Sunday, September 21, 2014

Frank Pasquale on “how masterful manipulation of the law has allowed tech and finance giants to grow incredibly fast”

Like many people I know, I am a huge fan of Frank Pasquale.  Thus, I was very excited to read his Balkanization interview (available here) discussing his forthcoming book, “The Black Box Society.”  The interview touches on a wide range of topics, so you should go read the whole thing, but here is an excerpt to tempt you in case you’re on the fence:

I think our academic culture is very good at analysis, but oft-adrift when it comes to synthesis. Specialization obscures the big picture. And law can succumb to this as easily [as] any other field. For example, in the case of internet companies, cyberlawyers too often confine themselves to saying: “Google and Facebook should win key copyright cases, and subsequent trademark cases, and antitrust cases, and get certain First Amendment immunities, and not be classified as a ‘consumer reporting agency’ under relevant privacy laws,” etc. They may well be correct in every particular case. But what happens when a critical mass of close cases combines with network effects to give a few firms incredible power over our information about (and even interpretation of) events?

 

Similarly, old banking laws may fit poorly with the new globalized financial landscape. Finance lawyers churn out position papers dismantling the logic of Dodd-Frank, Basel, Sarbanes-Oxley, etc. But if too-big-to-fail firms keep growing bigger, assured of state support, while everything else the government does is deemed contingent: what kind of social contract is that?

 

The lawyers of the Progressive Era and the New Deal dealt with similar challenges: massive firms that warped the fabric of economic, political, and even cultural life to their own advantage. They consulted the best of social science to recommend regulation—but they didn’t let some narrow field (like neoclassical economics) act as a straitjacket (as, say, antitrust lawyers of today are all too prone to do).

September 21, 2014 in Books, Current Affairs, Financial Markets, Stefan J. Padfield, Web/Tech | Permalink | Comments (0)

Saturday, September 20, 2014

It’s rare to see so many people interested in a proxy battle

But that’s what happened when hedge fund Starboard Value delivered a 294-slide presentation on the terrible food at Olive Garden as part of its fight for control of Darden Restaurants. (You can see the presentation in all of its glory here.)

The presentation not only received news coverage in standard outlets like WSJ and Bloomberg, but even attracted the attention of Slate and Mother Jones, who were amused by such detailed accusations as “Darden stopped salting the water in which it boils pasta,” that the crispy Parmesan asparagus is “anything but,” and Starboard’s lament that Olive Garden wait staff bring multiple breadsticks to the table at once, instead of delivering one per customer with a right of replenishment – which leads, according to Starboard, to cold breadsticks that “deteriorate in quality,” and encourages customers to fill up on the free stuff instead of ordering more things that cost money.

Starboard also complained that the Olive Garden menu has expanded to non-Italian offerings like tapas and burgers, that Olive Garden overstuffs its salads and lards them with too much dressing, and that the wait staff fail to push alcohol sales.

All of this, of course, led to such glorious headlines as “Olive Garden Defends Breadstick Policy,”  and a Business Insider review of Olive Garden restaurants (the verdict: Starboard was right; but for a contrary opinion, see the New Yorker's take).

The real debate, though, isn’t about food – it’s about the value of the real estate on which Darden’s restaurants sit – which didn’t really make it into most of the headlines.

That said, in a fairly ironic bit of timing, just days after the presentation, CalPERS announced that it was dumping all of its hedge fund investments, because they just aren’t delivering enough of a bang for the buck. CalPERS’s announcement, though, didn’t get quite the same news coverage – maybe it should have used power points.

September 20, 2014 in Ann Lipton | Permalink | Comments (7)

Friday, September 19, 2014

Call for Crowdfunding Book Chapter Proposals

I am passing on the English translation of a call for book chapters issued by a friend and colleague in Dijon, France.  The book is international and has a broad business management focus.

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As the editor of a forthcoming book, it is my greatest pleasure to invite you to submit articles as chapters. The tentative title is: Strategic Managerial Approaches to Crowdfunding Online. The book will be published by IGI Global publishers in the USA, within the series “Advances in Business Strategy and Competitive Advantage (ABSCA).”

