* BPC attorneys say legal action 'doomed to fail'
* Injunction would add 'over $16m' to its costs
* Activists 'harried and oppressed' on court bid
By NEIL HARTNELL
Tribune Business Editor
The Bahamas Petroleum Company (BPC) fears it could suffer "up to $500m in economic harm" if environmental activists succeed with yesterday's legal bid to halt its oil drilling plans.
The company's Bahamian attorneys, in a letter that unsuccessfully sought to dissuade the launch of Judicial Review proceedings, argued that the "unconscionable" move was "doomed to fail" and "contrary to the public interest" by attempting to block The Bahamas from discovering whether it possesses a natural resource that could financially benefit its people.
Leif Farquharson, a Graham, Thompson & Company attorney and partner, in a nine-page response to activist demands that BPC give an undertaking not to begin exploratory oil drilling until the Judicial Review action's merits are decided, argued that BPC's rights and interests would suffer "very serious prejudice" were an injunction obtained from the Supreme Court.
His November 30, 2020, letter to Fred Smith QC, the Callenders & Co attorney and partner who represents the activists, said BPC would incur costs "in excess of $16m" if it were forced to halt plans to drill its Perseverance One well at the 11th hour.
With the drilling ship, the Stena IceMAX, already well on its way to The Bahamas ahead of a December 20, 2020, start date that is just 11 days away, Mr Farquharson said his client had spent some $9.1m in preparation for this day after obtaining its Environmental Authorisation (EA) and other necessary environmental approvals in February 2020.
Given that the activists, represented by Waterkeepers Bahamas and the Coalition to Protect Clifton Bay (Save the Bays), had waited until the last minute to mount their legal challenge despite knowing of BPC's plans for months, the company's attorneys asserted that the "balance of convenience lies overwhelmingly" against the Supreme Court ordering a drilling halt.
"An injunction that BPC must suspend exploratory drilling would cause very serious prejudice to BPC," Mr Farquharson wrote. "The injunction would also be entirely contrary to the public interest, which lies in determining as speedily as possible whether The Bahamas has viable offshore assets.
"A total of approximately $120m has been expended since 2007 on the process of securing rights in The Bahamas to reach the point where it is able to commence exploratory drilling. BPC has incurred $9.1m on the project in specific reliance on the minister's (Romauld Ferreira, minister of the environment) of February 25, 2020."
Asserting that an injunction would cause "direct financial loss" to BPC and its shareholders, including Bahamian investors who injected around $900,000 into an investment fund that holds the company's shares, Mr Farquharson added: "Since February 2020, BPC has entered into contracts for the supply of the drilling ship, helicopters, supply boats and equipment purchases.
"Work and activity has already started. For example, equipment is currently being manufactured, and the drilling rig has been prepared, crewed and has set sail. The direct cost of suspending operations at this stage would be in excess of $16m, and the indirect cost and economic consequences vastly more than this."
Mr Farquharson said the present timeframe for drilling BPC's Perseverance One well, which will be located around 90 miles west of Andros close to the maritime border with Cuba, represented the last chance under the present EA authorisation. Failure to drill between December 20 and June 2021 would require the company to seek a fresh set of approvals.
"These drilling operations represent the last practicable opportunity for BPC to carry out drilling as authorised in the EA," he added. "The need to seek further authority could cost BPC a further $15m in direct costs, and could cause vastly greater indirect and consequential economic harm to BPC, which is estimated to be in the order of up to $500m."
The $500m figure is not broken down, but is likely to include the potential impact to BPC's share price on London's Alternative Investment Market (AIM). Investor and shareholder sentiment towards the company will likely take a negative hit once the Judicial Review challenge's filing becomes known, but oil drilling opponents are likely to be sceptical of the number quoted by Mr Smith.
While that figure is more than four times' what BPC has invested in its 14-year Bahamian activities to-date, Mr Farquharson argued that any injunction obtained by Waterkeepers Bahamas and the Coalition to Protect Clifton Bay would cause "irremediable prejudice" to the company unless the activists gave a "minimum of $30m" cross-undertaking in damages.
Arguing that it was "unconscionable" to launch Judicial Review proceedings when BPC's plans had been known for at least nine months (see other article on Page 1B), BPC's attorney also argued that the Bahamian public's interest will also be damaged by any legal-induced delays to exploratory drilling.
Pointing out that Mr Ferreira, as minister of the environment and housing, had the constitutional duty to decide whether BPC's activities were in the public interest, Mr Farquharson added: "The project will help identify the size and accessibility of The Bahamas' oil reserves and will thereby facilitate an informed decision in due course as to whether those reserves should be extracted.
"To order the suspension of the project at such a late stage, after the project costs have been incurred, would threaten its viability and thereby subvert the public interest."
BPC, anticipating a hard-fought and potentially lengthy legal battle, has already moved to protect its interests by obtaining approval for a high-powered UK-based QC, Clare Montgomery of Matrix Chambers, to lead its arguments in the Supreme Court.
However, Waterkeepers Bahamas and the Coalition to Protect Clifton yesterday said they are not seeking an injunction to halt BPC's exploratory drilling. Rather, in their filings seeking the Supreme Court's permission to launch Judicial Review proceedings, they are instead seeking a "stay of the proceedings" via the court's rules until the matter is determined.
While this would have the same effect as an injunction, the activists argued that BPC is "not entitled to be heard" on their ex-parte (meaning only they are present in court) bid for Judicial Review "or at all in this action until trial" of the substantive issues takes place.
"In addition, even though BPC are not parties to this action, by letter dated December 3, 2020, and parts of their previous letters, they have already begun to harry, oppress, harass and attempt to frustrate the applicants with demands that they are not entitled to make," the environmental groups alleged.
They accused BPC and its attorneys of "previewing their intention to apply to seek to stifle the applicants' right to a fair hearing within a reasonable time under article 20 of the constitution by a pre-emptive security for costs application.
"This tactic has become de rigueur in public interest litigation in The Bahamas by developers and the Government," Mr Smith argued on behalf of his clients. "BPC and BOP (Bahamas Offshore Petroleum, an affiliate) are not parties to the action, no relief is sought against them and, accordingly, any application by BPC and BOP to be joined or for security for costs will be resisted."
Carl Bethel QC, the attorney general, did not return Tribune Business calls and messages seeking comment as to whether the Government will seek security for costs, which is effectively a bond paid by one side to cover the other's legal costs in the event the former loses, in this particular case.
Meanwhile, Mr Farquharson, in what at times read as a legal lecture to Mr Smith, argued that the activists' case was "without merit" and should be withdrawn - an urging that has clearly fallen on deaf ears.
Oil exploration in Bahamian waters is an issue that has sharply divided public opinion and drawn international attention even before the existence of commercial quantities beneath the Bahamian seabed has been confirmed.
Those opposed to it believe the risk of a spill/pollution, and the threat of damage to the tourism and fisheries industries - and the pristine waters and environment upon which they rely - outweighs any possible benefit despite BPC arguing that there is minimal risk of any accident.
Others believe The Bahamas should at least find out whether oil resources exist before deciding whether to permit commercial production, while another body of opinion says the country cannot afford to ignore this opportunity given the economic devastation inflicted by COVID-19 and Hurricane Dorian,.
BPC has suggested that the Government could earn up to $5bn in royalty revenues over the 10-20 year life of the project, even with today's relatively low global oil prices that were last night hovering at between $45.57 and $48.84 per barrel depending on the indices.
Such promises have aroused scepticism among opponents, but BPC has previously said the Government would earn 25 percent of the per barrel price. It would receive the same share, with the 50 percent balance going to production costs.