Energy Issues Likely To Keep Lawyers Busy

Robert Lehodey, QC

Apr 29, 2010

By Jim Middlemiss, Financial Post

The announcement last month that Alberta would roll back its oil and gas royalty rates to 2007 levels is only one of the many developments brewing on the legal front that will impact the energy industry....

The competitiveness review for natural gas and conventional oil unveiled March 11 by the Ed Stelmach government reduced the ceilings on oil- and gas royalties....

The 5% front-end rate on natural gas and conventional oil will become permanent effective January 1, 2011. As well, the maximum rates drop to 40% on conventional oil from 50% and 36% for natural gas.

Lawyers applaud the changes. Robert Lehodey, a corporate lawyer at Osler, Hoskin & Harcourt, said the move is positive because the “government is finally communicating with the industry.” He said the previous royalty regime was “concocted” by a panel that “didn’t have industry expertise on it.”

...

One area of the gas business that is driving legal optimism is shale gas. ... The oil sands continues to be a big driver of legal work, both from a corporate-commercial and regulatory standpoint and no one sees that letting up anytime soon. ... Lawyers are also bracing for more changes in the regulatory environment. ... [and N]ative issues are playing an increasing important role in the development of the energy patch.

...

There’s a dark side to all this development. Rob Desbarats, a business lawyer at Osler, warns that environmental and investor backlash is on the rise and companies will face greater scrutiny from activist shareholders. “Things are getting tougher,” he said.

...

A final bugbear for the energy patch is a proposal by the federal government to create a national securities regulator. Mr. Lehodey said the concern is that under a national regulator, Alberta’s oil-and-gas expertise and “entrepreneurial spirit and knowledge” will be overshadowed by the larger Ontario jurisdiction and the province’s regulatory expertise will get “morphed into a mentality and approach that is by comparison overly administrative.”