- Sutherland

Energy Trading

For more than three decades, Sutherland has helped clients in the trading sector develop the means to anticipate, manage and minimize the unique legal risks associated with engaging in the energy business. Over the last decade, no industry has felt the forces of change more dramatically than the energy sector. In the natural gas and power sectors, participants face new competition at the wholesale and retail levels. Many asset owners now face asset optimization and restructuring, while for others, decisions are driven increasing environmental regulations and public scrutiny. In all sectors – oil, financial, gas, power and emissions – complex issues have arisen from the commoditization of energy through the increased use of forwards, futures, swaps and options. Sutherland's attorneys have been at the cutting edge of these developments.

We have represented trading and marketing companies since the 1970s and major financial intermediaries, including the New York Mercantile Exchange, since the early 1980s. Our understanding of trading informs every aspect of our legal work for this sector and helps us find practical solutions to business problems.

Our representation of trading, marketing and financial companies includes advice and counseling regarding the following areas:

Compliance;
Credit and Risk;
Crude Oil and Refined Products;
Derivatives and Financial Products;
Emissions and Renewables;
Environmental;
Litigation and Dispute Resolution;
Restructuring and Bankruptcy;
Retail Power and Gas; and
Wholesale Power and Gas Trading.

Sutherland's work for energy trading and financial companies has tracked the commoditization of the energy markets. As the business has changed, so has our practice. We know the economics of the industry and the government programs that affect it, and we are positioned to respond effectively and creatively to the legal challenges faced by participants in the energy markets.

Compliance

Compliance issues have become a critical part of our energy trading clients' success. Sutherland regularly advises clients on a number of compliance issues, including FERC's trading practice requirements; the CFTC's trading practices and market manipulation prohibitions; the requirements associated with trading regulated futures instruments on the New York Mercantile Exchange; and U.S. competition and antitrust laws, anti-money laundering regulations, restrictions on international trade, sanctions and anti-boycott regulations. Our representation of trading companies on compliance issues has included:

Comprehensive compliance training for traders and support personnel engaged in trading energy futures, derivatives and forward transactions, focusing on the CFTC's trading practices and market manipulation prohibitions and FERC's trading practice requirements;
Developing compliance policies and procedures;
Internal investigations of trading practices, including issues arising from commodities, energy regulatory and antitrust laws;
Defending corporations and individuals in civil and criminal proceedings and investigations by the CFTC, FERC and the Department of Justice concerning power, gas, gas liquids and petroleum trading matters; and
Counseling concerning NYMEX rules and reporting requirements.

Crude Oil and Refined Products

The world market for crude oil and refined products is constantly changing and evolving to keep pace with the world's insatiable appetite for energy products. This practice area is inherently international, and deeply impacted by global and political conditions. Our representation of companies in the crude oil and refined product industries includes advice and counseling regarding:

Contract documentation of spot and long-term crude and refined products supply agreements;
Acquisition and disposition of petroleum refining assets;
Long-term processing and off-take agreements with U.S. and international refiners;
Joint marketing arrangements;
Inventory financing arrangements for petroleum refiners and crude oil gatherers;
Preparation and negotiation of terminaling and throughput agreements;
Preparation of pipeline transportation agreements;
Litigation of commercial disputes; and
Federal and state income and transaction taxes affecting petroleum transactions.

Derivatives and Financial Products

We counsel clients on a broad range of energy and commodity derivatives issues, including contracting, documentation, regulatory, tax consequences and conflict resolution. We offer an array of services ranging from analyzing and negotiating derivatives documentation (e.g., ISDA Master Agreements, credit support documentation, and cross-product and cross-affiliate master netting agreements), to advising clients with respect to tax and disclosure implications of derivative transactions, to litigation involving the analysis and proper valuation of terminated derivative transactions. Our work in this area includes:

Developing "model" documents and documentation policies for options, derivatives and swaps in petroleum, natural gas, weather and power;
Evaluating and developing internal guidelines and controls for clients' derivatives activities and reviewing risk management policies related to their energy derivatives trading;
Representing clients before agencies, including the CFTC and FERC, both for regulatory matters and investigations;
Advising clients on "clearing" transactions through NYMEX Clearport (EFS and EFP transactions);
Advising clients on regulatory and commercial changes affecting virtual power trading; and
Representing numerous energy trading companies in litigation and mediation involving disputes regarding swaps and options against other market participants in mediation, court and arbitrations.

Emissions and Renewables

We partner with our clients to navigate the changing energy markets and the legislative and regulatory framework driving the development of renewable and low-emissions energy sources. We represent energy traders and investors in matters relating to biofuels, carbon and renewable and low-emissions power, including biomass, wind, solar, plasma torch and nuclear sources.

Sutherland lawyers currently are compiling and editing a new book, Carbon Trade and Finance in the Americas, for Cameron May, a London-based publishing company specializing in International Trade and International Environmental Law.

The book is scheduled for publication later in 2008.

