JASPER RESEARCH SEMINAR 2022 – PAPERS OVERVIEW
Thursday, June 16
8:15 AM – 9:15 AM
The Evolution of Canada’s Carbon Markets and Their Role in Energy Transition
Authors: Dana Saric, Jake Sadikman, Sander Duncanson (Osler, Hoskin and Harcourt LLP) & Landon Miller (Imperial Oil Limited)
The tapestry of compliance and voluntary market mechanisms for carbon and other environmental attributes currently available in Canada’s infrastructure capital markets reflects the almost thirty-year history of carbon policy development in Canada and around the globe. With a history of provincial and federal policy and regulatory changes that has left some scars and stranded investments, energy market professionals and emission offset project developers have been resilient in their efforts to scale, integrate and maximize opportunities for these products. Recent increased focus on climate-focused investment criteria and technology-bolstered acceleration towards net-zero targets, both domestically and internationally, has reinforced the need for more carbon finance investment and policy certainty, as well as standardization and credibility in both compliance and voluntary environmental product markets.
Following the Supreme Court of Canada’s ruling in March 2021 upholding the constitutionality of the Federal Government’s Greenhouse Gas Pollution Pricing Act, market expectations were high (and perhaps still are) that the regulatory landscape supporting carbon finance in Canada would finally come into better focus. This paper will explore the current snapshot of available compliance and voluntary carbon finance tools available in Canada and will highlight some of the challenges and opportunities in navigating the interplay between these products.
A current example of where these dynamics are playing out repeatedly is in the case of renewable energy projects that are eligible to create carbon offsets usable for compliance with regulations such as Alberta’s Technology Innovation and Emissions Reduction Regulation (“TIER”) and its associated offsets framework, while at the same time being the subject of growing demand by ESG-based corporate off-takers seeking voluntary environmental attributes in the form of Renewable Energy Credits (RECs). The ability of privately-developed renewable energy projects to generate both regulatory carbon offsets and voluntary RECs as alternative forms of environmental attributes is an issue that raises technical and substantive concerns in relation to safeguarding against double counting and supporting the criteria of financial additionality critical to the credibility of either product type.
9:30 AM – 10:30 AM
Restructuring and Insolvency Deals in the Oil Patch: Recent Trends and Developments
Authors: Chris Simard, Kristos Iatridis, Keely Cameron & Adam Williams (Bennett Jones LLP)
Market forces, the pandemic, and regulatory changes in recent years have created both opportunities and challenges for the energy industry. Insolvencies are being used to shed liabilities, for strategic restructurings, and to minimize the environmental liabilities that would otherwise end up with industry-funded orphan programs. Recent jurisprudence continues to shift this landscape and has left insolvency, particularly in the oil patch, in a state of flux.
According to the Office of the Superintendent of Bankruptcy, insolvencies in the Canadian mining and oil and gas sectors peaked in 2016, with 83 insolvencies filed by corporations under the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act. This corresponded with oil prices hitting a thirteen-year low. By 2018, the number of energy company insolvencies was down to 27, as creditors, the energy industry and insolvency practitioners awaited the Supreme Court of Canada’s decision in Orphan Well Association v Grant Thornton Ltd, 2019 SCC 5 [Redwater]. While filings rebounded slightly in 2019, 2020, and 2021, uncertainty following Redwater, the pandemic, and the rebound of oil as a result of the Russia/Ukraine war have continued to reduce the number of insolvencies from what had been anticipated.
As creditors and regulators continue to adapt to the Court’s decision in Redwater, new tools and dynamics have emerged. Legislative changes have provided the Alberta Energy Regulator with more levers to influence insolvencies and sales thereunder. Reverse Vesting Orders [RVOs] provide the potential to bypass license transfer requirements, maintain tax attributes, and shed certain liabilities to increase the chance that struggling energy companies can exit insolvency proceedings as a solvent entity. However, these areas are still in flux. Courts and commentators have recently opined on the possibility of limiting the future use of RVOs, and there is a growing tension between municipalities and Regulators on the issue of taxes post-Redwater. As companies seek to purchase assets from struggling companies or address obligations during insolvency proceedings, deal structure has become more important than ever.
