to make.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

I had an opportunity to meet the representatives of the Indian Resource Council, and I've realized all the opportunities, in research, in particular.

Minister, I see that there is a very large number of First Nations here, that the list is really long. You say in your presentation that some communities aren't ready and that they have to be assisted. Is a plan in place for that purpose, whether it be by you, your department or the IRC? If oil is discovered during drilling, the First Nations will absolutely have to be ready to deal with that. How do we prepare them?

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

That's an excellent question. Something has been raised with me, particularly by the Federation of Saskatchewan Indian Nations, who are seeing some of the traditional oil and gas that was in Alberta--and there's quite a bit of expertise and experience in Alberta--now shifting over somewhat to Saskatchewan because of interest in development there. That is why we've developed the two centres of excellence, one in Alberta and another one in Saskatchewan; they are the two biggest centres of Indian oil and gas activity. Also, each one is a little bit unique, one from the other. Indian oil and gas production in Alberta is somewhat different from the potential over in Saskatchewan, which tends to be more into heavy oil and so on. So the feeling was that there needed to be the two centres that would give expert advice, training, and a place to bounce around ideas about getting the maximum benefit for the first nations in each of those areas. The Indian Resource Council itself is an excellent resource. These folks are experts at what they do and have been an excellent resource. People have the council to go to directly. The centres of excellence are an effort to allow first nations to get the expertise they need early on and to talk to both legal advisors and professional people about how to maximize that benefit.

I think the centres of excellence are going to be part of the answer.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

Mr. Crowfoot, I would like to know why the Indian Resource Council is focusing solely on oil and gas. Wouldn't it be a good idea for you to be a bit involved in mining development as well? There are a number of places where major activities are underway in that field.

[The Chair, Conservative, Bruce Stanton]

Mr. Lemay, unfortunately, your time is up.

[Marc Lemay, Bloc, Abitibi—Témiscamingue, QC]

May he answer?

[The Chair, Conservative, Bruce Stanton]

He may briefly.

[Chuck Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

Very briefly, I will say that of course we're interested. Think how interested first nations are in other resource development opportunities. Of course they are very interested. But there are other acts and other ways of managing both mining and timber, for example. There are other acts that cover how they may be handled. This deals exclusively with Indian oil and gas because it's such a specialized industry, and it does require that kind of expertise. Other issues are important but need to be covered, I believe, under different acts of parliament.

[The Chair, Conservative, Bruce Stanton]

Merci.

Now we go to Ms. Crowder for seven minutes.