Business Law Prof Blog

These Reasons Social Benefit Entities Hurt Business and Philanthropy Will Blow Your Mind

I suspect click-bait headline tactics don't work for business law topics, but I guess now we will see. This post is really just to announce that I have a new paper out in Transactions: The Tennessee Journal of Business Law related to our First Annual (I hope) Business Law Prof Blog Conference co-blogger Joan Heminway discussed here. The paper, The End of Responsible Growth and Governance?: The Risks Posed by Social Enterprise Enabling Statutes and the Demise of Director Primacy, is now available here.

To be clear, my argument is not that I don't like social enterprise. My argument is that as well-intentioned as social enterprise entity types are, they are not likely to facilitate social enterprise, and they may actually get in the way of social-enterprise goals.  I have been blogging about this specifically since at least 2014 (and more generally before that), and last year I made this very argument on a much smaller scale.  Anyway, I hope you'll forgive the self-promotion and give the paper a look.  Here's the abstract: 

Social benefit entities, such as benefit corporations and low-profit limited liability companies (or L3Cs) were designed to support and encourage socially responsible business. Unfortunately, instead of helping, the emergence of social enterprise enabling statutes and the demise of director primacy run the risk of derailing large-scale socially responsible business decisions. This could have the parallel impacts of limiting business leader creativity and risk taking. In addition to reducing socially responsible business activities, this could also serve to limit economic growth. Now that many states have alternative social enterprise entity structures, there is an increased risk that traditional entities will be viewed (by both courts and directors) as pure profit vehicles, eliminating directors’ ability to make choices with the public benefit in mind, even where the public benefit is also good for business (at least in the long term). Narrowing directors’ decision making in this way limits the options for innovation, building goodwill, and maintaining an engaged workforce, all to the detriment of employees, society, and, yes, shareholders.

The potential harm from social benefit entities and eroding director primacy is not inevitable, and the challenges are not insurmountable. This essay is designed to highlight and explain these risks with the hope that identifying and explaining the risks will help courts avoid them. This essay first discusses the role and purpose of limited liability entities and explains the foundational concept of director primacy and the risks associated with eroding that norm. Next, the essay describes the emergence of social benefit entities and describes how the mere existence of such entities can serve to further erode director primacy and limit business leader discretion, leading to lost social benefit and reduced profit making. Finally, the essay makes a recommendation about how courts can help avoid these harms.

Priorities Matter: Energy and Beyond

I am speaking at a plenary session tomorrow during the the Energy Impacts Symposium at the Nationwide & Ohio Farm Bureau 4-H Conference Center in Columbus, Ohio. The program is exciting, and I look forward to being a part of it.  The program is described as follows: 

Energy Impacts 2017 is a energy research conference and workshop, organized by a 9-member interdisciplinary steering committee, focused on synthesis, comparison, and innovation among established and emerging energy impacts scholars from North America and abroad. We invite participation from sociologists, geographers, political scientists, economists, anthropologists, practitioners, and other interested parties whose work addresses impacts of new energy development for host communities and landscapes.

The pace, scale, and intensity of new energy development around the world demands credible and informed research about potential impacts to human communities that host energy developments. From new electrical transmission lines needed for a growing renewable energy sector to hydraulically fracturing shale for oil and gas, energy development can have broad and diverse impacts on the communities where it occurs. While a fast-growing cadre of researchers has emerged to produce important new research on the social, economic, and behavioral impacts from large-scale energy development for host communities and landscapes, their discoveries are often isolated within disciplinary boundaries.

Through facilitated interactive workshop activities, invited experts and symposium participants will produce a roadmap for future cross-disciplinary research priorities.

I will be talking about Community Development and the North Dakota Sovereign Wealth Fund, and we'll discuss the implications of the resource curse.  I am of the view that the resource curse is correlative, not causative, and that natural resource extraction can prove harmful to local communities, but that it doesn't have to be.  From North Dakota's $4.33 billion fund to Norway's Government Pension Fund Global, there are examples of funding that can provide for the future. But there are numerous examples of struggling communities and bankrupt local governments where funds benefited few. And even North Dakota and Norway provide stark contrasts in how the funds are used. The point, for me, is that generalizations overstate the role of the resource and understate the role of local decision making.  What we prioritize matters, and often, I think, we can do better.  It's not preordained.  We can do better, as long as we decide to do so. 

What Is Ideological Diversity in the Legal Academy?