This paper will explore the basics of insolvency in the oil patch, recent developments in the sector, and things practitioners should know moving forward.
10:45 AM – 11:45 AM
Alberta’s Renewable Energy Market – Developing Contract Issues
Authors: Scott Jeffers & Ian Clarke (TransAlta), David Eeles, Lincoln Mitchell, Robin Acworth, & Kyle Havart-Crans (Norton Rose Fulbright)
Governments and corporates around the world have increasingly demonstrated leadership in tackling climate change, resulting in new de-carbonization policies and initiatives and new corporate ESG mandates. At the same time wind and solar capital costs have decreased and new technologies, such as battery storage, are becoming more prevalent, thereby increasing the flexibility and utility of renewable energy generation. Developers and investors have already expended significant capital to further the development of renewable generation with, according to the International Energy Agency, renewables energy investment reaching its highest level ever in 2021 – $367 billion internationally; a trend that is only expected to increase if the global de-carbonization goals are to be realized.
Within Canada, Alberta is at the forefront of renewable development due in part to its unique power industry structure – a deregulated, competitive, wholesale power market, with non-discriminatory system access – which has attracted corporate off-takers and buoyed investment in renewable energy projects in the province, supported by corporate power purchase agreements. The pace of development is striking, and Alberta has rapidly become a preferred destination for renewable energy investment. The Alberta Electric System Operator says that 22% of the energy generated in Alberta in 2021 came from renewable energy sources. This is predicted to rise sharply – for instance, there are 61 solar projects currently under development in Alberta that could be completed by the middle of the decade.
This paper examines several emerging contracting and development challenges currently facing renewable energy projects in Alberta, and aims to provide concrete, practical advice on several discrete contractual issues. Topics covered include, among others: force majeure issues relating to the effect of the pandemic on global supply chains; diverse carbon offset / renewable attributes programs and implications for power purchase arrangements; developments pertaining to ethical procurement, including modern slavery and the use of tracing protocols; and the need for increased flexibility in contractual arrangements to accommodate the pairing of wind and solar with storage resources. Although this paper is based primarily on experiences gained while developing renewable energy projects in Alberta, the analyses and solutions presented can be applied in many jurisdictions.
Friday, June 17
8:30 AM – 9:30 AM
Hydrogen Roadmap – Policy, Regulation and Prospects for Future Development in Alberta
Authors: Gavin Fitch, Q.C., Michael Barbero & Kimberly Wasylenchuk (McLennan Ross LLP)
Hydrogen is touted as a significant and environmentally friendly means of addressing the world’s current and future energy demands. The Alberta government, through the Hydrogen Roadmap, has expressly adopted such a posture, elevating hydrogen as both a significant means of providing “clean” domestic energy while also serving as a catalyst for the province’s natural gas industry in the years to come. On cue, hydrogen projects in Alberta are becoming more commonplace, with industrial and other applications offering a tantalizing look into the future of hydrogen energy. Against this backdrop, we examine the policy, regulation and future prospects for development of hydrogen in Alberta.
We do so in four parts. In Part 1, we provide a high level overview of hydrogen, discussing the properties that make hydrogen attractive as an alternative energy source, the processes by which hydrogen is made, and the applications that hydrogen currently and potentially has. In Part 2, we dissect the current policy landscapes, with particular focus on Alberta’s Hydrogen Roadmap, and the federal National Hydrogen Strategy.
In Part 3, we move beyond policy and critically assess the regulatory environment within which hydrogen projects are assessed, permitted and constructed. We query whether the regulatory environment has kept pace with recent developments, and whether using existing legislation and regulatory regimes is the best approach from the perspectives of both attracting and regulating hydrogen development. By looking at the Alberta, Federal, and international perspectives we ask and hopefully answer the question of whether regulatory reform is needed and, if so, how much. For example, do we need a dedicated and separate regulatory regime for hydrogen, akin to the regime currently in place for oil and gas development in Alberta.