Please read carefully the following guidelines for submission:

The context

The emerging crowdfunding phenomenon is a collective effort by individuals who network and pool their money together, usually via the internet and without any specific conventional financial intermediation, in order to invest in and support for-profit, artistic, and cultural ventures initiative undertaken by other people or organizations. The spontaneous interactions and transactions between individuals allow relatively considerable fund raisings by drawing on small contributions from a relatively large number of individuals using the Internet, without standard financial intermediaries.

The advent of crowdfunding coincides with the democratization of information technologies that enable people to contact, interact, collaborate and exchange at lowest costs, if not for free. In fact, information technologies have allowed the drastic reduction of transaction costs and by the same the revival of ancient forms of transactions such as auctions, barter, tenders, recycling, and direct transactions between individuals.

Many platforms encourage crowdfunding such as Kiva, Babyloan, MyC4 in lending to the poor entrepreneurs, Prosper, Kapipal and Zopa in P2P social lending, Kickstarter, MyMajorCompany in entrepreneurial projects, SellaBand in music, etc.

Continue reading

September 19, 2014 in Books, Call for Papers, Corporate Finance, Joan Heminway | Permalink | Comments (0)

Call for Papers - 6th International Conference on Institutional and Technological Environment for Microfinance (ITEM 6)

Call for Papers

ITEM 6 – Tunis, Tunisia

Microfinance: Coaching, Counting, and Crowding


The Banque Populaire Chair in Microfinance of the Burgundy School of Business (France) and l’École supérieure du commerce de Tunis jointly organize the 6th edition of the annual conference “Institutional and Technological Environment of Microfinance” (ITEM) in March 2015 (17, 18, 19) in Tunis, Tunisia.

The 6th edition brings together–but not limited to-three major issues, which are shaping the sector of microfinance: Coaching, Counting, and Crowding.

Coaching in microfinance provides training in business and soft skills (attributes enhancing an individual's interactions and self-performance) that the poor micro-entrepreneurs rarely have. Increasingly, microfinance academics and practitioners consider building the human capital of micro-entrepreneurs a critical ingredient of moving out of poverty.

Counting and tracking the microfinance clients and prospects with the information technologies not only lessen information asymmetry, but also lower the transaction cost of financial intermediation. Corollary: information technologies can open ways for offering financial services to the poor as a normal way of doing and extending normal business, and accelerate their social integration. 

Crowding, based on the Web 2.0 technologies, enables direct interactions between millions of lending and borrowing people. Through crowdfunding, micro and small entrepreneurs can raise the crucial funds required for their projects by a large number of individuals via social networks on the Internet. It provides an unprecedented opportunity for alleviating poverty in both developed and developing countries.

In addition to the above topics, other microfinance related topics such as impact measures, social governance, innovation, and sustainable development are welcomed.

The ITEM conference provides a forum for both researchers and practitioners to discuss and exchange on financial inclusion. The conference in March 2015 seeks quantitative, qualitative and experience-based papers from industry and academia. Case studies and PhD research-in-progress are also welcomed. It encourages reflections on the potential and use of technology in microfinance in developed and developing countries.

Publication opportunity

Papers presented at the conference will also be considered for publication in partnering journals.

Submission procedure

Proposals: All contribution types require a proposal in the first instance, including a short abstract between 300 and 500 words, up to five keywords, the full names (first name and surname, not initials), email addresses of all authors, and a postal address and telephone number for at least one contact author.

Submission period for the proposals: Up to November 10, 2014.

Acceptance of proposals: By November 30, 2014. As abstract selection notifications will be sent out to relevant authors, please indicate clearly if the contact author is not the lead author.

Full paper: Only required after acceptance of abstract. Papers should not to be more than 5000 words including abstract, keywords and references.

Submission period for the full papers: Up to February 16, 2015.

Contacts:

  • ITEM6@escdijon.eu
  • Djamchid ASSADI: Djamchid.Assadi@escdijon.eu
  • Maaouia BEN NASR: Maouia.Ben-Nasr@escdijon.eu

Web site: http://item6.weebly.com

Fees: Author registration and payment must be completed by February 27, 2015.

There are special discounts available for early-bird registration, students and group bookings (3 registrations). Details will be available on the ITEM 6 website.

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[Ed. Note:  I participated in ITEM 5 last year.  The conference was very worthwhile and attracted a diverse group of scholars and others (in industry) from a number of countries (not the usual suspects, in many cases).  We took a field trip to a local microfinance lender on the first day of the conference (as part of the event), which was incredibly enlightening.  I am looking at funding opportunities to enable me to attend the 2015 conference as well.]

