Vinson & Elkins partners Matt Stammel, Jim Thompson and Nick Shum | Photo by Felix Sanchez
Call it a Clean Energy boom.
In 2021, $1.9 trillion was invested in energy worldwide, $750B of that in clean energy. And though experts say that is far short of the level needed to impact climate change, it’s causing ripples throughout the energy industry, including at one of its foremost law firms, Vinson & Elkins.
Who better to lead the push into renewable energy than a firm with a storied history in oil and gas that has paced the industry from its days of wildcatting to the current focus on wind, solar and other sustainable sources?
The firm has created a broad renewable energy footprint with top legal talent advising in Climate Change; Financing Renewables; and Renewables Tax & Tax Equity.
And what would a great energy practice be without a focus on disputes – whether oil and gas, wind and solar, international disputes or other permutations still to come?
“The scope of the transformation in the industry is quite broad,” says Jim Thompson, the firm’s preeminent energy litigation guru. “Analysis and assessment of climate change has been evolving over the past two decades, at least.”
Thompson notes that litigation involving climate change is not new to the Vinson & Elkins team, which has long been called on to defend the endless flow of cases filed by environmental groups over fracking and other issues.
“They’re evolving but we’ve been marching right along with the industry defending those cases, just like we’ve been defending traditional upstream and midstream cases,” Thompson says.
Thompson is a prime example of the talent driving the energy industry’s evolution. He grew up an “oilfield brat,” he says, well aware of the lore. His Dad was an engineer and lawyer for Shell. His family had spent time in Calgary, Oklahoma City and Houston, and were living in New Orleans when he was born. The family moved to Connecticut to be closer to New York, the oil corporate headquarters of the world until Houston beckoned the industry home in 1967.
So it seemed natural after graduating from Texas A&M with a degree in petroleum engineering that Thompson would head to South and West Texas to drill wells for Mobil Corp. Five years later, however, he decided to go to law school, and Mobil paid for it.
“After working the fields, I had a change of heart. I wanted to try lawsuits for a living and I didn’t want to be an engineer anymore,” says Thompson, who joined Vinson & Elkins in 1985 and rose to be the head of the firm’s global litigation practice and a highly respected leader on energy disputes. “That’s really how I worked my way to trying almost anything in the upstream or midstream space on the energy side.”
The Vinson & Elkins team boasts 11 partners, including Matthew Stammel, who heads Vinson & Elkins’ energy litigation group, and Nicholas Shum, who have repeatedly garnered multimillion-dollar victories throughout the U.S. for major energy producers when they encounter legal issues.
The firm’s litigators practice nationwide, from Pennsylvania to California, with cases ranging from a $97 million verdict from jurors in Denver for client Antero Resources Corp. to keeping Gastar Exploration’s fracking operations in the Marcellus Shale formation along the Ohio River in business.
Traditional energy producers now invest more in alternative sources like wind and solar, and the docket of Vinson & Elkins cases and corporate matters tied to those specialties is expanding proportionately.
“Clients recognize our ability to travel and to educate judges and juries on the industry and, whatever the issue is, to break it down and explain it so that everybody knows what we’re talking about,” Thompson says. “We’ve just been hired on two new matters within the last six months in California. We go wherever the dispute is if it touches the industry.”
FROM LAW SCHOOL TO ENERGY DISPUTES
Lawdragon: That’s quite an impressive reach. Tell me more about the history and development of the practice, and how each of you came here.
Jim Thompson: The firm is now in its 105th year, and it made its mark early in the energy space, really representing not majors but wildcatters, who were drilling wells at Spindletop and in East Texas. There were cases that involved lots of personality, lots of character, lots of stories. That evolved over the decades, and by the time I came, the firm was already known as the world’s leading energy law firm. The litigation practice was heavily focused on gas contract disputes and traditional oil disputes, and that’s what I cut my teeth on as a petroleum engineer. It’s all I ever wanted to do when I decided to make the jump, and it was just great that the firm embraced that and allowed me to step into my role.
LD: Jim worked in the industry before becoming a lawyer. What drew the two of you into this practice?
Matt Stammel: I grew up in the Denver area and had gone to law school at the University of Texas and clerked for a judge before coming to the firm in 1998. As a senior associate, I got to run a case involving an oil and gas company in Fort Worth that had been disrupted by a family feud over who owed what to whom and what the respective duties were. We were representing one of the brothers, and I got to know him very well and found all the intricacies of the industry and the colorful characters keenly alluring.