Lastly, in Part 4, we consider and canvass the future prospects for hydrogen development, with a critical assessment of whether hydrogen development and use in Alberta will be able to fully meet the ambitious goals that have been set by government.
9:45 AM – 10:45 AM
Putting the ABC in ESG – The Role of Anti-Bribery and Corruption Compliance Programs in Enhancing ESG Commitments
Authors: Mark Morrison (Blake, Cassels & Graydon LLP), Tom Booth (Shell Canada Limited) & Gina Campbell (Deloitte)
Environmental, Social, and Governance (“ESG”) commitments are increasingly part of the metrics used by stakeholders to evaluate corporate performance. Organizations are facing mounting pressures from employees, shareholders, financial institutions, and business partners to adopt objective criteria which demonstrate commitment to implementation of meaningful ESG measures. An appropriate risk-based anti-bribery and corruption (“ABC”) compliance program is integral to supporting an organization’s ESG goals. ABC programs engage the Governance pillar, in particular, given the inherent integration of ABC principles with foundational governance principles. ABC programs also engage the Social pillar of an organization’s decision-making, as interactions with federal and local government officials often influence a company’s social license to operate within a given community. Albeit to a lesser extent, in the resource and mining contexts, ABC programs can also directly engage an organization’s Environmental footprint, as many of the decisions from the Social and Governance pillars dictate how a company decides to interact and operate within its physical surroundings. A robust ABC program can also assist organizations in addressing unique challenges arising from engagements with Indigenous partners and communities as part of its ESG strategy and commitments. This paper explores each of these nuances and identifies key components of a comprehensive ABC program as part of a broader ESG framework. By rethinking ESG commitments to include ABC programs, organizations will be better equipped to address potential domestic and foreign corruption risks, and ultimately be better positioned to obtain credit from their stakeholders for satisfying meaningful and objective ESG criteria.
11:00 AM – 12:00 PM
Leading the Way? Liability Management for the Alberta Oil & Gas industry
Authors: Jeremy Barretto, Tamara Prince, Chris McLelland, Alyshea Surani (Cassels Brock & Blackwell LLP) & Jeff Davidson (Canadian Natural)
This paper analyzes the history, present challenges, and future opportunities of Alberta’s oil and gas liability management regime. Liability management is intended to mitigate the billions of dollars of liability associated with inactive and orphaned wells in Alberta.
Our review of the history of Alberta’s regulated liability management framework begins with the development of regulatory frameworks for oil and gas liability by energy regulators in Alberta, and encompasses its evolution over the years, culminating with the 2019 Supreme Court of Canada decision in Redwater.
On December 1, 2021, the Alberta Energy Regulator released Directive 088: Licensee Life-Cycle Management. Directive 088 guides the current landscape for Alberta’s liability management and provides a regulated liability management system throughout the energy development lifecycle for Alberta oil and gas licence-holders. We analyze whether the AER’s new Liability Management Framework, and significant discretion afforded to the AER, will reduce public and industry liabilities while efficiently processing licence transfer applications. Is the new Liability Management Framework likely to be successful or will it require further refinement?
Further, we analyze the oil and gas liability management models for oil and gas from other jurisdictions, including the North Sea and Australia and evaluate the robustness of the new Liability Management Framework relative to the world stage. Finally, we analyze whether oil and gas liability management models from other jurisdictions should inform Alberta’s model—or whether Alberta’s model is leading the way to address issues related to inactive and orphaned wells.
Saturday, June 18
8:45 AM – 9:45 AM
Recent Judicial Decisions of Interest to Energy Lawyers
Authors: Karen Fellowes, Q.C. & Natasha Doelman (Stikeman Elliott LLP)
The second year of the COVID-19 pandemic continued to impact the Canadian economy, commercial activity and the legal system in general. Courts, tribunals, legislatures, law firms, corporations and workers all learned to adapt to remote working, remote hearings, and new ways of living. Within the crisis came opportunities to modernize systems and think about new ways of accessing justice.
