On April 16, 2024 the Government of Canada tabled Budget 2024: Fairness to Every Generation. In Chapter 6 of its Budget 2024 entitled “A Fair Future for Indigenous Peoples”, the federal government unveiled a basic framework for a Federal Indigenous Loan Guarantee Program  (the “FILGP”). Aimed at enabling Indigenous communities to have greater access to affordable capital to assist in unlocking opportunities for equity ownership in natural resource and energy projects, the federal government provided Canadians with a first glimpse of the FILGP in the Fall Economic Strategy issued on November 21, 2023. Below is an excerpt from Budget 2024  articulating the federal government’s rationale for the FILGP:  

“Indigenous communities need to be able to share in the benefits of natural resource and energy projects in their territories and on their own terms. Due to the Indian Act and the legacy of colonialism, Indigenous communities have fewer options for securing capital or leveraging existing assets as collateral, leading to increased borrowing rates that create a barrier to equity investment in natural resource and energy projects. The number of major natural resource and energy projects with potential for Indigenous equity participation is anticipated to grow significantly, with the First Nations Major Projects Coalition’s research expecting this potential to reach $525 billion in capital investment over the next ten years. If Canada is to make sure that Indigenous communities are able to fully benefit from the opportunities ahead, they need fair access to affordable capital that meets their unique needs.”[1]

The Basic Framework

Natural Resources Canada has been mandated to take the reins for intake and capacity building under the FILGP, while a Crown corporation, the Canada Development Investment Corporation (“CDEV”), has been mandated to create a new subsidiary to provide support to Natural Resources Canada on due diligence and administrative matters.

Under the FILGP,  up to $5 billion in loan guarantees, in the aggregate, will be made by available for Indigenous communities for investment in a broad range of natural resource and energy projects across the country, through a sector-agnostic approach aiming to ensure that Indigenous communities in every region of Canada will benefit from the program.  Budget 2024 states that applicant eligibility would recognize Indigenous governments and their wholly owned and controlled entities, but other evaluation criteria such as project value is not yet available. The statement that the program will be sector-agnostic is very material as there was speculation that  oil and gas development could be excluded from the program parameters.  

To assist in launching the FILGP,  Budget 2024 notes that $16.5 million will be allocated to Natural Resources Canada over two years commencing in 2024-2025, including $3.5 million for capacity funding and delivery of the FILGP by CDEV.

We anticipate that Natural Resources Canada will look to Indigenous loan guarantee programs that have been established to date in Ontario, Saskatchewan and Alberta for guidance on implementation and the FILGP will act in parallel with these already established loan guarantee programs (for a snapshot of the existing Alberta, Saskatchewan, and Ontario Indigenous Loan Guarantee Programs, see our previous article here) as well as the loan guarantee program announced by the Government of British Columbia on February 22, 2024 in its 2024 Budget and Fiscal Plan, (for a brief summary, see our previous article here), in each case to the extent that proposed projects satisfy the applicable eligibility criteria.  It remains to be seen how the impact of other government programs, such as direct grants and contributions, and available loans from the Canada Infrastructure Bank, as well as the interplay between the federal guarantee program and the various provincial guarantee programs will ultimately be reconciled.  Presumably rules will be developed to ensure that availability of these capital sources to Indigenous communities is optimized. 

[1] Budget 2024: Fairness For Every Generation, Government of Canada, at page 285.