September 19, 2014 in Call for Papers, Conferences, Corporate Finance, Entrepreneurship, Joan Heminway | Permalink | Comments (0)

Some Thoughts on Hiring Committees

We are less than a month away from the AALS Faculty Recruitment Conference (a/k/a the “meat market” or the “FRC”). Reading the comments at PrawfsBlawg from the nervous candidates brings me back to my time on the meat market in 2010.

In this post, I hope to encourage hiring committees to engage in some perspective taking and improve the typical law school hiring process for candidates.

Instead of focusing on schools that I felt needed improvement in their hiring processes, I want to highlight one hiring committee that I think got it exactly right. The hiring committee was from The University of Oklahoma College of Law, made up of Emily Hammond (now at George Washington), Katheleen Guzman, and Joseph Thai.

Four years later, I remember their names vividly. I only made it to the FRC interview level with Oklahoma, and never got a call-back with the school, which makes their conduct that much more admirable. Oklahoma’s hiring committee excelled in three areas that I think all hiring committees should focus on and that I discuss more fully after the break: communication, transparency, and humanity.

Continue reading

September 19, 2014 in Haskell Murray, Jobs, Law School | Permalink | Comments (1)

Thursday, September 18, 2014

Alibaba and the forty (not really) risk factors

Teaching the definition of a "security" to business associations students who: 1) want to be litigators; 2) are afraid of math, finance, and accounting; 3) don't know anything about business; 4) only take the class because it's required; and 5) aren't allowed to distract themselves with electronics in class is no small feat.

Thankfully, as we were discussing the definition and exemptions, we also touched on IPOs. Many of the students knew nothing about IPOs but were already Alibaba customers and going through some of the registration statement made them understand the many reasons companies want to avoid going public. Of course, now that we went through some of the risk factors, my students who seemed gung ho about the IPO after watching some videos about the hype were a little less excited about it (good thing because they probably couldn't buy anyway).  

Now if I can only figure out how to jazz up the corporate finance chapter next week.

 

September 18, 2014 in Business Associations, Corporate Finance, Corporate Governance, Corporations, Current Affairs, Financial Markets, Law School, Marcia Narine, Securities Regulation, Teaching | Permalink | Comments (2)

Law Professor Positions - Lakehead University

Lakehead

Lakehead University in Thunder Bay, Ontario has three tenure-track law professor openings.

Information is available here.  

September 18, 2014 in Haskell Murray, Jobs, Law School | Permalink | Comments (0)

Legal Studies Position - Oklahoma State University

OSU

Oklahoma State University is the most recent addition to my updated legal studies position list.  Oklahoma State is looking for an assistant professor of legal studies to begin in a tenure-track position in August of 2015. 

September 18, 2014 in Business School, Haskell Murray, Jobs | Permalink | Comments (0)

Wednesday, September 17, 2014

New Insider Trading SEC Enforcement Action Against Law Firm IT Employee

Practitioners and academics alike should be interested in yesterday's announcement by that the SEC that it is bringing an insider trading enforcement action against a law firm IT employee for allegedly trading based on the firm's merger work for clients.  The employee allegedly made over $300,000 in a several year scheme of trading based upon client information.  The U.S. Attorney's Office filed related criminal charges against the employee.

Donna Nagy at Indiana University Maurer School of Law, in her article, Insider Trading and the Gradual Demise of Fiduciary Principles, explains the theory of liability which extends the insider trading scope to law firm employees:

Under the alternative “misappropriation” theory endorsed by the Court in United States v. O’Hagan, persons “outside” the issuing corporation can likewise violate Section 10(b) and Rule 10b-5.  Such a violation occurs when a fiduciary personally profits from a securities transaction through undisclosed use of a principal’s material nonpublic information. Thus, as the Court explained, whereas the classical theory “premis[es] liability on a fiduciary relationship between company insider and purchaser or seller of the company’s stock, the misappropriation theory premises liability on a fiduciary-turned-trader’s deception of those who entrusted him with access to confidential information.”

The SEC, in its release cautioned that "Insider trading by employees of law firms and other professional organizations is an important enforcement focus for us."

