Canadian Lawyer InHouse

April/May 2021

Legal news and trends for Canadian in-house counsel and c-suite executives

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26 www.canadianlawyermag.com/inhouse FEATURE WHEN OIL PRICES slipped into negative territory amid the onset of the pandemic in 2020, demand plummeted overnight, creating significant challenges for an already struggling industry. As prices continue to improve and the sector creeps toward recovery in 2021, in-house counsel can expect to face a rapidly changing regulatory landscape of workplace health and safety conditions coupled with substantial M&A activity and growing pressure for ESG accountability. Cenovus Energy Inc. merged with Husky Energy Inc. in January, creating Canada's third-largest crude oil and natural gas producer, based on total company production. A wave of other players will likely also consolidate as insolvencies inevitably occur. Pipeline capacity in Canada has troubled the industry for a long time. Still, planned expansions from Trans Mountain and Enbridge should address the issue and contribute to economic recovery. "The Canadian industry is reacting not only to COVID and all of the issues that came with reduced demand in 2020 but also to the general pressure that the industry has been under for several years," says Stephanie Stimpson, a partner in the Calgary office of Torys LLP. Depressed stock prices, constraints on capital investment, challenges with access to markets, climate action and increased regulation are all contributing factors, ESG accountability is more important than ever in the oil and gas industry Stimpson says. However, the industry is now feeling more optimism because of the recent uptick in oil prices, production increases and more efficient cost structures achieved during the downturn, she adds. Pressure on the environmental, social and governance front has continued to rise — from governments, investors and other stake- holders. When COVID first took hold, there was a question about whether ESG consider- ations would take a back seat to separate operational and financial priorities. But Stimpson says the opposite occurred, as climate action and a focus on social issues accelerated in 2020. "The ESG record for our oil and gas compa- nies in Canada is very good compared to most other jurisdictions," she says. "There has already Enbridge CLO discusses environmental, social and governance goals with Lucy Saddleton as energy sector creeps toward recovery been intense pressure on the industry for several years for sustainability, emissions reduc- tion, workplace safety and proper engagement with Indigenous communities." Patrick McNally, a partner in the Calgary office at Stikeman Elliott, agrees that ESG has never been more critical to the oil and gas industry. "The investor base of the public markets for our clients really shifted to demanding that accountability — especially for oil and gas companies that have been out of favour for the past five or six years," says McNally. "There's an accountability coming from the investor side." Enbridge Inc. follows a robust and evolving ESG strategy that includes a commitment to achieve net-zero greenhouse gas emissions by "If you're not considered one of the best in your industry in terms of ESG, access to capital is going to get more and more difficult because the capital providers . . . are going to become much more discerning about where they put their money." Bob Rooney, Enbridge Inc.

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