This paper summarizes a number of recent judicial and administrative decisions of interest to energy lawyers. The authors review key caselaw from several broad areas, including: Aboriginal law, Administrative law, Employment and Labour, Contractual interpretation, Tax law, Corporate and Securities law, Bankruptcy and Insolvency, and Constitutional law. In each area of law, the authors will provide insight on the significance and potential implications of these decisions on the Canadian energy industry.
The authors will also canvas more specific topics, such as: economic interests and the Crown’s duty to consult; the Canada Revenue Agency’s priority ranking in the restructuring process; the ability of Receivers to disclaim an agreement in the bankruptcy process and unilaterally impose go-forward terms on a secured party; royalties qualifying as an interest in land; the application of set-off in relation to joint-interest holdings; the evolution of the “reverse vesting order”; Provincial control over resources; the distinction between “owner” and “employer” in construction projects; and supply-chain/interprovincial and international border concerns arising from the pandemic and related protests.
10:00 AM – 11:00 AM
Richard Riegert Memorial Lecture: Property Rights and the Development of Geothermal Energy
Author: David R. Percy, Q.C.
In 2021, Alberta proclaimed the Geothermal Resource Development Act (“GRDA”), which is designed to encourage the development of an important source of renewable energy. It seeks to clarify property rights to geothermal energy and to remove legal obstacles that might discourage development.
The cornerstone of the Act is an amendment to the Mines and Minerals Act which declares that “the owner of the mineral title…has the right to explore for, develop, recover and manage the geothermal resources associated with those minerals and with any subsurface reservoirs under the land.”
This section raises two questions.
• Does it provide mineral owners with indisputable rights to exploit geothermal resources?
• Does it create effective incentives to production?
At common law, where A owns the surface and B has reserved mines and minerals, which party owns geothermal resources? The GRDA defines geothermal resources as “the natural heat from the earth” The reservation entitles B only to substances that are classified as mines and minerals. At common law, this depended on their vernacular meaning. Commonly “minerals” means substances beneath the surface that can be recovered for profit and “mine” refers to the space that contains minerals. Underground resources that are not minerals belong to A, the surface owner.
Much geothermal energy production does not produce any “mineral”. It brings to the surface only heat, obtained by conduction. At common law, the right to produce heat probably belongs to A.
Does the GRDA suppress the rights of A? Unlike most Alberta legislation dealing with sub-surface property rights, the Act is not retroactive and does not purport to remove competing rights to the resource.
In Alberta, on freehold lands it is common for the ownership of different minerals to vest in different people. The GRDA requires a geothermal proponent to negotiate with the owner of each mineral and possibly the surface owner. A Saskatchewan project requires 10 production wells and 8 horizontal injection wells with each well pairing 750m apart. Compared with BC and Saskatchewan legislation, the GRDA creates potentially high transaction costs for geothermal projects of this nature.
11:00 AM – 12:00 PM
Recent Regulatory and Legislative Developments of Interest to Energy Lawyers
Authors: David Wood, Gino Bruni, Taylor Campbell (Torys LLP) & Parvez Khan (Alberta Utilities Commission)
This paper provides an overview of recent regulatory and legislative developments of interest to Canadian energy lawyers from April 2021 to March 2022. It includes discussions of recent regulatory decisions and related judicial decisions, and well as changes to regulatory and legislative regimes impacting energy law. This paper will also discuss and comment on a number of ongoing regulatory and legislative developments to watch in the coming year. Topics discussed include the opportunities and challenges posed by decarbonization efforts, Aboriginal law, standard of review, and other natural resource and power developments.
If you have questions regarding the CELF Jasper Research Seminar, please contact us at firstname.lastname@example.org or at 1-800-281-0697.