Nick Shum: I came to Vinson & Elkins in 2010, straight out of the University of Houston, where I went to law school after playing tennis for four years at Southwestern University. Around my second or third year, I started working on some oil and gas cases. What I remember most vividly is that by my third or fourth year, I had begun working with Jim a lot and we became involved with the Gastar case. That was what really attracted me to the industry, because it was so technical in nature and required learning so much about the business of oil and gas, of drilling wells, in such a short time. Meeting the witnesses, meeting the characters, I fell in love with the industry. I’ve had the great fortune of working with Jim and Matt for many years on cases now, and I became a partner three years ago, in 2019.
THE RAPIDLY EVOLVING ENERGY TRANSITION
LD: How is the increasing concern about climate change and the expansion in renewable energy affecting your practice and the kinds of cases you take on as we move further into the 21st century?
JT: Look, the truth is that it’s all an evolutionary sort of practice, right? Thirty years ago, we were doing traditional oil and gas work in south Texas because that’s where the production was. But internally, at the firm, we do energy writ large. It’s not limited to just hydrocarbons, oil and gas. These days, it includes wind, solar, whatever our clients are investing in, however they’re transitioning, and like night follows day, litigation and suits. The reality is that all of these efforts are to generate power. And so, there’s a supply-chain aspect to bringing oil and gas to market, just like there is to bringing wind power to market and solar power to market. The source of energy may be different, but many of the issues are similar if not the same.
LD: Logically, that makes perfect sense, even though I know many people think of green energy and Big Oil as being totally separate. Can you give me an example?
JT: You probably remember the winter storm that hit Texas particularly hard in early 2021. We all live here, so we all froze and sat in the dark and our pipes burst; it was terrible.
What was happening in the industry was that natural gas lines were freezing and so sources of supply failed. On the wind farms, the turbines froze that weren't winterized and they failed, and that’s 20 percent of the grid in Texas. Natural gas is 50 percent of the grid in Texas. And so it was this daisy chain. When the supply failed, that led to power plants being overloaded and before you knew it, the whole system started to fail. So who got the call to represent the investors and the wind farms that couldn’t deliver on supply contracts backed by financial hedges? We did. Along with many other law firms, of course, but we absolutely got our fair share.
LD: So in a pandemic, you have a mass energy failure. As the leading energy lawyers, you must have been working around the clock.
JT: We were. And it was a fascinating world. Now the truth is, it all happened so fast over a short period of time. Commercial people will behave in a commercial manner; most of those matters have been resolved without going to trial.
But when you're facing those issues in real time you've got to treat everything like it’s going to trial: How do we best position ourselves to try this case if we must to achieve a successful resolution? And that's what happened with winter storm litigation for the most part.
MS: As our clients evolve, we're evolving with them. So money is now going into different types of projects where we’re starting to see disputes. I’ve been involved in some solar disputes and things like that, but the disputes follow the money usually by 12 to 18 months so I think we're starting to get into that litigation cycle.
LD: Bottom line, you’re all experts in energy systems writ large – rather than just oil, just gas, or just solar – including the mechanics, the sourcing, the harvesting and the delivery.
MS: Exactly. Here’s one good example: We represent a company that has a significant investment in a solar farm, and I was asked the other day to help figure out what their contractual rights were. It was basically a land-use agreement in which the solar farm was taking rights from the mineral owner. So we needed not only experience in contractual disputes but also specific knowledge about the rights of a mineral owner relative to other owners of various sticks in the bundle and how the solar agreement interacted with them.
NS: Obviously, we want to be helpful to our clients as they move from some traditional forms of energy like oil and gas toward solar and wind. We have these relationships that Matt was touching on with our corporate brothers and sisters who are assisting those clients with their investments now, and we’re also there to guide them along the way, transition with them. I think we’re very well positioned to stay in the forefront of energy litigation.
'WE ARE STRATEGIC AND INTENTIONAL'
LD: Together, you’ve definitely achieved a position of dominance for the practice. It’s recognized as an industry leader and often goes up against litigation boutiques that handle only energy cases. Tell me how you accomplished that and some of the cases you’re working on now.
MS: We'll handle any kind of dispute, really, wherever it takes us. We visit the plants in person, wearing the steel-toed boots, hard hats and everything else. To understand what you’re fighting about is important, as is meeting with the people who are running the plant, getting them to understand that you're firmly on their side, you're their lawyer, and they can trust you. You're there to fight for them. It’s good to meet with the people that you’re routinely talking on the phone with.
