Texas’ Economic Growth and the Changed Legal Landscape

As the rest of the nation has dealt with an economic downturn over the last several years, Texas has skirted by relatively untouched, prompting growth in the population and economy. The influx of people and capital, however, brings its share of change to the legal community.

According to the United States Census Bureau, the Texas population grew by 4.2 million between 2000 and 2010 (around 20 percent), at twice the national rate. As of May 2014, the U.S. Census Bureau puts seven Texas cities in the top 15 fastest growing cities in the country including: San Marcos, Frisco, Cedar Park, Georgetown, Odessa, McKinney and Pearland. As of Feb. 1, the Texas Comptroller’s office has calculated a projected state population of 26 million. Urban areas are credited with most of that increase; however, certain rural counties are experiencing a more recent influx of workers and families swelling their small-town populations.

Counties comprising the Eagle Ford Shale have experienced particular growth. Growth in those counties has been on the rise since the first discovery well was drilled by Petrohawk Energy in 2008, launching the hydraulic fracturing (“fracking”) boom. With the influx of people and money has come the influx of drug-related crime. According to a June 22 article in the Austin American Statesmen, “Drugs Follow Eagle Ford Energy Boom,” drug-related arrests in Cotulla, the La Salle county seat, have tripled since 2008. The arrests, the article cites, are in part a result of drug dealers targeting the area for new customers with available cash.

Only a year ago in the Midland-Odessa area it was nearly impossible to find a hotel on any given day. Hotel prices were high and rooms were hard to come by as companies rented rooms long-term for their incoming labor force. Traffic still congests the roads, food prices are going up and fast food jobs are going as high as $14 per 0hour. Though the number of real estate transactions have risen over the past few years to catch up with the influx of people, according to a March 14 article in the Midland Reporter Telegram, “Midland-Odessa Economic Growth Expected to Moderate,” local economists feel the market is levelling off. With more people coming to work in Midland-Odessa, more vehicles are on the road with a likely increase in personal injury related litigation. And with a greater presence of oil development in the area, there is more transactional and corporate work to go around.

Unsurprisingly, there is a whole family of case law popping up related to fracking including most often oil and gas lease disputes (e.g. Coastal Oil & Gas Corp. v. Garza Energy Trust in 2008 through the Texas Supreme Court, addressing the issue of whether subsurface hydraulic fracturing of a natural gas well that extends into another’s property is a trespass for which the value of gas drained as a result may be recovered as damages); environmental damages (e.g. FPL Farming v. Envtl. Processing Sys. in 2008 through the high court, addressing the issue of whether a regulatory permit to drill an injection well absolves the holder from civil tort liability for conduct authorized by the permit); and owner-contractor disputes (see, e.g., Bruington Eng’g v. Pedernal Energy this year through the Fourth Court of Appeals in San Antonio, in a suit against a project engineer, reviewing of a dismissal for failure to file a Certificate of Merit with the initial pleading).

Population and economic growth has had little impact on the number of cases filed in Texas courts. According to the Annual Statistical Report for the Texas Judiciary for Fiscal Year 2013, district and county-level court filings of injury and damage cases have fluctuated over the last 25 years and are only 4 percent higher than they were in 1988. However, the number of newly filed debt-related suits decreased dramatically between 2012 and 2013.

Growth is not dependent on proximity to the oil patch, however. In the past few years the lure of Texas’s big cities have drawn people through job growth and a comparable lower cost of living than other east and west coast metropolises. With economic growth comes a changing legal landscape. Houston’s legal market is swelling with opportunities not only in energy but in intellectual property, immigration, private equity and corporate transactions. Many major law firms who did not have Houston presences are clamoring to get in and there is a trend of local firms being absorbed to that end. Hopefully Texas will take the opportunity that comes with a healthy economy to continue to diversify itself so that it does not rise and fall with the energy industry.

This article first appeared in the Texas Lawyer on September 10, 2014. Katie Sunstrom is an attorney at Lorance & Thompson, PC.

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