Utica Resources sues Quebec government over denial of exploratory oil drilling permit

The province of Quebec is preparing to end oil and gas production opportunities after quietly toying with embracing the industry for decades. But companies in the sector aren't giving up without a fight.

One firm, Utica Resources Inc, has filed suit. They alleged the Quebec government acted "illegally" and with "political motives" when it refused its application for an exploratory drilling licence on the Galt project a few hours east of Rimouski in the town of Gaspe, according to the Globe and Mail.

Through various subsidiaries, Utica Resources Inc. holds thirty-one exploration licences, one production licence and three brine production authorization permits in the province. Many were obtained through deals with other exploration firms in recent years.

Utica also alleged introducing a new directive, without notice, establishes a "minimum distance of one kilometre between oil and gas drilling worksites and water sources," and the government arbitrarily contravened recommendations made by its staff. The suit, filed in the Quebec Superior Court, contends "the defendants have, in practice, annihilated any possibility of exploring, producing and developing hydrocarbon resources," disregarding the "rights and legitimate expectations" of all licence holders.

The lawsuit represents the front lines of the pitched legal and political battle underway between governments which have signed on to greenhouse emissions reductions targets in part through phasing out of hydrocarbons and influencing stakeholders' actions on these policy shifts.

A spokeswoman for Quebec Energy and Natural Resources Minister Jonatan Julien declined to comment, stating the matter was now before the courts.

In the Quebec National Assembly, Premier Francois Legault made his position clear: "We are working to ensure that, in the future, there will be no more permits given." However, he conceded Quebec "isn't a banana republic."

"We can't just do whatever we want; however, we want ... we're looking at the legal impacts surrounding the possibility of buying back existing permits," he said.

On September 15, the Natural Resources Minister said "all options" were on the table. These matters were complicated by another case brought forward to the courts by a Utica Resources affiliate, Gaspe Energies. The province holds an $8-million stake which it says it now regrets.

"Quebec's future is certainly not, in the medium term, tied to oil and gas resource development ... we're not looking at this with the same eyes we had ten years ago," said the spokesperson.

No new permits for exploration or drilling have been issued since the Legault government came to power in 2018. Near the mouth of the St. Lawrence River, Anticosti Island was previously a key focus of hydrocarbon development interest by private-sector companies and the government. Still, it is now being protected as the 8,000-square-kilometre territory vies for UNESCO world heritage status.

More recently, Utica alleged the minister declined to issue the company a permit to drill its Galt No. 6 well under the "pretext" there is a risk to nearby water sources. However, evidence by independent experts submitted by the company that drilling can be done safely.

Utica said that decision, which is the subject of a separate lawsuit, was a "purely political" one that went against the recommendations of the natural resource department's senior employees. The minister insisted he acted on a risk assessment.

Quebec announced its 2030 "Plan for a Green Economy" aimed at replacing fossil fuels with hydropower generated within the province to shrink the roughly $8.5-billion amount of oil it imports in a year to meet its energy needs.

The province is working to leverage its hydroelectric resources to cut that deficit through measures such as electric vehicle subsidies and backing construction of what it calls "high-performance, low-carbon buildings."