Energy and Projects

In a nutshell

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Energy and projects are two distinct but overlapping areas of law. When combined, they focus on the development, construction and financing of major natural resource (oil/gas, mining), power and infrastructure (airports, roads) projects. The construction of pipelines, refineries, mines and power generation and petrochemical plants is a big business, especially in emerging economies.

In addition, the projects component of an energy practice consists of both transactional and regulatory work (with regulatory work more prevalent in US domestic projects). There is a clear demarcation between transactional and regulatory work, with lawyers usually specializing in one of the two.

Non-energy projects work includes road, rail, shipping and telecom infrastructure and the construction of major multi-investor buildings such as jails and stadiums. Lawyers focus on the financing of projects and legal permissions for construction and developments.

What energy lawyers do

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Energy – transactional & regulatory 

  • Transactional work can cover anything across M&A, joint ventures, capital markets, private equity, venture capital and project development and finance work.
  • Energy lawyers deal with three types of clients: upstream, midstream and downstream. Upstream businesses deal with getting energy out of the ground – oil, gas, coal, sometimes geothermal. This includes mining and minerals companies. Midstream clients are in the refining, treating and transportation of resources industry and its offshoots. Downstream clients are energy distributors: gas stations, electricity providers, gas companies.
  • Lawyers advise clients on negotiating and drafting agreements related to things like energy projects, the sale of power companies, investment in and development of upstream resources and the financing of various energy investments.
  • Many firms’ energy work focuses either on infrastructure and construction projects or representations in front of the Federal Energy Regulatory Commission (FERC). FERC is a US government regulatory agency. It regulates electricity sales, electric rates, hydropower projects, natural gas pricing and oil pipeline rates. Its decisions can be reviewed by federal courts.

Projects 

  • Projects lawyers have three or four types of clients: sponsors/developers who put together the project; financiers (banks, international development agencies, foreign export credit agencies); the provider or contractor (who supplies raw materials or undertakes construction); and sometimes the ‘offtaker’ who purchases the products produced by the project. The most significant roles for lawyers are representing either the sponsors/developers or the financiers.
  • The typical work of a projects lawyer includes leading negotiations, drafting financial agreements and commercial contracts and ultimately running a transaction from start to finish.

Realities of the job

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  • Texas is “the land of opportunity” for energy lawyers focused on US-based projects. Its law schools – most notably the University of Texas – are some of the only ones in the country to provide energy classes. In Texas the energy industry is regulated by the Railroad Commission of Texas. Alaska is the country’s second oil state. With the recent explosion of natural gas (and oil) shale development, many other states have seen increases in energy activity.
  • The overwhelming majority of international work for projects lawyers is handled in New York – which remains the ‘money center’ for transactions in Latin America.
  • The Energy Policy Act of 2005 created a host of new regulations which companies in the industry are required to abide by. These include loan guarantees for technologies that avoid greenhouse gases, subsidies for alternative energy producers and incentives to drill for oil in the Gulf of Mexico.
  • Running (energy) projects requires a huge amount of due diligence. “You have to do a lot of homework for yourself, your clients and the deal," a BigLaw partner tells us. “The amount of shelf space taken up by each project is huge. There’s also a huge amount of drafting and very careful negotiating over disparities between parties and pieces of paper. It’s not unusual for a closing to consist of 200 or 300 documents.”
  • Work is often international or related to projects overseas, as there is hyperactive development of infrastructure and the energy sector in many economies. “Just look at where development is roaring to find out where we work: China, India, Brazil, Mexico, Indonesia, Peru, the Gulf states. There are giant infrastructure developments there – things are moving much faster than in the developed world.”
  • The international nature of work means lawyers often have to deal with “shaky jurisdictions. Structuring a deal to take into account political risk is very much a part of being an international projects lawyer. And that’s not just in less developed countries – there could be similar issues surrounding a mining deal in California.”

Current issues

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  • Renewable energy is of course a major focus. Investment in cleantech, the rolling out of clean energy infrastructure and the cleaning up of old ‘dirty’ energy are all major issues. This creates work for lawyers because federal and state governments are increasingly taxing and regulating old energy and encouraging the use of renewables.
  • The energy industry is waiting with bated breath to see if there comes a point where renewable energy becomes profitable enough for major investments to be made in the sector. If and when these come online this will require a major overhaul of the nation’s energy infrastructure and regulations.
  • Nuclear energy was seen as a “hot” area of development over the past decade. However, the safety and desirability of nuclear as an alternative to fossil fuels has been called into question after the Fukushima nuclear disaster in Japan. Germany decided to scrap all nuclear power by 2022. It remains to be seen how the future of nuclear energy will play out in other economies.
  • “On a worldwide basis there’s been a very strong interest in public-private partnerships,” a BigLaw partner tells us. “Capital demands are so high in areas that used to be the province of governments – who are broke – that they are looking for more ways to get money. And there is different legislation covering this in different countries.”
  • Houston has emerged as a hotspot for energy work in the US, as numerous BigLaw firms have opened offices in the city to cash in on the booming oil and gas industry. In 2011 alone, six firms moved into the city, which now houses shops from Cadwalader, Sidley Austin, Latham & Watkins and Jones Day among others.

What top energy and environment lawyers say

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Douglas Bland, partner, Vinson & Elkins

“A lot of effort is being put into the renewable electric power sector, but it’s going to move in fits and starts. There is so much transitional infrastructure that will be required to dramatically increase the share of power generated by renewables, that we won’t see a big jump in the near future. Instead the industry will move in smaller steps."

“Seeing all the new technology involved in not only ‘cleantech’ but also traditional energy development is exciting. And energy is such a big sector of the economy that it presents abundant opportunities for new challenges to energy lawyers.”

Daniel Bartfeld, partner, Milbank

“To be successful as a projects attorney, you have to really understand the underlying business and objectives of your client. Clients all have different objectives – when there are multiple parties around a table, all have different business objectives. When they are from different countries and cultures, it is the job of the lawyer to help bridge differences and facilitate agreement."

“My advice to incoming lawyers is to read the Wall Street Journal – there are articles on a daily basis about the energy and infrastructure projects that a Wall Street lawyer works on. If these projects sound interesting, then you'll likely find the lawyer's work interesting.”