Estevan – An integral, but perhaps overlooked part of the oilpatch are the lawyers who get the deals done, long before any drilling rig spuds a well. And there are precious few in Saskatchewan who specialize in the field of oil and gas law. One of the most prominent is Estevan lawyer Barry Bridges.
Bridges has been a lawyer for 45 years, and 44 of those have been spent in Estevan. It didn’t take him long to figure out there was a need for an oil and gas lawyer in the area.
He grew up in Govan, where his grandfather ran a grocery store, followed by his parents. “I broke the tradition and didn’t take over the grocery store,” he said in his Estevan office on May 3.
Bridges started out by getting an education degree, then went onto law school at the University of Saskatchewan. “I can’t see myself doing this for the rest of my life,” he decided after his teaching internship.
Scouted
He graduated from law school in 1973 and was admitted to the bar in 1974. He articled in Regina, and then came to Estevan right after that. “It was the opportunity, really. I was in one of the larger firms in Regina, and I didn’t care for that.”
Dennis Ball, a lawyer in with Hill-Klassen-McLellan-Ball essentially scouted Bridges, and invited him to come to Estevan and to join the firm.
“When I came here, that’s one thing I noticed: really there was nobody in southeast Saskatchewan doing oil and gas law, and there was a need for it,” he said. “But that was right at Bill 42 time, and the industry was really in a crisis. There wasn’t a lot going on at that time, which was probably good, because it gave me an opportunity to learn more about oil and gas law.”
It took until about 1976, the year he was made a partner, before things picked up. “What was going on in the Bill 42 days was the oilfield service companies were hit hard because there was no work for them to do. That meant changes in that regard. Some companies that were able to weather the storm better bought out other companies. One partner might buy out the other, or they might wind up the company. I was involved with that.”
Bill 42 was a seminal event that rocked the Saskatchewan oilpatch to the core. The NDP government at the time dramatically increased royalties, bringing the sector to its knees.
“The point of Bill 42 was to nationalize the oil industry for the province, as opposed to the National Energy Program, which was later. The NDP government of the day increased the royalties you had to pay on each well to the point where you would lose money if you kept them operating. So people started shutting in those wells. To counter that, the government imposed a penalty of $1000 a day if you had the well shut in longer than the prescribed period. So either way, you were in trouble. So you would keep it shut in as long as you could, then you would go and start it up to avoid penalty.”
“The royalties were beyond punitive. The point was, they wanted you to give, or sell at a modest price, your wells to SaskOil,” Bridges said. “It’s shocking to realize that could happen here in Saskatchewan.
Specializing in oil
“In those days I had a very general practice. I did anything that came in the door – divorces, real estate, corporate law, estates. Now I don’t do that sort of thing.
“You can’t do it all and be good at everything.”
Bridges came to that firm conclusion in the mid-1980s. “The law, like everything else, has become more complicated in the last 25 years. Because of that, it’s too hard to be an expert on everything,” he noted.
The original firm changed over there years, dissolved in 2001. Bridges & Company is partly a descendant of that firm. “I went on my own, but worked under McDougall Gauley up until 2015 when we changed and went to the Bridges & Company name,” he said.
In 2015 he was granted the Queen’s Counsel designation and in 2015, and each year since then, he was voted by his peers as one of the “best lawyers” in Canada in the field of oil and gas law.
There are two partners in Bridges & Company – Chad Jesse and Rob Nicolay. Surprisingly, Bridges is not a partner anymore. “They are the partners. I’ve withdrawn from the partnership in an effort to slow down some. They call me ‘counsel to the firm,’” said the 69-year-old Bridges. “I work less than full-time. It depends on the workflow.
“As long as I enjoy what I’m doing, I want to keep on doing it, but on a reduced basis.”
He’s put in a lot of 16-hour days, evenings and weekends.
There are very few lawyers in Saskatchewan who specialize in oil and gas law in Saskatchewan. The number would likely fit in his boardroom. “Most of the oil industry is driven out of Calgary, so people tend to use Calgary lawyers a lot,” he said. “When I came here, people had to use Calgary lawyers. There weren’t any (oil and gas lawyers) in southeast Saskatchewan.”
“I think if there were more lawyers who were knowledgeable in oil and gas, probably more of the work would be done in Saskatchewan,” Bridges said.
Once lawyers go to Calgary, they tend not to come back. “I think that’s part of it. Young people want to go the bit cities and the bright lights. WE just can’t compete with Calgary or Toronto or Vancouver on those terms.”
