Ottawa sued over Quebec fracking ban, Ontario Smacked by U.S. NAFTA Lawsuit on Fracking

Ottawa sued over Quebec fracking ban by The Canadian Press, November 23, 2012, The Toronto Star
Lone Pine says the Quebec government’s move to cancel a natural gas exploration permit for deposits beneath the St. Lawrence River last year was “arbitrary, capricious and illegal.” … Lone Pine cites Article 1117 under NAFTA in making its claim for the loss of a “valuable right … without due process, without compensation and with no cognizable public purpose.” Lone Pine says the suit has been filed against Ottawa because it is responsible for acts by provinces both under NAFTA and international law. Quebec passed the moratorium in order to study the controversial process in which fluid under high pressure is pumped underground to release petroleum from rock formations. … Lone Pine said that between 2006 and 2011 it had spent millions of dollars as well as time and resources to obtain the Quebec permits. “Suddenly, and without and prior consultation or notice, the Government of Quebec introduced Bill 18 . . . to suspend all exploration for oil and gas in the province (except for the purposes of scientific studies onshore.) Lone Pine said all attempts to discuss the matter with the province were “repeatedly rebuffed” and that it had been told the move was “a political decision and that nothing could be done to prevent it from being passed.” “It is Lone Pine’s hope that this dispute can resolved amicably through consultation and negotiation,” the company said in its notice. “However, is such consultation and negotiation is unsuccessful, Lone Pine will pursue arbitration” under NAFTA.

Ontario Smacked by U.S. Lawsuit on Fracking by John Daly, November 22, 2012, Oilprice.com
It is a measure of the technique’s success that its usage has now spread north of the border, but the downside for proponents is that Canada’s Quebec province has banned the procedure for present. Which has run afoul of Quebec’s fracking advocates, who are now using a novel legal defense in an attempt to overturn the prohibition, the North American Free Trade Agreement, signed in 1994. NAFTA was designed to promote inter-hemispheric trade between Canada, the United States and Mexico to create a trilateral trading community in northern America. The agreement ended tariffs on various goods and services to implement trading equality between Canada, the U.S. and Mexico.

Now, a U.S. firm is using a NAFTA argument to protest Quebec’s fracking ban.

Lone Pine Resources Inc., headquartered in Calgary but incorporated in Delaware, has revealed in a filing with the U.S. Securities and Exchange Commission this week that on 8 November it filed a notice of intent to sue the Canadian government under NAFTA’s Chapter 11 and would seek $250 million in damages. At issue? NAFTA Chapter 11 allows U.S. and Mexican companies to sue Canada if they assert that they have been abused by a Canadian government policy.

The contentious project has engendered much legal criticism, as opponents note that investor protections in NAFTA give business investors new power over sovereign nations and provide a new, broader definition of property rights. Under NATFA’s Chapter 11, a “regulatory takings” clause designates intangible property, such as a corporation’s potential future profits, as considered private property, under which any law or regulation that is imposed within the NAFTA zone to protect the public interest could be considered as “taking” and impeding that corporation’s earning potential, leaving the government to compensate the corporate owners for lost property or profit.

Lone Pine’s lawsuit is based upon Quebec’s June 2011 legislation that not only imposed a fracking drilling moratorium, but also cancelled permits for oil and gas activity in areas directly below the waters of the St. Lawrence River including the revoking of a Lone Pine permit covering 33,460 acres. Toronto lawyer Milos Barutciski, representing Lone Pine, while admitting that the Quebecois administration has the legal mandate to regulate shale-gas exploration and impose a moratorium nevertheless does not have the authority to retract mining licenses, telling journalists, “It just can’t, for political reasons, expropriate our property. And that’s exactly what NAFTA’s investor-rights provision is intended to protect.” Leaving the window open for negotiations, Barutciski added that Lone Star would continue talking to the Quebecois government and authorities in Ottawa to resolve the issue, but added that Lone Star filed the NAFTA claim so it could get the legal process underway.

The case will no doubt preoccupy the best (and most highly paid) legal minds of the North American continent for a number of reasons, quite aside from and beyond the generous legal fees that the case will engender. Stripped of its legalese, the Lone Pine lawsuit represents a potential groundbreaking precedent on provincial, national and international issues. Do provincial states in the U.S. and Mexico have the legal grounds to uphold regional legislation that might conflict with the supranational terms of an international treaty such as NAFTA? If they do not, then does this mean that corporations in effect have rights that supersede provincial, state, or national concerns? Accordingly, not only lawyers, but North American governments, will be closely watching the outcome of this case, which has nearly completely flown under the media radar.

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