Calgary seismic firm embroiled in legal fight
CALGARY - A Calgary-based seismic company claims its business is being undercut by regulatory agencies that have been publicly disclosing data it says it spent hundreds of millions of dollars to collect in Canada's offshore.
Geophysical Service Inc. makes — or rather made — its money by mapping the earth's layers beneath the ocean floor using sonogram-like technology, amassing a trove of valuable information that it would sell to oil and gas companies hunting for their next big find.
In a bevy of lawsuits, GSI says would-be customers have been getting hold of that data for free after files it submitted as part of the regulatory process — a required step in obtaining a permit to do the mapping — were improperly released.
GSI claims its intellectual property rights have been violated and its assets have been expropriated without compensation, rendering its data all but worthless.
The allegations have not been proven in court.
In its heyday, GSI was a 250-person operation that had a hand in some of Atlantic Canada's biggest offshore oil and gas discoveries. Through its predecessor companies, its history dates back to the 1930s.
Today its workforce can be counted on one hand. GSI doesn't do any seismic work anymore; it was forced to sell its two ships and hasn't booked revenues since 2009.
Instead of collecting and processing data, chief operating officer Paul Einarsson figures GSI spends 95 per cent of its time fighting its long-running and multi-fronted legal war against regulatory agencies, federal departments and its own one-time customers.
"I do this 10 hours a day," said Einarsson. "This is all I do."
Einarsson pegs the replacement cost of GSI data at $800 million to $900 million.
GSI has more than 30 lawsuits on the go, with more expected to be filed in the coming weeks. Some of the most high-profile cases are expected to be heard in court throughout 2014.
A decision in a case against the Canada-Nova Scotia Offshore Petroleum Board is expected soon and a case against the Canada-Newfoundland and Labrador Offshore Petroleum Board is expected to go to court later this year.
Other defendants include the National Energy Board, which oversees oil and gas activity in the North, various federal government departments and a slew of oil and gas explorers, large and small, that GSI says have accessed its data without paying for it.
Late last year, GSI filed a more than $170-million suit against U.S. energy heavyweight ExxonMobil and its Canadian subsidiary, Imperial Oil Ltd. (TSX:IMO), alleging "breaches of contract" and copyright infringement. Imperial spokesman Pius Rolheiser confirmed both his company and Exxon had been served, but declined to further comment as the matter is before the courts.
In an effort to modernize in the early 2000s, regulators began asking for digital versions of the data, rather than hard copies. One of their aims, Einarsson said, was to attract more oil and gas investment to the offshore — something he describes as tantamount to "welfare" for big oil and gas explorers.
"It really meant a huge expansion of the disclosure of the data," said Einarsson.
GSI has been forced to rely on Access-to-Information requests to find out if data is being improperly disclosed by the regulators — a slow and frustrating process for Einarsson and the company's remaining staff.
The boards are to keep non-exclusive, or speculative, data, which GSI collects in the hopes it can license it out, confidential for 10 years after it's submitted. But GSI argues its data should never be given away.
The guidelines do not set out what is supposed to happen once the confidentiality period is up, Einarsson said.
"It doesn't mandate disclosure. It doesn't override copyright. It doesn't override federal laws. It doesn't override our ownership laws. It just says nothing," said Einarsson.
The first major case began in the Supreme Court of Nova Scotia in November and Einsarsson is expecting a decision this month or next.
In that case, GSI was not seeking damages against the Canada Nova Scotia Offshore Petroleum Board and provincial government, but instead asked for a declaratory judgment that the law doesn't authorize the regulator to demand the data in the first place.
It also sought a permanent injunction "enjoining it from disclosing or otherwise making available to any person whatsoever and in any manner or format whatsoever the complete records, or alternatively the electronic records."
Kathleen Funke, a spokeswoman for the Canada-Nova Scotia Offshore Petroleum Board board declined to comment, as the matter is before the courts, "other than to say that we believe we have followed proper guidelines as set forth by the Accord Acts and our own geological and geophysical guidelines."
The National Energy Board, Canada-Newfoundland and Labrador Offshore Petroleum Board and the federal department of Natural Resources declined to comment as the matter is before the courts.
In a statement of defence filed in the Alberta Court of Queen's Bench this summer by the NEB, the federal regulator argues that the data is not protected by copyright, denying the material was an "original work" and that "skill, judgement or labour" were applied. The NEB also argues it did not benefit financially from the data and "acted in the public interest."
Teresa Scassa, Canada research chair in information law at the University of Ottawa, said copyright can be a "fussy thing" when it comes to data. The information itself may not be original, but the way in which it's compiled or arranged may be.
She said governments are not supposed to make public confidential information that's been provided by a private-sector company as part of a regulatory process. But the boards could argue there's an overriding public interest in making GSI's data public or that its data isn't sufficiently original to be protected under copyright.
"I wouldn't say either argument is a slam dunk," she said.
The GSI case, she said "will raise some very interesting issues that will have implications far outside of that context."
With revenues having dried up and legal bills mounting, Einsarsson says he'll keep up the fight as long as he possibly can.
It's not about saving his company; "I'm done," he says.
"It's the principle," he said. "I want to see it through because I want justice to be done. I don't want somebody else to have to do this. I want to teach these guys a lesson that they can't do this to Canadians."