Lone Pine Resources, a Canadian frac company in serious financial trouble with $300 million in aggregate debt sues Canada for $250 million to lift Quebec frac ban

American company sues Canada over fracking moratorium by John Upton, October 3, 2013, Grist
Quebec isn’t entirely sure about this whole fracking thing. Amid reports from across the continent of groundwater pollution, air pollution, deforestation, and other environmental side effects of hydraulic fracturing, the Canadian province has placed a moratorium on the practice beneath the St. Lawrence River. That doesn’t sit well with Lone Pine Resources, a Delaware-based company that has long eyed the gas and oil that’s locked up in the Utica shale beneath the grand waterway. The company claims it spent millions to get the appropriate permits to drill, and now that the fossil fuels seem out of reach, it says Canadians need to pony up more than $250 million in compensation. …

The company last month submitted a claim [PDF] to an international arbitration system seeking damages because of “Quebec’s arbitrary, capricious, and illegal revocation” of its “valuable right to mine for oil and gas under the St. Lawrence River.” The claim is based on Chapter 11 of the North American Free Trade Agreement, which allows private companies to sue governments when laws hurt their expected profits. … Meanwhile, Lone Pine Resources has been missing its loan repayments and desperately trying to work with its creditors in a bid to clamor out of a looming financial abyss. Coincidence much? [Emphasis added]

Firms sues to lift Quebec fracking ban by Julian Beltrame, The Canadian Press, October 3, 2013, MetroNews
Free trade critics say a $250-million damage suit being pursued as a result of Quebec’s moratorium on fracking is proof Canada needs to be careful in negotiating trade pacts around the world. The Council of Canadians, the Sierra Club and Quebec-based Eau secours say the suit by Lone Pine Resources Inc. (TSX:LPR) shows that trade deals that include investor protection clauses are a bad idea because they can prevent governments from passing laws to protect the environment. The groups are asking Lone Pine to drop the suit before a NAFTA panel, but company president Tim Granger says he is going ahead unless Quebec lifts its moratorium on fracking for natural gas under the St. Lawrence River. “As an organization we, in good faith, purchased leases, we paid rentals and then to just have been stymied, that’s not acceptable,” he said in an interview. “What we are asking for is some level of restitution for losses we have incurred and what we could have potentially received if we were allowed to develop those leases.” The statement of claim filed Sept. 6 says the company “expended millions of dollars and considerable time and resources” on the project and that the Quebec government was “arbitrary” and “capricious” in revoking the rights even before an environment study on the fracking process was completed. … The Canadian case has attracted even greater scrutiny because Quebec has yet to decide whether fracking — a process to inject fluid into the ground at a high pressure in order to fracture shale rocks to release natural gas inside — can be conducted safely under the St. Lawrence. “If a government is not even allowed to take a time out to study the impact without having to compensate a corporation, it puts a tremendous chill on a governments’ ability to regulate in the public interest,” said Ilana Solomon, director of the Sierra Club’s trade program in Washington, D.C.

Stuart Trew, a trade campaigner with the Council of Canadians in Ottawa, which has generally been critical of trade deals, says the suit has attracted attention in Europe, Australia and other countries contemplating major trade deals. … “We have no confidence the government is going to be able to limit cases brought by European countries, In fact, (the Canada-EU trade deal) could lead to more cases than have happened under NAFTA.” Even if the lawsuits fail, Trew said such cases serve as a chill to governments that want to regulate in areas of the environment and public safety and that is “entirely intentional.”

Another unusual aspect of the case is that Lone Pine is a Calgary-based firm and would not have standing as a foreign entity to sue Canada under NAFTA, but Granger said it can do so because it is registered in Delaware. Although the suit complains against a Quebec government action, the federal government would be liable to pay any damages if it succeeds since it alleges that obligations under the North American Free Trade Agreement were violated. In 2010, Ottawa agreed to pay AbitibiBowater $130 million to settle the company’s claim that Newfoundland illegally seized some of its assets, a suit that was also filed under NAFTA. Prime Minister Stephen Harper said at the time he would in the future seek to “reclaim” money from the provinces if their actions cause Ottawa to lose cases before international trade process. [Emphasis added]

No Fracking Way: How Companies Sue Canada to Get More Resources by Llana Solomon, October 3, 2013, Huffingtonpost.ca

Update: Lone Pine shares worthless under deal, Courts asked to approve plan to hand company to noteholders by Dan Healing, September 25, 2013, Calgary Herald
Long-suffering shareholders of debt-laden junior gas producer Lone Pine Resources Inc. will be left with nothing under a deal struck with its noteholders to trade debt for stock. The agreement announced Wednesday, which requires court approval, would result in shareholders having their stock cancelled without compensation while holders of the Calgary company’s debt instruments will wind up in full control. “For the corporation, this could be viewed as quite positive, anytime you eliminate close to $300 million of aggregate debt,[Refer to the links below, Lone Pine is suing the Canadian Government for $250 million possible profits perhaps harmed by the Quebec frac moratorium] said Tim Granger, president and chief executive of Lone Pine, in an interview. “The noteholders are converting $195 million of their notes to equity and then backstopping a $100-million equity infusion. The struggle for the company was its lack of liquidity because of its debt burden and this eliminates that.”

