Drafting Rules and Governing Provisions for Oil & Gas Agreements

Chip Johnston, Carolyn Simpson and Brad Ashkin

The drafting process has certain elements which can sometimes be seen as routine – governing provisions and the mechanics of the contract don’t get as much attention as other issues in a negotiation.  Although these elements of legal service can be seen as immaterial and uninteresting, they can create serious problems when they don’t work. 

We have prepared Drafting Rules and Governing Provisions for Oil & Gas Agreements as a quick reference guide to these issues which is designed to assist counsel in enhancing drafting quality and streamlining the drafting process.

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Changes to the regulation of greenhouse gas emissions in Alberta: the Government of Alberta announces first step in new climate change strategy

Allison M. Sears

An end to Alberta’s stigmatizing inertia on climate change policy was announced yesterday.  The new Minister of Environment and Parks, Shannon Phillips, announced that the Specified Gas Emitters Regulation (SGER) will be renewed for a period of two years with significant amendments she described as “interim measures” until such time as an advisory panel chaired by Dr. Andrew Leach, a professor at the University of Alberta, can undertake a comprehensive review of the province’s climate change policy and provide advice on a permanent set of measures. The review is intended to include broad consultation with the public, industry, First Nations, academia, and government, but must be concluded within three months as Premier Notley has indicated that she wants the report in hand in time for the Government to act upon it and make a further policy announcement prior to the meeting of the Conference of the Parties to the UN Framework Convention on Climate Change in Paris in December 2015.

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Completing a Substantial Private Placement with a TSXV-listed Oil & Gas Company

Chip JohnstonBen HudyAndrew Beamer and Maciej Zielnik - 

In the wake of major declines in oil and gas prices and reduced access to capital in the public markets, a number of TSXV-listed companies are considering substantial private placements to raise capital. 

Typically a substantial private placement involves the direct or indirect acquisition of 20% or more of the equity by either the purchase of common shares or convertible securities

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Continental Divide: Comparing Canadian and American LNG

Jonathan Drance and Brandon Mewhort - 

Over the last five years, as the shale gas revolution has massively increased the estimated gas reserves in North America, various proposals have been made to construct LNG export facilities, both in Canada and the US.  There have been over 20 proposals advanced in Canada and over 30 in the United States.

We are now at the point where final investment decisions (or FID) are being made and construction is starting, at least in the United States, with certain Canadian projects possibly not far behind.

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Checklist for oil & gas consulting agreements

Chip Johnston, Carolyn Simpson and Kris Noonan - 

This is the first in a series of blog posts - the "Oil and Gas Checklist Project" - regarding checklists for agreements commonly used by the oil and gas industry in acquisition, finance and commercial transactions. These materials are designed to assist internal counsel and business people to negotiate these forms by providing an overview of the key terms that may be relevant for the parties.

One of the most important parts of any contract review is assessing the ideas that are contained in an agreement to determine whether it addresses all of the potential issues that may arise. Unless a lawyer or business person is experienced with the negotiation of a particular kind of agreement, it can be a time-consuming and potentially risky process to accurately identify the deal points that matter.

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Canada Proclaims the Extractive Sector Transparency Measures Act into Force

Keith Chatwin, Ivan Grbesic and Christopher Yung  -

On June 1st  the Government of Canada proclaimed into force the Extractive Sector Transparency Measures Act (the Act). The proclamation comes in advance of the G7 Summit on June 7, 2015, and is a follow-through on the 2013 G8 Summit commitment made by Prime Minister Stephen Harper to establish new reporting standards for Canadian oil, gas and mining companies. The stated purpose is to foster better transparency to ensure that the resource extractive industries support proper development in the countries where they operate, while at the same time making it harder to conceal illicit payments.

