OTTAWA - 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 company estimates there are between 1.9 trillion and 3.3 trillion cubic feet of undiscovered natural gas trapped in the shale in the area covered by the suit, the equivalent of about half of Canada's total annual production.

But the groups say the suit has become symbolic for everything that is wrong with investor protection clauses in major trade agreements.

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.

Canadians should expect more lawsuits if it completes trade deals with the European Union and in the Trans-Pacific Partnership, he said, since both are likely to include investor protection provisions similar to the one found in NAFTA.

"These investment protections are going to be built into these mega-trade deals and this Lone Pine case has become kind of the poster child for what's wrong with giving corporations the right to sue governments when they don't like certain policies," he said.

"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.

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  • In this file photo from Oct. 14, 2011, a drilling rig is seen in Springville, Pa. State regulators blamed faulty gas wells drilled for leaking methane into the groundwater in nearby Dimock, Pa. It was the first serious case of methane migration said to be related to the Pennsylvania Marcellus Shale gas field drilling boom. (AP Photo/Alex Brandon, FILE)

  • British police secure the area where demonstrators erected a mock fracking rig with a banner reading 'No fracking in the UK' in a protest against hydraulic fracturing for shale gas outside the Houses of Parliament in London on December 1, 2012. AFP PHOTO / JUSTIN TALLIS

  • SPRINGVILLE, PA - JANUARY 18: A truck with the natural gas industry, one of thousands that pass through the area daily, drives through the countryside to a hydraulic fracturing site on January 18, 2012 in Springville, Pennsylvania. (Photo by Spencer Platt/Getty Images)

  • SAN FRANCISCO, CA - MAY 30: Protestors stage a demonstration against fracking in California outside of the Hiram W. Johnson State Office Building on May 30, 2013 in San Francisco, California. Dozens of protesters with the group Californians Against Fracking staged a protest outside of California Gov. Jerry Brown's San Francisco offices demanding that Gov. Brown ban fracking in the state. (Photo by Justin Sullivan/Getty Images)

  • People demonstrate on August 3, 2013 in La Petite Brosse, near Jouarre, outside Paris, to protest against an exploratory oil shale drilling, considering that it opens the door to the exploration of shale gas in the Parisian Basin. Banner reads 'Stop gas and oil shale'. AFP PHOTO / PIERRE ANDRIEU

  • In this Nov. 26, 2012 photo, Steve Lipsky demonstrates how his well water ignites when he puts a flame to the flowing well spigot outside his family's home in rural Parker County near Weatherford, Texas. The U.S. Environmental Protection Agency had evidence a gas company's drilling operation contaminated Lipsky's drinking water with explosive methane, and possibly cancer-causing chemicals, but withdrew its enforcement action, leaving the family with no useable water supply, according to a report obtained by The Associated Press. The EPA's decision to roll back its initial claim that hydraulic fracturing, or “fracking,” operations had contaminated the water is the latest case in which the federal agency initially linked drilling to water contamination and then softened its position, drawing criticism from Republicans and industry officials who insisted they proved the agency was inefficient and too quick to draw conclusions. (AP Photo/LM Otero)

  • In this file photo of Jan. 17, 2013, Yoko Ono, left, and her son Sean Lennon visit a fracking site in Franklin Forks, Pa., during a bus tour of natural-gas drilling sites in northeastern Pennsylvania. Ono and Lennon have formed a group called “Artists Against Fracking,” which has become the main celebrity driven anti-fracking organization. (AP Photo/Richard Drew, File)

  • In this March 29, 2013 file photo, a worker checks a dipstick to check water levels and temperatures in a series of tanks at a hydraulic fracturing operation at a gas drilling site outside Rifle, Colorado. (AP Photo/Brennan Linsley)

  • In this March 29, 2013 file photo, a worker switches well heads during a short pause in the water pumping phase, at the site of a natural gas hydraulic fracturing and extraction operation outside Rifle, in western Colorado. (AP Photo/Brennan Linsley)

  • In this March 29, 2013 file photo, workers tend to a well head during a hydraulic fracturing operation at a gas well outside Rifle, in western Colorado. (AP Photo/Brennan Linsley)

