This guest blog post was written by Carla Gunnin, a shareholder with Baker Donelson in Atlanta. Her practice is focused on labor relations matters and occupational safety and health issues and litigates cases before federal and state administrative tribunals throughout the United States in matters of Occupational Safety and Health (OSHA) law and Mine Safety and Health (MSHA) law. With federal budget battles over, employers, including oil and gas companies, can expect to see more from OSHA during the remainder of fiscal year 2014. OSHA's budget year began October 1, 2013 with the infamous shutdown of the government.  During the shutdown, federal OSHA only operated with a skeleton crew and many of the typical type of OSHA inspections did not occur. Now that a two year deal on federal spending was reached in December, 2013, OSHA not only has funding, but has also gained money in its budget due to many of the dollars related to the sequester budget cuts being given back as part of the deal.  What does this mean to employers? You guessed it, OSHA's back and with a vengeance. Already, OSHA's regulatory agenda has become packed with items. In particular, one of the more hotly contested proposed regulations would require many employers to provide OSHA with their injury and illness date as often as quarterly or at a minimum, at least once per year. Currently, OSHA only gathers specific data of injuries and illnesses from employers when an OSHA inspection is conducted. More general data is gathered pursuant to surveys that are sent out by the Bureau of Labor Statistics or OSHA's Data Initiative. How would proactively providing data to OSHA affect an employer? Well, for one, it could trigger an OSHA inspection when one otherwise would not occur. OSHA will have the data electronically and will be able to use the data to target employers for inspection. If the data was truly an accurate depiction of safety or health hazards at the worksite, then that would not necessarily be a bad thing, however, what about the severe injury that occurs to an employee who is engaged in employee misconduct?  The employer may have an excellent case for employee misconduct, but even so, the recordkeeping regulations require that the injury be logged on the OSHA 300s (of course, this is assuming that the nature of the severe injury triggered one of the reporting requirements under the recordkeeping regulations).  The injury that would be reflected in the records would not necessarily reflect an unsafe worksite, yet, the employer could face the aspect of an OSHA inspection. This proposed rule would also allow for the posting of the collected injury and illness data on OSHA's website, allowing anyone to review an employer's injury and illness data. The proposed rule would be a major change for many employers by allowing data to be easily reviewed by competitors, unions (potentially useful when attempting to organize a union campaign - currently, regulations only provide for unions accessing the injury and illness data at unionized facilities), prospective employees, media, or, basically, anyone who just wants to review the data for whatever purpose. Currently, only certain people are allowed access to an employer's injury and illness data. Anyone can comment on a proposed rule and given the potentially wide-ranging effect of this rule, most employers should comment. Comments are being accepted until March 8, 2014. On the enforcement front, with David Michaels continuing to head the agency, it is clear that OSHA will remain vigorous in enforcement efforts.

