http://www.financialpost.com/Investors+Norway+have+shale+pains/3833614/story.html

MONTREAL - Opponents of drilling Quebec's Utica shale natural gas play are stepping up calls for a moratorium at environmental hearings, evoking nightmare scenarios of poisoned drinking water and the loss of pristine farmland if the resource is commercialized.

But it's investors 5,500 kilo-metres away who have taken the biggest financial drubbing as the debate over shale gas rages.

Five of Norway's leading investment banks have written to Quebec's Bureau d'audiences publiques sur l'environment, the government advisory body reviewing the Utica development, expressing concern that their clients' stakes in Questerre Energy Corp. are taking a bath because of regulatory uncertainty surrounding the play. Calgary-based Questerre, together with Talisman Energy Inc., is the main developer of the Quebec Utica resource. Unlike Talisman, which has other major exploration and drilling sites, Questerre is focused almost exclusively on the Utica natural gas field.

A bet on Questerre is a bet that the Utica shale will live up to its estimated potential and yield up to 69 trillion cubic feet of natural gas, more than enough to power every house in the province for a century. And it's primarily investors in Norway who made that bet early on. Questerre has raised US$250-million in equity over the past five years, most of it from Norwegian capital markets.

The Norwegians are upset that Questerre shares trading on the Oslo stock exchange have tanked about 36% since Sept. 30, about the time the Quebec government's environmental review began. And they're warning that any prolonged regulatory uncertainty could threaten financing of other shale gas companies in the province. The hearings resumed on Monday.

Over that time, Oslo's overall market has risen 8% and other similar-sized energy companies have gained 15%. The stock is among the most actively traded on the Oslo exchange, surpassing its TSXlisted shares by a typical factor of nine to one.

"Norwegian investors are disappointed and discouraged, as their significant investments have been made assuming that Quebec enjoyed a stable fiscal and regulatory regime," Henrik Tangen, director of Norwegian investment bank SEB Enskilda, said in one of several letters by investors dated early November. Enskilda is a financial advisor to Questerre.

Quebec Premier Jean Charest's Liberal government has so far rejected calls for a moratorium on exploring the Utica play, a formation of natural gas lodged in rock located in the St. Lawrence Lowlands. But shale gas development plans have proven to be hugely unpopular in the province, with a Leger Marketing poll released last month showing three-quarters of Quebecers backing the suspension of all exploration until impact studies are completed. Quebec Natural Resources Minister Nathalie Normandeau has said social acceptance of shale gas development is "fundamental" before commercialization takes place.

"Some investors are concerned there may have been a subtle shift in the attitude of the Quebec government," executives with the investment banking arm of Oslo-based DnB NOR Bank write. "This is of concern to us as we do not want to see investors lose confidence in the Quebec opportunity due to uncertainties in relation to the regulatory framwork. This may result in capital being diverted into other energy plays that provide investors with greater visibility."

DnB NOR is a leading underwriter for Questerre.

Arild Andresen, assistant director of corporate finance at Oslo-based First Securities AS, said the damage to future investment in Quebec of a moratorium would linger long after it was enacted. "It would lead to investors questioning the future stability of the regulatory framework."