-Anne Tucker

September 17, 2014 in Anne Tucker, Securities Regulation | Permalink | Comments (0)

Tuesday, September 16, 2014

Return from the Bakken: It's Good to Be Home

After my long trip away from my wonderful family in western North Dakota, I stopped in Chicago for the ABA Site Evaluation Workshop on my way home.  I'm not quite where my co-blogger is on the whole accreditation thing, but it was not my favorite thing to add another day away from my family. On the plus side, I got to see my brother and his family the night before it, and I appreciated my time with my colleagues from WVU and beyond, so it was okay.  

It was hard to be away, but it sure was a great to get home. I even got to come home to this after a long five days: 

H

On so many levels, I am very, very fortunate. 

September 16, 2014 in Joshua P. Fershee | Permalink | Comments (1)

Monday, September 15, 2014

Crowdfunding and Medical Philanthropy

Crowdfunding site GoFundMe recently removed the funding page for a person looking to crowdfund her abortion.  Past crowdfunding campaigns have funded fertility treatmentsgender confirmation surgeries, organ transplants, and other medical procedures and treatments.  Watsi is an entire crowdfnding platform dedicated to financing medical care for patients through donations.  While I usually research and write about crowdfunding business entities and projects, the crowdfunding of medical procedures and treatments has gotten more and more traction with those needing or wanting financial assistance for expensive medical care.  It seemed like a good time to say something about it . . . .  But what to say?

Continue reading

September 15, 2014 in Current Affairs, Joan Heminway, Web/Tech | Permalink | Comments (2)

I'm Done with ABA Accreditation

I was recently asked to serve on an ABA site team to reaccredit a law school. I have done this before; it’s hard work, but it’s fun. You get to see how another law school operates and meet many legal educators you might not otherwise meet.  But I turned this one down and I told the ABA to take me off their list of potential accreditors.

I have decided that I will no longer serve as an ABA accreditor. I see no evidence that ABA review is doing much to increase the quality of legal education. The accreditation rules stifle creativity, protect traditional law schools from competition, and increase the cost of legal education.

The newly revised ABA standards are better in some ways than the current standards. They accommodate some technological changes, although at least ten years too late. And I was happy to see that the restrictions on distance education were loosened a little. But the changes are too little, too late.

Ironically, the new ABA standards require law schools to justify their programs based on student outcomes, something the accreditation rules themselves have never done.

I’m not willing to play the game anymore. I’ll leave enforcement of the ABA rules to people who think they’re worth enforcing.

September 15, 2014 in C. Steven Bradford, Law School | Permalink | Comments (1)

Sunday, September 14, 2014

Hobby Lobby Redux: 7 Corporate Law/Theory Quotes

This coming Tuesday, I am scheduled to provide a brief overview of the corporate law/theory aspects of Hobby Lobby as part of the University of Akron’s Supreme Court Roundup.  What follows are the seven key quotes from the opinion that I plan to focus on (time permitting) in order to highlight what I see as the key relevant issues raised by the opinion. Comments are appreciated.

Issue 1: Did corporate theory play a role in Hobby Lobby?

While I believe the majority made a pitch for applying a pragmatic, anti-theoretical approach (“When rights, whether constitutional or statutory, are extended to corporations, the purpose is to protect the rights of … people.” Burwell v. Hobby Lobby Stores, Inc., 134 S. Ct. 2751, 2768 (2014)), the following quote strikes me as conveying an underlying aggregate view of corporations:

In holding that Conestoga, as a “secular, for-profit corporation,” lacks RFRA protection, the Third Circuit wrote as follows: “General business corporations do not, separate and apart from the actions or belief systems of their individual owners or employees, exercise religion. They do not pray, worship, observe sacraments or take other religiously-motivated actions separate and apart from the intention and direction of their individual actors.” 724 F.3d, at 385 (emphasis added). All of this is true—but quite beside the point. Corporations, “separate and apart from” the human beings who own, run, and are employed by them, cannot do anything at all.

134 S. Ct. at 2768.

 

Continue reading

September 14, 2014 in Business Associations, Constitutional Law, Corporate Governance, Corporate Personality, Corporations, Current Affairs, Religion, Social Enterprise, Stefan J. Padfield, Unincorporated Entities | Permalink | Comments (2)

Saturday, September 13, 2014

North Dakota State University - ESPN's College GameDay and Business Law

NDSU

First Joshua Fershee visits North Dakota, now ESPN's College GameDay

North Dakota State University, which is being featured on GameDay this morning, is also one of the schools looking for a business law professor (albeit a "lecturer") on my updated list here.

