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NAFTA challenge launched over Quebec fracking ban
JEFF GRAY Law Reporter
14:17 EST Thursday, Nov 15, 2012
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Energy firm Lone Pine Resources Inc. is taking on Quebec’s fracking moratorium, saying it violates the firm’s rights under the North American free-trade agreement and demanding more than $250-million in compensation.
The company disclosed in a filing with the U.S. Securities and Exchange Commission this week that it has filed a notice of intent to sue the Canadian government under NAFTA’s controversial Chapter 11.
Those provisions of the treaty allow U.S. and Mexican companies to sue Ottawa if they feel they have been wronged by a government policy or action.
The company is just one of many affected by Quebec’s moratorium on the extraction of natural gas using hydraulic fracturing, or fracking, which involves injecting liquids deep into the ground. It has been controversial for its potential effects on the environment and drinking water.
According to Lone Pine, Quebec’s legislation passed last June also cancelled permits for oil and gas activity in areas directly below the waters of the St. Lawrence River – including the cancellation of a permit held by Lone Pine covering 33,460 acres.
Company spokesman Shane Abel said in an interview that under Quebec’s legislation, the company received nothing for the loss of the permit. “We think that the expropriation is arbitrary and without merit ... We think that’s a clear violation of the NAFTA agreement.”
The NAFTA challenge, levelled at a major environmental policy, could encourage critics of trade deals as they now question Canada’s proposed investor-protection agreement with China, which would extend similar rights to Chinese investors in Canada.
Lone Pine, which also has assets elsewhere in Canada, is headquartered in Calgary but is incorporated in Delaware. It trades on the New York Stock Exchange and Toronto Stock Exchange. The company was created in 2011, spun off from Denver-based Forest Oil Corp. in an initial public offering.
Quebec’s moratorium is meant to stay in place at least until the province completes an environmental review of fracking, expected in 2014.
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Stornoway, Quebec resolve mine road impasse
BERTRAND MAROTTE
11:05 EST Thursday, Nov 15, 2012
Stornoway Diamond Corp. has struck an agreement with the Quebec government that breaks the logjam over completion of a 240-kilometre stretch of road leading to the company’s diamond mine project.
The project, an all-season two-lane gravel highway extending Route 167 further north to Stornoway’s Renard property in the remote James Bay area, ran into major cost overruns.
The newly installed Parti Québécois government, which is footing most of the bill, ordered a review of the infrastructure project, which ballooned to about $470-million from the initial 2009 budget of $260-million.
The delay threatened Stornoway’s target of starting mine construction in July 2013 and getting to production by 2015.
Meanwhile, critics slammed the project as a glaring example of the previous Liberal government’s largesse towards the private sector by assuming hefty infrastructure and electric-power costs for new mining and forestry developments in the north.
The original terms of the agreement between Quebec and Stornoway were for the company to contribute $44-million over a 10-year period – financed by a loan from the province -- to the highway extension, as well as pay out up to $1.2-million a year in maintenance costs.
Quebec, which also holds a significant stake in the company, was to pay the rest of the construction cost as well as cover overruns.
Construction on the road began in February.
Under new terms negotiated between the province and the company, Stornoway will take over responsibility for building the final 97 kilometres of the 240-kilometre long highway, but as a lower-cost “mining grade” single-lane road.
The government will pay for the first 143 kilometres of the road.
Quebec will also provide Stornoway with an unsecured credit facility of up to $77-million to complete the work.
The government says the new deal represents a $124-million reduction in its share of the construction cost.
Total costs for the entire road extension will come in at no more than $304-million, it said in a news release Thursday.
“We sat down with Quebec and negotiated a new framework. The obvious thing to do was for us to take over management of the process,” Stornoway president and chief executive officer Matt Manson said in an interview.
“We’ll be in full control of the development schedule for the first time.”
The Renard diamond property – Quebec’s first diamond mine -- is located about 250 kilometres north of the Cree community of Mistassini and 350 kilometres north of Chibougamau in north-central Quebec.
Pre-production capital costs are in the $800-million range.
“We view this agreement positively as it represents an important milestone in derisking the Renard diamond project and is indicative of the government’s ongoing support for the project,” Desjardins Securities analyst Brian Christie said in a research note Thursday.
Although these are two different resource industries working in different parts of the province there are severe implications with both articles due to political decisions made within in Quebec. Plan Nord appears to be running into funding issues with reduced infrastructure being constructed now (while still an improvement also has ripple effects for other users in the area) while the oil and gas sector is starting to fight back over the fracking ban. For comparision sake the Lower Athabasca Regional Plan in north east Alberta is a major policy management plan that superceeds other resource rights and compensation will be paid eventually to a number of industries due to the lands involved going from development lands to protected lands.