"... we feel that it is necessary that the principals [Ottawa and Victoria] demonstrate their commitment to reinvigorating the process by dealing with this issue [the debt] as a priority... As such, we strongly recommend that, as a starting point, B.C. and Canada demonstrate their political will to making progress by first relieving First Nations of the debts they incurred during the past 18 months." - First Nations Summit Task Group

B.C. native leaders are demanding Canadian and B.C. taxpayers forgive nearly $200 million in debt run up during a decade of fruitless treaty negotiations.

In a series of letters to federal minister of Indian Affairs Robert Nault and B.C. Attorney-General Geoff Plant, the First Nations Summit has balked at proposals to reinvigorate the land-claims talks and insist they need a solution for their financial albatross.

The summit says the governments should first wipe out debts accumulated during the past 18 months, when treaty negotiations were in abeyance as a result of the B.C. government's referendum on the treaty process.

They did not say how much of the more than $177 million in total debt was assumed in the dying days of the New Democratic Party administration and since May 2001, when the Liberals won a landslide victory, promising in part to remedy the treaty process, under which, although it was established in 1992 with much optimism, not a single treaty has been signed.

The Indians, who lay claim to almost all of British Columbia and its natural resource wealth, blame the paucity of progress on government stalling.

"Over the past year and a half, British Columbia has significantly contributed to this lack of progress by holding its referendum," wrote former NDP cabinet minister and now Grand Chief Ed John, along with Herb George and Lydia Hwitsum -- the trinity who lead the summit.

"While British Columbia stated that negotiations would continue while it conducted its referendum, in fact, tables did not engage in meaningful active negotiations as B.C. unilaterally set aside substantive issues that are critical to achieving treaties ... First Nations should not solely bear the burden of lack of progress over the past year and a half due to the referendum."

In a second letter to the two ministers, also dated Aug. 20, B.C.'s premier native organization also vehemently objected to some of the plans being discussed, particularly "threats of governments to unilaterally disengage from active negotiations."

The Indians oppose a suggested "time-out" concept whereby negotiations between the governments and a First Nation could be suspended because they are going nowhere.

"Governments threats to disengage from or shut down certain negotiation tables are contributing to the instability and lack of productivity in the treaty process," the native leaders said.

"They are also exacerbating the existing imbalance in the treaty negotiation process by putting pressure on First Nations to justify why negotiations should continue at their specific table.

"In effect, it will allow governments to 'cherry-pick' the tables at which they will continue negotiations ... We are concerned that governments will effectively force First Nations into time-outs by providing them with two options: Take a time-out or we will terminate negotiations with you."

Funding during a time-out is also a thorny problem, the summit said.

In an earlier, third letter, dated Aug. 12, the summit told both governments it had other serious concerns, including fears about proposed new legislation setting out a policy framework for treaty negotiations.

"We are of the view that the broad framework set out in the 1991 Task Force Report together with the 1992 Treaty Commission Agreement, including the subsequent federal and provincial legislation and the summit resolution, provide a sufficient basis for the process. As well, the courts have strongly endorsed the process of negotiation as a civil way to resolve and reconcile treaty issues."

The letters, obtained by The Sun, were presented to First Nations chief negotiators at a meeting in Vancouver Sept. 5 and 6.

The crushing debt run up by the natives is the central hurdle facing federal, provincial and aboriginal representatives trying to find a new way to settle land-claims.

Originally, Indian bands were given access to tax money so they could pay for lawyers and consultants to participate in the process created by the two levels of government and aboriginal leaders.

Funding for natives is provided in the form of 80 per cent loans and 20 per cent grants, all of which is provided by Ottawa, but the cost of which is shared 60/40 with Victoria.

The loans are structured in such a way that no interest is charged on advances made before a First Nation reaches an agreement in principle with Canada and B.C.

Once such a deal is struck, interest is charged on new advances. Once the loan comes due, interest is charged on the entire amount.

Under the arrangements, repayment by the natives comes due on the earlier of the following: 12 years after the first advance, seven years after the conclusion of an agreement in principle, when a First Nation's treaty comes into effect, and when a First Nation is in default under the agreement and the federal minister demands repayment.

The funding system was designed in the belief that treaties would trigger a wealth transfer to Indian bands, allowing them to repay the loans and that deals would be struck within seven to 12 years.

Those expectations have been shattered and most native groups are deep in debt, worried about how they will service the loans when they come due starting in 2006.

Many chiefs are facing angry band members who have seen no progress in land claims, no improvement in their squalid living conditions and the rise of a new cadre of Indian treaty bureaucrats living high on the hog.

In a recent secret report to participants in the treaty process, also obtained by The Sun, officials said: "As a result, it is becoming harder for First Nations Leadership to obtain the necessary mandate from their constituents to continue negotiations and take on additional loans to fund their continued participation.

"In some cases, First Nations are considering opting out of the treaty process, in part because of concerns with their mounting debt relative to the amount of progress being made in negotiations . . . .

"Both Canada and B.C. are concerned about their potential financial exposure in the event that First Nations do not conclude treaties and cannot repay their loans when they come due."

Some bands are said to have run up more money in debt than they will receive from a settlement of their land claims.

The summit leaders say they appreciate that federal and provincial officials are trying to craft a solution.

"However, we feel that it is necessary that the principals [Ottawa and Victoria] demonstrate their commitment to reinvigorating the process by dealing with this issue [the debt] as a priority," they wrote.

"As such, we strongly recommend that, as a starting point, B.C. and Canada demonstrate their political will to making progress by first relieving First Nations of the debts they incurred during the past 18 months."

If the natives default on their loans, B.C. has agreed to indemnify Canada for 50 per cent of the amount that cannot be recovered.

A spokesman for Nault's office said the minister had received the letters but not yet replied.

The summit has asked Plant and Nault to respond to its concerns before its next meeting Sept. 18-20.