More than a few legal blogs and scholars have taken note of a recent paper by Adam Bonica (Stanford University), Adam S. Chilton (University of Chicago), Kyle Rozema (Northwestern University) and Maya Sen (Harvard University), “The Legal Academy’s Ideological Uniformity.”  The paper finds that those in the legal academy are more liberal than those in legal profession generally.  Anecdotally, I have to say I am not surprised. 

The abstract of the piece is as follows:

We find that approximately 15% of law professors are conservative and that only approximately one out of every twenty law schools have more conservative law professors than liberal ones. In addition, we find that these patterns vary, with higher-ranked schools having an even smaller presence of conservative law professors. We then compare the ideological balance of the legal academy to that of the legal profession. Compared to the 15% of law professors that are conservative, 35% of lawyers overall are conservative. Law professors are more liberal than graduates of top 14 law schools, lawyers working at the largest law firms, former federal law clerks, and federal judges. Although we find that professors are more liberal than the alumni at all but a handful of law schools, there is a strong relationship between the ideologies of professors from a law school and the ideologies of alumni from that school. However, this relationship is weaker for schools with more conservative alumni.

Jonathan Adler recently discussed the paper in a piece for The Volokh Conspiracy,  How ‘ideologically uniform’ is the legal academy? Adler notes, that the paper's "findings are based upon an examination of reported political donations. While this is an admittedly imperfect measure of ideology, it does allow for comparisons across population groups." I agree on both counts.   

I am particularly interested in (and a bit skeptical of) the use of political donations as the proxy for ideology.  I understand why the authors used that proxy: the information is available and it does, as Adler says, provide for comparisons.  My skepticism is not about their process or choice, but merely about whether it tells us very much about legal ideology. I think it tells us primarily about political party. And even there, in a primarily two-party system, it only tells us about preferences between those two parties, and if the data is primarily presidential, about those two specific candidates. 

My point is that legal ideology is often different that political party choice. When choosing between two parties, we all have priorities of our views, too. For example, I am a far bigger believer in the ability of markets to solve problems than many of my colleagues.  I am more skeptical of government intervention and increased regulation than many of my colleagues. But because of a few priorities that tip my balancing test, I would almost certainly come out "liberal" in using my modest contributions to political parties as the assessment of my ideology.  

In assessing legal ideology, though, I would argue diversity comes more from how we view the law than particular candidates or certain social issues. Obviously, it is much harder to assess that, but I think it should matter when considering how law schools teach.  

Some legal programs (like SEALS) have been seeking diversity of viewpoints, along with other measures of diversity, for panel and discussions groups. This is a good thing. It's not always easy to assess, though. Maybe we should just ask. Here's how I'd assess my own legal ideology: When it comes to economic regulation, my thinking is much more in line with former law professor and SEC Commissioner Troy A. Paredes than I am with, say, Elizabeth Warren. When it comes to business entities law, I am far more Bainbridge than Bebchuck.  For environmental law, more Huffman or Adler than Parenteau. Of course, I have at various times agreed and disagreed with them all.  

I, like many others, am very skeptical of an ideological litmus test or quota system. And yet I also think there is value in embracing different perspectives and viewpoints.  Ultimately, I don't care how someone votes when I assess whether they are a good legal scholar, a good colleague, and a good teacher. I do care that they value diversity of all kinds (including ideological), and I care that they believe in encouraging and faciltitating productive discourse. There is little value in lockstep thinking in any arena, and that is particularly true in legal education. I'm glad this discussion is part of how we consider moving forward in legal education.  

Note to the White House: More Energy Supply Drives Down Prices

Energy and business are closely related, and the former often has a direct impact on latter.  At Whitehouse.gov, the President has posted his energy plan, making the following assertions: 

Sound energy policy begins with the recognition that we have vast untapped domestic energy reserves right here in America. The Trump Administration will embrace the shale oil and gas revolution to bring jobs and prosperity to millions of Americans. We must take advantage of the estimated $50 trillion in untapped shale, oil, and natural gas reserves, especially those on federal lands that the American people own. We will use the revenues from energy production to rebuild our roads, schools, bridges and public infrastructure. Less expensive energy will be a big boost to American agriculture, as well.

It is certainly true that we "have vast untapped domestic energy reserves right here in America." It has brought some wealth and prosperity to the nation, and low oil prices because the country "embrace[d] the shale oil and gas revolution to bring jobs and prosperity to millions of Americans." However, low oil and gas prices (which largely remain) have slowed that growth and expansion because shale oil and gas exploration and production was wildly successful. 

