Petrolia Inc. (CVE:PEA) has announced it will suspend its Haldimand 4 drilling project after the town council in Gaspe voted last month to halt its operations.
The company says it will go ahead with its other projects in the region, notably at the Bourque and Anticosti sites.
It suggests the action by Gaspe town council is illegal and not only an affront to the company's property rights, but also to the residents of the economically struggling region.
The company said in a statement today it will await legal clarification on the matter, while hoping the parties can work out a solution with the help of authorities.
The Haldimand site is on the edge of the town and is believed to have almost eight million barrels of oil — or about $800 million at current prices.
Petrolia says it will leave its drill and major equipment in the area, while moving other equipment to drilling projects elsewhere.
The firm says that site is key to understanding the petroleum systems in the region and could lead to more discoveries in the Gaspe peninsula.
"It also paves the way for an axis of economic development which could prove important for the local workforce," Petrolia said in a statement.
The Gaspe-Magdalen Islands region off the Gulf of the St. Lawrence consistently has an unemployment rate almost twice as high as the provincial average, and sometimes higher.
But the region is also a prized tourist destination, known for its unspoiled forests and picturesque fishing villages.
Local critics of the Haldimand project are concerned about its impact on the environment, especially on water quality.
The Quebec government applauded the company announcement. It said the delay will allow for better assessment of the various stakes.
"We are of the opinion that to have gone ahead in this climate would have been unhelpful to all the actors involved," said Natural Resources Minister Martine Ouellet.
In an interview in Davos, Switzerland, Quebec Premier Pauline Marois said the Gaspe town council's decision ''raises questions'' but that Quebec is not giving up on oil.
''We will try to reassure citizens who have concerns and expectations, as well as companies,'' Marois said as she attended the World Economic Forum.
''That's the role of a government: to be able to tap resources that will make Quebecers richer. We mustn't give up on tapping our oil.''