Company vs. Company Dispute Resolution Task Force

Senior representatives from various petroleum industry associations with the support and assistance of dispute resolution professionals are focusing on ways to better manage, control and resolve conflict. They have formed an industry-wide Dispute Resolution Task Force that will recommend improvements in industry agreements and processes that will address the negative impacts of unresolved conflict.

Conflict is a natural and inevitable byproduct of business, and how we manage that conflict significantly impacts our success. Members of the Task Force have identified conflict situations and business effects resulting from disputes which include:

• delays in the conduct of operations and the associated erosion of project economics;
• maintenance of receivables accounts at unacceptable levels on a sustained basis;
• the inability to move to closure on audit exceptions in a timely manner;
• dispute resolution processes that are lengthy, expensive and require large allocations of internal resources that must be diverted from other corporate opportunities; and
• a negative impact on the ability and willingness of the joint venture parties to work together in a way that optimizes the value of their existing and future projects.

Industry must strive for timely, efficient and effective resolution of its business conflicts in order to minimize the impact they have on the bottom line. Benefits occur when parties in dispute meet and begin to build a relationship between each party’s representatives. This often results in a clearer (and perhaps narrower) definition of the matters that are actually in dispute. In the past decade significant positive results have been achieved through voluntary dispute resolution processes. These voluntary processes promote early negotiation in a collaborative, interest-based fashion with growing support from stakeholders, governments and regulators.

New models of dispute resolution are already providing promising opportunities to deal with conflict and enhance relationships by addressing a broad spectrum of industry disputes. Beyond industry the Alberta Court of Queen’s Bench is currently looking at a Court Annexed mediation program for all civil cases. Industry regulators are also using ADR processes on an increasing basis. The Alberta Energy and Utilities Board’s (EUB) Appropriate Dispute Resolution (ADR) program, for example, is becoming recognized as a state-of-the-art model for regulatory agency ADR programs. The National Energy Board is currently circulating its own discussion paper on ADR and is also represented on the Task Force.

While the preliminary feedback from these regulatory initiatives is encouraging, there is recognition by the regulators and industry that improvement opportunities exist and that those improvements will be facilitated by the participation by regulators on the Task Force.

However, the real opportunity for ADR in our industry transcends the regulator. Gas processing and transmission, unresolved audit claims and force pooling, for example, are sometimes very contentious and costly disputes that frustrate the parties involved. While these issues and the others faced by our industry on a daily basis are often complex and cumbersome, the processes to resolve them should not be and do not need to be. Industry agreements and processes plus regulatory framework must be improved to enhance the opportunity for constructive and effective conflict management.

The Task Force goals and ambitions are:

• to enhance industry awareness of the benefits of using open and constructive communication to identify and address disputes when first recognized;
• to create an industry association-sponsored ADR protocol for broad industry circulation and approval;
• to draft ADR sample clauses for incorporation into future industry agreements;
• to create a framework and guidelines for industry use of ADR options; and
• to identify areas where regulatory support would enhance the use of ADR tools and techniques.

The ultimate success of these initiatives rests with industry’s willingness to take a different approach. When traditional negotiations break down or become problematic it is often difficult for the parties to avoid becoming adversarial and positional.

The following petroleum industry interests are represented at the Task Force and are leading this important initiative:

• The Canadian Association of Petroleum Producers
• The Small Explorers and Producers Association of Canada
• The Canadian Association of Petroleum Landmen
• The Petroleum Joint Venture Association
• The Petroleum Accountants Society of Canada
• The Energy and Utilities Board
• The National Energy Board
• The Calgary Chamber of Commerce DR Committee
• The ADR Subsection of the Canadian Bar Association
• The Canadian Association of Petroleum Land Administration

The Task Force has created four teams to address specific targets as follows;

• Team 1: Communication/ Education/ Liaison
• Team 2: Regulatory Alignment
• Team 3: Contractual Provisions
• Team 4: Tools and Guides

This is an important opportunity for the petroleum industry to take the lead in transforming conflict into collaborative solutions. The Company vs. Company DR Task Force represents a multi-disciplinary cross section of industry professionals including engineers, geologists, landmen, joint venture, marketing, regulatory, mediators, arbitrators, solicitors and litigators.

We invite you to be part of better business conflict management. Contact a member to find out more about the Task Force and the progress we are making toward achieving that goal.