LGX doubles lawsuit over Manyberries

By Collin Gallant on July 11, 2018.

cgallant@medicinehatnews.com @CollinGallant

An oil company that, like the City of Medicine Hat, is suing the federal government over environmental restrictions near leases around Manyberries, has doubled the damages it is seeking to $123 million, the News has learned.

LGX claims that operating protocols and a moratorium on new drilling near sage grouse habitat severely hampered the economic viability of operations it bought in 2012 for $45.5 million.

A new statement of defence from Justice Canada however, states that possible restrictions under the Species at Risk Act were well known at that time, as was the presence of endangered sage grouse. It argues the claim should be dismissed as Ottawa hasn’t “expropriated” any land as is claimed, and legislation doesn’t include provisions for compensation.

A similar statement of defence was filed in a separate but similar lawsuit the City of Medicine Hat filed with several junior oil companies.

That action is scheduled to advance to the discovery phase in August, officials with city’s petroleum division confirmed to the News.

It seeks $71 million in total for “damages suffered” when the government restricted new drilling activity on thousands of publicly-owned acres of land south of Medicine Hat and in southwest Saskatchewan in late 2013.

The LGX statement of claim was publicly released via bankruptcy proceedings the company entered into in 2016. Since then most assets other than the 115 wells in Manyberries and related infrastructure have been sold off.

The receiver has argued the potential settlement, and the fact the assets were hard to sell, meant the best course of action was to continue the lawsuit. The plaintiff in the bankruptcy action is ATB Financial, which is a secured creditor for $30 million.

Likewise, city elected officials have said a potential payout and exit from Manyberries would be a prudent course of action for the controversial field.

The city’s production company purchased the fields near Manyberries from Chinook Energy in early 2012 for a total of about $42 million with a plan to rework wells and boost production to cover the purchase price.

The viability of the field became an election issue in 2013, shortly before the federal environment ministry imposed the order.

The city and other companies claim the government did not properly consult with stakeholders.

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