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Short supply, high demand, and skyrocketing prices for oil and gas have generated hysteria in California, anger at the gas pumps, and a looming threat of summer blackouts. But they’ve done wonders for Texas law firms. In Houston, which bills itself as the energy capital of the world, major law firms are not just weathering the economic downturn, they’re thriving. Texas firms are helping both Big Oil clients and small and midsize gas and electric companies — emboldened by high commodity prices and a pro-power president — buy land, build energy plants, finance pipeline projects, and defend themselves against massive suits. “It’s all really picked up,” says David Runnels, a partner at Houston’s Andrews & Kurth. For about 15 years, relatively low prices deterred investment in the natural gas industry, helping create the shortages that brought on the current boom. Now Andrews & Kurth lawyers are representing Enron Corp.; El Paso Corporation; NRG Energy, Inc.; and Conoco Inc. in the range of matters that surround power plant construction. “They’re building from the ground up,” says Runnels. “We’re seeing everybody and their brother building a power plant for the next three or four years,” agrees George (Guy) Young III, a partner at Dallas’s Haynes and Boone. “Everything picks up in the oil and gas business when prices go from $12 to $30 [a barrel].” Although smaller energy companies have had a hard time selling stock or high-yield bonds to finance large asset purchases, many of them are merging, creating another growth business for Texas lawyers. “Everybody’s talking to everybody about doing deals,” says Young. While the IPO work that fueled legal business in the past couple of years has died down, lawyers now are doing the opposite: taking public companies private. Another growing source of business is “energy outsourcing,” in which companies that depend on large amounts of energy reduce their vulnerability to fluctuating prices by contracting out their needs to an energy company. There’s also plenty of contract work for companies that service and supply oil companies. High oil and gas prices have generated lots of business around building pipelines, particularly to bring energy to California and other Western states. “We represent clients involved in a whole spectrum of projects to increase energy production and to transport energy to areas where it’s needed,” says Vinson & Elkins managing partner Harry Reasoner. Corporate finance lawyers help finance the new projects, negotiating joint ventures and supply agreements. Deregulation of power across the country, which has encouraged companies to enter the market, has created more work as well. It’s not just energy that power companies are involved in. Increasingly, they’re using the infrastructure they’ve developed to transport oil and gas to get into other industries, like telecommunications. Many have rights of way that can be used for the fiber-optic backbone of broadband transmission, says Pat Oxford, a partner at Houston’s Bracewell & Patterson. Firm business, he says, is “growing with them.” A year ago Texas firms were kicking themselves for not having gotten in early on the tech boom, but now they’re gloating as they realize they’ve avoided some of the costs of its downfall. Vinson & Elkins, for example, dramatically expanded its Austin office in the past couple of years to take advantage of the burgeoning high-tech business there. But Reasoner insists he’s been able to shift many of those lawyers into handling the exploding amount of energy work. It’s a theme echoed by many of Texas’s managing partners. Indeed, large Texas firms, which maintain active practices in real estate, contracts, finance, and litigation, are well suited to handle the panoply of work offered by expanding energy companies. A growing part of that business involves liquefied natural gas, known as LNG. It’s a complex but useful way to transport gas by converting it to liquid. The liquid is carried long distances in tankers, then regasified at its destination. While the time frame for developing LNG projects is shorter than for building pipelines, the cost of creating facilities to transform and transport the gas is very high. “In the past it was not economical — now it is,” says Jay Golub, a partner at Houston’s Baker Botts. Large firms with diverse practices represent clients at every stage of the process, from production of natural gas to liquefaction, deals for purchasing tankers, regasification facilities, and oil pipelines. Although most of the litigation coming out of California’s energy crisis is being handled by lawyers out West, Baker Botts is representing Reliant Energy, Incorporated, in litigation, regulatory, and bankruptcy matters there. And Haynes and Boone, which worked on El Paso Electric Company’s bankruptcy in the early 1990s, has been advising the California Assembly on Pacific Gas and Electric Company’s bankruptcy and the potential bankruptcy of Southern California Edison. So let the Californians wring their hands and point fingers. As Haynes and Boone partner Bernard “Buddy” Clark, Jr., says, “It’s good news for the state of Texas.”

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