The President says, "We must take advantage of the estimated $50 trillion in untapped shale, oil, and natural gas reserves, especially those on federal lands that the American people own."  But it's not clear how that's helpful. That is, selling our (the American people's) assets when the market is at or near record lows doesn't seem like very good asset management.  

The plan is to "use the revenues from energy production to rebuild our roads, schools, bridges and public infrastructure."  I am very fond of all of these things, though I am skeptical that the federal government should take a leading role in all of them. I am open to the discussion.  But, if we're selling our assets at pennies on the dollar of historic value, I am particularly skeptical of the benefits. 

"Less expensive energy will be a big boost to American agriculture, as well." Low energy costs do help agriculture. That is certainly true.  But notice that making energy even less expensive means we get less for our assets, and we're dumping more cheap energy into a market where private businesses in the oil and gas sector are already having a hard time.  

Facilitating a boom from cheap energy means investing in new jobs to use the energy, not just getting more of the energy.  Plants that use our cheaper fuels to make and build new products could help, but it's never easy.  High energy prices can stifle an economy, but low ones rarely spur growth.  About a year ago, an Economist article from January 2016 remains accurate, as it explained that sudden and major price increases can slow an economy rapidly, as we saw in Arab oil embargo of 1973. However, "when the price slumps because of a glut, as in 1986, it has done the world a power of good. The rule of thumb is that a 10% fall in oil prices boosts growth by 0.1-0.5 percentage points."  

The article further explains: 

Cheap oil also hurts demand in more important ways. When crude was over $100 a barrel it made sense to spend on exploration in out-of-the-way provinces, such as the Arctic, west Africa and deep below the saline rock off the coast of Brazil. As prices have tumbled, so has investment. Projects worth $380 billion have been put on hold. In America spending on fixed assets in the oil industry has fallen by half from its peak. The poison has spread: the purchasing managers’ index for December, of 48.2, registered an accelerating contraction across the whole of American manufacturing. In Brazil the harm to Petrobras, the national oil company, from the oil price has been exacerbated by a corruption scandal that has paralysed the highest echelons of government.

I am all for a new energy plan to help the economy grow, and I support continued energy exploration and production as long as it is done wisely, which I firmly believe can be done.  But adding new competitors (by allowing more exploration on federal lands) simply won't help (and it really won't help increase coal jobs). More supply is not the answer in an already oversupplied market.  And the current proposal is just giving away assets we will want down the road. 

My "New" Article on Fracking and Property Law in West Virginia: What's in a Date?

I am happy to say I just received my new article, co-authored with a former student, S. Alex Shay, who is now a Trial Attorney in the Office of the United States Trustee, Department of Justice. The article discusses property law challenges that can impeded business development and negatively impact landowners and mineral owners in shale regions, with a focus on the West Virginia portion of the Marcellus Shale. The article is Horizontal Drilling Vertical Problems: Property Law Challenges from the Marcellus Shale Boom, 49 John Marshall Law Review 413-447 (2015). 

If you note the 2015 publication date, you can see the article has been a long time coming.  The conference it is linked to took place in September 2015, and it has taken quite a while to get to print. On the plus side, I was able to do updates to some of the issues, and add new cases (and resolutions to cases) during the process.  I just received my hard copies yesterday -- January 9, 2017 -- and I received a notice it was on Westlaw as of yesterday, too.

I always find it odd when law reviews use a specific year for an issue, as opposed to the actual publication year.  I can understand how a January publication might have a 2016 date. That would have made sense, but dating the issue back to 2015, when I discuss cases decided in 2016 seems a little weird.  I know there is a certain level of continuity that the dates can provide, but still, this seems too long. 

When I was editor in chief of the Tulane Law Review, one of the things we prided ourselves on was not handing off any issue from our volume to the next board. A few years prior to our arrival, a committed group of Law Review folks caught up everything -- publishing, if memory serves (and legend was correctly passed on), two and a half volumes. And Tulane Law Review publishes six issues a year. They, apparently, did not sleep. 

I am happy to have the article our, and the editors did good work.  It just would have been nice to have it appear a little more timely and relevant than I think this "new" article does.  For anyone who is interested, here's the abstract (article available here): 

This article focuses on key property challenges appearing as part of the West Virginia Marcellus Shale play. The paper opens with an introduction to the Marcellus Shale region that is the focus of our analysis. The paper explains the horizontal drilling and hydraulic fracturing process that is an essential part of shale oil and gas development. To help readers understand the property challenges related to shale development, we include an introduction to the concept of severed estates, which can create separate ownership of the surface estate and the mineral estate. The article then focuses on two keys issues. First, the article discusses whether horizontal drilling and hydraulic fracturing constitute a “reasonably necessary” use of surface land to develop mineral rights, and concludes they are, at least in most instances. Second, the article discusses difficulties in analyzing deed language related to minerals rights and royalty interests, which has created challenges for mineral owners, leasing companies, and oil and gas developers. Please note that although the publication date is 2015, the article was not in print until January 2017 and discusses cases from 2016. 

