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Letter to the Minister of Energy and Natural Resources

Brossard, November 15, 2018


On December 10, 2016 the previous government passed a new law governing the hydrocarbon sector. This law according to the experts was among the most severe in the world. Despite this severity, our industry has welcomed this legislation, saying that we could live with it and that the environmentalists would be satisfied. Last June, your predecessor, Minister Moreau, filed a series of regulations relating to this law in droves. These regulations came into effect on September 20th. These have undergone last minute changes compared to those adopted following the public hearings held on the subject. Many of these regulations significantly limit the scope of the law in some respects and make the work of exploration companies almost impossible, constituting a sort of disguised moratorium. The new regulations create tasks and obligations that will cause the short-term disappearance of small Quebec companies like ours. 

Our Company, RESOURCES AND ENERGY SQUATEX INC, is a 100% Quebecer publicly traded junior company (www.squatex.com), which was founded in 2001. The company currently holds oil and gas exploration licenses in Quebec. These permits cover a total area of 6,560.9 square kilometers on which it has so far invested more than $ 18 million. Of these permits, 2,173.7 Km2 are located in the St. Lawrence Lowlands of the and 4,313.4 km2 in the Lower St. Lawrence. Since its inception, Squatex has specialized in the search for conventional oil and gas resources, while innovating to significantly reduce the ecological footprint on the ground and without resorting to hydraulic fracturing of the rock. The most important work was carried out in the Lower St. Lawrence region, which led in 2013 to one of the largest hydrocarbon discoveries in Quebec: Potential reservoir Massé containing high quality natural gas and oil (Appendix 1). 

Since 2012, because of the many government uncertainties that have persisted, investors interested in oil and gas have fled Quebec. The loss of equity capital of companies operating in Quebec due to lack of confidence in government policies has caused serious harm to those who can not now find the capital needed to continue their activities. This problem mainly affects junior companies like Squatex. 

If nothing is done to amend the regulations that took effect on September 20, a Quebec junior company like Squatex will disappear. The fruit of the experience and professional expertise acquired during 17 years of work will be lost, while the company has a huge development potential, both in terms of employment and the economy, for the Lower St. Lawrence region and for all of Quebec. 

So, Minister, for the moment Squatex does not intend to resort to the courts as we mentioned in our press release issued November 08, 2018 (Appendix 2) that we sent by email. We believe that the current situation calls for urgent action on your part. We first ask that you temporarily freeze the application of the current rules by December 20, 2018 (the date on which penalties are scheduled) in order to allow the junior companies to survive, while making certain modifications necessary for this survival. Secondly, we are asking for a meeting with you and your colleagues as soon as possible so that we can share with you our plans and recommendations to help and promote the economic development of the hydrocarbon sector in Quebec. 

You will find hereby a summary description of the current problematic concerning the regulations of the Hydrocarbons Act which we suggest you to modify (Appendix 3). 

Hoping for a favorable response from you, Minister, please accept our best regards. 

Jean-Claude Caron 


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