The Canadian government is facing a challenge over Quebec's fracking moratorium under the North American Free Trade Agreement, commonly known as NAFTA.

It's a case both territorial opposition leaders say Yukoners should watch carefully.

Liz Hanson, the leader of the NDP official Opposition, said the case should give "great pause” to Yukoners who think it would be possible to limit hydraulic fracturing, if the practice is permitted in the territory.

"There's no such thing as being a little bit pregnant,” she said in a recent interview.

"You either are or you aren't. So if we're going to allow fracking, we are, if we're not going to allow it, we should say no ... that's why we called for a complete moratorium, not a selective one, until we've had a complete review.

"The (legislature's) select committee must complete all of its work and there must not be any activities until that's completed,” she said.

The all-party MLAs' select committee on the risks and benefits of hydraulic fracturing was established last May.

The case also reconfirms the NDP's concerns about the Canada-China Foreign Investment Promotion and Protection Agreement (FIPA), Hanson added.

It raises "the huge challenge that we face with these trade agreements that place us as citizens, and then our legislative assemblies, basically at the (risk of being) threatened by corporate entities in other countries,” she said.

But Environment and Economic Development Minister Currie Dixon firmly disagrees.

"With a comment like that, Ms. Hanson is displaying her fundamental misunderstanding of the distinction between foreign investment protection agreements and a free trade agreement,” he said in an interview.

"Those are two very different and distinct legal instruments. A free trade agreement like NAFTA, which is the basis for the challenge in Quebec, is fundamentally different than the FIPA which Canada entered into with China recently,” Dixon said.

"What the foreign investment protection agreement between Canada and China does in a practical sense for Yukon is it prevents the public government from discriminating against an investor on a basis of their country of origin.

"So we could not pass a law in the Yukon that discriminates specifically against Chinese investors .... That is fundamentally different than the level of challenge and the level of strength of claim that is provided for through NAFTA.”

The Canada-China FIPA, signed in September 2012, is currently going through ratification processes in both countries.

Currently, both companies interested in the Yukon's oil and gas resources are foreign-owned.

Northern Cross, an oil and gas company with projects in Eagle Plains, is majority-owned by China.

EFLO Energy Inc., previously EFL Overseas Inc., an American company, has significant interests in the Kotaneelee gas field in southeast Yukon.

While Northern Cross has said it has no plans to frack in the near future, EFLO has been clear about its interest in the shale gas potential of the Kotaneelee region.

Neither company could be reached for comment on the case for this story.

Sandy Silver, the leader of the Yukon Liberal Party, said he's very interested in following this case, but his initial reaction is that the company "doesn't have a leg to stand on.”

While he understands the company's wish to recoup some of its losses, he said it's a long shot.

Still, for the Yukon and other jurisdictions facing the fracking question – it's something to pay "close attention to,” Silver said.

Hanson's assessment that it demonstrates the difficulty of permitting limited fracking in a region is "a bit of a stretch,” Silver added.

While Dixon agrees the case is of interest to the territory, he noted some key differences between the situations in Quebec and here.

For instance, the Yukon doesn't currently have a moratorium on hydraulic fracturing in the territory, he noted.

"In order for a moratorium to be in place, there must be some legislative or regulatory instrument to be in place that causes it to be in effect, and there is not,” the minister said.

"What we have currently is a verbal commitment made by the former minister in the legislature (Brad Cathers) and echoed by myself that we would not permit any hydraulic fracturing operation in this territory until the work of the select committee has concluded. So we are different from Quebec in that sense,” he said.

"Quebec has an official capital M moratorium on the process.”

But the differences won't preclude the government from paying attention.

"Is it something we will consider and pay attention to? Of course we will; any jurisprudence around the development of natural resources in Canada is something we take interest in and in this particular case, it's something we will of course be watching,” Dixon said.

In its notice of arbitration, Lone Pine Resources Inc. submits it's filing suit "for the arbitrary, capricious, and illegal revocation of the Enterprise's valuable right to mine for oil and gas under the St. Lawrence River by the Government of Quebec without due process, without compensation, and with no cognizable public purpose.”

The company said it expended millions of dollars and considerable time and resources to obtain the necessary permits from the Quebec government to mine for oil and gas in the province, including below the St. Lawrence River.

The company goes on to say that without any notice or consultation, the Quebec government introduced Bill 18 into the National Assembly on May 12, 2011.

The bill aimed to revoke all permits pertaining to oil and gas resources beneath the St. Lawrence River.

Lone Pine is seeking $250 million in compensation.

Representatives of Lone Pine Resources and the Quebec government could not be reached for further comment.