Investor bails on Cape Breton drilling project

Investor bails on Cape Breton drilling project by Brett Bundale, Business Reporter, November 12, 2012, Chronicle Herald
Anti-drilling protests have caused a key investor to pull out of a controversial exploratory oil well proposed for Cape Breton. Neal Mednick, president and chief executive of PetroWorth Resources Inc., said the mounting opposition to oil and gas development near Lake Ainslie forced the skittish investor to pull out of the $1.6-million project. “We’re talking with a number of potential farm-in partners,” the head of the Toronto energy firm said in an interview Sunday. “We were very close to closing a deal with one of them, but all the demonstrations and controversy caused them to reconsider, and they decided not to proceed.” A group of protesters slowed Canso Causeway traffic to a crawl in September to express their disagreement with drilling near Cape Breton’s largest freshwater lake. The protest came on the heels of a court battle a local environmental organization launched to oppose the exploratory oil development. The Margaree Environmental Association lost its bid to have the Nova Scotia Supreme Court overturn the provincial environment minister’s decision to allow the drilling of a well. But Neal Livingston, the group’s co-chairman, now calls the protests and court case “highly successful.” “This is a very serious issue in our community, and I think the opposition has been successful in making our opinions known to investors,” he said, citing PetroWorth’s loss of a farm-in partner and the company’s declining stock value.

But Mednick said the energy firm is still in talks with other parties and has until July 15 of next year to get a well drilled, according to its permit. “It’s just that with this (partner), we were particularly close to a deal, and so we’re sort of back to the drawing board.” Although PetroWorth has proposed a 1,200-metre well at an estimated cost of $1.6 million, Mednick said some of the interested investors have suggested drilling two shallow wells instead. Two wells at about 350 metres deep would cost less, he said. A farm-in partner is a key investor that earns a stake in the development of a project through its investment, Mednick said. “These are oil and gas companies that come in and, essentially, the deal is they pay a certain amount on the well that is drilled in order to earn an interest in the property.” He said “it would be nice if people in Cape Breton were open-minded about this issue and actually looked at the facts rather than the emotion.” However, Livingston said the proposed development is in an inappropriate place and that opponents will continue to voice their concerns. “It’s too close to homes, too close to watercourses and too close to drinking wells. That has always been the major point that rallied the community on this issue.” [Emphasis added]

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