Our work in this area includes:

Monitoring and influencing the shifting legal landscape at the federal, regional and state legislative and regulatory levels by drafting, analyzing and commenting on proposed statutes, regulations and policy initiatives;
Structuring and document transactions involving the generation, purchase, sale, monetization and transfer of carbon, emission, and renewable energy credits;
Defending, negotiating and resolving contested permit proceedings or enforcement actions involving air emissions and disputing the sufficiency or legitimacy of renewable energy and emission credits or off-sets;
Developing carbon off-set, mitigation and sequestration strategies to facilitate new energy project development; and
Developing appropriate climate change disclosures and risk management discussion for SEC reporting.

Environmental

We represent energy traders as they address the array of federal, state and international environmental laws and regulations that govern their transactions and investments. We advise both domestic and international energy companies on the U.S. environmental issues associated with their lending and borrowing transactions and when they acquire or dispose of businesses and property. In this context, Sutherland attorneys have litigated major cases concerning the state and federal laws and defended clients in federal and state environmental enforcement proceedings. We have advised clients on the following matters:

Environmental compliance trading programs, including emissions and carbon trading;
Commercial and lending transactions, including due diligence and environmental risk allocation;
Environmental litigation;
Crude oil and oil spill planning and risk management, including federal, state and international marine oil spill laws;
Fuel specifications and mobile source program counseling;
Environmental compliance and enforcement matters;
Permitting and health and safety matters; and
Environmental policy development and rulemaking.

Litigation and Dispute Resolution

Backed by attorneys comprising one of the nation's preeminent energy practices and a world class group of litigators, our energy litigation team is prepared to tackle the broad range of disputes facing energy companies today. We understand the energy industry and your business. Our 25 energy litigation attorneys aggressively pursue the client's interests and have tried cases and argued before both federal and state courts – trial and appellate – as well as before regulatory agencies and arbitration panels. Recognizing the importance of client resources, we quickly develop a strategy with you to devote the right mix of attorney experience and skills and work closely with the client to achieve optimal results. In short, our energy litigation practice involves the full range of litigation, arbitration, mediation and negotiation on behalf of energy companies, with seasoned lawyers who long have been involved in the industry as the turbulent energy commodity markets have grown and evolved.

LNG

Sutherland's Global LNG Group, comprised of 21 lawyers and other professionals, represents LNG stakeholders at all phases of the value chain. As the Global LNG market continues to grow, the LNG Sales and Purchase Agreement (SPA) is evolving from the traditional, long-term, oil-indexed SPA to an instrument of commerce for short-term transactions, spot trades and other supply arrangements. Our lawyers have represented a number of companies contracting in the fast evolving LNG short-term and spot markets, and we understand the unique interests of new market entrants, including commodity traders, financial institutions and various niche market participants. We have also advised clients on the commoditization of LNG, including futures, swaps and hedging.

Restructuring and Bankruptcy

We have been actively involved in the most significant recent bankruptcies of energy trading and marketing companies. We also have represented debtors in possession as special energy counsel, working closely with traditional bankruptcy counsel and restructuring consultants, to provide specialized advice regarding energy contracts, trading, forward contracts, swaps, netting agreements, futures contracts, tolling agreements and regulatory matters. We provide advice relating to procedures for properly terminating and valuing trading contracts and portfolios, negotiating to liquidate positions consensually, responding to counterparty defaults or terminations, evaluating contract legal risks, and developing strategies for reducing such risks. In this context, we have dealt with contracts for power, natural gas, coal, capacity, emissions and environmental attributes.

We have counseled clients on a number of important energy bankruptcy issues, including:

Procedures for terminating and liquidating forward physical and financial positions and tolling agreements;
Valuation of physical natural gas and power positions, tolling agreements and financial swaps, derivatives and options;
Determining whether specific contracts qualify as forward contracts;
Automatic stay, preferences, and fraudulent conveyance issues;
Enforceability of setoff and netting issues; and
Credit support, collateral and guarantee issues.

Retail Power and Gas

Retail power and gas providers and commercial and industrial end-users regularly rely on our energy transactional lawyers to structure and document large, complex physical and financial energy commodity-based transactions, to develop form purchase and sale agreements that accommodate multiple retail markets, to advise them in connection with potential bankruptcy or credit constraint scenarios, and to handle their corporate and M&A needs, such as acquiring or divesting regional electricity providers or retail 'books of business.' That same market segment often turns to our regulatory and litigation teams to develop compliance training programs, provide regulatory advice, litigate commercial and regulatory disputes, and advocate policies at state PUCs.

Wholesale Power and Gas Trading

We have led the fight for pro-competitive wholesale policies in the natural gas and power industries industry and have consistently advocated regulatory policies that permit market forces freer play. Our attorneys have a great deal of expertise in the negotiation and documentation of complex, structured transactions providing for the wholesale purchase and sale of electric power and capacity, natural gas, tolling of gas and power, financial hedging of gas and power, gas storage, and the provision of electricity transmission and natural gas transportation. In addition, we have developed model documentation for energy trading and marketing companies, using industry-standard forms, such as ISDA Master Agreements, the EEI Master Power Purchase and Sale Agreement, the Western Systems Power Pool Agreement, Master Netting Agreements and NAESB Gas Master Agreements.