While most of my co-bloggers teach at much bigger sports schools than I, as I mentioned previously, it is a lot of fun teaching at a school that gets at least occasional national attention for its sports teams.  

September 13, 2014 in Business School, Haskell Murray, Sports | Permalink | Comments (0)

The Solicitor General Recommends a Grant in Moores v. Hildes

The Solicitor General recently filed a brief with the Supreme Court recommending that the Court grant certiorari in the Ninth Circuit case of Moores v. Hildes, No. 13-791.  If the Court takes this recommendation (which I’m guessing it will), it will be the third Section 11 case scheduled to be heard this Term.  (I’ve blogged about the prior two here and here.)

[More under the cut]

Continue reading

September 13, 2014 in Ann Lipton | Permalink | Comments (0)

Friday, September 12, 2014

Delaware Judges and Law Review Articles

In 2007, J. W. Verret (George Mason) and then Chief Justice Myron Steele authored an article entitled Delaware's Guidance: Ensuring Equity for the Modern Witenagemot, which discussed "some of the extrajudicial activities in which members of the Delaware judiciary engage to minimize the systemic indeterminacy resulting from the resolution of economic disputes by a court of equity."

One of these extrajudicial activities is authoring or co-authoring law review articles.  In this post, I am not going to weigh in on whether Delaware judges should be authoring law review articles, but rather, I simply note that there are two recent law review articles and one recent book chapter by Delaware judges that warrant our attention. 

Vice Chancellor Travis Laster - Evidence-Based Corporate Law.

John Maynard Keynes is said to have observed, "When the facts change, I change my mind. What do you do, sir?" In Delaware's Choice, Professor Subramanian argues that the facts underlying the constitutionality of Section 203 have changed. Assuming his facts are correct, and the Professor says that no one has challenged his account to date, then they have implications for more than Section 203. They potentially extend to Delaware's jurisprudence regarding a board's ability to maintain a stockholder rights plan, which becomes a preclusive defense if a bidder cannot wage a proxy contest for control of the target board with a realistic possibility of success. Professor Subramanian's facts may call for rethinking not only the constitutionality of Section 203, but also the extent of a board's ability to maintain a rights plan.

Chief Justice Leo E. Strine, Jr. and Nicholas Walter (Yale), Conservative Collision Course?: The Tension between Conservative Corporate Law Theory and Citizens United.

One important aspect of Citizens United has been overlooked: the tension between the conservative majority’s view of for-profit corporations, and the theory of for-profit corporations embraced by conservative thinkers. This article explores the tension between these conservative schools of thought and shows that Citizens United may unwittingly strengthen the arguments of conservative corporate theory’s principal rival.

 

Citizens United posits that stockholders of for-profit corporations can constrain corporate political spending and that corporations can legitimately engage in political spending. Conservative corporate theory is premised on the contrary assumptions that stockholders are poorly-positioned to monitor corporate managers for even their fidelity to a profit maximization principle, and that corporate managers have no legitimate ability to reconcile stockholders’ diverse political views. Because stockholders invest in for-profit corporations for financial gain, and not to express political or moral values, conservative corporate theory argues that corporate managers should focus solely on stockholder wealth maximization and non-stockholder constituencies and society should rely upon government regulation to protect against corporate overreaching. Conservative corporate theory’s recognition that corporations lack legitimacy in this area has been strengthened by market developments that Citizens United slighted: that most humans invest in the equity markets through mutual funds under section 401(k) plans, cannot exit these investments as a practical matter, and lack any rational ability to influence how corporations spend in the political process.

Because Citizens United unleashes corporate wealth to influence who gets elected to regulate corporate conduct and because conservative corporate theory holds that such spending may only be motivated by a desire to increase corporate profits, the result is that corporations are likely to engage in political spending solely to elect or defeat candidates who favor industry-friendly regulatory policies, even though human investors have far broader concerns, including a desire to be protected from externalities generated by corporate profit-seeking. Citizens United thus undercuts conservative corporate theory’s reliance upon regulation as an answer to corporate externality risk, and strengthens the argument of its rival theory that corporate managers must consider the best interests of employees, consumers, communities, the environment, and society — and not just stockholders — when making business decisions.

