Northern Cross sues YG over fracking ‘moratorium’

Northern Cross is suing the Yukon government for up to $2.2 billion, claiming the government put a moratorium on hydraulic fracturing in 2015.

Northern Cross is suing the Yukon government for up to $2.2 billion, claiming the government put a moratorium on hydraulic fracturing in 2015.

The oil and gas company claims the government effectively cancelled 15 oil and gas exploration permits in the Eagle Plains Basin and wants to be compensated.

Northern Cross filed the lawsuit in Yukon Supreme Court April 4.

While the newly elected Liberal government promised to put in a place a moratorium on fracking, it’s the previous Yukon Party government that closed off the Eagle Plains region to shale oil development.

In April 2015 the Yukon government announced it was adopting the recommendations of the select committee on hydraulic fracturing. It also said it was open to “responsible shale gas development opportunities in Yukon, but only in the Liard Basin.”

For Northern Cross, that’s akin to imposing a moratorium.

The company also said that the government already reimbursed $3.7 million it spent on exploration permit deposits.

“In recognition of the fact that the moratorium stripped Northern Cross of its sub-surface right to the oil and gas in the Subject Lands … the defendants reimbursed Northern Cross outstanding work deposits,” the lawsuit reads.

Northern Cross says it is within the government’s power to cancel oil and gas permits if further exploration or development are not in the public interest under the Oil and Gas Act.

But that same act says in that case the government has to compensate the company.

The moratorium essentially amounts to cancelling Northern Cross’ permits, the company said.

“If the moratorium and resulting cancellation of Northern Cross’ Dispositions are in the public interest … the cost of the moratorium should be borne by the public, rather than Northern Cross who has spent over $100,000,000 in capital expenditures in good faith to develop its oil and gas resources in the Yukon,” the lawsuit reads.

The company is seeking $395 million, including $4.6 million for rentals, $100 million for capital expenditures, $15 million for costs related to complying with regulations, and $190 million in capital costs.

The company also wants $1.8 billion for the “fair market value of the 8.6 billion barrels of unconventional resources proven to exist on the Subjected Lands.”

Throughout the statement of claim Northern Cross seeks to prove that the government knew from the start the company’s plan was to frack.

In 2006 and 2009 Northern Cross obtained exploration permits for lands with unconventional resources, which can only be extracted through fracking, the company said.

It also planned to drill exploration wells which are characteristic of unconventional resources because their depths are greater than for conventional oil plays.

In June 2011 the company said it met with Yukon government officials and presented them with plans to evaluate the unconventional resources in the Eagle Plains Basin.

“At no time during these discussions did the Defendant indicate that hydraulic fracturing might not be permitted,” the lawsuit reads.

It also conducted a study that showed the 8.6 million barrels of oil that could only be extracted through fracking. Northern Cross said it shared all of that information with the government.

But in its presentations to the select committee in 2015, Northern Cross wasn’t as categorical.

“Northern Cross presented information about its Eagle Plains program … that it had no immediate plans for hydraulic fracturing but would prefer if the option was left open,” the committee report reads.

Back in October 2016, a Chinese-owned oil company sold its 60 per cent stake in Northern Cross to a Canadian shareholder.

China National Offshore Oil Corporation (CNOOC) had invested $115 million in Northern Cross back in 2011.

At the time, Northern Cross president Richard Wyman wouldn’t say why CNOOC sold it stake but said the future of the company in the territory was “not certain at all.”

“The regulatory framework in the Yukon has got serious challenges,” he said. “And so I can’t tell you whether this is going to proceed or not. There’s a lot of uncertainty.”

In March 2016 Northern Cross sued YESAB over its decision to refer its oil and gas exploration project to a higher level of assessment after 20 months of review.

The government has not yet filed a statement of defence.

Contact Pierre Chauvin at pierre.chauvin@yukon-news.com

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