Ultimately, the article concludes, legislators and regulators may choose to add surface owner protections and impose other measures to lessen the burden on impacted regions to ease the conflict between surface owners and mineral developers. Such efforts may, at times, be necessary to ensure continued economic development in shale regions. Communities, landowners, interest groups, companies, and governments would be well served to work together to seek balance and compromise in development-heavy regions. Although courts are well-equipped to handle individual cases, large-scale policy is better developed at the community level (state and local) than through the adversarial system.

Note to Trump and the New Congress: Play Conservative and Leave It Alone

When it comes to regulations and economic policy, I am quite conservative.  Not a Republican-type conservative (probably more Libertarian in a political sense), but in the sense that I often advocate for less regulation, and even more often, for less changes to laws and regulations. People need to be able to count on a system and work within it. As such, whether it is related to securities law, energy and environmental law, or other areas of the law, I find myself advocating for staying the course rather than adding new laws and regulations.  

For example, a while back, co-blogger Joan Heminway quoted one of my comments about securities law, where I noted "my ever-growing sense that maybe we should just take a break from tweaking securities laws and focus on enforcing rules and sniffing out fraud. A constantly changing securities regime is increasingly costly, complex, and potentially counterproductive." 

After the BP oil blowout of the Deepwater Horizon well in the Gulf of Mexico, I similarly argued that we should approach new laws with caution, and that we might be better served with existing law, rather than seeking new laws and regulation in a hasty manner. I explained, 

[T]here are times when new laws and regulations are necessary to handle new ways of perpetrating a fraud or to address new information about what was previously viewed as acceptable conduct. But often, new laws and regulations are not a reaction to new information or technology; they are a reaction to a unique and unfortunate set of facts that is more likely related to timing or circumstances than an emerging trend. Other times, it is a lack of enforcement of existing protections meaning the problem is not the law itself; it is the enforcement of the law that is the problem.

Choosing a Better Path: The Misguided Appeal of Increased Criminal Liability After Deepwater Horizon, 36 Wm. & Mary Envt'l L & Pol. Rev. 1, 19 (2011) (footnotes omitted). More recently, I have taken the same view with regard to hydraulic fracturing regulations:

There may well be a need for new regulations to improve oversight of hydraulic fracturing and other industries that pose environmental risks, but new regulations do not necessary lead to better oversight. . . . There is a strong argument that the problems related to hydraulic fracturing (and, for that matter, coal extraction, chemical storage, and hazardous waste operations) are more linked to a lack of enforcement and not a lack of regulation.

Facts, Fiction, and Perception in Hydraulic Fracturing: Illuminating Act 13 and Robinson Township v. Commonwealth of Pennsylvania, 116 W. Va. L. Rev. 819, 847 (2014). 

I swear I have a point, beyond just quoting myself.  Here it is: I'd like to urge the President-Elect and the 115th Congress to sit back and stay the course for a little bit to see where things are headed. I have a strong suspicion things are headed in the right direction from an economic perspective. This is not to suggest that there are not holes in the economy or people in desperate need of jobs, training, and education (there are -- I live in West Virginia. I know.). But with a White House and a Congress controlled by the same party, the GOP play should be simply: we're in charge now, and the economy is ready to move ahead.  

We have already seen it -- the stock market is up and economic indicators look better.  And there has been no new legislation or regulation (or repeals of either).  It's just consumers believing the economy will get better.  And consumer confidence is key to expansion.  Who cares that it started before the election?  What matters is whether we're going in the right direction.  And it seems we are. The Financial Times reported today: 

A gauge of US consumer sentiment has hit a post-recession high, painting a positive outlook ahead of the key holiday shopping season as recent data point to a strengthening US economy.

The Conference Board’s consumer confidence index climbed to 107.1 in November from 100.8 in October, the highest since July 2007 and above analysts’ forecast of 101.5.

Most of the survey was conducted before the presidential election on November 8. But “it appears from the small sample of post-election responses that consumers’ optimism was not impacted by the outcome,” said Lynn Franco, director of economic indicators at the Conference Board. “With the holiday season upon us, a more confident consumer should be welcome news for retailers.”

