A light in the oil slump Tunnel

In 2014, when plummeting oil prices bucked Calgary’s economy, the city’s legal community — especially corporate lawyers — must have slumped in their saddles. Oil & gas have long been the rich lifeblood of the Alberta economy and, in Calgary especially, that resource sector kept lawyers well fed.

A light in the oil slump Tunnel

In 2014, when plummeting oil prices bucked Calgary’s economy, the city’s legal community — especially corporate lawyers — must have slumped in their saddles. Oil & gas have long been the rich lifeblood of the Alberta economy and, in Calgary especially, that resource sector kept lawyers well fed.

But in the fourth quarter of 2014, crude oil prices, after peaking at US$106.65 per barrel, stumbled as low as $28.49 in the ensuing years. Just lately, providing some hint of respite, prices have ranged up around the mid-$50s.

Sagging oil fortunes wasn’t the only change that walloped Alberta since then, impacting legal practices of all sorts. After 44 years of rule by Progressive Conservative governments, the NDP pulled off a stunner by winning a majority in the 2015 provincial election. Over its years in power, the NDP has enacted a slew of changes to environmental, educational and labour laws, which have impacted a wide range of businesses and institutions.

As the de facto capital of the Canadian oil and gas sector, diving fossil energy prices has a gloomy impact on many lawyers in Calgary’s corporate law community. Foreign investments shriveled, M&A work evaporated and corporate clients pulled back hard on reins when it came to every kind of legal cost. Law firms had to streamline their operations and trim billing fees for whatever work they still wrangled.

So as 2018 wrapped up and 2019 began — with headlines still abounding about Alberta’s struggling economy — one might reasonably expect lawyers at Calgary’s major law firms to sound as surly as Rooster Cogburn in the western True Grit.

But no. “It’s been our best year ever,” says Robert Maxwell in a surprisingly cheerful opening line about how Fasken’s Calgary office fared in 2018. Maxwell co-manages the office with Clarke Barnes.

The good news at Fasken, they both expound, was broad based across most of their office’s practice areas. “I’m in litigation,” says Maxwell. “I can speak from personal experience. Our litigation and regulatory practices are super busy.”

It took entrepreneurial grit for Calgary to get through the past five years. Barnes has watched how many clients in the suffering oil & gas sector have reinvented their businesses to survive.

“As an example,” he says, “I have one or two service company clients that have started divisions that focus more on construction.” A tubular manufacturing company with which he worked that once thrived supplying the oil and gas industry opened a commercial landscaping division to keep its workforce going. “The entrepreneurial spirit, while taking some dents, is still alive and well in Calgary.”

Not that all is perfect, says Pat Maguire, Calgary managing partner at Bennett Jones LLP. Alberta and Calgary still face economic hurdles. The prime one, of course, is overcoming regulatory hurdles and the fierce opposition of environmental and Indigenous activists to build pipelines that would finally get Alberta crude access to new markets besides the United States.

It won’t be easy. In May 2018, the Trudeau government announced it would buy Kinder Morgan’s divisive Trans Mountain pipeline expansion project for $4.5 billion. It could potentially triple the flow of crude from Alberta’s oilsands to new markets. But just four months later, the Federal Court of Appeal stopped the project in its tracks. It ruled that the National Energy Board had failed to properly consider the concerns of First Nations over how increased tanker ship traffic would threaten B.C.’s coastlines and their communities.

In the view of Colin Feasby, managing partner of Osler Hoskin & Harcourt LLP’s Calgary office, Alberta’s economic climate the past four years has made things “both hot and cold” for lawyers, depending on their practice areas.

“The big change in the market in Calgary is historically there were lots of junior oil and gas companies, many of them public. And later on, there were income trusts. That generated a lot of junior corporate finance activity,” he says.

Ben Rogers, office managing partner at Blake Cassels & Graydon LLP in Calgary, has seen an uptick in acquisition and divestiture activity the past year. For example, last December, Athabasca Oil sold some of its pipelines and a storage terminal to Enbridge Inc. for $265 million. Rogers says there’s also been an increase in “monetization transactions” in which oil and gas companies sell off pieces of their infrastructure in exchange for long-term rights via leasebacks or royalty streams to continue using those facilities.

“I and others believe the worst is behind us,” says Bennett Jones’s Maguire. “There are more people finding jobs than losing jobs.” The Calgary and Alberta economy will grow, if slowly, he predicts.

Maguire, who says Calgary’s employment rate is slowly recovering, has, like Fasken’s Maxwell, also witnessed what he terms a “repurposing” of Calgary’s business talent. “Calgary is still full of smart, entrepreneurial business and technical people who won’t sit still.” From the gloom has emerged a wave of startups in agribusiness, technologies including blockchain and crypto-currency, and, notably, cannabis. And they all need lawyers in a variety of practices such as taxes, contracting, intellectual property, regulatory work and financings. However, cautions Maguire, until the prices improve for Canadian crude and gas and the price differential narrows between Alberta oil and the international price, “we will still see stagnated capital investment.”

