This guest post has been written by Dennis Horner, a partner with Management Consultancy Services at BDO United Kingdom. He can be reached at [email protected]. In today’s global economy, it is crucial for organisations to manage risks, maintain control over assets and keep running costs as low as possible. This is no different for the mining sector, although these aims may be more difficult to achieve due to the often challenging locations and conditions in which organisations operate. The effective use of technology is a critical key underpinning these objectives. The computer systems and processes deployed will need to provide a sound platform on which an organisation’s processes function. A number of factors need to be considered to achieve this.

In our previous issue, Energy & Mining International ran a special section highlighting some of the winners of the Oil & Gas Awards for 2013. The section focused on winners from the Rocky Mountain and Gulf Coast regions, and last week the Oil & Gas Awards announced the finalists for the Southwest, West Coast and Midcontinent regions. The winners will be announced at an awards gala celebration in October. According to the organization, the Oil & Gas Awards "promote and celebrate the positive contributions made by organizations in the upstream and midstream sectors of the oil and gas industry." You can expect to see more profiles of the finalists and winners in the Southwest, West Coast and Midcontinent regions in EMI as they are announced.

This guest post has been written by Bryndon Kydd, CA, Vancouver leader of BDO Canada's Energy and Natural Resources Group. For more information, he can be reached at [email protected]. A few years back, when Canada was first contemplating transitioning to International Financial Reporting Standards (IFRS), one could have been forgiven for keeping an eye to the sky for falling pieces. Talk of how mining organizations were losing control of their financial statements and how those statements were increasing in length, adding to the disregarded pages tossed to the recycling bin, had many executives feeling anxious. In the aftermath of this transition, it’s worth taking a look at what’s really changed for Canadian mining companies over the last few years. Obviously, technical accounting guidance is different from before. However, what has fundamentally changed is how companies are able to express their thoughts and intentions in their financial statements. Before IFRS, CFOs often argued against CGAAP (Canadian Generally Accepted Accounting Principles) guidance in order to articulate the spirit of a contract or transaction. The perception and source of the frustration was that the rules were not written with mining companies in mind, preventing the true nature of a transaction from being expressed in the company’s reporting. The spirit of IFRS as a principles-based framework allows management to do just that. In many cases, we now see differing points of view on the same guidance, often with all of them being acceptable. This shift in mindset provides companies with unprecedented flexibility to truly articulate to their stakeholders what they have done and why; a change that equally benefits companies and investors when fully embraced through transparent disclosure and careful contemplation of the guidance. A good example of IFRS’s flexibility in the application of the guidance is whether finance costs should be capitalized or expensed in connection with exploration and evaluation (E&E) expenditures. On this particular issue, some believe the guidance in IAS 23 (Borrowing costs) and IFRS 6 (Exploration for and evaluation of mineral resources) appear to conflict. While IAS 23 requires the capitalization of borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset when it is probable that they will result in the entity obtaining future economic benefits, the nature of E&E expenditure per IFRS 6 means that it is unlikely that an entity will be able to satisfy the probability test for future economic benefits. Consequently, it could be argued that capitalizing borrowing costs related to E&E assets is not permitted. Many accounting firms and industry preparers recognize this issue as being resolved through an accounting policy choice, with each entity establishing a policy that works best for their particular circumstance and applying it on a consistent basis. This is just one of many such examples of varying interpretations that exist throughout IFRS, thereby enabling management to select the approach that best articulates the company’s specific circumstances to the financial statement reader. Canada has been a world leader in reporting for mining companies for many years, from our involvement in the development of IFRS 6 and IFRIC 20 (Stripping costs in the production phase of a surface mine) to the global recognition of National Instrument 43-101 and its sister CIMVal Standards as the gold standards in geological reporting. With the transition to IFRS, Canada has become an integral part of a global network to which we can directly contribute through our assistance with IFRS interpretations. This was a change for the better.

