2018 was a banner year for M&A activity in the energy space, with numerous high dollar value transactions in the upstream, midstream, downstream and oil field services (OFS) segments. As investors in the public securities markets have shown a significantly decreased appetite for new issuances of equity by energy companies, the preferred exit or growth strategy for 2018 has been through strategic mergers, acquisitions or divestitures. These transactions have manifested themselves in various forms: asset acquisitions and divestitures, private equity investment into “drillcos” with strategic oil and gas companies, public-public mergers between OFS companies and upstream shale drillers, and simplification transactions by master limited partnerships (MLPs) in the midstream space. In addition to all this M&A activity, one element has become significantly more prevalent in the oil and gas industry throughout 2018 and shows no signs of letting down for 2019: water.
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In today’s interconnected society, cyber breaches are inevitable. As the saying goes, it is not a matter of if, but when, an organization will be breached. This is particularly true for businesses in the energy sector, which is one of the most frequently targeted industries for cyber attacks. From producers to pipelines and refineries, energy companies’ computer systems are increasingly at risk of becoming the target of a sophisticated and targeted cyberattack, making cyber risk mitigation paramount.
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The legacy of Keystone XL lives on, as fallout from that politically influenced debate has created a stigma for many new pipeline construction projects.  The Sierra Club and other opposition groups openly admitted that their challenge to the Keystone XL pipeline was really a stalking horse to bring more attention to climate change generally.  While that opposition was not intended as a more specific objection to pipelines, regional and local citizen groups are now opposing almost any form of new pipeline construction, on a more confrontational basis, using Keystone XL climate change type arguments even where they are not relevant.

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The development of new oil and gas in various shale plays around the U.S. has led to a rise in the number of transfers and acquisitions of pipeline assets.  Prudent operators have always requested and reviewed documentation as part of their due diligence in making acquisitions, but it is becoming increasingly important that certain records be located during due diligence or factored into the transaction if such records are lacking and must be recreated.  Decision makers involved in pipeline acquisitions may only involve pipeline safety managers or counsel late in the process, without sufficient time to include the issue of records as part of the transaction.  That can be a costly mistake.

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Recent legislative and regulatory developments at the federal and state levels signal lawmakers’ increased attention to issues related to the abandonment of oil and gas pipelines.  The U.S. House of Representatives is currently considering a bill, proposed earlier this year in the wake of a release of crude oil in the streets of a Los Angeles suburb from an out-of-service pipeline. The bill would amend the federal Pipeline Safety Act to require inspections of pipelines to confirm their status each time they are listed as abandoned or transferred as part of a sale.  Just after this bill was introduced in the House, the State of Louisiana passed a law requiring approval from the State Public Service Commission for the abandonment of portions of interstate natural gas pipelines entirely within the State, allowing the Commission to deny such approval if abandonment would cause gas supply inadequacies.  Other states, such as North Dakota, have also recently passed legislation concerning proper procedures for pipeline abandonment.  These developments reflect the range of issues associated with pipeline abandonment, from public safety to energy supply reliability.

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In the wake of a pipeline release, beyond notifying all required federal and state government agencies, an operator should keep in mind another important notification—its insurer.  Most insurance policies contain mandatory conditions, including notice of claims and cooperation with the insurer.  Failure to comply with these conditions may result in a denial of coverage.  The

The issuance of a Corrective Action Order (CAO) can have significant and ongoing consequences for a pipeline operator.  A powerful enforcement tool typically associated with the shutdown of a pipeline facility, a CAO often means numerous compliance obligations and significant disruption of normal operations, not to mention the stigma accompanying a CAO’s pre-requisite finding that continued operation of a pipeline facility would be “hazardous to life, property, or the environment.”  49 U.S.C. 60112(a)(1).

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