First Things First

Note: The rules and law may have changed since this article was first published. It is provided for archival purposes but you should consult with your lawyer for the current state of the law

More than 70 First Nations in Saskatchewan are covered by Treaties 2, 4, 5, 6, 8 and 10. First Nations legal entitlement to land in Saskatchewan derives primarily from these treaties. Because First Nations are increasingly important to Saskatchewan’s economic progress, a clear understanding of the development process is essential. There is a complex relationship between the First Nation, the federal government, the provincial government and a project developer.

If a First Nation and developer have agreed to move forward on a project, it is common to first enter into a Memorandum of Understanding (MOU). An MOU outlines the intent or understanding of the parties but is usually drafted to be non-binding. Because an MOU is non-binding, project developers can publicize the signing of the MOU, perhaps for financing purposes, but neither side is compelled to proceed with development of the project. If the project moves forward, however, the complicated issues of aboriginal title, registration and realization of security interests on First Nations land will need to be addressed.

The next step after the MOU is to enter into a binding agreement for development on the land. There are many different types of agreements which may accomplish this. For example, in renewable energy projects it is common to see Lease Option Agreements. A Lease Option gives the developer the exclusive right to elect development of a project on the specified First Nation land, but it is not a lease, and the project will only proceed if the Option is exercised.

If that occurs, the next step is a Lease Agreement. The lease, however, may not be executed until a Power Purchase Agreement (PPA) has been secured for the purchase of the energy. Once a PPA is obtained, negotiations on the lease can commence. Due to restrictions on the use of reserve land, First Nations property may be “designated” so that a lease can apply. The federal Indian Act states that designated First Nations lands are “any tract of land or any interest therein the legal title to which remains vested in Her Majesty and in which the band for whose use and benefit it was set apart as a reserve has, other than absolutely, released or surrendered its rights or interests”. Where First Nations land has been designated, the federal Minister of Indian Affairs and Northern Development may enter into a lease of that land for the purpose for which it has been designated. This is the most common lease process on First Nations land for development projects.

A lease on designated First Nations land will usually be registered in the Indian Land Registry. The Registry is an archive to examine, register and maintain documents (e.g. leases, allotments, designations, orders in council and the like,) relating to interests in First Nations lands. As for the lease itself, most normal commercial provisions apply. It will ordinarily include a provision for assignment of the lease to subsequent owners. The lease could have provisions permitting mortgages and also granting to lenders rights of notice of default, right to cure default, right to foreclose, to take possession, and to sell. Some leases will also allow for tripartite agreements between the Government of Canada, the provincial government and the First Nation for the protection of a lender. The terms of a tripartite agreement could also be built into the lease.

Collecting rent under a Lease Agreement is not always the goal of a First Nation. They may prefer to own a portion of the equity in a project. In these cases, the MOU can be followed by a Joint Venture Agreement where the developer and First Nation each take a negotiated ownership share in the project. These agreements are complicated and comprehensive. Increasingly, Joint Venture Agreements include provisions for training First Nations individuals to undertake the operation and maintenance of the project.

These processes can differ from ordinary development arrangements, but still rely on typical commercial principles and guidelines. Although project development on First Nations land can be challenging, opportunities abound in Saskatchewan for enterprising First Nations and progressive developers.