Canada: Key Developments In Canadian Private M&A Law For The Oil And Gas Industry - Q1 2015

The first quarter of 2015 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 January 1, 2015 that may be of particular interest.

Oil & Gas and Regulatory

  • The Alberta Energy Regulator (AER), together with the Aboriginal Consultation Office, introduced new First Nations consultation procedures which require more complex upstream oil and gas projects to undergo more extensive stakeholder consultation.
  • In response to an increase in shipments of crude oil by rail, the federal government introduced Bill C-52 to the House of Commons, proposing amendments to the Canada Transportation Act and the Railway Safety Act that will toughen the liability and compensation regime for federally regulated railways that suffer spills.
  • As a result of its consultations with stakeholders regarding environmental concerns, TransCanada cancelled its plans to build a crude oil export terminal in Quebec as part of its Energy East Pipeline. It said it will look at alternative facilities.
  • New B.C. regulations prohibit natural gas field pipelines in northeastern B.C. from being converted to transport oil and diluted bitumen to LNG export plants on the B.C. coast.
  • The AER's play-based regulation initiative (PBR) will move forward in the Duvernay shale formation pilot area near Fox Creek and govern the unconventional oil and gas development projects included in the PBR. Operators of projects under the PBR will, among other things, be encouraged to collaborate on surface development plans in order to reduce their negative effects.

Tax

  • The Department of Finance released a proposal allowing accelerated capital cost allowance treatment for certain facilities used in the liquefaction of natural gas.

Competition

  • The Supreme Court released its Tervita decision providing guidance on how a proposed merger may lead to a substantial prevention of competition. The Court instructed the merging parties and Commissioner on the application of the Competition Act's "efficiencies defence" and the nature of the efficiencies to be considered. In general, if the anti-competitive effects outweigh the efficiencies, the defence is not available.
  • Industry Canada increased the Competition Act pre-merger notification "size-of-target" review threshold from $82 million to $86 million, and the Investment Canada Act direct acquisition threshold from $354 million to $369 million.
  • Changes to the Investment Canada Act regulations will significantly increase disclosure requirements for investments not subject to review and will extend timelines for national security reviews of non-Canadian investors which the Canadian government believes may be injurious to Canadian national security.

Sanctions

  • Canada expanded its list of prohibited Russian and Ukrainian individuals.

Employment

  • The Ontario Superior Court of Justice held that method of recruitment can create an implied promise of job security resulting in entitlements for the employee on termination.
  • The Supreme Court recently clarified the test of constructive dismissal in finding that an employer must communicate honestly with an employee who is subject to a non-disciplinary suspension with pay. This type of suspension must be for legitimate business reasons and must not offend the employment contract.
  • The Ontario Superior Court of Justice held that employers are required to give reasonable notice on termination to dependent contractors (a contractor who works exclusively for the employer) comparable to the notice to be given to an employee.

Notable Transactions

  • Encana's sale of its Clearwater assets to Ember Resources for $605M.
  • Whitecap Resources' acquisition of Beaumont Energy for $588M.
  • Financing of Prairie Storm Energy by NGP Natural Resources for up to $400M.
  • Bonterra Energy's purchase of oil and gas assets in the Pembina Cardium for $172M.
  • TORC Oil & Gas' purchase of light oil assets in southeast Saskatchewan for $128M.

Additional Key Stikeman Elliott Blog Posts

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.

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