Claudia Cattaneo, Western Business Columnist, Financial Post · Mar. 21, 2011 | Last Updated: Mar. 22, 2011 7:01 AM ET

The tiny hamlet of Conklin, a Métis community in the heart of the next wave of oil-sands development in northern Alberta, is signing an historic deal Wednesday that marks a new chapter in the relationship between the oil-sands industry and aboriginal communities.

The deal with Cenovus Energy Inc. will give the 300 members of the community benefits worth an estimated $40-million to $60-million over 40 years tied to the growth of oil production from nearby projects — a form of royalty because the more the company produces, the higher the benefits.

The agreement — the details of which Cenovus wants to keep secret, but the community wants to tell everyone about — marks a major win for aboriginal communities seeking to reap long-term benefits from escalating oil-sands activity that is impacting their environment and way of life.

Making aboriginals find common ground with oil-sands companies and their aggressive plans for growth helps both sides to move away from their traditional adversarial relationship.

While the right thing to do, at issue is the impact on the rest of the oil industry, which is bracing for a domino effect that could be costly and unpredictable.

Other companies have resisted entering into such royalty-type agreements because they are expected to raise expectations among other aboriginal communities and because they are simply uncomfortable with making such payments.

“Anything that relates to production is a royalty, and royalties are the responsibility of the Crown in accordance with the laws,” said one industry source.

Some 17 First Nations and six Métis settlements sit on top of Alberta’s deposits. Some will see the agreement as a step toward obtaining a full-fledged share of oil sands revenue.

The agreement also breaks new ground because it involves a Metis community rather than a First Nation and because the entire community was aware of the terms and voted on it.

The deal is part of a trend in which energy players are offering long-term agreements, mostly secret, to reduce what some consider their biggest risk — aboriginal opposition — that could result in lawsuits, regulatory delays or negative publicity.

Conklin is so delighted with its haul, which involves job creation, community investment, business development, education and training, it’s hosting a formal signing ceremony on Wednesday.

It’s also in negotiations with other companies operating in the area, including Statoil ASA, Devon Energy Corp. and Petrobank Energy & Resources Ltd. to achieve similar terms, increasing the money it collects from industry.

“We know that our community is going to change as a result of all the development around us, not just Cenovus, and are pleased that at least one of our neighbouring companies recognizes that and is prepared to do their part to help us adapt to and benefit from that change,” Shirley Tremblay, President of the Conklin Metis Local #193, said in a community newsletter in which the agreement was announced in January.

Conklin is located less than 20 kilometres away from Cenovus’s Christina Lake project and the recently announced Narrows Lake project.

In the same newsletter, Cenovus said it anticipates the agreements will help mitigate business risk, provide additional certainty around process and timelines with impacted stakeholders, and allow the communities to benefit from company’s operations.

Cenovus spokeswoman Rhona DelFrari would not put an exact value on the deal, but confirmed that it’s expected to be worth tens of millions of dollars over the life of its projects in the region.

“We’re supporting the community’s effort to understand and reduce the potential impacts of development while participating in the associated long-term benefits,” she said in an e-mailed statement. “As Cenovus expands its development, the community gets more funding to help it manage any potential adverse and positive effects of growth.”

With Total SA signing a secret agreement with three First Nations last fall to withdraw objections to its oil sands projects, and Enbridge Inc. offering $1.5-billion in cash, jobs, business opportunities over 30 years and a 10% stake in its Northern Gateway pipeline project in exchange for support from First Nations, the cast appears to be set for a new type of aboriginal strategy on the oil sands. It’s unclear whether it will mean more harmony or bigger asks.

Financial Post

ccattaneo@nationalpost.com