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Yukon government seeks to have bulk of oil company's $2.2B lawsuit thrown out

Chance Oil and Gas is seeking up to $2.2 billion in damages stemming from the government's 2015 fracking moratorium.

YG contends Chance Oil and Gas never had permits for commercial production

Northern Cross drilled four exploratory wells in the Eagle Plains area of Yukon in 2012-13. (Northern Cross)

The Yukon government wants a judge to throw out large portions of a lawsuit filed by Chance Oil and Gas in the wake of the territory's 2015 moratorium on hydraulic fracturing.

In March, the Yukon government filed an application to have much of Chance's suit thrown out. 

The company's statement of claim, which was re-filed in February, alleges the government's fracking ban amounts to "unlawful de facto cancellation" of the company's oil rights in Eagle Plains.

"The minister's decision to implement a moratorium was an arbitrary and unreasonable one that was not based on any science or study, and therefore without legislative authority," the statement of claim reads.

The claim also alleges expropriation, nuisance and "unjust enrichment" by the government. Chance president Richard Wyman did not respond to a email seeking comment.

Only test wells ever approved, YG says

The government wants those claims dismissed outright. It also wants the claims against the Minister of Energy, Mines and Resources dismissed. The suit names the minister, along with the government and the Energy, Mines and Resources department itself.

In a statement of defence filed in late March, the government says it never granted Chance the right to establish commercial production at Eagle Plains. The statement says Chance was only ever granted exploration permits that gave Chance the right to drill test wells and sell any oil it found during those tests.

The government says it was aware that fracking might be needed to access the Eagle Plains deposit, which is located in a shale formation (sometimes called "tight" oil). 

"Chance repeatedly disavowed any immediate intention to use hydraulic fracturing techniques," the government's defence reads.

Chance's claims says the Eagle Project would have "clearly and obviously" have required fracking, which is typical of shale oil deposits.

Suit followed fracking ban

Chance, formerly Northern Cross, filed the suit in 2017. The company, which had exploration rights to deposits near Eagle Plains in northern Yukon, is seeking as much as $2.2 billion in damages.

The company's claim says the damages should include more than $1.8 billion for the "fair market value" of 8.6 million barrels of proven oil reserves. The statement says the company would also accept awards of $395 million or $207 million to cover various fees and capital costs.

The former Yukon Party government issued the fracking moratorium in 2015 following months of hearings on the practice by a select committee of the Legislative Assembly. Fracking is only permitted in the natural-gas rich Liard Basin in southeast Yukon, and only with the approval of local First Nations.

The Liberal government, elected in November of 2016, later said it would not issue permits for fracking operations anywhere in the territory.

The matter is scheduled to be back in court in May.

Clarifications

  • This story has been edited to clarify that since January 2017 the Yukon government adopted a policy stating it would not issue permits for fracking operations anywhere in the territory.
    Apr 24, 2020 2:57 PM CT

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