Financial Post – Claudia Cattaneo

Codie McLachlan for National Post

Codie McLachlan for National PostRodney Yellowdirt stands next to the re-routed Pembina pipeline near Alexander First Nation, Alta. With the support of residents, including Yellowdirt, a portion of the pipeline was originally going to be built across land owned by Alexander First Nation before meeting with opposition from the community’s new chief.

Like many members of the Alexander First Nation in Central Alberta, Rodney Yellowdirt is fed up with years of confrontation led by its chief, Kurt Burnstick, against Calgary-based Pembina Pipeline Corp. over its $2.5-billion oil and gas pipeline expansion from Fox Creek to Namao.

It’s not because Yellowdirt doesn’t like the project. It’s because the community needs it, he said, and its chief has gone too far in waging a costly war against Pembina because the company refused to pay him a bribe, an allegation that emerged during court proceedings last year between the company and the band.

“First Nation people are not opposed to development,” he said in an interview. “They want to create opportunities and build for themselves. Kurt made the choice to … get the benefits for himself. He did not consult with the community, so we lost that opportunity.”

A three-year regulatory and legal battle between Pembina and Alexander, a reserve with 2,500 band members located about 50 kilometres northwest of Edmonton, came to an end last month, when the company decided after a last-ditch attempt earlier this year to walk away from negotiations and build the final leg of its project around the reserve rather than face more legal delays.

As a result, Yellowdirt, the owner of Pisim Contracting, which employs 25 community members and could have benefited from the project by providing construction and other services, said the community has lost jobs, business opportunities and future taxes that could have alleviated poverty and dependence on government handouts.

The 270-kilometre project is under construction and is scheduled to be completed this summer. Some 2,000 workers are on the job, but none from Alexander.

They are not the only ones who lost. Pembina ends up with a 23-kilometre longer route instead of building near an existing pipeline right of way that would have minimized land disturbance, and Burnstick racked up a pile of legal bills.

Codie McLachlan for National Post

Codie McLachlan for National PostPembina’s re-routed pipeline is currently under construction near Alexander First Nation. The pipeline now runs 23 kilometres around the community just outside of Edmonton after originally being designed to run across Alexander’s land.

(While taking on Pembina, Burnstick was also in and out of court defending himself against sexual assault charges by women on his reserve. In his defence on the first set of charges, of which he was found not guilty in January, Burnstick said he was simply caring for a friend and band member. A second set is going to a preliminary hearing July 5).

Burnstick turned down requests for an interview. After being asked to respond to the bribe allegations and to explain why he was so opposed to the Pembina project, he responded in a text: “No comment after looking at your questions!”

The tale of Pembina’s pipeline expansion and its dealings with Alexander provides a rare window into what energy companies must navigate in their pursuit of a social licence for projects amid growing aboriginal compensation expectations and the growing need for pipeline transportation.

Pembina originally proposed the project — its biggest ever — in 2013 and quickly started approaching hundreds of landowners, eight aboriginal communities and one Métis settlement to discuss its plans.

With a capacity of 420,000 barrels a day, the project was designed to meet the transportation needs of 38 companies producing oil and gas from the Montney, Duvernay and Wilrich formations.

These three areas are the only ones in Alberta that have seen continuing levels of activity during the oil price downturn because of low costs, advancements in technology and prolific finds. Investment in other areas, particularly the oilsands, has dramatically dropped.

Once built, the pipeline will receive products from existing Pembina pipeline systems located west of Fox Creek and deliver them to the Namao Junction pump station, facilitating delivery to the Fort Saskatchewan and Redwater areas.

All told, Pembina held hundreds of meetings to discuss concerns and negotiate opportunities for benefits.

In the early days of the project, when Alexander had a different chief, the First Nation was supportive. The community even asked whether the pipeline could be built inside its reserve so it could collect taxes. Pembina looked into the request, but decided it would be too risky because of the proximity to residences, waterways and difficult terrain.

Instead, the company stuck to its preferred route, which was adjacent to the existing Alliance pipeline, a major gas pipeline built in 1997 located just outside the reserve. Yellowdirt said he took a look at Pembina’s proposed right of way, located largely on farmland, and concluded it would have had minimal impact on the reserve.

Pembina offered Alexander many benefits: jobs, opportunities for businesses to provide construction and other services, and community investments.

Yellowdirt said trouble with the project started when Burnstick was elected chief in mid-2013.

In his first meeting with Burnstick at the Tim Hortons in Morinville, Alta., John Young, Pembina’s head of aboriginal relations, said the chief demanded that all business available to Alexander from the pipeline’s construction be directed to his companies, rather than to the reserve’s many entrepreneurs.

Worried about the potential for kickbacks, Young refused, he said in an interview.

John Lucas/Edmonton Journal

John Lucas/Edmonton JournalKurt Burnstick is the chief of Alexander First Nation in Alberta. He opposed the construction of a portion of a pipeline across band land despite other community members supporting the project.

“I said, ‘I won’t do any business with you that way, because you are taking their margins and that would make them unprofitable,’” said Young, who was once a police officer specializing in aboriginal policing with the Calgary Police Service and then with the federal government.

More meetings were held where Burnstick asked for benefits and Young refused.

Meanwhile, the community was kept in the dark.

“We had no idea of Pembina approaching Alexander with these types of opportunities and this project,” Yellowdirt said. “We only recently found out about this in the past few months.”

Even some members of the council weren’t aware that Burnstick was in talks with Pembina, said councillor Allan Paul. “We didn’t know what was going on,” he said.

Undaunted by Young’s response, Burnstick asked to meet with Pembina’s vice-president and chief legal counsel, Harold Andersen.

