Husky, Suncor suing Nalcor for millions over unpaid well costs
Legal battle latest in long-running dispute over costs at the South White Rose Extension project
A multi-million-dollar legal battle between Nalcor, this province's energy corporation, and two major players in Newfoundland's offshore, has taken some new twists.
Husky Oil and Suncor Energy are at odds with Nalcor over costs at the South White Rose Extension project, and the dispute has now surfaced at a court in Alberta, where the companies say the dispute should rightfully be settled.
A statement of claim filed by Husky and Suncor in June in the Court of Queen's Bench of Alberta claims Nalcor owes nearly $9.7 million for its outstanding share of the costs of what is called a "gas flood well" at the project.
This follows a statement of claim filed by Nalcor in May to the Supreme Court of Newfoundland and Labrador, in which it asked the court to order the return of nearly $2.4 million that Nalcor had paid to Husky, and to clear the ledger of all outstanding balances.
Nalcor argues that its stake in the project is limited to oil production in the expansion fields, and that it is not responsible for any costs or liabilities related to gas.
The oil companies say the joint venture agreement makes it clear that all disputes must be settled in an Alberta court, and have asked the Newfoundland court to throw out the matter.
All three are joint venture partners in the so-called White Rose Growth Lands, with Nalcor owning a five per cent interest.
The well was completed in 2014 at a cost of nearly $200 million, and according to court documents, it is paired with the main producer well to provide "pressure support" and to "maximize oil recovery from the Growth Lands."
This was the first gas well in the White Rose field; all others are water flood wells.
A difference of interpretation
The documents say Nalcor's five per cent share of the well is nearly $11.2 million.
Husky and Suncor say the well was strategically placed in order to optimize oil recovery for all three partners, including Nalcor.
"However ... and contrary to its contractual obligations, Nalcor refuses to pay for its share," the court document states.
The competing statements of claim seems to indicate a difference of interpretation, with Nalcor referring to "natural gas production and storage," and no reference to flood wells.
Nalcor 'repeatedly breached' agreement
Husky is the operator with a nearly 70 per cent ownership stake, while Suncor owns just over 26 per cent.
Husky says it received all the necessary approvals from its two partners before proceeding with the well, adding that Nalcor has "repeatedly breached" the joint agreement.
What's more, says the company, Nalcor has been "unjustly enriched" by receiving its five per cent share of oil revenues, while refusing to pay well costs.
The court documents says Husky and Suncor have paid Nalcor's share of the costs, and are now claiming restitution.
The South White Rose project is located in the Jeanne d'Arc Basin off Newfoundland's Grand Banks, about 350 kilometres southeast of St. John's.
In a written statement, Nalcor said it would allow the legal process to play out, but will "enforce its contracts and protect its investment in offshore Newfoundland and Labrador's oil and gas developments, as any company would be expected to do."
The statement said the White Rose Extension is a long-term project that will benefit the people of Newfoundland and Labrador for many years to come, and Husky and Suncor are important long-term partners for Nalcor.