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high energy town Calgary is a The red-hot energy market in Calgary has slowed, but law firms in the city are having no problems finding interesting work in the cyclical economy. whammy of low natural gas prices, federal Finance Minister Jim Flaherty's taxing of income trusts, and the fallout from the recommendations that arose out of the Alberta government's royalty review. These are the sorts of things investors don't like to hear, and A the province is now seeing businesses taking their money else- where — to Saskatchewan, to British Columbia, and beyond. "Business hates uncertainty," says David Whelan, managing partner of the Calgary office of Borden Ladner Gervais LLP. "The past year has been tough because there's been a perfect storm of low [natural] gas prices versus cost, the costs of drill- ing have gone up significantly over the past two or three years, and the price of gas has come off. People don't realize that Al- berta really is a gas province in terms of what makes the eco- nomic engine run. " Harry Campbell, managing partner of Calgary-based Burnet Duckworth & Palmer LLP, says with oil prices reaching $100 a 36 FEBRU AR Y 2008 www. C ANADIAN Law ye rmag.com BY KIRSTEN MCMAHON lberta, a province once touted as having the "Alberta advantage," saw some tough times last year — and most law firms in Calgary predict this rough patch will continue for their clients next year. The province is dealing with the triple barrel it's hard to complain but that, "Alberta's basically a natu- ral gas jurisdiction, and the natural gas prices aren't as high as oil prices right now, so the drilling is down. "The service companies are suffering right now and the nat- ural gas business is kind of in the tank," he says. Couple that with the feds' decision to tax income trusts, and it's a nightmare for the junior oil companies. Campbell explains the synergy that existed between junior oil companies, trusts, and major oil companies like this: the juniors would go out and explore reserves, and when those reserves started to produce 10,000 barrels a day, the juniors would then sell that production into a trust, make a nice profit, and start raising money in the capital markets all over again. At the same time, if major oil companies had pools that they didn't think fit with their portfolio, they would sell to the trusts. Under the new world order, some of these trusts will remain as trusts, some will turn into corporations, while others will be taken out by private players. It's easy to see how the junior oil companies lose out in the end. "You take out the trusts, rightly or wrongly, now the junior oils are in the tank because they have no exit strategy to speak of, gas prices are down, and they can't raise equity because no one's really interested in the story