As discussed in our post last October, the Act will require affected entities to report any payments made in relation to the commercial development of oil, gas or minerals during a financial year that exceed either the amount prescribed by regulation or, if no amount is prescribed, $100,000 of the following nature and whether monetary or “in kind”:

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BC LNG: Regulatory Approvals and Project Risk

 Jonathan Drance and Brandon Mewhort

Several BC LNG syndicates are nearing, or appear to be nearing, final investment decisions, but they will need all significant regulatory approvals before those decisions are made. The most significant regulatory approvals for a BC LNG project are: (1) a National Energy Board (NEB) export licence; and (2) an environmental assessment certificate issued under the Canadian Environmental Assessment Act (CEAA) and/or British Columbia’s Environmental Assessment Act (BCEA).

For the three BC LNG projects which are generally assumed to be closest to reaching final investment decisions, the status of their regulatory approvals are as follows:

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Private equity funding options for energy management teams

Chip Johnston, Brad Ashkin and Erin Dand

In the face of recent changes in commodity pricing, unpredictable equity capital markets, and the growing importance of scale in Canadian energy development, many leading energy management teams are seriously considering private equity funding alternatives, including the equity line of credit (ELOC).

Stikeman Elliott has market-leading expertise in this area and we have prepared an overview paper entitled The Oil & Gas Equity Line of Credit which reviews:

  • the key commercial terms of an ELOC
  • a market survey of ELOC economic returns in Canada
  • frequently asked questions about ELOC funding
  • the 41 private equity energy sponsors that have been active in Canada in recent years 

Our objective in preparing this publication is to support Canadian managers in evaluating, accessing and implementing this source of funding.  

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Examining California and Quebec's cap-and-trade systems

P. Jason Kroft and Jonathan Drance -

In our latest blog piece covering Ontario’s planned adoption of a cap-and-trade system that will be linked with the existing systems in Quebec and California, we described some of the major recent developments in Ontario and the United States to help put the province’s cap-and-trade efforts in context. These developments include: the successful implementation of legislation and market mechanisms to curb sulfur dioxide and nitrogen oxide emissions in the 1990s and early 2000s, the development of the Western Climate Initiative, the signing of a Memorandum of Understanding with respect to a provincial and territorial cap-and-trade initiative between Ontario and Quebec, and the introduction of enabling cap-and-trade legislation in Ontario. In this piece, we illustrate the key elements of Quebec and California’s linked cap-and-trade regime with a view towards anticipating how Ontario may choose to design its system over the coming months.

While the content, scope and design of Ontario’s cap-and-trade system has yet to be determined, there is already a significant congruence between the California and Quebec regimes. For example, both systems cover the same greenhouse gases and sectors, set the same emissions thresholds and have virtually identical allocation methods. Several other similarities are also evident when comparing Quebec’s relative population size and gross regional product to those of California (21% and 16%, respectively). For example, Quebec’s Allowance Budget, Maximum Emissions Covered, Emissions Target and Offset Use Limit (as illustrated in the table below) are all between 15% and 16% of California’s, closely mirroring their differences in population size and economic activity. On this basis, with a population of 13.6 million (35% of California) and a gross regional product of US $570 billion (30% of California), Ontario’s cap-and-trade system may well yield similar relative results. Naturally, however, other factors will come into play as Ontario implements cap-and-trade, and we will follow these developments closely.

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BC LNG: the Path to First Gas

Jonathan Drance and Brandon Mewhort -

There have been at least 15 proposals to build LNG export terminals in British Columbia. Together, these proposals contemplate building LNG terminals capable of processing in excess of 200 million tons per annum (MTPA). This capacity represents more than 50% of current world-wide LNG capacity and is more than double the capacity of Qatar, currently the global leader in LNG. Obviously, not all of these projects will be completed. Indeed, it is unlikely that anything near this level of capacity will be developed in BC, particularly if current market conditions persist.

However, at least some of these proposed projects are worth closely monitoring. There are three LNG projects - Woodfibre, Douglas Channel and the Petronas - led Pacific Northwest – which are widely reported to be making (or at least aiming to make) a final investment decision (FID) as soon as practicable and, in any event, at some point in 2015.

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