Chief Justice Leo E. Strine, Jr. and Vice Chancellor Travis Laster, The Siren Song of Unlimited Contractual Freedom

One frequently cited distinction between alternative entities — such as limited liability companies and limited partnerships — and their corporate counterparts is the greater contractual freedom accorded alternative entities. Consistent with this vision, discussions of alternative entities tend to conjure up images of arms-length bargaining similar to what occurs between sophisticated parties negotiating a commercial agreement, such as a joint venture, with the parties successfully tailoring the contract to the unique features of their relationship.

As judges who collectively have over 20 years of experience deciding disputes involving alternative entities, we use this chapter to surface some questions regarding the extent to which this common understanding of alternative entities is sound. Based on the cases we have decided and our reading of many other cases decided by our judicial colleagues, we do not discern evidence of arms-length bargaining between sponsors and investors in the governing instruments of alternative entities. Furthermore, it seems that when investors try to evaluate contract terms, the expansive contractual freedom authorized by the alternative entity statutes hampers rather than helps. A lack of standardization prevails in the alternative entity arena, imposing material transaction costs on investors with corresponding effects for the cost of capital borne by sponsors, without generating offsetting benefits. Because contractual drafting is a difficult task, it is also not clear that even alternative entity managers are always well served by situational deviations from predictable defaults.

In light of these problems, it seems to us that a sensible set of standard fiduciary defaults might benefit all constituents of alternative entities. In this chapter, we propose a framework that would not threaten the two key benefits that motivated the rise of LPs and LLCs as alternatives to corporations: (i) the elimination of double taxation at the entity level and (ii) the ability to contract out of the corporate opportunity doctrine. For managers, this framework would provide more predictable rules of governance and a more reliable roadmap to fulfilling their duties in conflict-of-interest situations. The result arguably would be both fairer and more efficient than the current patchwork yielded by the unilateral drafting efforts of entity sponsors.

September 12, 2014 in Business Associations, Constitutional Law, Corporate Governance, Haskell Murray, LLCs, Partnership, Unincorporated Entities | Permalink | Comments (0)

Thursday, September 11, 2014

A Trip to the Bakken: Day 4

Today started in Williston, ND, and we then went to Mountrail County.  We vistied Tioga and Stanley, then headed south through New Town and Killdeer on the way back to Dickinson, where we stay tonight before flying out tomorrow morning (ridiculously early, I might add). 

We started the day at Williston State College, where we learned about the TrainND program and other degree programs.  TrainND works with companies to do OSHA and other safety training, and trained more than 16,000 people last, the vast majority of whom were employed.  The College also offers degree programs for those seeking to be Lease Operators and PLC-trained operators. Interesting for academics, the college had 38% turnover last summer.  The college has invested in campus housing for faculty, which can be part of the incentive package to bring people.  Apartments run from $2600/mo for 1 and 2 BR options, with home rentals over $3K.  Seventy percent of new faculty hires are moving into the new campus housing apartments (which looked nice from the outside). Just like the industry, the college is "catching up" with the whole thing. 

We saw more densely packed well sites, such at this 9-pack (nine wells on one well pad).  This is an advantage of hydraulic fracturing, in that one well pad can handle multiple wells, which leads to less land impact per well.   9pack

We also saw major traffic, including long lines of traffic coming over the
BridgetrafficFour Bears Bridge at Lake Sakakawea.   LakeWe didn't have a terrible time driving, and it was not the horror story that has been repeated at times, but it was striking to have open rolling hills with very few signs of people, other than wells, flares, and trucks. 

  Flare2

We saw two natural gas faciltities, aswell, today, which is encourging, as it's important to have facilities to take the natural gas that's coming out of the ground along with the oil.  

Also of interest was a waste water facility, which is critical to better oil production.  I have written many times that the biggest concern about hydraulic fracturing in not the fracking or drilling process; it's surface concerns about spills of things like the waste water coming back up the well.  (Drilling matters, too, but protecting ground water in that context is about good well casings, and the concerns are largely the same as conventional drilling.)  
WasteacctpedSuch facilities are important, as they have helped vastly reduce the use of impoundment pits used for waste water in the early Bakken experience.  