 

And, just to reinforce that is not a post-election position, I have been making this argument on this blog since at least 2010, when I wrote, How to Fix the "Broken" Financial System: Stop Trying to Fix It. 

So, let's stay the course for a bit and see how people respond to a little stability. Let's see what a surge in consumer confidence can do for the U.S. and world economies. Let's make sure it's broken (and if so, how), before anyone tries to fix it. And maybe, in the meantime, we can spend a little time treating each other better.

For Coal Jobs, Rhetoric Trumps Truth

Back in May, I discussed Donald Trump’s campaign dubious promises to bring back coal jobs to places like West Virginia and Kentucky.  He promised (and continues to promise) that reduced regulation and elimination of the Clean Power Plan will bring back job.  Voters in West Virginia bought the claim, and they believed it from incoming governor, Democrat Jim Justice, a billionaire coal magnate.   

Trump and Justice spoke the other day, with the Governor-Elect saying in a statement:

“It’s an exciting day for West Virginia because we now have a pathway to the White House and a president-elect who is totally committed to putting our coal miners back to work. President-elect Trump made it clear that he won’t forget about West Virginia when it comes to our nation’s energy policies. I will work closely with the President-elect and his administration on clean coal technology, rolling back the job-killing EPA regulations on coal, and growing West Virginia’s other job opportunities.”

How this will work to improve coal jobs remains an open question.  Trump has yet to announce his energy-related appointments, which will include the EPA, Department of Energy, and Department of Interior.  His energy secretary short list (and possibly Interior) still includes Harold Hamm, CEO of the oil and gas company, Continental Resources. Forrest Lucas (of Lucas Oil) remains on the list, as well.  So, how are oil and gas executives going to help coal?  Well, by “rolling back the job-killing EPA regulations on coal,” of course. (Note: that is really an EPA issue, not a Department of Energy issue.)

The problem with this for coal country, as I have noted before, is that rolling back these regulations also has the effect of rolling back regulations that impact the natural gas industry, meaning that even as coal gets cheaper, so does natural gas. 

Further, there is talk in the administration about opening up more federal lands to coal mining and oil and gas exploration.  (This would be a Department of Interior action, not Energy.)  This move, too, is curious, as it is hard to see how increased access to more supply is going to move up prices to support the struggling industries.  A greater supply of oil or gas or coal will lead to even lower prices.  Lower taxes and reduced regulations equals means a lower cost of exploration and production, which leads to more resources and lower prices.  

Absent a commitment to increasing the cost of natural gas, coal is simply not going to compete.  Natural gas burns cleaner than coal, is substantially more flexible, and despite criticisms of the process of hydraulic fracturing, it is environmentally preferable to coal mining. With oil and gas executives playing a large role in the new administration, there is no reason to expect coal will get a preference over natural gas.  Perhaps renewable energy sources will be less attractive, though the prices of those sources continues to drop, and natural gas can actually work to facilitate those such energy sources.  Recent reports suggest renewables and natural gas are the future.  This does not bode well for coal. 

Increased research on clean coal would have value. There are still millions of people around the world without access to electricity, and millions more getting power from old coal-fired plants that create health and environmental problems. But that research is not likely to change markets in the near term, and it is not likely to benefit U.S. coal miners as long as cheap natural as remains.  And it is expected to remain.   

Finally, reduced regulations may help move the energy sector forward more quickly, and it may help facilitate related businesses who use natural resources as a feedstock or energy-intensive processes.  That remains to be seen.  Any plan that does that, though, still likely leaves coal, and the people who work in the industry, behind. Just saying you will save coal jobs, doesn’t make it true.  But apparently it does make some people feel better.  I doubt that will last very long. 

AALS 2017 Annual Meeting: Overview of Socio-Economics Programs

 

The Association of American Law Schools (AALS) Annual Meeting will be held Tuesday, January 3 – Saturday, January 7, 2017, in San Francisco.  Readers of this blog who may be interested in programs associated with the AALS Section on Socio-Economics & the Society of Socio-Economics should click on the following link for the complete relevant schedule: 

Download Socio-Economic AALS Participants + Descriptions 161018

Specifically, I'd like to highlight the following programs:

On Wednesday, Jan. 4:

9:50 - 10:50 AM Concurrent Sessions:

