Northern Cross Ltd. has filed a $2.2-billion lawsuit against the Yukon government over a fracking moratorium.
The oil and gas company filed the lawsuit last week against the government, the Department of Energy, Mines and Resources, and the department’s minister, Ranj Pallai, in Yukon Supreme Court.
It claims that the government’s moratorium on hydraulic fracturing or fracking has impaired their exploration rights in the Eagle Plains Basin.
Northern Cross owns 15 oil and gas exploration permits in the Eagle Plains Basin, which were awarded in 2006-2007 and 2009.
They include about 1.3 million acres of oil and natural gas mineral rights.
In 2011, these permits were reorganized into five groupings in anticipation of a major exploration program for unconventional resources that would require fracking.
According to the statement of claim, Northern Cross says that these permits incorporate a bundle of rights which include fracking. It says the government was well aware through each step of the process of its fracking intentions.
“There is no doubt that the defendants knew Northern Cross was pursuing unconventional opportunities,” reads the statement of claim.
Northern Cross says it has spent more than $100,000,000 to develop oil and gas resources in the area and that it’s now owed damages, including for a loss of opportunity.
It also claims that from the 2006 request for posting review up until the moratorium in 2015, there was no indication that fracking would not be allowed in the area.
But on April 9, 2015 the Yukon government announced a moratorium on fracking in the territory except for the Liard Basin.
This was following recommendations from the January 2015 final report from the Select Committee Regarding the Risks and Benefits of Hydraulic Fracturing.
The suit says none of the committee’s recommendations included a ban on fracking and they recommended further study on the potential impacts of fracking in the Yukon.
“The moratorium went far beyond any of the select committee’s recommendations,” reads the statement of claim.
It adds that the moratorium was imposed without further study and with disregard to the impact it would have on Northern Cross.
In April 2015, Northern Cross expressed its concerns to the government and requested that they be granted certain concessions. The company says it was reimbursed for $3.7 million for outstanding work deposits and tenure was extended on one of its permits.
Northern Cross is now claiming damages arising from misrepresentation, de facto cancellation, de facto expropriation, and unjust enrichment.
It says the government’s moratorium on fracking essentially cancelled its exploration rights.
“The moratorium takes away Northern Cross’ right to pursue the development of the oil and gas resources that have been proven to exist on the subject lands,” reads the statement of claim.
It’s claiming $395 million for refund on work deposits, application fees, rental amounts, sunk costs and interest.
It’s also seeking $1.83 billion in damages for loss of opportunity of 8.6 billion barrels of oil, at fair market value, identified as being contained in the area through a resource evaluation.
The claim also considers other remedies if the court does not find the moratorium is a de facto cancellation of the company’s disposition.
It says the moratorium should then be considered an unlawful interference with economic interests for which it’s owed an alternative $395 million.
Or, the moratorium constitutes a nuisance for unreasonably interfering with Northern Cross’ ability to exercise its propriety interests. And for that they are owed $207.3 million.
The claim also states the government has been unjustly enriched for inducing Northern Cross into undertaking exploration activities and benefitting from those activities.
“They have gained a much clearer picture of the locations and scale of the unconventional resources found in the Eagle Plains basin for their or others’ future use, at no cost to themselves,” says the lawsuit.
It’s also alternatively seeking an order so the moratorium does not apply to them.
Finally, it’s claiming costs, judgment interests and other relief as the court deems just.
Northern Cross’ activity in the area includes the drilling of four wells in 2012 and 2013.
It says it was granted licences to drill between 2,800 and 3,800 metres, and that the government was aware that drilling to this depth was for the purpose of identifying unconventional resources.
Following the drilling program, Northern Cross says it acquired 315 kilometres of 3D seismic data and 25 km of 2D seismic data, and undertook exploration activities at a cost of $115 million.
The statement of claim says this is the first time 3D seismic data were done in the Yukon and that it significantly reduces risk, increases efficiency and improves success rates of wells.
It sent this data to Schlumberger Oilfied Services, whose resource evaluation revealed a large area of shale holding approximately 8.6 billion barrels of oil.
The oil and gas company says it also paid $2,183,570 in rent from the time permits were granted.
The government has yet to respond to the suit and the claims have not been proven in court.
Neither representatives from Northern Cross nor the government could be reached for comment before press time this afternoon.