First Nation Blockade is a Breach of Court Order: Obsidian Energy

The blockades established by the Woodland Cree First Nation (WCFN) disrupting Obsidian Energy Ltd.’s operations at the Walrus field in the Peace River area constitute a breach of a court order and breach of a resolution agreement.

That’s according to Obsidian Energy, who said in a statement that the timing of the blockade was related to lost service contracts by WFCN.

“The WCFN is attempting to coerce us into providing payments to them that are similar to production royalties, even though we already pay royalties to the Alberta government for production on these Crown lands,” Obsidian Energy President and CEO Stephen Loukas said. “The WCFN also wants to act as an exclusive agent for services used by the company and charge excessive amounts for service contracts. These are not reasonable terms for a resolution to the blockade”.

WFCN Forms Blockade

In April, Obsidian Energy said it provided companies affiliated with the WCFN with the opportunity to compete for two commercial contracts, one for pad site construction within the Walrus operating area and one for the supply of gravel for field maintenance and construction. The company explained that the submissions by the WCFN companies were “materially higher” than those of the successful bidders, both of whom are partnered with other Indigenous groups in Alberta.

On May 5, approximately 48 hours after learning of its second contract loss, the WCFN established a blockade near the company’s Walrus field, interfering with the ability of Obsidian Energy employees and third-party contractors to access the site.

At the time the blockade was established, the Walrus field was producing approximately 1,275 net barrels per day (bpd) of oil consisting of approximately 600 bpd of base production and 675 bpd of new production from the 15-19-082-16W5 pad, which was recently brought online and was early in the process of recovering fluid, Obsidian Energy said.

On May 11, the WCFN relocated its blockade approximately 11 kilometers west to the entrance of the Company’s Harmon Valley South (HVS) field, interfering with the ability of Obsidian Energy employees and third-party contractors to access the sites. Obsidian Energy took immediate action to ensure the safe evacuation of our employees and contractors while notifying all appropriate regulatory authorities including the RCMP, the Alberta Energy Regulator (AER) and the County of Northern Sunrise, according to the release.

At the time the blockade was established, the HVS field was producing approximately 4,500 net barrels of oil equivalent per day (boepd). The Walrus field production was promptly restarted, and attempts were made to negotiate with the WCFN, through the RCMP, to allow for safe access to the HVS field to continue operations.

‘A Breach of a Court Order’

Obsidian Energy said WCFN’s blockades constitute a breach of a court order and a breach of a resolution agreement dated February 23 between the company and the WCFN. As part of the resolution agreement, “the WCFN agreed to not counsel, encourage or facilitate any of its members to physically prevent, impede, restrict or in any way physically interfere with any person or vehicle travelling to or accessing the specified work areas, including but not limited to sites in the Walrus field and the HVS field,” the company noted. Obsidian Energy secured the resolution agreement with a consent injunction order in the event of a breach by the WCFN.

Loukas said, “We have a duty to our shareholders to make prudent use of our assets (including financial) and to our suppliers to be fair when awarding contracts. We will continue to use our strict procurement process to award contracts, based on qualifications, Indigenous content, experience, and health, safety and environmental practices that result in a selection that is the best value proposition for the company and the local community. The WCFN-affiliated companies can certainly win future contracts with us, as they have in the past, if their bids are competitive”.

“However, notwithstanding that our offer to the WCFN remains open, it is currently difficult to see a clear path to a negotiated resolution of our commercial dispute with the WCFN. We reserve the right to pursue all legal means to restore the lawful operation of our HVS field, and may, without further notice, commence civil litigation against the WCFN and related parties for damages, including but not limited to all foregone revenue on shut-in production,” Loukas added.

On May 6, WFCN said in a statement it was formally notifying Obsidian Energy that the proposed expansion of their drilling operations on their Traditional Territory had been rejected by the WCFN and its Chief and Council.

"WCFN is known across the energy sector as one of the most business-friendly nations in the province and in the country. We support responsible resource development, and enthusiastically partner with companies that are willing to comply with their legal obligations," WFNC Chief Isaac Laboucan-Avirom said. "However, the conduct of Obsidian Energy and their staff has been the worst we have ever seen from a company. The business practices and intimidation tactics of their executives has made it impossible for us to allow their expansion to proceed”.

WFCN in February provided notice to the Alberta Energy Regulator (AER) that Obsidian Energy Ltd.’s planned expansion of wells on their territory cannot proceed. WFCN became concerned about Obsidian’s oil development plans in its territory after the AER found that improper disposal of industrial waste had caused a serious earthquake, the First Nation said in an earlier statement.

The AER in March 2023 had issued an environmental protection order against Obsidian Energy after the Alberta Geological Survey found that Obsidian’s disposal operation induced a series of seismic events in the Peace River region.

To contact the author, email rocky.teodoro@rigzone.com