Joint venture the right way to do oil, gas deals with First Nations

The latest partnership venture on Onion Lake Cree Nation is the way of the future for oil and gas development on First Nations.

“I think it’s time First Nations, especially in this sector, come to the table with no less than 50/50 with any joint venture,” said Chief Wallace Fox. “The pick and shovel days are gone for Onion Lake Cree. We are going to be in business and have demonstrated that and we are here to work with whoever wants to work with us.”

Eight years after initial talks between Fogo Energy Corp., headquartered in Calgary, and Onion Lake Cree Nation, a joint venture has been signed that will see the First Nation benefit from more than royalties.

“Our history goes back a long way. I first met with the Nation in 2003-2004, before they had any significant amount of oil activity on the reserve,” said Fogo Energy CEO Bill Trickett. However, three or four months of discussion back then ended with OLCN entering into agreements with other oil and gas companies.

Both BlackPearl and Canadian National Resources Ltd. are presently on the First Nation extracting oil, but the agreements between those companies and Onion Lake Energy provide only limited benefits beyond the normal royalty payments.

The status quo, said Fox, is that Indian Oil and Gas Canada negotiates with oil and gas companies on behalf of a First Nation, issues the permits and makes the First Nation aware of the outcome. The First Nation receives royalty payments and a signing bonus.

“We’ve eliminated that whole process,” said Fox. “We went directly into this agreement on our own.”

In fall 2010, OLCN began talks with Fogo Energy once more as the First Nation was considering opening up nine more sections of land for production. The venture signed between the two energy companies has far-reaching implications. Not only does the First Nation receive royalties, but it also receives 50 per cent of the money made from every barrel of oil sold.

“We’ve put together a deal of equals,” said Trickett. “We’re bringing the capital to bear and the expertise and Onion Lake Energy brings the mineral rights.”

A timetable has been established for drilling, all of which will occur on the Saskatchewan side of the First Nation.
“A huge conglomerate, they come into our reserve (and) they have mineral rights all over (the country). The last place they drill is a First Nation. But they tie up the mineral rights (on the First Nation) for a certain number of years,” said Fox. “With this deal, we control the drilling activity.”

Twelve wells will be drilled this year and 36 next year.
“There’s probably up to 70 or so all together, but we won’t know that until we get into it,” said Trickett.  “We might find some things are better than we thought and some things aren’t as good as we thought.”

This isn’t exploration drilling, he added. Work already done has resulted in 14,000 barrels of production on the reserve.

The joint venture will also result in spin-off benefits, with Onion Lake holding the right of first refusal to provide all goods and services.

Caption: Chief Wallace Fox (right) of Onion Lake Cree Nation presents Bill Trickett, CEO of Fogo Energy, with a gift.

Photo: Muskwa Productions & Consulting