Quebec could face suits over Anticosti
If the Quebec government backs out of its contract to explore for oil and gas on Anticosti Island, its jointventure partners say they will sue.
Even though the provincial government owns a 35- per- cent interest in the joint venture and has a contractual obligation to help fund the drilling of three wells this summer on the island in the St. Lawrence River, Quebec Premier Philippe Couillard this week continued to distance himself from the shale project.
“Clearly our faith in Quebec as a place to invest in oil and gas, or any other possible development for that matter, is shaken,” Corridor Resources Inc. chief executive Steve Moran said in an email.
He confirmed the company would seek compensation if the government breaks its contract with Corridor and its partners.
Corridor is one of three companies with an owner- ship stake, alongside the Quebec government through Resources Quebec, in Anticosti Hydrocarbons LP.
“We have not yet determined the amount of any damages, and we and our partners have been focusing on moving the project forward,” Moran said.
The Couillard government — which at one point commissioned studies on how to get oil and gas off the island of Anticosti — now says it wants nothing to do with the joint venture.
“My name will never be associated with the dilapidation of Anticosti Island,” Couillard said in the province’s National Assembly this week, according to the Montreal Gazette. “My name will never be associated with the aggressive savaging of a natural environment like Anticosti.”
However, a number of executives with assets in Quebec contacted by the Financial Post said the government of Quebec, and the Liberal party in particular, are already closely tied to the project.
On coming to power in 2014, Couillard’s Liberals launched a “Strategic Environmental Assessment” on the entire hydrocarbon sector in the province, and another one specifically on Anticosti.
Montreal-based engineering firm WSP Global Inc. was contracted by the province to do a study on Anticosti. Its report, released in October 2015, explored different scenarios for getting oil and gas off the island, including the construction of a US$ 4billion pipeline stretching 900 kilometres from Anticosti, then under the St. Lawrence all the way to Quebec City’s south shore.
But it was the Parti Quebecois government of Pauline Marois, just before the 2014 election, that signed a $57-million exploration contract with a consortium to explore the island’s energy potential.
That contract gives the Quebec government a 35- per- cent equity stake in the Anticosti development, while Corridor, Petrolia Inc. and Saint-Aubin E&P ( Quebec) Inc. each own 21.67 per cent.
As part of the deal, Corridor and Petrolia contributed their land holdings on the island and the Quebec government agreed to help finance the venture, which was set to drill and frack three wells on Anticosti — which is twice the size of Prince Edward Island — this summer.
In June 2014, shortly after the Liberals replaced the PQ, Petrolia issued a statement that said the company was “satisfied with the government’s confirmation that it will respect the agreement signed on March 31.”
However, executives think Quebec’s premier has changed his position in the past three months, putting the project in jeopardy and potentially leaving taxpayers on the hook for breaching the contract.
Couillard now says the PQ made an “unforgivable error” in signing the contract and has indicated he is willing to break it.
“If that were to occur, we would certainly think twice about entering into another agreement with the Government of Quebec as our financial partner,” Moran said.
When the agreement was first signed, the PQ said the project was estimated to provide $ 45 billion in royalties, tax revenues and profits directly to the province over the next 30 years, and create hundreds of jobs.
A report in the Journal de Montreal Wednesday suggested the idea of exploring for oil was kicked around when Jean Charest was still premier. Minister of Natural Resources Pierre Arcand said there were “discussions” on the subject under Charest, but the political drive came from the PQ.
“There have always been places within Quebec where there might be the potential of oil,” he told reporters in Quebec City Feb. 5.
Irrespective of which political party signed the agreement, the joint-venture partners in the Anticosti project say they have a contract.
In addition to a potential breach of contract in this case, executives at other oil and gas companies with assets in Quebec told the Financial Post that they have consulted l awyers about making claims based on what they believe are badfaith negotiations by the Quebec government.
These companies have invested money in exploration activities in various parts of the province, but have been waiting for years for the release of the Quebec Energy Strategy to find out whether they will be allowed to begin producing oil and gas — including from conventional wells that don’t require hydraulic fracturing.
The claimants would seek to recover the capital they’ve s unk i nto t he province based on assurances from the government that at least conventional development would be allowed.
“Couillard flies all over the world in a Bombardier plane, and it doesn’t have an extension cord,” one executive said, referring to what he called the premier’s preference for electricity over hydrocarbons.
Neither Couillard nor Arcand responded to requests for comment.
Quebec Oil and Gas Association president Michael Binnion, who is also the chief executive of Calgarybased Questerre Energy Corp., said Couillard’s attitude toward energy — from the Energy East pipeline project to the Anticosti venture — seems to have shifted following the Paris conference on climate change in December.
Binnion, who is not one of the executives planning to take legal action against Quebec, believes the province had at one point considered oil and gas development as a way to boost its local economy; now it is actively opposing such development.
“Quebec thinks it’s greener than green because they use hydrocarbons, but don’t produce them,” he said.