• Energy: Peripheral Vision Avoids New Sector Pitfalls
  • March 26, 2004 | Authors: Mungo Hardwicke-Brown; Craig N. Spurn
  • Law Firm: Blake, Cassels & Graydon LLP - Calgary Office
  • Factors ranging from the decline of reserves to deregulation are enticing energy companies searching for growth opportunities into new ventures: Pipeline carriers are moving into the power generation business, and retail marketers into upstream oil and gas production and electricity generation.

    As their companies move into new areas, corporate counsel must understand legal principles, industry customs and legal issues which are unique to, or have differing applications from, their core businesses. For example, companies expanding into electricity marketing must be aware of its unique codes of conduct and antitrust rules. Counsel also must take care not to apply the wrong approach to the negotiation and documentation of transactions. For instance, in the area of force majeure, the use of a "standard" clause may not be appropriate in an electricity purchase agreement as an electricity generation plant outage can have a significant impact on alternative source prices.

    Further, as industry regulators face unique situations and issues, deregulation has resulted in continually changing law as it relates to governance and regulatory matters. This leaves corporate decision makers with a measure of uncertainty for potential investments.

    These recent developments make it progressively more difficult for corporate counsel to provide timely and specific legal advice. It is now more critical than ever for corporate counsel to have peripheral vision on legal and lateral industry issues -- a core skill needed to avoid surprise pitfalls in new sectors.