Natural Resources Minister Bruce Northrup says the government had no choice but to approve the lease. (CBC)

Windsor Energy Inc. has been granted a five-year lease to continue exploring for oil and gas in southern New Brunswick.

Natural Resources Minister Bruce Northrup made the announcement Tuesday, just five months after he asked the RCMP to investigate the company for allegedly violating the Oil and Natural Gas Act.

"This has not been an easy decision for me but, legally, it is the only one that respects the contract with the former government," he said.

The former Graham government granted the Calgary-based company a three-year licence to carry out exploration for oil and natural gas in the Sussex-Hampton-Quispamsis area in November 2008, Northrup said.

Under the terms of the licence, Windsor Energy has committed to spend $4.5 million on exploratory work during the three years.

'We have all learned from this experience. It has shown us that we need to clarify and strengthen some of the rules related to oil and natural gas exploration and development.'—Natural Resources Minister Bruce Northrup

Last November, when the licence expired, Windsor applied to convert the licence to a five-year lease, which would allow the company to continue exploring for five years and make plans to drill.

"Windsor met and exceeded the monetary commitment made to the previous government," said Northrup. "Therefore, I was advised that Windsor Energy is legally entitled to have its licence converted to a lease."

Not granting a licence could open the province up to legal action, he said.

"We have all learned from this experience," he said. "It has shown us that we need to clarify and strengthen some of the rules related to oil and natural gas exploration and development."

There will be new rules within a month that will include stiff penalties for violations, Northrup said.

Drilling as early as next year

It's unclear where exactly Windsor Energy's test sites would be, but they're expected to be located east of Highway 1.

Drilling could begin next year, with government approval, the company's chief executive officer Khalid Amin told CBC News.

Windsor Energy is still analyzing the seismic data and will be putting together a plan for exploratory drilling, he said during a telephone interview from Calgary.

Earlier this month, Amin said he expected his company would be granted the lease, despite problems with the province last fall.

He said his company had fulfilled all of the legal obligations to get its exploration licence converted to a lease.

Still, he said Tuesday he's pleased with the government's decision.

Renews calls for moratorium

Meanwhile, Opposition Liberal energy critic Brian Kenny said the case illustrates the need for a moratorium on shale gas activities in the province, which his party has been calling for.

"This government talks about tough regulations for shale gas companies, but minister Northrup’s decision to grant Windsor Energy a new five-year lease proves we have little protection from this type of exploration," Kenny said in a statement.

"We need a moratorium on this industry now," he said. "A recent poll shows that’s what more than 80 per cent of New Brunswickers want. This government needs to respect the wishes on New Brunswickers on this file.”

Company raised ire last fall

Many people were upset that Windsor Energy went ahead with seismic testing in Sussex before the town gave its approval. (CBC)

Windsor Energy ran into trouble with the provincial government in October when its contractor Seismotion conducted seismic testing within Sussex town limits without written permission from the town council.

At that time, the minister said he wanted the company penalized and forwarded a complaint to the RCMP.

But the police opted not to lay charges because nothing in the existing regulations allowed a company to be punished.

Northrup and Premier David Alward have committed to introducing an environmental protection plan this spring that would cover industrial developments.

Alward has said he wants to impose the continent’s toughest shale gas regulations on companies working in the province.

Pledge to improve communications

On Tuesday, Northrup said he hopes there are no further complications with Windsor Energy.

"I didn't agree with a lot of things they had done in the past. I would like to think that in talking to Windsor Energy we can turn another page here," he said.

"They've made a commitment that they will better communicate with the staff, will better communicate with myself and they'll better communicate with stakeholders that are in the area."

Alward's government has faced mounting criticism in the last year over shale gas exploration and the use of the controversial hydraulic fracturing process.

Hydro-fracking is a process where exploration companies inject a mixture of water, sand and chemicals into the ground, creating cracks in shale rock formations. That process allows companies to extract natural gas from areas that would otherwise go untapped.

Opponents of the process say it could have a negative effect on local water supplies and many of them have held protests across the province.

The premier has said the shale gas industry could provide huge economic benefits for the province, which is struggling with a deficit of $183 million and high unemployment.

Alward has promised those economic benefits won't come at the expense of the environment.