First Nations launch $3-billion lawsuit against Ottawa for failing to protect resource rights

Dozens of Canadian First Nations are suing the federal government over allegations officials mismanaged their oil and gas resources for decades.

The Onion Lake and Poundmaker Cree First Nations have filed a $3 billion class action suit on behalf of a total of 72 First Nations across the country.

The suit accuses Indian Oil and Gas Canada (IOGC), the Crown corporation responsible for overseeing on-reserve oil and gas, of various failures in its responsibility to get the best deal possible for First Nations.

Blaine Favel is working as an advisor for Sutts, Strosberg LLP, the firm representing the First Nations. He said one of the main issues is over ‘offset royalties’ – a fee charged to companies who drill next to First Nations land and divert their oil.

Favel said IOGC has been chronically underfunded, and hasn’t had adequate staff to monitor adjacent wells and collect fees.

“Three thousand to 5,000 wells, one person measuring all of these thousands of offset wells. They don’t have the capacity, so they’ve let it slide, and it’s run into huge, huge problems for First Nations people where they’re drained,” he said.

The suit also alleges IOGC failed to get enough oil and gas development done on land assigned for that purpose by the First Nations. Under the Indian Act, reserves are required to designate land they want developed.

“There’s two things (IOGC) could have done: make more lands available for drilling and be aggressive on it, or go after the producers that are adjacent for royalty compensation for the oil that they’re taking. They did neither of those things,” Favel said.

Favel said the issue has festered since the first wells were drilled on reserve lands as far back as the 1950s.

He noted the suit is seeking compensation for the lost offset royalties, as well as royalties not generated through the failure of IOGC to develop enough on-reserve wells. The suit is also looking at damages from jobs related to oil production that were never created due to the lack of development, and also alleges that even in cases where IOGC did collect royalties, it failed to calculate them accurately. 

Chief Wallace Fox of the Onion Lake Cree First Nation said the lost money from IOGC’s botched management has been sorely missed in the affected communities.

“We could have used that funding, and the rest of the nations that are impacted by this, providing adequate housing, education, et cetera. And other needs identified by individual First Nations,” he said. “We could have used that resource to be able to provide for some of the needs and unfunded areas from the federal government through Indian and Northern Affairs.”