Law firms see silver linings in oilpatch clouds; Despite feeling betrayed by the federal government, Alberta firms see greenbacks in its green initiatives: [National Edition]
Czarnecka, Marzena. National Post [Don Mills, Ont] 11 Apr 2007: FP10.
A little something you may not know about lawyers: They’re generally grumpy in March. Really grumpy.
As winter gives way to spring, law firm accounting departments are crunching the numbers that determine profits for the previous calendar year, and compensation committees are deciding how much each individual partner will profit from the profits.
Everyone’s on edge and not terribly pleasant to be around. (Note for next year: Good time for associates and support staff to go on holiday.)
In Calgary, this March was extra prickly — and not just as a result of internally generated stresses. It starts with the federal budget and what it didn’t do about income trusts.
Not that the pronouncements on trusts were a surprise, given the path Ottawa has been on since Oct. 31, but it still irked. And it hit 2006 law firm profits. More on that in a minute. But irked law firms sent out irked budget analyses to irked clients under cranky titles such as “No help for the oilpatch in the federal budget” (that title courtesy of Borden Ladner Gervais). No one likes what they see as a tax grab.
“Some jurisdictions like Russia, Venezuela and Bolivia, they have squeezed the neck of the golden goose — which is the oil industry,” says James Pasieka, a partner with the Calgary office of Heenan Blaikie.
“Those jurisdictions do so unabashedly with a sharp twisting motion. Here, the government of Canada just can’t keep its hands off the neck of the golden goose. Of course, here it is not so overt, here the hand is just to steady the beast so that the government can pluck feathers off the wings and tail.”
Bitter? Betrayed? You bet. All the more because this was supposed to be the oilpatch’s government.
“No question there is a sense of shock if not betrayal that a supposed business-friendly government would take these steps, such ill-conceived steps, without consultation, and that regardless of feedback from the industry, they would not back down,” says Mr. Pasieka.
Like many Albertans, he draws the inevitable comparison between the income trust initiative and the National Energy Program. Except, of course, Alberta has always expected to be treated unfairly by the Liberals.
Between one thing and another, the mood was distinctly grumpy when people gathered March 30 to decide the future of True Energy Trust. Unitholders did not approve the company’s reconversion to a corporation.
“What happened with True Energy is another illustration of how the income trust tax changes are having an impact across the sector,” says Brock Gibson, a partner with Blake, Cassels & Graydon.
Mr. Gibson was at the infamous unitholder meeting along with half the lawyers in Calgary. Like everyone else, he uses it as a barometer of the patch’s current mood. Irked.
Here’s another big part of the reason — and it’s one most lawyers prefer not to talk about. It has to do with Calgary firms’ financial performance in the fourth quarter of 2006. The year was phenomenal for law firms. The final three months? Well, the first three quarters were phenomenal. And most partners grumble a bit about their share of the points regardless. When the overall pie is suddenly decreased irked.
And when they’re reminded that the rates their Toronto partners are charging are still higher than Calgary rates– irked even more.
Calgary rates have been creeping up slowly for a few years now, but not quite at the rate of Calgary property prices or general cost of living in a boom town.
An informal survey of Calgary managing partners has them saying while Toronto rates are still higher, most Calgary partners don’t think this is profoundly unfair.
Funny, an informal survey of Calgary partners has them saying while Calgary rates are still lower, “that will be changing soon, God willing.”
With almost every firm in the city a national firm, or at least with a Toronto office, developments should be interesting. Of course it’s possible some of these issues will fall by the wayside when Calgary lawyers unirk. And, to be fair, they, like their clients, are trying to move on.
“I would say most people have gone through the obligatory stretch of grumbling and now, like all business people are moving on to look for solutions,” says John Carleton, a partner with Macleod Dixon.
But, as Mr. Carleton admits, easy for him to say — he’s one of those occasional Calgary aberrations, a lawyer with virtually no oil and gas clients. He’s a power guy: electric power. Wind power, too. Don’t forget that — it’s important.
“This does increase the opportunity for non-trusts to transact,” says Ron Deyholos, a partner with the Calgary office of Blake, Cassels & Graydon.
Now, he does have oil and gas clients — but power clients, of both the conventional and newly fashionable renewable sort, form a good chunk of his clientele. A trend?
To say the oilpatch has been grumbling over the income trust fiasco is an understatement. But the conservative government’s new- found desire to deal with climate change and be somewhat less environmentally responsible? That has a silver lining.
“The government initiatives in respect of the greenhouse gases, all of those have a silver lining,” says Mr. Pasieka.
“I think that capture and sequestration of CO2 as a result of government initiated policy could be a positive thing for the industry.”
How weird is that? In the spring of its discontent, the oilpatch isn’t really grumbling about climate change and initiatives that may prod it towards greater environmental sensibility. That’s OK. In fact — it’s potentially lucrative.
“It is a long-term feature of our business,” says Mr. Carleton.
“It is very clear that our governments are moving to requirements for better emission control and in conjunction of that the development of renewable sources of energy.
“That’s going to mean financing work, regulatory work, project development work. So it is long term, it is here to stay.”
Now, where’s that “can do” attitude when income trusts are the topic of conversation? It’s coming.
” The industry always has been entrepreneurial and resilient and entrepreneurs will find a way to go forward,” says Mr. Pasieka.
But first, some say, there may be a little pay-back. “I think the Conservative government took its home base here in Alberta for granted and I think they are about to see some of the impacts,” says Mr. Pasieka.
“I know first hand that previous Conservative supporters may not vote for them. Certainly, their funding is down.”
You know they’re not going to vote for the Liberals. Nor for the NDP. So who’s left? The Green Party? Stranger things have happened.
To borrow from a dead English playwright, “Hell knows no fury like an Albertan scorned.”
Something managing partners should meditate on whether Calgary and Toronto billing rates make it on to the executive committee’s next agenda.
Black & White Photo: Todd Korol For National Post / James Pasieka says the federal government “can’t keep its hands off the neck of the golden goose.”
(Copyright National Post 2007)