  • Josh Fox, director of the anti-fracking, Oscar-nominated documentary “Gasland” testifies during a House Committee hearing on oil drilling, "fracking" legislation at the Illinois State Capitol Tuesday, May 21, 2013, in Springfield, Ill. (AP Photo/Seth Perlman)

  • This is a Thursday Aug. 15, 2013 image of the Cuadrilla exploration drilling site in Balcombe, southeast England. (AP Photo/Gareth Fuller/PA)

  • A child plays near a farmers' protest in an area where oil company Chevron plans to put a drilling rig exploring for shale gas in the south-eastern Polish village of Zurawlow on June 11, 2013. AFP PHOTO / JANEK SKARZYNSKI

  • Protesters hold a banner during a protest outside of the Momentive resin plant, Monday, July 8, 2013, in Morganton, N.C. Dozens of environmental activists blocked a chemical plant Monday to protest against the company's sale of products used in the natural gas drilling process called hydraulic fracturing, or fracking. (AP Photo/The News Herald, Mary Elizabeth Robertson)

  • A fracking rig exploring for shale gas of oil company Chevron on June 11, 2013 in a village of Ksiezomierz in south-eastern Poland. AFP PHOTO / JANEK SKARZYNSKI

  • People demonstrate on August 3, 2013 in La Petite Brosse, near Jouarre, outside Paris, to protest against an exploratory oil shale drilling, considering that it opens the door to the exploration of shale gas in the Parisian Basin. AFP PHOTO / PIERRE ANDRIEU

  • Opponents of hydraulic fracturing in New York state attend a news conference and rally against hydraulic fracturing, also known as fracking, on January 11, 2012 in New York City. (Photo by Spencer Platt/Getty Images)

  • Eric Weltman of Food & Water Watch attends a news conference and rally against hydraulic fracturing, also known as fracking, in New York State on January 11, 2012 in New York City. (Photo by Spencer Platt/Getty Images)

  • Opponents and supporters of gas-drilling, or fracking, walk into the last of four public hearings on proposed fracking regulations in upstate New York on November 30, 2011 in New York City. (Photo by Spencer Platt/Getty Images)

  • Engineers on the drilling platform of the Cuadrilla shale fracking facility on October 7, 2012 in Preston, Lancashire. (Photo by Matthew Lloyd/Getty Images)

  • Engineers at work on the drilling platform of the Cuadrilla shale fracking facility on October 7, 2012 in Preston, Lancashire. (Photo by Matthew Lloyd/Getty Images)

  • General views of the Cuadrilla shale fracking facility on October 7, 2012 in Preston, Lancashire. (Photo by Matthew Lloyd/Getty Images)

  • Engineers look at the Cuadrilla shale fracking facility on October 7, 2012 in Preston, Lancashire. (Photo by Matthew Lloyd/Getty Images)

  • A lump of shale rock on display at the Cuadrilla shale fracking facility on October 7, 2012 in Preston, Lancashire. (Photo by Matthew Lloyd/Getty Images)

  • Engineers on the drilling platform of the Cuadrilla shale fracking facility on October 7, 2012 in Preston, Lancashire. (Photo by Matthew Lloyd/Getty Images)

  • Engineers at work on the drilling platform of the Cuadrilla shale fracking facility on October 7, 2012 in Preston, Lancashire. (Photo by Matthew Lloyd/Getty Images)

  • Drill heads on display at the entrance to the Cuadrilla shale fracking facility on October 7, 2012 in Preston, Lancashire. (Photo by Matthew Lloyd/Getty Images)

  • An engineer displays a lump of shale rock at the Cuadrilla shale fracking facility on October 7, 2012 in Preston, Lancashire. (Photo by Matthew Lloyd/Getty Images)

  • Actor/director Mark Ruffalo (C) speaks at the Hydraulic Fracturing prevention press conference urging the protection of the drinking water source of 15 million Americans at Foley Square on April 25, 2011 in New York City. (Photo by D Dipasupil/Getty Images)

  • (L-R) Actor/director Mark Ruffalo, Denise Katzman, Wenonah Hauter, and Water Defense co-founder/campaign director Claire Sandberg attend the Hydraulic Fracturing prevention press conference urging the protection of the drinking water source of 15 million Americans at Foley Square on April 25, 2011 in New York City. (Photo by D Dipasupil/Getty Images)