Welcome to M&A 2008-style - powered by coal, natural gas and coal seam methane. In ALB's September issue we find that contrary to popular perception, east coast lawyers are seeing a fair slice of the action.

We have heard the phrase 'two-speed economy'used to describe the contrasting fortunes of the resource sector and the wider economy respectively - but what about two-speed M&A?

Tony Damian, partner at Freehills, is one M&A expert who has seen a dramatic increase in the level of M&A work from the resources sector - particularly coal and natural gas.

"Over the last couple of years, we've seen assets in the coal market hotly contested," he said. "It's a real race for those assets; compare that with the situation in sectors like the financial services market, where there's a clear demarcation between the players who have suffered at the hands of the credit crisis and the players who have been able to turn that state of play to their advantage."

Louise Baldwin, general counsel at Centennial Coal, said that record coal prices are in part driving increased M&A activity in the industry. "We can expect to see activity from the China and India players in particular as they look to secure supply," she said.

Centennial Coal typically outsources work to law firms when it is involved in major asset acquisitions or disposals, such as last year's A$1.1bn sale of the Anvil Hill project and Austral Coal to Xstrata.

Western Australia has traditionally been a powerhouse of the mining sector, but Damian warns against discounting the importance of the eastern states.

"For example, this year has seen frantic activity in coal seam methane LNG in Queensland," he said. "We've seen the whole sector being rewritten with landmark deals."

The major players have Queensland LNG resources in their sights. Malaysian state energy firm PETRONAS recently agreed to pay up to A$2.4bn for a 40% share of Coalplay

Santos' LNG upstream assets for the A$7.7bn proposed LNG plant at Gladstone, and will be a partner to Santos in the plant. That is only one of many resources projects happening along the east coast and Damian said that the result has been increased activity for the Freehills M&A team in both Sydney and Brisbane.

Meanwhile, the boards of Queensland Gas Company and Sunshine Gas Limited have announced their agreement to an offer by QGC for all the issued shares in Sunshine. Queensland Gas has engaged Austock Corporate Finance as financial advisor and Atanaskovic Hartnell as legal advisor, while Sunshine has engaged Wilson HTM Corporate Finance as financial advisor and Clayton Utz as legal advisor.

The future holds two uncertainties - first, the suggestion that the Rudd government will move to restrict foreign investment, and secondly the possible impact of a carbon trading scheme when it is introduced. Not that these uncertainties have had any effect on the recent pace of transactions in the sector -and the general industry consensus is that any changes to foreign investment rules will most likely be targeted at non-commercial government entities.

Meanwhile, the details of carbon trading are still being worked through and it is a case of 'watch this space'. Like many in the industry, Baldwin is waiting to see the final form of the carbon trading scheme, but she does not expect it to have a major impact on deal activity. "Clearly there will be the additional cost of buying emissions permits, but this is not going to change the underlying demand for the product itself," she said. ALB