Legal troubles won't derail planned refinery: proponent

A plan to build a petroleum refinery in southern Newfoundland is still viable, despite a challenge to have the developing company declared bankrupt, the proponent says.

Newfoundland and Labrador Refining Corp. will argue for court-ordered protection this week, as creditor SNC Lavalin is moving to have the company declared bankrupt.

Newfoundland and Labrador Refining disclosed the challenge on Friday, sending the value of principal shareholder Altius Minerals Corp. into a spiral in Toronto Stock Exchange trading.

Managing director Brian Dalton said remains confident that NLRC will be able to launch a refinery in Placentia Bay, the second oil refinery in Newfoundland and Labrador.

"Absolutely," Dalton, who is also the president of Altius Minerals,told CBC News.

"What's happened has certainly not been helpful to the process, but we're doing everything we can to explain the situation to those that we were already talking with, making sure that once we are in the right position again that we can resume and pick up where we were."

Dalton told delegates to an oil and gas conference in St. John's last week that the company is seeking foreign investment to shore up the company's plans.

In court documents, engineering giant SNC Lavalin says it is owed $20 million.

Dalton said his goal is to have this particular legal situation straightened away so that the company can focus on the refinery.

The company's plan had been to launch construction on the Placentia Bay site this summer.

Obtained environmental approval

Until financial problems surfaced earlier this year, the company had been lining up elements the refinery's development. It negotiated a long-range labour agreement with trades unions, and had obtained environmental approval from the Newfoundland and Labrador government.

You have to try really hard not to let [the setbacks] weigh on your mind and focus on the real business that needs to get done to make this happen the way we had always envisioned, Dalton said.

With about 3,000 workers expected to have been working on the construction phase, the refinery had been welcome news for communities near Placentia Bay, including the service town of Clarenville.

Mayor Fred Best said the setback could affect tradespeople who are currently living away from home.

"There've been some houses sold in this area recently by people in Alberta who have been thinking that, 'If we have a second refinery, we're going back to Newfoundland to live,' " Best said.

Best expects plans for the refinery to get back on track soon.

Nick Bailey, who opened a sports store in Clarenville only three weeks ago to cater to local hikers and golfers, said legal battles and money troubles are all par for the course in business.

"We're willing to sit back and wait and see how things turn out," he said.

"It's a huge area that we serve in Clarenville, so to have one project, you know, hit a bump in the road doesn't mean that the future doesn't look as bright as it always has."

Donna Balsom, who owns a gardening centre, said she is hopeful that the legal troubles prove only to be a short-term snag.

"I'm going to say it's a bump in the road," she said.

I guess I'm an optimist at heart. I do try to sell flowers here in Newfoundland," Balsom said with a laugh.