The private session occurred in November 2014, when Pembina staff, Burnstick and council members had a previously scheduled meeting at a hotel in northeast Calgary near the airport.

What happened at the meeting is documented in testimony as part of proceedings before the Alberta Court of Queen’s Bench in Calgary on April 8, 2016.

During questioning by Alexander’s lawyer, Caroline O’Driscoll, Andersen said the meeting started with some introductory pleasantries about how things were going for the new chief and a few updates about Pembina.

And then, “Kurt did ask me for a gratuitous payment, and I didn’t ask him what it was for. What I did say was that Pembina was prepared to … work with Alexander First Nation Band-owned companies, we’re prepared to work with their individual-owned contractors, we are prepared to hire people on the job, we are prepared to hire qualified individuals to work for Pembina, we are prepared to do the environmental technical program. But I could not do that.”

Handout Pembina Pipelines

Handout Pembina Pipelines John Young is head of aboriginal relations for Pembina Pipelines.

Andersen continued: “I said, any of those things we are interested in, and we are interested in partnership. And the conversation went to where Kurt asked — and this is Chief Burnstick — asked a couple more times, and ultimately I think he said, I just need three or 400 grand. And I said, I’m sorry chief, but I cannot do this.”

Burnstick asked for the payment “to make the issue go away,” according to a transcript of the proceedings.

Andersen said he explained to Burnstick that such payments would have put his company, which is listed on the New York Stock Exchange, offside laws such as the Foreign Corrupt Practices Act, Sarbanes-Oxley Act requirements, the company’s fiduciary obligations and its ethics policy, which “prohibits making any type of payments that are just gratuitous.”

During the same proceedings, O’Driscoll pressed Andersen on what specific benefits the Alexander First Nation would get from the project, such as equity or revenue sharing, and expressed skepticism about the bribe allegation.

“Why did it take six or seven months before Pembina made any indication this had happened back to Alexander, if that’s what you allege happened?” O’Driscoll asked, referring to the bribe.

Andersen said the issue was handled discreetly because Burnstick was a new chief and “no one wanted to make a big deal of it.” He also said Pembina wanted to continue to have good relations with the band over the long term.

Young said that he’s not aware of Burnstick disputing the allegation.

Burnstick also took his opposition to the Pembina project before the Alberta Energy Regulator. It was the first hearing in the company’s 60-year history. In previous projects, the company was able to reach amicable agreements with all those impacted and avoid the costly procedure.

Alexander said it opposed the project because it wasn’t adequately consulted and that it wanted to protect its community so it had a viable future.

A three-week hearing occurred in October 2015, and the regulator in March 2016 decided to approve the pipeline with 11 conditions. It found that adverse effects on aboriginal communities, including Alexander, could be mitigated.

“The proposed project would be adjacent to and parallel the Alliance (right of way) in the vicinity of the Alexander reserve,” the regulator found. “There is no evidence before us to suggest that if approved, the construction and operation of Pembina’s project on the applied-for route will impair Alexander’s aspirations for its community.”

But Burnstick didn’t buy it and Alexander, under his direction, appealed to the Court of Queen’s Bench, where the bribe testimony emerged. The litigation was resolved with Pembina and Alexander agreeing to re-route the pipeline around the band’s lands, as well as lands that the band plans to acquire in the future.

News of the bribe request spread through Alexander. Burnstick was asked by band members at a community meeting to explain himself and he responded that it was Pembina that offered to bribe him, Yellowdirt said in the interview.

Meanwhile, the chief was fighting a separate legal battle over allegations of sexual assault by several women in his community. Many of the band’s women were so outraged that they held widely publicized protests against him.

Burnstick was found not guilty of sexual assault in January, but he will face a second set of sexual assault and break-and-enter charges. This week, a court in Morinville scheduled a preliminary hearing on July 5. The latest charges have not been proven in court.

Pembina made a last-ditch effort earlier this year to explain the upside of building the pipeline along the existing Alliance right of way by holding an information session for the First Nation hosted by its chief executive, Mick Dilger. Burnstick didn’t attend. Many members of the community did and were supportive of the project, Yellowdirt said.

A quorum of the band’s council then decided to side with Pembina.

“Some other First Nations on the pipeline route, they got some pretty good arrangements,” Alexander councillor Paul said, and some councillors wanted to see if they could still capture some benefits from the project.

But Burnstick remained opposed and appealed in Federal Court. At a hearing last month between Pembina, the council’s quorum and Burnstick, the chief sought and was granted more delays.

In reaction, Young said his company decided to end the legal fight, build the route around the community that was agreed upon, and advised Alexander of its decision.

Yellowdirt said Burnstick has not provided an accounting of the legal bills incurred so far to fight the Pembina project. He estimates they are likely in the range of $500,000 and he believes Alexander doesn’t have the means to pay them. Alexander councillor Paul confirmed the estimate.

Codie McLachlan for National Post

Codie McLachlan for National PostRodney Yellowdirt looks across land where a pipeline was going to be built before meeting opposition from Chief Kurt Burnstick on Alexander First Nation, Alta.

“We the members are left with the costs of Kurt Burnstick’s actions,” Yellowdirt said.

Pembina’s Young said it’s not easy to build long, linear projects such as pipelines that impact multiple aboriginal communities with overlapping traditional territories, all saying they have a better claim than the next, and all wanting a piece of the opportunity.

“Frankly, there are so many trees to cut down and so much land to clear, we need the wisdom of Solomon to try to divvy up that pie and still ensure we are meeting all of our criteria, such as competitiveness and safety,” he said.

But the confrontation experienced with Burnstick was in a league of its own, he said.

“All those folks at Alexander hoping for the original route, the long-term tax base, near-term opportunities and community benefits, were very disappointed,” Young said. “I, too, am disappointed.”