Lawyers in the oil patch

By Michael Dempster March 2013

Six energy lawyers tell us about interesting time in their practice.

Lawyers in the oil patch Evan Nuttall
Firm: Partner, Borden Ladner Gervais, Calgary
Photo credit: Marnie Burkhart / Jazhart Studios

How times change. A decade ago we were reading that an energy crisis loomed because we were rapidly depleting our oil and gas reserves. Today, hardly a week goes by without the discovery of new deposits, — particularly the vast oil and gas resources in Alberta’s emerging shale prospect. New technology allows exploration in new fields and in older traditional plays once considered inaccessible or too costly. On the other hand, and not for the first time in its history, slumping commodity prices have been hurting Alberta’s economy.

“The whole industry continues to reinvent itself because of horizontal drilling and fracking (hydraulic fracturing),” says Calgary lawyer Jay Reid.

“Everyone’s aware there’s a lot of oil and gas in the ground. It’s just a question of whether you can extract it on an economic basis.”

In Alberta, busy lawyers remain nonetheless enthusiastic about an industry that has become a worldwide venture — with Canadian law firms right in the thick of it.

We asked six energy lawyers to provide a snapshot of what they unanimously call an interesting time in their practice.

Evan Nuttall

Firm: Partner, Borden Ladner Gervais, Calgary

Expertise: Intellectual property litigation

Much of my practice involves patent litigation. The oil and gas industry in Alberta is very competitive and companies are under increasing pressure to recover oil and gas more efficiently and in a manner that’s going to have minimal impact on the environment. So it requires innovation. Companies are becoming increasingly aware of the need for intellectual property and particularly patents. If a company comes up with new and useful downhole tool, or a way of extracting bitumen, or a new drilling fluid, the revenue it can make from that innovation on many occasions is very significant. Patent litigation is one of the new battlegrounds for oil and gas companies. Six years ago BLG had no one doing patent litigation and now it’s got six partners involved. There are large, small and mid-sized firms that have sizable patent portfolios. What I like about it is that it’s highly specialized. You not only require knowledge of a complex area of the law and the applicable rules, but you have to have a thorough understanding of the oil and gas industry and the technologies involved.

 

Jay Park, Q.C.

Jay Park, Q.C.

Jay Park, Q.C.
Photo credit: Marnie Burkhart/Jazhart Studios

Firm: Senior Partner, Norton Rose, Calgary

Expertise: International, M&A

I’ve had various phases in my international practice and now I’m in the Middle East and Africa phase doing work in places like the Republic of Chad, offshore Ghana and Iraq. What I find intriguing about the space I’m working in is the extent to which we’re assessing and defining ways to develop resources that have been looked over in the past or that new technology and new practices are now making viable . . . What I’m finding, for example, are situations where states are asking: Should we develop shale? And if so, how do we do it? My answer to them is, “well, the regime (regulations) you have for shale doesn’t work. The regime was designed for oil and gas found in a different way.” I tell them we need to modify regimes so that they will work to permit the development of these resources. That’s what I find engaging. I tell states that people will develop these resources if they create a set of rules that make it economically attractive . . . and where environmental, health and safety issues are adequately addressed. A great deal of what I’ve been doing is helping investors and states get their head around the changing mix of resources.

 

Leanne Krawchuk
Leanne Krawchuk

Leanne Krawchuk
Photo credit: Curtis Trent

Firm: Partner, Fraser Milner Casgrain, Edmonton 

Expertise: Coal

We continue to see significant interest in coal exploration and development in Alberta, both domestically and from foreign investors located primarily in Asia, Australia and the United States. We expect there will be significant due diligence in the coming years relating to coal mine asset acquisitions in Alberta and B.C. As we look at the foreign demand for both thermal and metallurgical coal, thermal being used for electrical generation, and the met coal being used for steel making, we’re expecting demand to be strong. Domestically, the focus will be on mine development. There is a lot of exploration in Alberta to date, and what you are going to see in the next few years is more foreign capital coming in that will be needed to take those projects to commercial development. With that we expect to see more regulatory applications relating to mine permitting and licensing, permitting for coal processing plants and conveyor belt systems and the necessary significant infrastructure that goes along with development of a coal mine. This interest from abroad also brings significant M&A activity as well.

 

Brad Grant
Brad Grant

Brad Grant
Photo credit: Bookstrucker Photography

Firm: Managing partner, Stikeman Elliott, Calgary

Expertise: China coverage — finance

Asian companies are currently very active in Canada. Many Asian companies have different perceptions of risk, advantageous costs of capital, access to capital, a long-term planning horizon and a need for resources that makes Canada attractive. The scale of the oil sands and shale gas projects require access to foreign capital so there is a logical match between Canadian companies and their Asian counterparts. We are currently acting as Canadian counsel to China National Offshore Oil Company in its acquisition of Nexen Inc. Stikeman Elliott was one of the first Canadian firms to have a presence in Asia. We continue to have initiatives focused on the Asian market to assist with investments into Canada. Recently, much of this investment has taken the form of joint ventures, a trend likely to continue. The United States and United Kingdom law firms have had a significant presence in Asia and are increasing that presence. With some recent Canadian law firm mergers with U.K. firms, a couple of Canadian firms now have a presence in Asia. Other Canadian firms have opened representative offices so Asia is certainly an area of focus for many Canadian law firms, including Stikeman Elliott.

 

Jay Reid
Jay Reid

Jay Reid
Photo credit: Bookstrucker Photography

Firm: Partner, Burnet, Duckworth and Palmer, Calgary

Expertise: Small cap stocks

All my junior clients right now, with a couple of exceptions, are chasing oil because of low natural gas prices. It’s a capital-intensive business and what I’ve seen is that the financing windows open and close quickly for juniors. So from a legal point of view we must be ready to act on very short notice to finance these entities and help them raise their money. We’ve also seen recently where some junior oils have gone from pure growth stories to trying to provide yield to investors. That means a busier time for a lawyer as those type of transactions are often accompanied by an asset or corporate acquisition or work to be done surrounding that. I also think it’s going to be a busy year for M&A as well. There are many companies for sale; private companies the public companies are interested in and public companies that have been for sale for a while and may have to make a move. You have to be responsive and maintain that good line of communication with your clients to ensure everyone’s ready because the pace at which M&A happens is much more rapid than 20 years ago when I started.

 

Thomas McInerney
Thomas McInerney

Thomas McInerney
Photo credit: Bookstrucker Photography

Firm: Partner, Bennett Jones, Calgary

Expertise: Climate change

Having addressed coal-fired electricity generation, the federal government, in keeping with its sector-by-sector approach to greenhouse gas emissions, now appears ready to turn its attention to the oil and gas industry. 2013 may see the federal government roll out draft oil and gas industry specific emissions regulations and it will be interesting to see what will be required of industry participants federally versus what Alberta’s existing climate change regime already requires of large emitters of greenhouse gases. It is uncertain the extent to which the introduction of such federal regulations will result in changes to Alberta's regime, if at all. Will the Alberta and Canadian governments make accommodations in furtherance of an equivalency agreement that harmonizes provincial and federal requirements? Or will the oil and gas industry have to grapple with two different sets of regulations for greenhouse gas emissions? This interplay between federal and provincial regimes will be closely watched by industry and energy/regulatory lawyers alike. With new regulations comes a renewed focus on understanding what they mean for our clients both in the context of ensuring compliance and to identify and help our clients maximize opportunities presented by them.

Michael Dempster is a freelance writer based in Calgary.
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