Some First Nations in Alberta want an exemption from the provincial government's decision to mandate oil production cuts.

The First Nations say the provincial government has no right to dictate the level of oil and gas activity on their land. They believe the oil curtailment policy could have a negative financial impact.

Since the beginning of January, the Alberta government is forcing oil companies to restrict production in an effort to clear a backlog of oil and boost prices for Canadian crude, which sold for about $50 less per barrel than the American benchmark — West Texas Intermediate oil — during the fall.

As a result, oil prices in Western Canada have soared.

While the price boost is beneficial for First Nations who collect royalties from oil producing companies on their land, some leaders oppose the curtailment.

First Nations will "likely be impacted negatively by the curtailment of oil production," said Chief Roy Fox with the Blood Tribe in southwest Alberta during his motion challenging the policy at last month's annual general meeting for the Indian Resource Council (IRC). The IRC represents First Nations with oil and gas resources on their lands.

He also said the Alberta Energy Regulator and government "have no jurisdiction over First Nations lands and resources and that the decision regarding oil curtailment does not, and should not apply to them and their oil and gas operations."

The motion was unanimously supported, although fewer than 10 of the IRC's more than 100 members were present at the time. Neither Fox nor the IRC returned requests for an interview.

Alberta Premier Rachel Notley says giving an exemption to First Nations 'would mean that we were probably not curtailing.' (Jason Franson/The Canadian Press)

Debatable jurisdiction

For the curtailment policy to be effective, everyone has to do their part, according to Alberta Premier Rachel Notley. That includes First Nations.

"Exempting them would essentially mean that we were probably not curtailing," she said recently. "There's definitely issues there that we need to consider in respect to consultation and accommodation, but at the end of the day balance what was a need, in our view, to act quickly and definitively."

Whether the Alberta government has the right to dictate oil and gas activity on First Nation is not clear, according to Indian Oil and Gas Canada (IOGC) — the federal agency responsible for managing and regulating oil and gas resources on First Nation reserve lands.

"It's very complex," said John Dempsey, a regulatory compliance director at the IOGC. "We're looking into it now. It gets down to the level of the Canadian constitution."

Dempsey himself is a member of the Blood Tribe and works out of the IOGC's office on the Tsuut'ina Nation, which is located on the western edge of Calgary.

"The federal government has jurisdiction over lands reserved for Indians," he said. "But, the constitution also talks about exclusive jurisdiction of the provinces to regulate exploration and conservation of oil and gas within the provincial borders. So, it's not explicit about whether that applies to First Nation lands."

Whether the Alberta government has the right to control oil and gas operations on First Nation land is a complex issue, says Dempsey with Indian Oil and Gas Canada 1:09

The lack of clarity will likely take longer to solve than the curtailment will last, considering the significance of the dispute. The Alberta government has also begun easing the production cuts, saying the policy is a short-term measure.

Targeting First Nations

Typically, companies pay higher royalty rates on First Nations land than they do elsewhere in the province, according to Dempsey, which is why First Nations worry oil companies will decide to comply with the curtailment by shutting in their wells on reserve land.

"If a company looks at it purely from the economic perspective, they may want to target First Nation lands to cut production," said Dempsey. "That's one of the things we want to make sure we look into and, if that is occurring, we need to address that with the provincial regulator."

There is no official data showing companies are taking that action, at least not yet.

The IOGC will only receive oil production figures from January, the first month of the curtailment, sometime in late-February or early-March.

There are 23 First Nations in the province with oil wells on their lands, although not all of them are producing oil.

About 1.8 million barrels of oil was produced from First Nations land during the 2016-17 financial year, according to the IOGC. The total amount of money collected by the IOGC on behalf of First Nations in Alberta and Saskatchewan was $59.6 million in 2016-17, down from about $250 million in 2011-12.

Some First Nation leaders are also upset they were not informed by the Alberta government about the curtailment until after the policy was announced.

"We have heard the complaints," said Dempsey. "I am not aware of any consultation that the province did prior to the curtailment."

The Alberta government said it did not communicate directly with First Nations, but instead with industry, since companies themselves make the decision where to curtail oil production.

"The special energy envoys appointed in November met with a number of operators, including those with close involvement with First Nations and producing from First Nations mineral rights," said Alberta government spokesman Mike McKinnon in an emailed statement.

"Operators have contractual commitments to First Nations and to freehold mineral owners, and it will be up to the operators to approach their commitments appropriately," he said.

Price boost

Not all First Nation leaders oppose the curtailment plan, since higher oil prices are beneficial to just about everyone associated with the oilpatch.

"The premier had to do what she had to do," said Chief Allan Adam with the Fort Chipewyan First Nation, located north of Fort McMurray. While Adam's First Nation does not have any oil production on its land, it does have benefit agreements with oilsands companies as well as businesses that service the industry.

The majority of the oil produced in Western Canada is exported to refineries in the U.S.

"If I was a politician, I wouldn't be giving the oil to the United States for $15 or less a barrel," said Adam.