The U.S. shale boom continues to foster optimism for energy CFOs as we enter 2014. In our sixth annual Energy Outlook Survey of 100 U.S. oil and gas chief financial officers, we found that the industry expects healthy international and domestic demand for U.S. resources to drive profitability, but many companies remain wary of potential obstacles ahead. CFOs expect that both global and domestic supply and demand dynamics will continue to favor the United States in 2014. Energy executives forecast accelerated production of U.S. resources throughout the year: 73 percent predict an increase in the domestic supply of natural gas, and 76 percent anticipate an increase in domestic oil production, as well. However, CFOs also see opportunity in the international markets; 64 percent anticipate growth in global demand for natural gas, while 65 percent are expecting a similar increase for oil. With these dynamics encouraging industry growth, CFOs are feeling sunny about both the economy and their own finances this year. Sixty-three percent of CFOs feel confident about the U.S. economy and its impact on demand for energy in 2014, a 54 percent increase from last year’s study. Moreover, 71 percent express optimism about their access to capital this year, up 20 percent from last year. However, facing an uncertain regulatory environment and perennial volatility in oil and gas prices, CFOs are hoping to channel their increased resources inward. Expansion is less of a priority this year than in 2013, with more than half of CFOs surveyed anticipating no change in M&A deal flow, and 43 percent expecting an increase. This contrasts with last year’s projections, when 53 percent of CFOs expected to see a rise in M&A activity. Furthermore, when asked how they plan to bolster profitability, one-third of CFOs cite improving internal business processes as a top tactic, and only a quarter anticipate investment in new technologies. Nearly one-in-four CFOs expect to scale down their business: 12 percent plan to reduce exploration, while 11 percent cite staff cuts. In addition, a plurality (38 percent) say they will pursue cost reduction programs in an effort to increase value for stakeholders, a 58 percent jump from last year’s study. Legislative and regulatory changes remain CFOs’ primary challenge in the coming year, as well as the main driver of their conservative financial planning. A majority of CFOs (53 percent) believe legislative changes will be the top factor inhibiting overall industry growth in 2014, and a plurality (36 percent) cite regulatory changes as a top political concern for 2014. Energy executives are also keeping a wary eye on international developments. Forty-six percent cite ongoing turmoil in the Middle East as having the greatest impact on oil price volatility in the coming year, and one-quarter of CFOs indicate that economic growth in Asia may also cause prices to fluctuate, a three-fold increase over our 2013 study. Despite uncertainties surrounding new regulations—particularly those focused on the environment—CFOs are accepting environmental stewardship as a core part of their corporate plans, and are increasingly seeking environmentally responsible ways to exploit U.S. oil and gas resources. Sixty-one percent of CFOs indicate that they plan to increase their capital investment in environmentally-friendly E&P processes in 2014, a 15 percent jump from last year’s study. Meanwhile, carbon emissions are a lesser concern at this time, with only 17 percent citing them as a top environmental challenge. Nevertheless, many major producers, such as ExxonMobil and BP, are now incorporating the cost of a potential carbon emissions tax in their long-term financial plans. Overall, our survey revealed an overarching theme of confidence and optimism among industry executives that suggests we will see continued growth in the U.S. oil and gas industry this year. However, the industry remains all too aware of potential challenges around the bend, and is dedicating resources toward developing the agility required for navigating a volatile marketplace. This guest post has been written by Charles Dewhurst, leader of the Natural Resources practice at BDO USA. He can be reached at [email protected].

This guest post has been written by Bruce Gordon, Partner with the Natural Resources practice at BDO Australia. For more information, Bruce can be reached at [email protected]. An increasing appetite for mergers and acquisitions among junior explorers in the Australian mining industry could become a trend over the next 12 months, largely as a result of dwindling cash reserves and a lack of capital combined with increasing costs. Recent research by BDO Australia examined the financial health of junior explorers as of the end of September 2013 and found that 333 of the 832 junior exploration companies listed on the Australian Securities Exchange (ASX) had cash balances of less than the $AUD1 million. In addition, more than half (498) had less than $AUD2 million. Critically, the research indicated that 375 companies didn't have sufficient current funding to continue operations over the next six months without securing additional capital or a reduction in administrative and/or exploration expenditures. The study also revealed that if current levels of expenditure continued, 107 of these companies would not have sufficient funding through the end of 2013 for administrative expenses alone. Moreover, the pullback of investors from riskier investments at the junior end of the market has created a capital desert that has not been seen in a decade. The working capital position of the industry’s smallest companies is so severe that many do not have sufficient cash to wait for market conditions to improve. Costs of exploration have also increased dramatically in Australia, which explains in part why approximately half of all locally-generated exploration funding is being invested offshore, with developing nations capturing the lion’s share. It has been reported that there are now 325 Australia-based companies operating about 850 projects (including 45 operating mines) in Africa. Australia is now ranked fifth in the race for funding in the exploration sector, capturing 12 percent of the global spend, behind only Africa, Latin America, Canada and Eurasia. There are obvious options for junior exploration companies in this precarious state, including joint ventures, farm-ins and mergers and acquisitions. Mergers between explorers and producers, or among explorers themselves, are potentially viable options for improving the fiscal position of junior explorers struggling under funding shortfalls and other pressures. Backdoor listings (otherwise known as reserve takeovers) are also gaining momentum. There were 24 deals in the nine months leading into September 2013, and there are no signs of that slowing. The number of completed and pending backdoor listings in 2013 has already exceeded 2012 levels, and with a long list of struggling Australian-listed companies, the trend seems likely to persist. The new Australian government’s pledge to introduce an exploration development incentive could provide some welcome relief for the mining sector. This incentive has been welcomed by many exploration companies, as it will allow investors to deduct the expense of mining exploration against their taxable income. The challenge for the junior exploration industry in Australia, then, is survival: survival until the industry receives a kick-start from government incentives, until a change in investor sentiment, and/or until a rationalisation of the sector occurs through corporate activity.

