A northern Alberta timber project is on hold after an independent investigation found the deal between three Métis Settlements and a London-based energy group violated a provincial law.

The KPMG investigation found that the East Prairie, Paddle Prairie and Peavine Métis Settlements violated the Métis Settlements Act by entering into a joint venture agreement with Active Energy Group without due diligence, according to a letter sent to the settlements Monday by Aboriginal Relations Minister Kathleen Ganley and obtained by the Journal.

The investigation found the settlements’ councils “provided insufficient evidence” that proper planning, risk assessments and consultations were done before the joint venture agreement was signed.

The letter includes a ministerial order signed by Ganley requiring a community information meeting — with 21 days’ notice — is held in each of the settlements. It also requires a forest management plan and a risk assessment. Ganley will also appoint an inspector to ensure the order is fulfilled.

Ganley said in a statement the order was issued “to enhance the accountability and transparency of these settlements.”

In July 2014 the settlements agreed with Active Energy Group to form the Kaquo Forestry and Natural Resources Development Corp. to commercialize timber from mature forests covering 250,000 hectares of Métis land.

The deal would have Kaquo pay the settlements for the rights to harvest the timber, which would be turned into biofuel. The settlements would run operations and Kaquo in exchange would provide community infrastructure.

Active Energy Group and the three settlements will each hold 45 per cent of the shares. The remaining 10 per cent goes to B.C. Grand Chief and Kaquo board chairman Ron Derrickson.

The investigation was ordered by former premier Jim Prentice in early 2015 after several people complained to the ministry about how the agreement was managed. Concerns were also raised about the potential 197-year life of the agreement.

Active Energy Group expects the project to proceed as soon as January 2016, but is consulting with the Métis settlements on the new conditions.

The company’s chief executive said in an interview Friday the company did its due diligence while consulting on the project with the settlements’ members.

“The investigation should never have gone forward,” Richard Spinks said by phone from Warsaw, Poland.

“They assumed, I’m sure, that we would give up and leave and go and do business elsewhere, but it’s become almost a matter of principle.”

Another meeting is scheduled for Sept. 28 in High Prairie, he added. But because the ministerial order was made on Monday and requires the settlements provide 21 days’ notice, another public consultation meeting will have to be held at a future date, Spinks noted.

The order is adding further delays to a project that will eventually employ 700 people, Spinks said. He said he has already put $2 million US toward the project.

The KPMG investigation cost $140,000.