Cap in Hand - Are you ready for the Ontario Cap and Trade Regime?

P. Jason Kroft and Luke Sinclair - 

The Ontario government has introduced a carbon cap and trade regime expected to go live in January 2017. The cap and trade program will have real impacts for consumers and business. Click here to see a high level summary of the program with initial estimates of the costs. We are also available for consultation if you want to see how this program may impact your own business. We will continue to monitor the development of the program with practical insights for business.

"Pétrole social": What's That?

Erik Richer La Flèche - 

On April 7, 2016, Premier Philippe Couillard and four of his ministers unveiled Quebec’s 2030 Energy Policy. As discussed in our April 8 overview post, this initiative is a “green” policy that sets ambitious de-carbonization goals.

The last chapter of the Policy deals with fossil fuels (pages 57 to 62). Page 58 refers to “social oil”. What is social oil? A quick search of the internet does not show prior uses in French or English. The expression appears to be the work of a clever government wordsmith.

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Quebec releases its Energy Policy 2030

Erik Richer-La Flèche - 

On April 7, 2016, the Government of Quebec released its much-anticipated Energy Policy 2030 before 500 guests at Montreal’s Place des Arts.

Since its election on April 7, 2014, Premier Philippe Couillard’s Liberal government has issued a steady stream of economic and industrial policies that would put dirigiste France to shame. In the last 18 months, it has issued policies, strategies, guides and papers on a broad range of subjects. To name only a few, these include the Maritime Strategy, the Quebec Aluminium Development Strategy 2015-2025, the Strategic Vision for Mining Development in Quebec, the 2013-2020 Action Plan on Climate Change, the Plan Nord toward 2035, 2015-2020 Action Plan, and the Green Paper on Social Acceptability.

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Federal Budget addresses the taxation of Emissions Allowances

Doug Richardson and Julie D’Avignon -

Prior to the federal budget of March 22, 2016 (Budget 2016), the tax treatment of emissions allowances was governed by general principles of income tax law.  Budget 2016 proposes to introduce a specific regime that applies to emissions allowances.

Pursuant to Budget 2016, emissions allowances will be treated as inventory.  However, due to the potential volatility in the value of such allowances, the allowances will not be subject to the “lower of cost or market” method for the valuation of inventory.  Any free allowances received by a regulated emitter will not be included in income.  The emitter will be entitled to a deduction for an accrued emissions obligation to the extent that the obligation exceeds the cost of any emissions allowances acquired by the emitter and used to settle the obligation.  If a deduction is claimed in respect of an emissions obligation that accrues in one year (for example, 2017) and that will be satisfied in a subsequent year (for example, 2018), the amount of the deduction will be brought back into income in the subsequent taxation year (2018) and the taxpayer will be required to evaluate the deductible obligation again each year, until it is ultimately satisfied.  The amount of the deduction will be equal to the cost of the emissions allowances acquired by the taxpayer and which can be used to settle the emissions obligation, plus the fair market value of any emissions allowances needed to full satisfy the obligation

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Key Developments in Canadian public markets law for the oil and gas industry - Q4 2015

Chip Johnston and Andrew Beamer - 

The following is an overview of key developments in Canadian public markets law applicable to the oil and gas industry from October 1, 2015 to December 31, 2015.

Mergers and Acquisitions

  • In CB Gold, a target was subject to a hostile bid and subsequently agreed to a friendly deal which was combined with a placement of 4% of the target’s stock to the second bidder.  The BCSC cease-traded the pre-bid rights plan so as to allow for a 72 day bid period, but did not offer a view on the propriety of the placement.  The first bidder continues to acquire shares of the target.