The energy and natural resources industry was founded by entrepreneurs; entrepreneurs who drilled the first oil wells, dug the first mine shafts and built the first hydro dams. They were trailblazers who shaped the world we live in today, in which we rely on energy and natural resources made available through their innovations. Energy is an essential component in our daily lives, from fueling our cars, to heating our homes, to powering the appliances we depend on. However, the world is changing. The United Nations estimates the world population will increase by 2 billion people in the next 30 years, attributing much of the growth to developing countries. This means growing energy requirements to power homes, businesses, industry, transportation, electricity generation and other vital services. Even taking into consideration improvements in energy efficiency, the U.S. Energy Information Administration estimates that the global demand for energy will increase by 56 percent in the next 30 years. In order to keep pace with rising global energy demands, and with some conventional resources already on the decline, we will have to rely on unconventional resources. Much like the forefathers of the energy and natural resources industry, energy resources considered “unconventional” today are rapidly becoming the norm thanks to continued technological advances made by leaders in their field. These modern day entrepreneurs have developed tools, techniques and technologies that are unlocking the world’s unconventional resources, including heavy oil/oil sands and tight oil/gas, in some of the world’s most daunting locales, such as deepwater and the Arctic. Breakthroughs by innovative individuals and companies in areas such as directional drilling, hydraulic fracturing and liquefied natural gas have helped energy production keep pace with increasing demand. Entrepreneurs’ technological advances will continue to be important to the industry, since a significant portion of the world’s resources are located in challenging environments that require new tools and processes to extract them. Entrepreneurship has historically been, and will continue to be, a critical part of the energy and natural resources industry. The most successful organizations in the industry are embracing this entrepreneurship within their organization. We are seeing new technology being developed and implemented by leaders not afraid to look to the markets to determine innovative solutions for some the industry’s biggest hurdles. New technologies are changing the landscape of the industry and these leaders are reaping the benefits.  What is your organization doing to be at the forefront of change? This guest post has been written by Justin Friesen, partner in the energy group with BDO Canada. He can be reached at [email protected].

The organizers of the Oil & Gas Awards announced last week that Acting Secretary of the Pennsylvania Department of Environmental Protection Christopher Abruzzo had been added to the judging panel for 2013 Northeast Oil & Gas Awards. Abruzzo joins the more than 50 senior industry experts who will judge entries. The winners for the Northeast region will be presented to winners at a gala awards dinner ceremony in March 2014 in Pittsburgh. "The Oil & Gas Awards celebrate companies that have achieved corporate success whilst also fulfilling their responsibilities to the environment, maintaining the health and safety of their workers and being committed to their corporate social responsibility to the communities they work in," the organizers said in a statement. "It is fantastic for the Awards initiative, the participating companies and the industry as a whole that the Department of Environmental Protection are judging the Awards, seeing the industry’s efforts to work in a responsible way and reviewing the best practice being developed by companies." Abruzzo served as deputy chief of staff to Governor Tom Corbett before being appointed to the position of acting secretary by Corbett in April. "Abruzzo brings 20 years of public service experience to DEP," according to the event's organizers. "He was elected in 2007 to serve as a member of the Derry Township (Dauphin County) Board of Supervisors, and has served as chairman of the board of supervisors since 2010. Abruzzo was appointed in 2008 to the board of the Derry Township Municipal Authority which oversees the township’s wastewater systems, interceptor lines, sewage treatment plant, and the treatment and disposal of industrial waste. He served as chairman of the authority board in 2010 and 2011. While chairman, he was instrumental in directing the township’s response to flooding caused by catastrophic storm events Hurricane Irene and Tropical Storm Lee. Abruzzo’s six years as a local government official give him a unique understanding of the many issues and challenges that municipalities encounter as they strive to implement best practices and meet environmental standards and regulations." For a full listing of the Oil & Gas Awards judging panel, visit http://www.oilandgasawards.com/judges/.

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