Law Times

PAGE 12 FOCUS March 26, 2012 • Law TiMes BY JULIUS MELNITZER For Law Times who aren't really feeling the eco- nomic slump. That's because the North L awyers involved in pipe- line transactions are among the few corporate lawyers in the profession American pipeline sector enjoyed a robust level of mergers-and- acquisitions activity in 2011 and continues to do so in 2012. "Both commercial and politi- cal factors are driving this M&A activity," says Frank Turner of Osler Hoskin & Harcourt LLP. Most significantly, there has been a growing demand for pipeline capacity, particularly from the oilsands. "Things are so tight that pro- ducers are resorting to putting their crude oil on trains in order to get them to gathering systems," says Turner. "In fact, pipelines were over- subscribed by 60 per cent in February, meaning that 60 per cent of what producers wanted to move didn't move." Oilsands producers are also eyeing Asian markets as a possible hedge against the backlash against heavy oil that exists in some parts of the world. For example, the European Union is currently con- sidering a directive that would limit the import of oilsands products into Examples of pipeline M&A transactions in 2011 • Kinder Morgan Inc.'s $38-billion acquisition of El Paso Corp. • The buyout of Pacific Northern Gas Ltd.'s 50-per-cent interest in the Pacific Trail Pipelines by Apache Corp. and EOG Resources Inc., bringing their combined ownership to 100 per cent • The subsequent sale of 30 per cent of Apache and EOG's interests in the Pacific Trail to Encana Corp. • Energy Transfer Equity's $9.4-billion takeover of Southern Union Co. • Caisse de dépôt et placement du Québec's purchase of 16.5 per cent of Colonial Pipeline Co. from ConocoPhillips Co. • Enbridge Inc.'s agreement to buy 50 per cent of the Seaway crude oil pipeline from ConocoPhillips for $1.15 billion • The $100-million investment by various Canadian and foreign producers and refiners in Enbridge's Northern Gateway project • AltaGas Ltd.'s agreement to acquire Pacific Northern Gas, a B.C. transmission and distribution system, through a deal worth $230 million 'Things are so tight that producers are resorting to putting their crude oil on trains in order to get them to gathering systems,' says Frank Turner. member countries. As well, there's a vocal anti-oilsands lobby in the United States. The liquefied natural gas (LNG) market is another driver. "Natural gas markets are depressed but not in some parts of Asia where LNG can bring four or five times as much as it does in North America," says Turner. "Producers need a pipeline that will allow them to transport hydrocarbon products to a point of seaborne export so they can sell to Asia." As it turns out, Canada's first LNG export facilities are in Kitimat, B.C., a considerable dis- tance from the sources of natural gas. "A number of transactions in the pipeline sector were aimed at accessing networks to move hydrocarbons to the West Coast for export to Asia," Turner notes. Then there's the need to deliv- er product from non-traditional areas. "You've got all sorts of infra- structure deficits to be addressed in places like the eastern sea- board and Quebec," says Fred Erickson of Stikeman Elliott LLP in Calgary. From a regulatory perspective, getting a new pipeline authorized is a formidable challenge. "It's an incredibly politicized What do your clients need? The means to move on. Guaranteed. Baxter Structures customizes personal injury settlements into tax-free annuities that can help your clients be secure for life. » Pre- and post- settlement consultation and support » Caring professionalism for over 30 years » No fee to you or your clients process, as the controversy over the Keystone pipeline well dem- onstrates," says Turner. "Applicants are looking at a ™ 24- to 36-month wait for obtain- ing regulatory approval for an oil pipeline and 18 to 24 months for a gas pipeline. That can make buy- ing an existing pipeline a much more attractive proposition." Despite the current condi- tions, mergers-and-acquisitions activity related to pipelines may slow down somewhat. "We may be seeing the peak FREE BAXTER APP! FREE BAXTER APP! DOWNLOAD OUR HANDY PRESENT VALUE/LIFE EXPECTANCY APP FOR YOUR MOBILE DEVICE AT BAXTERSTRUCTURES.COM DOWNLOAD OUR HANDY PRESENT VALUE/LIFE EXPECTANCY APP FOR YOUR MOBILE DEVICE AT BAXTERSTRUCTURES.COM Need more information? Contact us at 1 800 387 1686 or baxterstructures.com because there has already been a great deal of consolidation and a lot of the big networks that haven't been acquired are held by owners who have long-term strategies for those assets," says Turner. "Also, if the regulatory process becomes more streamlined as the government has recently prom- ised, more people may be inclined to build rather than buy." LT Baxter_LT_Jan9_12.indd 1 www.lawtimesnews.com 12-01-05 4:13 PM Pipelines hot for M&A Robust transaction activity continues in 2012

• Cover