I heard for at least the third time today that the EPA is the biggest risk the industry faces. I continue to believe this is a red herring.  That is, the biggest risk the industry faces is a major disaster from careless activities.  It seems that many of the biggest concerns on that front are being handled well in North Dakota (better, in my sense, than in the Marcellus Shale).  It's not to say everything is right, but there does seem to be a commitment to getting the process done well. Economic incentives are largely aligned with that goal, too.  

The one thing that concerns me here, conceptually, is that people don't seem that concerned about water safety.  I know most of the industry is working hard to keep things clean, but a bad chemical spill, oil spill, or waste water spill in the lake (picture above) could be disastrous.  It's not that I have seen anything specific that makes me worry about the lake. I didn't.  It's just that I'd prefer to hear, "We're worried about water contamination,  but we're doing our best to prevent it."  Instead, " I have have heard repeatedly, "Water issues aren't really a concern." I think that means that major issues haven't arisen, and not that people don't care, but that doesn't mean issue can't or won't arise. 

Finally, as to the EPA, I don't think the EPA is poised to do much to slow hydraulic fracturing in oil country.  And I don't think they should. That said, a major disaster would open the door to EPA or other federal action. Such a disaster would invite a shut down, and I know the industry doesn't want that.  If the industry continues to improve, as it has since 2007, major disasters should be avoided. Here's hoping industry, regulators, and the people of the region continue to improve safety so that the benefits of heavy oil production increasingly outweigh the downsides. It can be done, and I sincerely hope it is.

September 11, 2014 in Current Affairs, Entrepreneurship, Joshua P. Fershee, Teaching | Permalink | Comments (0)

Is it time to repeal the Dodd-Frank conflict minerals rule? Maybe, but not so fast

As I predicted in 2011 here and here, in 2012 here, in 2013 in amicus brief, and countless times on this blog, the SEC Dodd-Frank conflicts minerals law has had significant unintended consequences on the Congolese people and has been difficult to comply with. Apparently the Commerce Department, which has a role to play in determining which mines are controlled by rebels so that US issuers can stay away from them, can't actually figure it out either. In the past few days, the Washington Post, the Guardian, and other experts including seventy individuals and NGOS (some Congolese) who signed a memo, have called this misguided law into question.  In my view, without the "name and shame" aspect of the law, it is basically an extremely expensive, onerous due diligence requirement that only a few large companies can or have the incentive to do well or thoroughly. More important, and I as I expected, it has had little impact on the violence on the ground and has hurt the people it purported to help.

I had hoped to be wrong. The foundation that I work with helps medical practitioners, midwives, and traditional birth attendants in eastern Congo and many of their patients and neighbors are members of the artisanal mining community. I won’t go as far as Steve Bainbridge has in calling for the law’s repeal because I think that companies should do better due diligence of their supply chains, especially in conflict zones. This law, however, is not the right one for Congo and the SEC is not the right agency to address this human rights crisis. Frankly, I don’t know that the EU's voluntary certification is the right answer either. I hope that Canada, which is looking at a similar rule, pays close heed and doesn’t perpetuate the same mistake that the US Congress made and that the SEC exacerbated. In the meantime, I will stay tuned to see how and if the courts, Congress, and the SEC revisit the rule.

 

September 11, 2014 in Corporate Finance, Corporate Governance, Corporations, Current Affairs, Ethics, Financial Markets, Marcia Narine, Securities Regulation | Permalink | Comments (0)

Law Professor Positions - Campbell and Wyoming

Campbell2                                                      Wyoming

Two recent professor postings that may be of interest to our readers:

Campbell University School of Law (Raleigh, NC) has posted a law professor opening (commercial law).

University of Wyoming College of Law (Laramie, WY) has posted a law professor opening (business law).

September 11, 2014 in Business Associations, Haskell Murray, Jobs, Law School | Permalink | Comments (0)

Wednesday, September 10, 2014

A Trip to the Bakken: Day 3

We covered a lot of ground today, driving up from Medora, ND, to Williston, ND, through Watford City.  The traffic was not terrible for us, though the truck traffic and the road construction was slow going for a while.  We're told we missed the worst of the traffic because our timing was good. It still felt like big city traffic in what is not a big city.  Traffic

Watford City has been a prime example of a place where the oil boom has caused significant growing pains. A recent article in The Atlantic asked, What If Your Small Town Suddenly Got Huge?, and explained: 

The Bakken oil boom has brought rapid growth to many towns and cities in western North Dakota, including Williston, north of the Missouri River, and Dickinson, alongside Interstate 94. But Watford City, where the population has jumped from just 1,400 people six years ago to more than 10,000 today, has experienced a particularly dramatic shift in character. 