This guest post has been written by Charles Dewhurst, partner and leader of the natural resources practice at BDO USA. He can be reached at [email protected]. The U.S. shale boom, now in its second decade, is facing an increasing number of obstacles as it continues to drive industry growth and development of new technologies. Our third annual analysis of risk factors cited by the top 100 publicly-traded U.S. E&P companies in their most recent 10-K filings finds that many shale production-related risks, ranging from regulation to infrastructure capacity, are top of mind for industry leaders in 2013. Pressure to lessen the environmental impact of E&P operations at U.S. shale formations is growing from the government and general public alike, and companies are facing an increasingly heated regulatory environment. As a result, 96 percent of all companies in the study cite risks associated with environmental regulation compliance as a top concern this year. More specifically, concerns about hydraulic fracturing regulation are mounting, with 85 percent of companies listing it as a threat, up from 74 percent in 2012 and 52 percent in 2011. At the same time, risks associated with managing the liabilities and costs of pollution resulting from operations have risen modestly. Eighty-seven percent of companies cite it as a risk this year, up slightly from 79 percent in 2012. But hydraulic fracturing regulation isn’t the industry’s only concern. Regulations aimed at mitigating the impact of climate change are proliferating as natural disasters grow in frequency and severity. Eighty-nine percent of companies say that climate change and greenhouse gas regulations could pose a threat to their businesses this year. With President Obama recently announcing several new initiatives to tackle climate change, companies are on high alert for additional regulations. Environmental regulation is not the only obstacle oil and gas producers are now encountering. As shale production volumes grow, companies are beginning to face very real infrastructure limitations. According to our study, 80 percent of companies cite a lack of adequate pipeline, storage and trucking capacity as threats to their business, up from 63 percent last year and 29 percent in 2011. The industry is currently identifying ways to address this shortage, with many midstream companies building new pipelines to carry crude from Texas and Oklahoma to Gulf Coast refineries. Yet this only partially solves the problem: U.S. refineries cannot keep up with the pace of current shale production, and reliance on third-party transportation and processing remains perilous for E&P companies. Eighty percent of the 10-Ks we studied cite these third-party relationships as a risk. Meanwhile, the future of the Keystone XL pipeline remains in flux, with President Obama tying its approval to minimizing its environmental impact. Overall, our analysis of 2013’s top risk factors reveals that while many of the top risks—regulation and environmental liabilities—are evergreen, the nature of these threats continues to evolve. New technology drives industry innovation and exponential growth, creating new opportunities. However, with new opportunities always come new pain points.

This guest post has been written by Eloise Young, Ph.D., senior program manager of NineSigma, the leading innovation partner to organizations worldwide. She can be reached at [email protected]. Carbon-based emissions, such as carbon dioxide (CO2), have drawn massive amounts of negative attention. But what if carbon could be transformed from a liability to an asset? What if an economy arises where carbon-based products become sought after, valuable and integral to the fabric of our lives? This is the vision of the $35 million (Canadian) CCEMC Grand Challenge: to identify and support development of technologies that convert CO2 emissions into carbon-based products – promoting new businesses and new markets. Topics selected for grand challenges are generally sweeping in scope, aspirational, and provide social good. They enable individuals and groups with diverse technical expertise to collaborate and create breakthroughs. A recent example is the Ansari X Prize. Twenty-six teams from around the world competed to be the first to launch a private, manned spacecraft into space twice within two weeks. The Scaled Composites’ Tier One won the $10 million prize in late 2004. But it has been estimated that over $100 million was invested by the vying teams to develop new supporting technologies. The Climate Change and Emissions Management (CCEMC) Corporation is an Alberta, Canada-based not-for-profit corporation that operates independently of government. The CCEMC is dedicated to the discovery, development and deployment of clean technologies to reduce greenhouse gas emissions (GHGs) and to assist Alberta in adapting to climate change. It provides ongoing, dedicated funds to support transformative technologies that will reduce GHGs. The challenge spans a period of five years. During the current first round, up to 20 participants will be awarded seed grants of $500,000 (Canadian) to develop or prove proposed technologies. In addition to receiving seed grants, Round 1 winners will also have access to a support network of business and technology advisors, venture capitalists, and other resources. Anyone with a bright idea is welcome to submit a short (one to three pages), non-confidential proposal at The deadline to submit proposals is July 31, 2013. The best and most innovative proposals will be identified, and those selected will be invited to submit a complete and comprehensive proposal. The CCEMC and an external judging panel will choose the 20 winners from these invited proposals. Winners will have two years to develop or prove out their technologies. In subsequent rounds, Round 1 winners and any other groups will be able to submit proposals to win one of five $3 million (Canadian) development grants. Eventually, one of those five winners will advance to win the $10 million (Canadian) commercialization grant. But the intent is that technologies which do not advance will have benefited from the funding and the mentoring from the support network to be able to leverage their exposure and experience to gain funding and/or opportunities from other organizations besides the CCEMC. The CCEMC Grand Challenge is a prime example of a quest that is both aspirational and achievable. It is based on the premise that together, we have the ability to create a cradle to cradle cycle for carbon that will strengthen our economy and reduce carbon footprints.

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