Oil Price Crash Hits Royalty-Dependent Indigenous Communities

Plummeting oil revenues are walloping more than 100 Indigenous communities across Western Canada that depend financially on fossil drilling within their territories—with the lost royalties and jobs putting social programs, youth supports, and personal livelihoods at risk in the face of steep pandemic-related costs.

One such community, reports CBC, is Frog Lake First Nation, one of the largest oil-producing First Nation territories in Canada. Located 260 kilometres northeast of Edmonton, Frog Lake has been home to drilling since the 1970s, with oil production peaking in 2012 at 9,000 barrels per day. During those boom times, the community thrived, building hundreds of new homes, establishing facilities and programs, and expanding post-secondary education. But the Nation was hard hit when oil prices crashed in 2014; as of early this year, only 800 barrels per day were being produced in the region, reports CBC. Energy royalties and related compensation has plummeted from more than C$250 million in 2011–12 to about $55 million in 2018. 

Now, facing renewed price sieges from both the Saudi-Russia oil war and COVID-19, Frog Lake has made the painful decision to turn off its pumps for the duration of the slump. “We would probably get an invoice instead of a revenue cheque,” said Chief Greg Desjarlais in an interview with CBC. “We had no choice but to shut in our wells.” 

And jobs are being lost as well as royalties. CBC reports that oil companies are scaling back their spending and putting a hold on new wells, a retraction that spills down the entire supply chain. Local Indigenous-owned drilling services are feeling the pinch—such as Pimee Well Servicing, a Frog Lake-based supplier that recently reduced its work force by 20%. 

Such a devastating loss of revenue comes just oil-dependent Indigenous communities like Frog Lake are facing the steep cost of protecting their communities from COVID-19. The Indian Resource Council, which represents about 130 Indigenous communities in Western Canada, recently sent out an urgent plea for help, reports CBC. In response, the federal government has pledged some $300 million to help keep Indigenous businesses afloat during the pandemic.