What is energy law?
Before we consider the work that energy lawyers do, we first need to define what is meant by energy. Energy is the broad catch-all term that encompasses both traditional sources of power like oil and gas as well as renewable sources such as wind; geo-thermal; waste to energy; solar; and nuclear power. Energy transactions typically generate a great deal of work for the banking, corporate and regulatory practices of a law firm but due to the all-encompassing nature of energy law, you will often find that environmental, safety and planning; antitrust and competition; dispute resolution and litigation; intellectual property; and tax practices also play a crucial role and typically are heavily involved in advising energy sector clients.
Useful/key skills which are needed
A clear and proven understanding of the law goes without saying but the key to being a strong energy lawyer is the ability to apply your legal knowledge practically and commercially to the facts of each client matter. Clients require lawyers who understand their business and the commercial realities of their sector and at Norton Rose Fulbright, many of our global energy lawyers have previously worked within major energy companies.
The energy sector is becoming ever more important in powering economies in both the developed and developing world and as a result working in energy is hugely interesting and exciting due to the variety of the work it entails. Given the many different aspects of an energy transaction (such as financing, construction, commercial, regulatory and environmental to name but a few), a lawyer needs to be versatile, organised and ‘on the ball’ at all times. Clients are continually pushing the boundaries of both technological and geographical advances.
Excellent communication skills are also crucial – building a strong relationship with each client is key if you want to build your practice and ensure that clients continue to return to you for advice. Energy projects, for example, can take several years to implement and so not only do you need a lot of stamina but also an ability to build a good rapport with the parties involved in a project.
Realities of the job
Energy transactions can take on a life of their own, with each of the parties and their respective advisers moulding the project to achieve specific objectives and allocate risks appropriately. As transactions get close to completion there can be a large number of tasks to complete in a short space of time, but by working together, the pressure will be shared and the timetable met.
The energy sector is continually evolving, for example in the different methods of generating energy, from renewable technology to new ways of extracting, transporting and storing oil and gas; the ways that energy generation capacity is financed; and approaches to trading and regulation, meaning that lawyers must evolve with the sector. Energy lawyers have a unique opportunity to work at the cutting edge of what is one of the most important sectors and one which powers the supply of some of our most basic needs.
The day-to-day work varies depending on which projects you are involved in at any time and the stage of such projects. There could be meetings with the clients either in the office or on site, either in the UK or overseas, negotiations with the other parties, agreements to be drafted, amended or reviewed, due diligence reports to be written, memoranda of advice to be compiled and articles or presentations to draft. There may be lunches or drinks to attend with the clients (or as importantly, with the team!).
The work that you do as a trainee will play an important part in ensuring every transaction runs smoothly and reaches a successful conclusion for your client. The work that you are given will become increasingly engaging as you gain more experience and there are plenty of absorbing tasks on offer.
Developments in this area in the past 12 months
The energy sector is continually evolving. Major developments in the UK in the last 12 months that will shape the future UK energy market include 1) the ongoing impact of regulatory change; 2) new providers and avenues for finance; and 3) the emergence of the UK shale gas market.
The impact of regulatory change – in February 2015, the Department of Energy and Climate Change (DECC) confirmed that a new kind of low carbon energy subsidy, a Contract for Difference, had been awarded to a total of 27 projects, representing a total capacity of 2,139 MW. Though not all projects will be built out, strong competition appears to have brought the cost of subsidies down and many of these projects are now forging ahead. The change of government in May brought challenges to the solar PV and onshore wind sectors in particular, with announcements by DECC of early closure of the Renewables Obligation (RO) support regime for onshore wind and small scale solar PV, against a backdrop of previous moves to close the RO early for larger solar PV projects. In the meantime, a capacity market has been established in the UK to help ensure that enough power remains available at times of system stress, and the EU has begun the process of implementing EU-wide climate and energy targets and policy objectives for the period between 2020 and 2030. Expectations remain elevated for an international climate agreement to be entered into at the COP21 negotiations in Paris at the end of 2015.
New providers and avenues for finance – the entry of new providers of finance into the energy market continues, with non-bank lenders taking a role in an increasing number of debt transactions. Equity players and financial investors continue to invest in the renewable energy sector in particular; with the emergence of the renewable energy listed ‘yieldco’ in the UK. Essentially a corporate entity, its principal purpose is to own operating renewable assets that produce long-term stable, often index-linked cash flows, the large majority of which are distributed to shareholders in the form of regular dividends. Last year also saw the first renewable infrastructure fund to list on the main market of the London Stock Exchange.
UK shale gas: globally, the developments in shale gas technology continue to change the energy sector, shifting the sector’s focus to new markets, with the potential to transform some of the world’s largest importers of energy into energy exporters. Policy decisions continue to influence the degree of encouragement the shale gas sector receives.
In the UK, compared to other markets, the shale gas industry is still in its infancy. Ahead of more drilling, fracture stimulation and testing there are no reliable indicators of potential productivity. However, the British Geological Society has estimated that the UK shale gas reserve potential could be as large as 150 billion cubic metres of natural gas, which is 5.3 trillion cubic feet. This is very large compared with 2-6 bcm estimate of undiscovered gas resources for onshore conventional petroleum in the UK.
Upcoming amendments to the Petroleum Act 1998 (Act) and the draft Onshore Hydraulic Fracturing (Protected Areas) Regulations 2015 (currently before Parliament) may also have an impact on the shale gas market, restricting the areas in which fracking may occur. This has been and will continue to be an active area for energy lawyers in the coming years.
Norton Rose Fulbright
Norton Rose Fulbright is a global legal practice. We have more than 3,800 lawyers based in over 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia. Recognised for our industry focus, we are strong in financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.
For further information about the firm, see www.nortonrosefulbrightgraduates.com