A tiny village on Quebec's Gaspé Peninsula is facing off against an oil company in a legal battle that could end up costing the community $1.5 million.

The municipality of Ristigouche Sud-Est is being sued by Gastem, a Montreal-based oil-and-gas exploration and development company, for passing a bylaw in March 2013 establishing a two-kilometre no-drill zone near the source of the village's water.

At the time, Gastem had provincial permits for exploration in the area, and Gastem president Raymond Savoie​ said the bylaw was passed without consulting the company.

​The trial, which is expected to last 10 days, got underway Tuesday in Quebec Superior Court in New Carlisle, Que. A total of 30 people, including local councillors and experts in municipal law, are expected to testify.

"The stake is this: Does a municipality have the right to adopt a bylaw towards the protection of the common good without fearing a lawsuit?" Mayor François Boulay said in an interview Wednesday.

Mayor François Boulay says it will be impossible for the village to pay Gastem if the exploration company wins.

If the village — home to only 157 people — ends up losing, it will have a difficult time footing the bill. The $1.5 million in damages sought by Gastem is more than five times Ristigouche's annual budget.

"From a citizen's standpoint, I can tell you that many people are anxious. They fear losing this trial," Boulay said.

Oil company wants 'rights recognized'

Savoie, a Liberal cabinet minister under former premier Robert Bourassa, didn't want to speculate earlier this week when asked if he hopes to get the full amount from the village.

Gastem sold its exploration rights soon after filing the lawsuit in 2014.

"We will see what will result from the trial, but at least we want to have our rights recognized," he told The Canadian Press.

A legal victory for Ristigouche, on the other hand, would set a precedent that municipalities have the right to guarantee their citizens a healthy living environment, Boulay said.

Ristigouche-Sud-Est is on the south side of the Gaspé Peninsula. (Radio-Canada)

In 2014, the village launched a fundraising campaign to help pay its legal fees. Solidarity Ristigouche has so far raised more than $281,000 from residents, environmental groups and municipalities across the province.

The village also has the backing of Quebec's Federation of Municipalities.

Municipalities want stricter limits on oil exploration

Villages and towns across Quebec are hoping the trial spurs the provincial government to introduce stricter rules around oil and gas exploration.

Last June, 230 municipalities filed a request with Quebec's Environment Ministry seeking similar protections to those in place in Ristigouche: a distance of two kilometres between a gas-and-oil company's installations and the sources of drinking water on their territory.

Environmentalists are also watching the case closely. Several dozen protesters gathered outside the courthouse on Tuesday in support of the village.

Environmental activists gather Tuesday outside the courthouse in New Carlisle, Que. (Radio-Canada)

Environment Minister David Heurtel has said a two-kilometre boundary, like the one in Ristigouche, is too restrictive, and restrictions should be evaluated on a case-by-case basis.

A spokesperson for Heurtel declined to comment Wednesday, citing the ongoing court case.

Under current provincial law, passed a year after Ristigouche passed its bylaw, exploration must be at least 500 metres from a water source.