Quebec is set to shut down the books on oil and gas production in the province for good after a decades-long flirtation with the industry. But companies with exploration permits don’t pack their bags without a fight.
In the latest development, Utica Resources Inc., a small Quebec company a company that was closer than any other to the development of the province’s first major petroleum trading zone, filed a lawsuit last month against the Quebec government. Utica alleges government acted illegally and for political reasons in denying company’s exploratory drilling license application on the Galt project near the town of Gaspé.
By tabling without notice a new directive establishing a minimum distance of one kilometer between oil and gas drilling sites and water sources, and by taking “arbitrary” decisions that flout the recommendations of its own senior officials, Quebec has acted “on the sidelines” of existing laws and put a kibosh on the industry, says Utica.
“The defendants have, in practice, annihilated any possibility of exploring, producing and developing hydrocarbon resources,” Utica said in the August 30 lawsuit filed in the Superior Court of Quebec. The government’s actions “completely flout the rights and legitimate expectations” of all licensees, according to the lawsuit.
Quebec government ends oil and gas exploration on Anticosti Island
Utica is sort of a consolidator. Its various subsidiaries hold 31 exploration permits, one production permit and three permits for the authorization of brine production in the province – many of them were acquired under agreements with other exploration companies over the past three years.
The legal salvo points out that governments around the world that plan to leave their fossil fuel resources in the ground risk battles with stakeholders as they pursue such policy changes. The lawsuit also contains details of internal oil and gas deliberations that have taken place within Prime Minister François Legault’s government, providing a small window into his thought process as he attempts to transition to cleaner energy.
Utica is asking the government for financial compensation in an unspecified amount, which it says should include money invested to date in exploration as well as unrealized profits from commercial oil and gas production. Estimates of possible awards range from around $ 500 million for license cancellation alone, to $ 3 billion or more if potential revenue losses are also included.
None of the allegations have been proven. A spokeswoman for Quebec Energy and Natural Resources Minister Jonatan Julien, who is named as a defendant in the lawsuit, said the government would not comment as the case is before the courts.
Quebec’s senior political leaders confirmed last week that the government plans to permanently close the door to oil and gas development in its territory, a move that would have little practical effect since there is no oil or gas. commercial produced in the province. They also expressed some sensitivity to the judicial and reputational ramifications of such a decision.
“We are working to ensure that in the future, there will be no more permits issued”, declared Mr. Legault to the National Assembly of Quebec. “[But] it is not a banana republic. We cannot do what we want, as we want…. We are examining the legal impacts surrounding the possibility of buying back existing permits.
Julien told reporters in Quebec City on September 15 that “all options” are on the table on the issue of fossil fuel development. The government is awaiting a judge’s decision on a separate lawsuit launched by the Utica Gaspé Énergies subsidiary last year that could clarify its obligations. The province has an $ 8 million stake in Gaspé, an investment it says it now regrets.
“The future of Quebec is certainly not, in the medium term, linked to the development of oil and gas resources”, declared Mr. Julien, stressing that the province still needs to import fossil fuels for the moment to respond. most of its energy needs – mainly for heating. and gasoline. Corn he is working to replace them as quickly as possible with hydraulic solutions. “We don’t look at this with the same eyes as 10 years ago.”
Drilling that took place over several decades confirms that Quebec has significant reserves of natural gas and also oil, although estimates vary as to how much can be recovered profitably. All of this remains untapped, in part because of government moratoriums and bans on specific activities such as hydraulic fracturing.
No new exploration or drilling permits have been issued since the Legault government came to power in 2018. Anticosti Island, near the mouth of the St.Lawrence River, was previously a key focus of hydrocarbon development by private sector companies and government, but is now protected as the 8,000 square kilometer territory competes for UNESCO World Heritage status.
Utica believes that Quebec’s political leaders have long given up on the industry, even as the province maintained a legislative framework allowing oil and gas companies to continue their pre-commercial activities. Officially, according to the company, the government’s mantra was that Quebec could replace some of its oil and gas imports with locally produced fossil fuel resources, even if it switched to cleaner energy over time. . In reality, however, the company says it was a farce.
A new rule introduced in August 2018 by the government of the Liberal Premier of Quebec, Philippe Couillard, which prevented oil and gas drilling within a kilometer of a water source unless the authorization given by the natural resources minister was “unreasonable and unreasonable” because it was made without following the legally required consultation process, Utica said in her lawsuit. The company assumes that Couillard made the decision, just six days after the announcement of a provincial election, to neutralize the potentially divisive issue of fossil fuel development during the campaign.
More recently, Utica alleges that Mr. Julien refused to issue the company a permit to drill its Galt No. 6 well on the “pretext” that there is a risk to nearby water sources, despite evidence of independent experts submitted by the company that drilling can be done safely. The decision, which is the subject of a separate lawsuit, was a “purely political” decision that went against the recommendations of the Natural Resources Department’s own senior officials, Utica said. The minister insisted that he act on the basis of a risk assessment.
Utica has obtained internal communication between Mr. Julien’s chief of staff and Mr. Legault’s chief of staff regarding the approval or otherwise of the Galt drilling. In an exchange, the minister’s chief of staff raises commercial and political considerations, saying, “Do we really want a debate on fossil fuel drilling now?” Galt will never be a big deposit, according to the information available. But not moving forward would have legal, and possibly financial, implications. “
The company also cites a briefing note prepared for Mr. Julien by another senior official in Quebec’s Ministry of Natural Resources which it says directly led to the minister’s decision in October 2020 to ban drilling at Galt n ° 6. This note evokes the potential incongruity of Quebec approving an oil drilling campaign while it was preparing to present its “Plan for a green economy” 2030 – an electrification and climate change policy deployed last November which aims to eventually replace fossil fuels with hydroelectricity produced in the province.
Quebec currently imports about $ 8.5 billion in oil per year, or about 57% of its trade deficit. The government is now working to leverage the province’s hydroelectric resources to reduce this deficit through measures such as subsidies for electric vehicles and to support the construction of what it calls “high-performance, low-performance buildings.” carbon emission ”. It is also boosting hydropower exports through long-term supply contracts in New York State and elsewhere.
Greenpeace urges Quebec to move forward with an oil and gas development ban, saying it has more to gain than lose with such a move. There is a broad consensus among the political parties of Quebec that it would be a good thing for the province, the environment. said the group.
“Quebec could gain credibility [with such a move] and assert itself as the first nation to ban oil and gas exploration and development in North America, ”Greenpeace Canada spokesperson Patrick Bonin said in an email. “It would be a strong signal that could create a snowball effect and prompt other jurisdictions to do the same.”
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