McCarthy Tétrault LLP / mccarthy.ca Gordon Nettleton Regulatory Issues Facing Canada’s Oil and Gas Industry

McCarthy Tétrault LLP / mccarthy.ca

Gordon Nettleton

Regulatory Issues Facing Canada’s Oil and Gas Industry


The Background

Changing Market Dynamics¬Gas

¬ Cdn gas supply abundant from technology (shale gas exploitation)

¬ Prolific trend in US ¬ Geographic proximity to US markets causes

Cdn exports to decline and US supply to serve Cdn markets

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The Background

Changing Market Dynamics¬Crude

¬ Cdn crude supply increasing¬ US crude markets remain most attractive ¬ Constrained access adversely affects net

backs to industry and Cdn governments ¬ US domestic supply on the rise but unlikely to

back out Cdn crude types

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The Background

¬ Response to Market Changes:¬ New infrastructure required to access

alternative tidewater markets¬ Need for Canada to position itself as being able

to serve new markets.

¬ Market Access & Diversification ¬ Largest issue facing Canada’s O&G Industry

¬ Is Canada up this challenge?

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Solving The Market Diversity Challenge

The Requirements

¬Asian marketplace demands¬ Export supply certainty & security¬ Commercial development & operational certainty¬ Fiscal regime certainty¬ Regulatory certainty

¬Opportunity to serve Asian markets is limited¬ Canada is competing with worldwide market

participants.

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Policy/Regulatory Initiatives

¬Legislation¬ Process Changes:

¬ export authorizations ¬ Redefinition of public involvement role ¬ Changes in role/scope of regulator decisions¬ Imposing time limitations on processes

¬ Effectiveness of changes still unclear

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Policy/Regulatory Initiatives

¬Policy¬ Government buy-in essential & unprecedented¬ Discussions are beginning (finally!) around

national energy strategy¬ Will not work without involvement and role for

First Nations affected by new development¬ Learn from Canada’s success stories (e.g. Kitimat

LNG, BxM 500 kV)¬ Commercial structures exist that promote win-win-win

opportunities

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Regulatory Proceedings

¬ Involves impartial public interest decisions

¬ Decisions are based on presented evidence

¬ Concurrent Processes (with settlement)¬ Litigated outcome provides some certainty¬ Common Objective: avoid negative outcomes:

¬ Project denial, delay/appeal, cost increase

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Strategies to Manage Risks During Regulatory Proceedings

Regulatory Objectives:

¬Proponents: ¬ demonstrate evidence supports the relief sought

¬Opponents:¬ Test/present evidence to

¬ Raise doubt regarding the merits of the project¬ Raise doubt about the credibility of the Proponent and the Crown¬ Improve settlement bargaining position¬ Establish an evidentiary for appeal purposes

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Top 10 Strategies For Proponents

1. Build a Strong Evidentiary Record ¬ Focus on Consultation Record

2. Credibility of Witnesses¬ Familiarity with case, issues and comfort with

litigation process

3. Regulators and “Tough” Decisions¬ Avoidance strategy¬ Has the proponent taken all reasonable steps to

avoid opposition?

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4. Know the Case(s) Against You¬ How do you intend to position your case vis a

vis theirs? ¬ What additional evidence do you need?

5. Develop a Litigation Resource Plan ¬ Who is doing what & when? ¬ Advanced Planning is a key for success

6. Witness Training¬ Comfort in the hearing room is key for success

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7. Co-ordination with the Crown¬ Aboriginal risks lie with the proponent AND the

Crown. ¬ Ensure open lines of communication exist with

Crown¬ Roles and expectations must be known in

advance. ¬ Who is doing what, when? ¬ What role will the Crown take in the hearing

process?

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8. Have a Public Relations Plan ¬ Do not leave this to the lawyers!

9. Assess Need/Impact of Cross Examination ¬ On what basis will you credibly attack:

¬ Elder stated oral evidence¬ Positions taken regarding strength of claim

¬ Cross examination has risks!

10. “Backwards First” Strategy¬ Know your final argument and work from there!

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McCarthy Tétrault LLP / mccarthy.ca Gordon Nettleton Regulatory Issues Facing Canada’s Oil and Gas Industry