There is dirt being moved everywhere: for roads, for housing, and, of course, for oil.  Driving this region you see very few homes, rolling hills, a few small buttes, and some abandoned farm homes. Oil wells blend in surprisingly well in many spots, as the sites are often small, and they look like small farms, without the farm house or barn.  The colors of the sites blend in with the landscape, and are often easy to miss if they are far from the road, other than the flicker (and sometimes blaze) of flared natural gas that comes up with the oil and has no where else to go.   Notfarm

It continues to be striking to me that here in oil country, that gas is burned rather than saved, when back in West Virginia and the rest of the Marcellus Shale play (and in Texas's Barnett Shale), millions of dollars are spent per well to pull that exact commondity from the ground.  Efforts to gather the gas here in North Dakota are underway, but it's not an easy undertaking.  There is little immediate need here for natural gas, as there is abundant electricity already available because of lignite coal, and even some wind and hydro power in the state. The crew camp we visited on Tuesday is completely electric (no natural gas)-- even for heat, because the prices are so low.  

Later in the day discussed traffic issues in the area with the state Department of Transportation, landowner issues with a landowner group, and air and water quality with a state health department official. I plan to write more on each of these issues in the next few weeks, so for now I'll just note that, as you'd expect, traffic is bad; landowners without mineral rights are sometimes not happy; and the health department has some challenges.

We also had the chance to speak with a geologist in the area, who explained the basics of the formation and how it works. It was interesting, but I'll leave that to the geology folks, as there are plenty of sources discussing that (PDF). The thing I wanted to note now was her explanation of the North Dakota's library of core samples. A recent Bismarck Tribune article explains:

In the early 1950s when the oil activity began, then-North Dakota State Geologist Wilson M. Laird, Ph.D., went to the legislature and lobbied to preserve the rocks of the producing zones and store them into a library. They bought Laird's concept, created a law based on the Model Act drafted by the Legal Committee of the Interstate Oil Compact Commission and the archives began.

This collection of rocks may be the most valuable rocks on the planet as they hold the secrets to the Bakken. Those secrets are being unlocked everyday as new technologies are created in response to the publicly-owned core samples of North Dakota.

Some states have adopted similar libraries, some have not. Looking across state lines at Montana where the Bakken crude also roams underfoot, less production is occurring. According to many in the industry, the historical shared data within the Wilson Laird library is one of the key reasons.

"In 2013, industry and academia examined 79,000 feet of core, an all-time record in the core library." Ed Burns, North Dakota State Geologist said. "More specifically, we had 28 companies and nine separate universities use the library."

In the past sharing data was not as common due to the large amounts of information, intellectually property rights and competition. North Dakota was the exception to that rule.

Apparently core samples are required about every 30 feet (horizontally or vertically) once the well gets below 8,000 feet vertically. (There are some exceptions when things get going quickly, but even then samples are needed about every 90 feet.) Because so much of North Dakota's information is publicly available, this information can help companies figure out what to look for in the drilling process, which can help maxmize production from wells. 

This kind of forced data sharing is rather remarkable in that it's not something we usually see among competitors.  That said, in an industry with a depleteable resource where virtually every state has a law outlawing "waste," it does makes some sense.  See, e.g., the North Dakota Century Code: 

43-02-03-06. Waste prohibited. All operators, contractors, drillers, carriers, gas distributors, service companies, pipe pulling and salvaging contractors, or other persons shall at all times conduct their operations in the drilling, equipping, operating, producing, plugging, and site reclamation of oil and gas wells in a manner that will prevent waste.

The industry would be well served to share such information and show a similar commitment to avoiding waste in all aspects of the process (not just oil and gas).  We'd probably see less water use, better environmental protection, and faster clean up where things go wrong.  There's some indication that at least the best of the industry are doing so, and I sincerely hope that continues. Stay tuned for Day 4.  

September 10, 2014 in Current Affairs, Entrepreneurship, Ethics, Joshua P. Fershee, Travel | Permalink | Comments (0)