“When we recruit lawyers here, we go looking for the people who might have tried that and said that’s all nice, but I’d like to live in a smaller centre where the quality of life is a little better.”
“It’s tough to recruit lawyers to cities the size of Estevan.”
They’re not recruiting right now, but that could change in a hurray with US$100 oil and a pipeline or two, he noted.
Oil and gas law
“For the most part, my clients are mid-sized to smaller oil companies,” Bridges said. “Over the years I’ve done work for some of the major oil companies, but must of their stuff is done in Calgary or other centres. I do a lot of work for farmers and other mineral owners as well.”
“We also do a lot of negotiating the petroleum and natural gas lease. That’s where it starts. If we’re not acting for the oil company, we’re free to act for the mineral rights owner, who is often the farmer. So we negotiate the royalty that he gets, the money that he gets, the wording of the lease.
“It’s called a lease. It’s not really a lease. A lease is you use something for a while and you give it back. The oil company doesn’t give the oil back.”
“We do a lot of that, and negotiate the terms of surface leases.”
Royalties
Asked for a range of what a typical royalty would be, he said, it depends a bit on the economy.
“When the price of oil is low, the oil companies try to drive the royalties down. For the most part, the royalties would be in the 17 to 20 per cent range. Sixteen, on today’s market, I would regard as low. I would put 17 pretty much as the bottom end of the range, and 18 is going to catch the vast majority,” Bridges said.
Where minerals are highly sought after, i.e. next to some good production, or more than one oil company is bidding on it, 20 per cent or even the low 20s is possible.
Using an example of when oil was $100 per barrel, he said, “The industry has a standard form of lease. Not all oil companies use it, but most do. That standard form of lease typically says that you get your percentage of the current market value at the point of measurement. They meter how much the well makes every day, and that is your point of measurement.
“The expenses almost all come off after that point of measurement. So what your share of the oil is worth, at the point of measurement, is not the $100 per barrel, because to get it marketable, it has to be treated. The salt water and other impurities have to be taken out of it and it has to be gotten into marketable condition and transported to a pipeline terminal,” Bridges said.
“Transportation becomes a factor. So, the oil company gets to say you get 18 per cent, but you also have to pay 18 per cent of the treating and processing costs to make this emulsion into marketable oil. And you have to pay 18 per cent of the cost of transporting that oil to TEML’s pipeline terminal.”
How much water a particular well makes adds up the costs. There’s typically a lot, and it has to be separated and put into a disposal well.
“The typical approach, by oil companies, is that even if it’s pipelined, they get to charge you a return on their capital costs.”
“Usually what happens, the oil company will pay you your royalty each month. They’ve already deducted what they call your share of the expenses.”
Lifting costs is a very negotiable point, he said. “When you are going to enter into a petroleum and natural gas lease with an oil company, that’s one point you should negotiate with them, because usually, they will negotiate to no deductions, so your 18 per cent comes off the top.”
“There’ve been lots of mineral owners in southeast Saskatchewan whose royalties well exceed $1 million per year.”
Negotiating pays off
There’s a whole range of attitudes when it comes to mineral rights owners. Very few people will not want any development on their land. Others have held the rights for a long time, and they’re quite anxious to make a deal. Bridges said they can sometimes give in too easily. The more sophisticated ones will say “no” to get better terms. Maybe a third are in that last category, he said, and they’re almost always successful.
“If I’m acting for the mineral owner, I would be negotiating with the land agent. If I’m acting for the oil company, the oil company will often ask me to draft the terms they want in the lease, or if the mineral owner asks for a specific clause.”
That type of work is as low as 35 per cent of his work, and at the high end, it can be as much as 90 per cent, mostly for the oil companies. In 2008, they were really busy.
His work also involves oil companies selling land and leases from one to another. He also does work on surface leases, unit agreements, pipeline easements, and contracts between oil companies and service companies, although an awful lot of that last point comes out of Calgary.
Bridges has been around long enough to see the large oil companies pull out of southeast Saskatchewan, the rise of the junior producers, and then the wave of consolidation now underway with local oil companies. He’s seen serial entrepreneurs keep getting back into the game after selling their wells.
“I’ve been fortunate enough to have clients who have invited me to invest with them,” Bridges said, noting he’s had “skin in the game.” And while he’s been fortunate enough that most of the time it’s been positive, there have been some losers, too.
Bridge’s wife, Bonnie, has been married to him 49 years this June. She has helped in the office from time to time, but has retired from that. The high school sweethearts got married in 1969, and they’ve had four children, all of whom felt law was not for them.
“You have to have a very understanding spouse,” Bridges concluded.