  • In Canadian Oil Sands, a target was subject to a hostile bid and adopted a rights plan.  The ASC cease-traded the rights plan so as to allow for a 90-day bid period.  The bidder extended and then reached a friendly deal with the target and completed the acquisition of the target
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Key Developments in Canadian private M&A law for the oil and gas industry - Q4 2015

Jennifer McPherson, Kevin Guenther, Andrew Beamer, Allison Sears and Chip Johnston - 

The following is an overview of key developments in Canadian law and regulatory practice applicable to private M&A in the oil and gas industry from October 1, 2015 to December 31, 2015.

Oil & Gas Regulatory

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

 Jason Kroft and Luke Sinclair

In this post we will more closely examine the details of Ontario’s recently announced draft cap-and-trade system in combination with its counterparts in California and Quebec. You will recall that last year we suggested that Ontario's system would follow closely in the footsteps of the existing cap-and-trade systems found within California and Quebec. The link to the May 2015 piece can be found here.

As a result of Ontario’s desire to join the Western Climate Initiative (WCI) and the benefits of a harmonized approach to the salient details of a cap-and-trade system that Ontario would introduce with the programs in Quebec and California, we suggested that any proposed cap-and-trade system must follow the detailed policy architecture of the WCI and accordingly, would mimic to a large extent the content, scope and design of the systems within Quebec and California. We further hypothesized that, based on existing public disclosure, the Ontario government had already effectively committed to joining the WCI and the recently released details of the proposed Ontario system have confirmed our predictions to be accurate. 

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Ontario's long awaited cap-and-trade plan

 Jason Kroft and Luke Sinclair - 

Yesterday, the provincial government released its 2016 Ontario Budget and with it came the details of their much anticipated cap-and-trade plan. The plan, which will be governed by the Climate Change Mitigation and Low Carbon Economy Act, will be linked to existing cap-and-trade systems in Quebec and California under the Western Climate Initiative. The provincial government anticipates that the cap-and-trade plan will cover a broad range of industries, which, in aggregate, account for nearly 82 per cent of the province’s total emissions. The plan is expected to generate proceeds in excess of $1.8 billion through the sale of carbon allowances and is intended to do most of the heavy lifting necessary to enable Ontario meet its greenhouse gas reduction target of 37% below 1990 levels by 2030.

Details of the cap-and-trade plan can be parceled into three primary sections: the plan itself; the cost of the plan; and investment of the proceeds.

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Key issues in Canadian energy M&A for US buyers

 Chip Johnston, Bradley Squibb and Julie D’Avignon

Although Canada is undergoing its most severe oil and gas downturn since 1998, it remains an important jurisdiction for oil and gas investment and will continue to import substantial amounts of capital and technical expertise from the United States in order to develop its considerable hydrocarbon potential.

The following presentation from Stikeman Elliott and Hilary Foulkes and Paul Perea of Tudor, Pickering, Holt & Co. outlines key topics related to M&A the Canadian oil and gas sector by US buyers, including the following. 

  • Review of the structure of the Canadian energy market
  • Overview of the Canadian public M&A process, including timing and terms
  • Key terms of Canadian confidentiality agreements
  • Important Canadian tax considerations for US investors

Please click here to download the presentation. 

PIPE Investments in Canadian Listed Oil & Gas Companies

A substantial private placement or “private investment in public equity” (a PIPE) involves the direct or indirect acquisition of a control position in a public company by an investor through the purchase of shares of the target and (in most cases) warrants or debentures that are convertible into shares of the target.

A PIPE allows an investor to acquire a substantial equity position at a discount and  an option on the equity to reward future performance while affording the investor the ability to influence and re‑invigorate corporate strategy.

For management a PIPE affords capital to exploit growth opportunities in a down market and creates a lead investor that can support later capital market fund raising. For shareholders, a PIPE is an alternative to M&A (or worse outcomes) and offers the opportunity to realize substantial value later in the cycle as commodity prices recover.

Our PIPE toolkit is a summary of the key commercial, regulatory and tax considerations for investors and targets contemplating a PIPE. We have also reviewed some of the terms of representative PIPE transactions

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