The second quarter of 2015 saw a number of legal developments that may specifically affect private companies in the oil and gas industry. Below, we’ve compiled a list of key developments in Canadian law and regulatory practice from April 1 to June 30, 2015 that may be of particular interest.

Oil & Gas and Regulatory

  • Federal law now requires Canadian oil and gas companies to make annual disclosure of payments to all levels of domestic and foreign governments.  
  • Petronas made its final investment decision to proceed with the Pacific Northwest LNG project, subject to certain federal and provincial approvals, which are expected by the end of 2015.
  • New federal regulations require stronger tanks with enhanced safety features to be used when transporting oil and ethanol by rail. The
  • Alberta Energy Regulator (AER) clarified the process for coordinating the reviews of the AER and the Aboriginal Consultation Office, which manages Crown consultation with aboriginal groups, of energy development projects.
  • The federal government advanced legislation imposing unlimited liability on pipeline operators who release hydrocarbons into the environment.
  • The Saskatchewan Court of Appeal ruled that the province does not have a duty to consult when granting exploration rights to oil sands resources located beneath treaty lands which do not involve the sale of surface rights. Operators must acquire surface rights from the landowner or by application to the Saskatchewan Surface Rights Board.
  • Alberta increased its carbon levy and added requirements for large emitters to meet certain emission reduction targets. Emitters of less than 100,000 annual tons are not affected.

Transaction Structure

  • The B.C. Court of Appeal held that a contract was formed through a series of emails which contained all of the essential terms of a transaction and indicated an intention of the parties to be bound, even though no formal agreement was signed.
  • A B.C. trial court determined that directors may be personally liable for contracts if the contract does not reference the full legal name of the corporate entity and the other party is misled as to what party is under contract.

Tax

  • The federal government proposed rules to expand the application of the anti-avoidance rule in Section 55 of the Income Tax Act (Canada), which prohibits a corporation from using a tax-deductible dividend on shares it holds in another corporation to reduce taxable capital gains it would otherwise have paid on a disposition of those shares.
  • The Federal Court held that companies must provide tax accrual working papers to the CRA to provide a roadmap for the audit process.

Competition

  • Preliminary communications with the Competition Bureau in which parties disclose anticompetitive conduct in the hopes of obtaining immunity or leniency are not protected by settlement privilege.
  • For the first time, the Competition Tribunal considered a contested application for an interim injunction in the context of a proposed merger and granted the Commissioner the authority to take control of the management of certain assets pending the determination of the competition issue.

Employment

  • The Ontario courts expanded the personal liability of directors for unpaid wages by using the oppression remedy to hold the estate of a deceased director liable for unpaid wages,termination pay and employment related debts.