In This Issue:

- The "Preliminary Agreement" – Framing or Frustrating the Deal?

- Recent Maritime Cases Illustrate the Different Legal Risks Involved with Conducting Offshore Oil and Gas Operations

- Texas Supreme Court Holds that "Reasonable Certainty" Requirement Applies to Claims for "Lost Market Value"

- What Does the UK's New Conservative Government and New Secretary of State for Energy and Climate Change Mean for the UK's Energy Sector?

- EPA and U.S. Army Corps of Engineers Finalize Rule Expanding Federal Jurisdiction Over Waters and Wetlands

- Department of Energy Report Examines Wind Energy's Potential

- Excerpt from The "Preliminary Agreement" – Framing or Frustrating the Deal?:

Preliminary Agreements come into play when structuring and negotiating a broad spectrum of transactions and agreements. They are embraced by many market participants and are, at best, tolerated by others. They have been the source of litigation and, in some cases, very well-known litigation. A Preliminary Agreement manifests itself in many ways, ranging from a valuable nonbinding tool to frame a proposed transaction; to a set of principles agreed by representatives of counterparties who do not ultimately structure and negotiate a deal; to an unintended legally enforceable agreement with numerous ambiguous or missing terms; and, finally, to an intentionally enforceable agreement. What is certain is that the Preliminary Agreement is a widely accepted way to progress many commercial arrangements. They often bring focus to a proposed transaction, identify terms that may be deal breakers, provide a sense of commitment from the parties, and establish a timeframe in which the parties intend to finalize a negotiation. On the other hand, Preliminary Agreements can prove to add a layer of additional cost, cause the parties to get tied down to prospective deal terms set out in the Preliminary Agreement, and (in some jurisdictions) inadvertently create a duty to negotiate in good faith. Preliminary Agreements are commonly and successfully used for LNG sales, acquisition or divestiture of stock or assets, long term commodity (such as natural gas) sales, joint ventures, and many others. If common, and often fundamental, provisions are clearly documented and understood by the parties, a Preliminary Agreement will serve as a useful framework for structuring and negotiating a transaction, as opposed to a document that frustrates a definitive agreement of the parties.

Is it binding in whole or in part? Often the commercial (and some legal) terms of a Preliminary Agreement are not intended to be binding, but are intended to serve as the basis for future negotiation. However, in some circumstances, the parties elect to make the agreement binding in the event a definitive agreement is not achieved. There is rarely an agreement that is truly not binding at all – drafters clarify in the document the binding nature of various provisions. If the commercial terms in a Preliminary Agreement are intended to form the basis of future negotiation or serve as principles in future negotiations, such provisions are typically made expressly non-binding in the Preliminary Agreement. In these circumstances the provisions addressing the non-binding nature of the agreement, governing law, exclusivity (if applicable), term, confidentiality, assignment, notices and certain other miscellaneous provisions are, and should be, obligations of the parties to the agreement. Under some laws, in addition to concise language in the body of the Preliminary Agreement, it is important to also state at the top of the agreement that it is "Subject to Contract". In some jurisdictions the Preliminary Agreement will create an obligation to negotiate in "good faith". When a Preliminary Agreement is intended to be binding, it should be explicitly stated to avoid future disputes over the agreement's nature. In this case, it is critical that the agreement include the key commercial terms in sufficient detail that they are not left to later interpretation. It is also critical that governing law and sufficient non-commercial (legal) terms are also included to ensure some degree of certainty in interpretation and enforceability should there be a future dispute.