Granger said Wednesday’s deal, made with three large holders of about 75 per cent of its notes after the company missed $10-million interest payments in August and September, is good for employees, who will keep their jobs. He agreed it’s not good for shareholders. “That’s the unfortunate aspect out of this transaction,” he said. “The company needed to raise a significant amount of money — since last May when I came here, I’ve been back and forth to Toronto to raise capital — and capital is not being offered.” Lone Pine was delisted from the New York Stock Exchange last week for failing to meet minimum market capitalization of $75 million and a minimum closing price of $1 US. … Lone Pine relieved CEO David Anderson of duty in February and hired Granger in April. … “It was missteps by management, a higher leverage position to start off with and average to poor economics in their asset portfolio,” he said. Granger agreed Lone Pine’s debt was too high but he said its failure was mainly due to crashing prices for natural gas. [Emphasis added]

Lone Pine Resources Announces Restructuring Agreement With Noteholders and Related Court Proceedings Press Release by Lone Pine Resources, September 25, 2013, Marketwired in Digital Journal
Lone Pine Resources Inc. (“Lone Pine” or the “Company”) today announced that it has reached agreement with holders (the “Supporting Noteholders”) of approximately 75% of the outstanding 10.375% Senior Notes due 2017 (the “Senior Notes”) issued by Lone Pine Resources Canada Ltd. (“LPR Canada”) on a restructuring plan that, if successfully implemented, will significantly reduce the Company’s debt obligations and materially improve the Company’s overall capitalization and liquidity. The Company has commenced proceedings in the Court of Queen’s Bench of Alberta under the Companies’ Creditors Arrangement Act (“CCAA”), and ancillary proceedings under Chapter 15 of the United States Bankruptcy Code (“Chapter 15”) in the United States Bankruptcy Court for the District of Delaware, to implement the restructuring. Lone Pine, LPR Canada and all other subsidiaries of the Company are parties to the CCAA and Chapter 15 proceedings. “The proposed restructuring transaction is the result of a lengthy evaluation and deliberation by Lone Pine’s management and board of directors, together with its financial and legal advisors, on a range of alternatives available to the Company,” said Tim Granger, President and Chief Executive Officer. “The proposed restructuring is designed to significantly reduce the Company’s long-term debt and improve its liquidity, which will allow Lone Pine to resume investment in its attractive asset base, while at the same time allowing the Company to retain its relationships with its current employees, industry partners and suppliers.”[Emphasis added]

Lone Pine Resources misses US$10.1M interest payment; risks default on notes by The Canadian Press, August 16, 2013, Calgary Herald
Lone Pine Resources Inc. failed to make a US$10.1-million, semi-annual interest payment on its senior secured notes Thursday, setting the clock ticking on a possible default the could force the natural gas and light oil developer to seek protection from creditors. The company, incorporated in Delaware but headquartered in Calgary, said failure by Lone Pine Resources Canada Ltd. to make the payment will result in default on the 10.375 per cent senior notes maturing in 2017 unless remedied within 30 days. Such a default would allow the trustee or holders of at least 25 per cent of the US$195 million in aggregate principal amount to declare the notes immediately due and payable with accrued interest.

LPR Canada’s failure to make the interest payment on the senior notes could also lead to a cross default under a credit agreement dated March 18, 2011, between Lone Pine, LPR Canada, JPMorgan Chase Bank, N.A., Toronto branch as administrative agent and other agents and lenders. As of Aug 15, Lone Pine had approximately C$178 million outstanding under the credit agreement. … Lone Pine is engaged in the exploration and development of natural gas and light oil in Canada, with principal reserves, producing properties and exploration prospects in Alberta, British Columbia, Quebec and the Northwest Territories.

Last November, the company announced it was suing the Government of Canada in a case involving Quebec’s controversial moratorium on hydraulic fracturing or fracking. Lone Pine says the Quebec government’s move to cancel a natural gas exploration permit for deposits beneath the St. Lawrence River the previous year was “arbitrary, capricious and illegal.” The company said it was filing the suit under the Chapter 11 dispute settlement provisions of the North American Free Trade Agreement and that it was launched against Ottawa because it is responsible for acts by provinces both under NAFTA and international law. [Emphasis added]

[Refer also to:

Little lawsuit, big implications for future of fracking projects

EU-Canada trade agreement threatens fracking bans

Why Can Corporate Interests Trump Sovereign Rights? Lone Pine Resources suing Quebec government trying to protect citizen health and environment from harms caused by fracking

Public vs. corporate rights: NAFTA Chapter 11 invoked in Quebec fracking decision

Timing is right for a fracking ban to protect Ontario from NAFTA lawsuits says Council of Canadians

Canadian taxpayers could be on hook for Quebec fracking decision because of NAFTA Chapter 11 that protects corporations even if they risk health, the public interest and environment to take profit

Ottawa sued over Quebec fracking ban, Ontario Smacked by U.S. NAFTA Lawsuit on Fracking

NAFTA challenge launched over Quebec fracking ban ]

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