One good example involves a Texas-based client who hired us to defend against a very substantial royalty class-action, in which Mississippi royalty owners claimed they were underpaid over a period of many years, by tens if not hundreds of millions of dollars. There was no injunction, as there had been against Gastar, but the royalty issues require very complicated briefing and a lot of expertise. We were able to get a complete dismissal for that client in federal court.
With that same client, I handled a dispute over the construction of a gas-processing plant up in Wyoming, which was very exciting. I had to learn all about the gas stream that came out of the ground in that part of Wyoming and why it was causing different parts of the plant to corrode.
NS: As an associate coming up through the ranks, that was an attractive aspect of the energy practice here: the ability to work in a variety of different courts, in arbitration proceedings as well as in a variety of different jurisdictions, having the opportunity to travel to different places and meet with witnesses and clients and actually get into the businesses. My trips ranged from three or four weeks in Marshall, Texas, to taking depositions in San Francisco or New York and spending the week between Christmas and New Year’s Day in Moundsville, W.Va.
JT: It’s also no small thing that our corporate law colleagues are dominant in their space, as well, and those relationships benefit all of our clients.
MS: That’s one of the ways that we really set ourselves apart, especially from the boutique firms. For example, we represented a company called Gavilan Resources – a portfolio company of Blackstone – in a case that came up in the context of a bankruptcy, so we had our bankruptcy group from New York on it, we had merger-and-acquisition lawyers from Dallas and Houston on it, we had specific energy project lawyers from Dallas and Houston on it, we had environmental lawyers who got involved, and we had midstream-energy lawyers in our Houston office who got involved.
It touched every aspect of the oil and gas business. And while Jim, Nick and I spent a lot of our time litigating the case, we were relying on a lot of expertise and a lot of hard work from others at the firm and that’s not unique to that case. What makes us so good is that we work a lot with our corporate lawyers, whether it’s on litigation matters or just on counseling our oil and gas clients. We really try to be a full-service shop, whether it’s an oil and gas company or a private-equity company that’s investing in different oil and gas operations.
LD: And I’m sure that goes both ways, right? So when the energy dealmakers are working on something and assessing litigation risk, they pick up the phone and call you and can better gauge the value of something once they’ve got the experts to weigh in.
MS: Yes, and we do that a lot.
NS: While every case that our group takes on is different, we have a general philosophy that we treat and prepare every litigation matter like we’re going to try it. So we are strategic and intentional about the pretrial decisions we make so as to put ourselves in a position to be successful at trial. That philosophy is another of the things that makes a difference, particularly when we’re going up against some of the litigation boutiques.
In terms of my own personal experience – and I know this is not unique – in the last five or six years, I’ve had at least one major trial or arbitration if not multiple major trials or arbitration every single year.
LD: Speaking of trials, tell me about some of the jury verdicts that stand out for each of you.
NS: The Colorado verdicts are two that are definitely memorable to me. The first was in 2017, in federal court, for our very good client Antero and it was really one of the first that I got to work on from the inception. It began a few years earlier with a breach of two huge natural gas purchase contracts from a utility company in New Jersey. There were two years of workup and then we tried the case in the summer of 2017 and came back with a $60 million jury verdict.
I also remember Jim’s fantastic closing arguments that sealed the deal. We were up against a very reputable Houston firm that the opposing side hired to come in and try the case at the last minute. I think the combination of the work we put in throughout the trial and our energy and trial experience helped us carry the day. Two years later, for the same client, we were able to surpass that with a $97 million jury verdict, this time in state court in Colorado. The crazy thing is, to some degree, those cases were moving along in parallel.
MS: I had a trial several years ago in Dallas involving a helium-processing plant that our client had shut down. One of the helium buyers had a real problem, which led to an output-contract dispute. It was a pretty technical case that turned on why the plant shut down and whether we had any obligation to sell with the plant shut down.
After we won the case, we had a chance to talk to the jurors, and those conversations were great. It just reaffirms your belief in the jury system. Plus, the experience of talking to the jury and trying the case all the way through to a verdict really helps you prepare for the next case. It gets you to focus on what you’re going to talk about and how you’re going to talk about it with people who aren’t in the industry, who don’t have the deep background that we’ve developed. How do you make a story resonate? The more you do it, the better you get at it.