The seemingly overnight explosion of the Marcellus Shale play has attracted law firms of all sizes and practices from both inside and outside Pennsylvania. But while some believe the amount of work coming from major drillers will require the huge staff only a megafirm can provide to manage it, smaller firms are banking on the depth of their expertise to help them remain competitive.
Energy lawyer Michael P. Joy, upon joining Reed Smith in Pittsburgh as a partner in its energy and natural resources group from his boutique law firm Biltekoff & Joy in Buffalo, N.Y., told The Legal in January that he chose the firm because he believed “the volume of work, as well as the [sophistication] and the breadth of the projects” related to natural gas drilling in Western Pennsylvania are evolving in such a way that only large firms with a wide range of expertise will be equipped to handle them.
“A small operator may own [10,000] or 15,000 acres and may drill a couple of wells a year,” Joy said. “But some large independents and majors are able to acquire hundreds of thousands of acres and the need is that much greater. You truly need teams of people to do this.”
But not everyone shares that sentiment.
Kevin L. Colosimo, managing partner of the 30-lawyer Pittsburgh-area office of Houston-based Burleson LLP, said he’s never had a client hire his firm based on the number of lawyers it has.
“What you need to handle these matters is an understanding of the science and an understanding of the legal issues and a depth of experience in the issues,” he said. “The mere fact that a large firm has hundreds of lawyers doesn’t speak to the depth of their knowledge or experience in these matters. What sets us apart is the depth of our knowledge and breadth of experience representing oil and gas exploration and production companies.”
Kristian E. White, who opened West Virginia-based Steptoe & Johnson’s Southpointe, Pa., office at the beginning of 2011, four months after the firm opened in Meadville, Pa., said his firm, predicting the growth of the industry in the Appalachian Basin, has made an effort to bulk up its support staff over the past five years to keep pace.
“We have 180 title abstractors throughout our firm that we have positioned throughout the Appalachian Basin in different locales” where there is a lot of natural gas activity but where the firm does not have official offices, such as Washington, Pa., and New Martinsville, W. Va., White said.
But White agreed with Colosimo that a strong, concentrated focus on oil and gas work is as important as, if not more important than, staff or lawyer headcount.
“While our 230 attorneys [firmwide] may be less than a firm of 600 or 1,000, more than half our attorneys focus their practices on the energy industry,” he said.
Colosimo said some large general practice firms that have entered the Marcellus Shale play do not have the same type of expertise as a firm like his that focuses solely on the energy industry.
“I see larger firms who are trying to reinvent themselves to be oil and gas lawyers,” he said. “Oftentimes, the people who were doing commercial real estate development are suddenly retooled and recharacterized as oil and gas lawyers.”
For some firms, Colosimo continued, size is the main selling point.
“I think the number of people a large firm lists on its website under a tab that says ‘Energy’ or ‘Oil and Gas’ is a way of them marketing to the industry that they are big, when in fact not all of those people are oil and gas lawyers and the majority of them are not dedicated to the full-time pursuit of oil and gas law,” he said.
Colosimo did note that there’s plenty of work to go around and plenty of competition for that work, but maintained that size has not been a factor when vying for work.
If anything, he said, smaller firms may even be at an advantage because of their rate structures.
“We’re in a competitive environment due to the price of gas being so low, so the value component to clients is much higher,” he said. “We provide that value component in a much greater way than a big firm.”
White had a similar take.
“We’ve been told by energy companies that the rates we charge are very competitive in relation to larger firms that are looking to get involved in the market because, historically, our offices have been in geographic areas where we have lower overhead,” he said.
Another advantage smaller firms have is a lower probability of encountering conflicts among their clients, according to Colosimo.
“We don’t have conflicts because our entire investment is in the [oil and gas] industry,” he said. “Other firms are still doing a lot of coal work. I believe to be dedicated to the oil and gas industry in Appalachia, doing coal work creates the potential for conflicts.”
None of this is to say larger firms are not becoming increasingly competitive in the Marcellus Shale play, but Colosimo said many of the matters his firm has seen larger firms involved in do not constitute pure oil and gas work.
“As far as where the competition sits, we see other firms involved largely in M&A-type transactions where the expertise called upon is not necessarily an oil and gas expertise, but an M&A expertise,” he said.
White, meanwhile, said his firm has experienced competition from larger general practice firms in the hiring market.
“We have found that some of these larger firms will use headhunter services and reach out to firms such as Steptoe and literally go down the office list and call each associate,” he said. “We lost a couple of our attorneys in Southpointe to one of the largest firms based in Pittsburgh that is looking to build an energy practice. We understand the market’s very competitive right now. There are only X number of true energy lawyers in the marketplace and if you want to grow, you’re going to have to recruit from either oil and gas companies themselves or from other law firms.”