At least one other area of legal work is now thriving at city law firms. “Our litigators, like many of our colleagues in the marketplace, tend to be chugging along very nicely,” notes Alan Ross, managing partner of Borden Ladner Gervais LLP’s Calgary office. “Our construction litigation team was especially busy on a number of major matters.”

The construction industry, it seems, is prone to contractual disputes. During the prosperous years preceding 2014, Calgary’s skyline bristled with cranes during an office building boom. And there were big infrastructure projects being built around the province.

However, contractual disagreements can take years to brew into actual litigation. Now numerous cases — particularly involving engineering, procurement and construction contractors — says Maxwell, are percolating through his and other major Calgary law firms.

In a year where both the shifting provincial and federal regulatory environments posed new hurdles for Alberta resource companies, Osler’s Calgary office still managed its best year post-2014, says Feasby. “Despite some of these challenges in the industry, it was a reasonably strong year because a lot of those headwinds actually create legal work.” His cites his firm’s work with Kinder Morgan on Trans Mountain — with Osler teams working on numerous judicial reviews, injunctions, environmental hearings and all manner of appeals — as a classic example.

As oil businesses suffered, wind and solar energy began to shine under the NDP. The province, as part of its climate leadership plan, vowed to shut down all coal-fired electricity plants by 2030 and add 5,000 megawatts of renewable electricity to Alberta’s grid. The related legal work involved in competition tenders for renewable power projects helped offset, to a degree, some of the billing hours Calgary law firms lost from the fossil fuel sector.

“Renewables is absolutely a big area, not just for us, but for a number of our competitors,” says Feasby. “I think a lot of people see it as a new opportunity.”

So far, the Alberta government has held three competitions for renewable energy, most of them wind projects. The approved projects have brought $2.2 billion in investments to the province, creating 1,700 jobs, the government says.

BLG acted for the Alberta government on its first solar RFP. That led to the development of the $30-million Brooks project, which began producing power in mid-December. The largest solar project in Western Canada so far, the 50,000 solar panels in a farm field near Brooks, Alta., will power 3,000 homes.

Political factors have also clearly had a significant impact on Calgary’s legal community in recent years, with another provincial election expected in May and a federal election in October. A swing toward conservative governments could reverse many of the regulatory, business, tax, employment and climate legislation enacted by Rachel Notley’s NDP and Justin Trudeau’s Liberals. That could mean yet another influx of legal work as firms guide clients through yet another tide of regulatory headaches.

There have been plenty of those headaches to keep labour and employment lawyers such as Frank Molnar busy since the NDP came to power in 2015. A partner with Field Law, a regional firm with 120 lawyers in Calgary, Edmonton and Yellowknife, the NDP, says Molnar, brought “massive” changes to Alberta’s labour laws.

Bill 7 was the Alberta government’s response to a 2016 Supreme Court of Canada decision that the Saskatchewan government violated the constitutional right of some public employees, including essential services, by prohibiting their right to strike or engage in collective bargaining. By bringing post-secondary institutions under a revamped Labour Relations Code, Bill 7 gave Alberta’s academic staff the right to strike. It also requires that post-secondary institutions negotiate essential service agreements with employees.

Another piece of legislation, Bill 17, the Fair and Family-Friendly Workplaces Act, came into force on Jan. 1, 2018. The first change to Alberta’s Employment Standards Code since 1988, Bill 17 improved compassionate care provisions, including increasing the compassionate leave period to 27 from eight weeks.

It all meant significant work for labour lawyers around the province. “These changes have come upon our clients quickly, one after the other,” says Molnar, who counsels post-secondary institutions, municipalities, hospitals, manufacturing and, of course, oil and gas companies. “So, they need a lot of help understanding what these changes meant to them.”

If there was one practice area that seemed to remain steady through Calgary’s economic turmoil, it was family law. “I get asked a lot whether the downturn has created an uptick in divorces,” says Heather Davidson, co-founder of Davidson Fraese Family Lawyers. “The answer is no.” But, she adds, her divorce clients face a hard reality now; the assets they bought before 2014, such as homes, are now worth significantly less than their purchase price. “Or,” she adds, noting that many of her clients are in fact employed in oil and gas, “they have to face the reality that their stock options, for example, maybe aren’t worth exercising because they are not in the money.” In past years, divorcing couples might well have relied on the exercising of stock options to soften the blow of dividing up assets and living separately.

Davidson is finding more former spouses now want to leave Alberta after a divorce, complicating child custody arrangements. There’s also more reluctance to agree to fixed spousal support terms because the partners earning more income have greater uncertainty about their job futures than they did five years ago.

It’s made for more frictional proceedings, says Davidson. But it’s been relatively smooth sailing for Calgary’s family law practices during the downturn. “Our practice,” says Davidson, “is kind of recession proof.”

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