Key Developments In Canadian Private M&A Law For The Oil And Gas Industry - Q4 2014

The last quarter of 2014 saw a number of legal developments that may specifically affect private companies in the oil and gas industry. Below, we've compiled a list of key developments in Canadian law and regulatory practice since October 27, 2014 that may be of particular interest.

Oil & Gas and Regulatory

• The Extractive Sector Transparency Measures Act, expected to come into force in June, will require Canadian oil and gas companies to disclose public payments made in connection with commercial developments. This payment history will be made available to the public – buyers should conduct diligence of these payments and later filings.
   
• The Alberta Energy Regulator held that an aboriginal group objecting to an oil sands exploration program must prove that it would directly affect cultural and traditional land use activities – oil sands developers will now be able to obtain the AER's approval for these programs unless an aboriginal group can prove exceptional circumstances exist.
   
• The Alberta Court of Queen's Bench decided that in the context of drilling wells, a finding of gross negligence requires conscious indifference (i.e., a marked departure from ordinary standards) or very great negligence. This decision marks the first time the Court has considered the degree of caution required of operators in the field.
   
• The B.C. Environmental Assessment Office approved the Petronas-led Pacific Northwest LNG Export Terminal, TransCanada's Prince Rupert Gas Transmission and Spectra Energy's Westcoast Connector Gas Transmission pipelines. Federal approval is pending.
   
• Alberta issued the Water Conservation Action Plan outlining 20 short-term and five long-term actions to protect groundwater from risks associated with oil and gas development. Current water conservation and allocation policies will be expanded in early 2015 to include water conservation measures for hydraulic fracturing.
   
• Ontario and Quebec have adopted joint principles for TransCanada to meet in connection with its Energy East Pipeline. The NEB controls its approval but incidental provincial authorizations will be required before TransCanada can begin development.

Transaction Structure

• The B.C. Court of Appeal held that a party must act quickly in order to rely on fundamental breach to justify terminating an agreement.
   
• The Supreme Court held that there is a common law duty to act honestly in the performance of contractual obligations, but no duty to perform obligations in good faith or reasonably. While the parties must not lie or knowingly mislead each other, they are not required to forego advantages flowing from the contract.
   
• The B.C. Court of Appeal determined that a waiver of liability could be unenforceable if the party seeking to rely on it engaged in fraudulent conduct that went to the heart of the contract – egregious fraud was not required.

Sanctions

• Canada expanded its economic sanctions against Russia to prohibit Canadians from shipping/exporting specified goods to Russia or to any person in Russia for use in oil exploration or production.

Competition

• Proposed amendments to Canada's competition laws take aim at geographic price discrimination, particularly unjustified "price-gouging" of Canadians as a result of the U.S.-Canada price gap.
   
• The Competition Bureau indicated that digital and mobile ads and campaigns will draw increased scrutiny and must be designed and implemented in compliance with privacy, antispam and competition laws.

Employment

• The Alberta Government amended the Personal Information Protection Act (Alberta) to, subject to certain qualifications, allow a labour union to collect, use or disclose personal information about an individual without his consent in relation to a labour union dispute.

Intellectual Property

• The Combating Counterfeit Products Act passed first reading in the Senate and will provide Canadian trademark and copyright holders additional options to protect their brands and works.

Notable Transactions

• Pembina's acquisition of the Vantage pipeline system and an interest in a Saskatchewan ethane extraction plant for $865.27M.
• Encana's sale of its Clearwater assets to Ember Resources for $605M.
• Encana's sale of its Montney gas and processing assets to Veresen and KKR for $412M.
• EOG Resources' sale of the majority of its Canadian assets for $410M.
• PennWest's sale of non-core assets in south central Alberta for $355M.
• Aspenleaf Energy agreed to acquire Coral Hill Energy for $325M.
• Whitecap's purchase of assets in Elnora for $266.7M.
• Petrus' acquisition of Ravenwood Energy for $195M.
• Sprague's acquisition of Kildair Service for $175M.
• Bellatrix Exploration's acquisition of assets in its core Alder Flats area for $118M.
• Ontario Teachers' Pension Plan, ARC Financial investment of $81M in BluEarth Renewables.
• Corrosion and Abrasion Solutions, Gulf Pine Energy, Enterprise Group, Hyduke Energy Services, Pure Technologies, and Rapid Rod Services acquired private oilfield services targets.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.