1. The Future of Corporate Governance:
   How Do We Get From Here to Where We Need to Go?
   andre cummings (Indiana Tech)                            Steven Ramirez (Loyola - Chicago)
   Lynne Dallas (San Diego) - Co-Moderator        Janis Sarra (British Columbia)
   Kent Greenfield (Boston College)                        Faith Stevelman (New York)
   Daniel Greenwood (Hofstra)                                 Kellye Testy (Dean, Washington)
   Kristin Johnson (Seton Hall)                                 Cheryl Wade (St. John’s ) Co-Moderator
   Lyman Johnson (Washington and Lee)
2. Socio-Economics and Whistle-Blowers
   William Black (Missouri - KC)                                 Benjamin Edwards (Barry)
   June Carbone (Minnesota) - Moderator             Marcia Narine (St. Thomas)

1:45 - 2:45 PM Concurrent Sessions:

1. What is a Corporation?
Robert Ashford (Syracuse) Moderator                             Stefan Padfield (Akron)
Tamara Belinfanti (New York)                                             Sabeel Rahman (Brooklyn)
Daniel Greenwood (Hofstra)

On Thursday, Jan. 5:

3:30 - 5:15 pm:
Section Programs for New Law Teachers
Principles of Socio-Economics
in Teaching, Scholarship, and Service
Robert Ashford (Syracuse)                                                     Lynne Dallas (San Diego)
William Black (Missouri - Kansas City)                             Michael Malloy (McGeorge)
June Carbone (Minnesota)                                                     Stefan Padfield (Akron)

On Saturday, Jan. 7:

10:30 am - 12:15 pm:
Economics, Poverty, and Inclusive Capitalism
Robert Ashford (Syracuse)                                                     Stefan Padfield (Akron)
Paul Davidson (Founding Editor                                          Delos Putz (San Francisco)
Journal of Post-Keynesian Economics)                             Edward Rubin (Vanderbilt)
Richard Hattwick (Founding Editor,
Journal of Socio-Economics)

The War on Coal is Also a Technology Issue (Despite the Politics)

Last week, I explained that the "War on Coal" Is Really A Competition Issue, with cheap natural gas prices as a major reason coal production and use have declined. Beyond the impact of natural gas on coal jobs, technology is also an issue. Technology is making mining more efficient, but it is making the market harder for coal miners. Following is a chart I created from Energy Information Administration data that shows coal production and employment statistics for 2013 and 2014.

Coal Production Data

	2014		2013		Percent Change
Coal-Producing	Number of Mines	Production	Number of Mines	Production	Number of Mines	Production
State and Region1
Appalachia Total	804	266,979	877	269,672	-8.3	-1

-- Underground

292

193,434

339

188,090

-13.9

2.8

-- Surface

512

73,545

538

81,582

-4.8

-9.9

Powder River Basin (surface)

16

418,156

16

407,567

-

2.6

Coal-Related Employment Data

Coal-Producing	Underground	Surface	Total	Underground	Surface	Total	Underground	Surface	Total
State and Region
Appalachia Total	32,545	12,141	44,686	35,740	14,115	49,855	-8.9	-14	-10.4
Powder River Basin	-	6,592	6,592	-	6,635	6,635	-	-0.6	-0.6

The data show the coal-production and employment figures for 2013 and 2014.  Surface mining in the Powder River Basin (the highest producing region in the country) increased coal production 2.6% and employment dropped 0.6%, while underground mining production for Appalachia increased 2.8% even though employment dropped 8.9%.  For the United States, overall coal production increased 1.5% between 2013 and 2014, while the number of employees dropped 6.8%. Thus, even as coal production increased modestly, the number of employees holding those jobs declined significantly. 

This doesn't deter politicians from making other claims, though.  As I noted last week, the presidential race has included rhetoric claiming anti-coal regulations are what really hurt coal jobs. And it's not just at the presidential level.  Coal states often feature politicians promising to bring back coal jobs. In my home state of West Virginia, for example, both candidates for governor are making such a promise.  

As an aside, in the Ohio U.S. Senate race between Rob Portman and Ted Strickland, Sen. Portman has made use of this similar line of attack, claiming that former Ohio and governor and U.S. Representative Strickland "turned his back" on Ohio by not supporting coal jobs. The advertisement, available here, features workers from (at least for a West Virginian) an interesting choice of mine: Rosebud Mining.  (A perceptive former student, Ken Bannon, alerted me to the ad or I would have missed it.)  

People outside of West Virginia may not recall the chemical spill in January 2014 that contaminated the Elk River and left 300,000 West Virginians without drinking water.  As I noted in a post back then, the company that owned the chemical site was Freedom Industries, which listed as its sole owner, Chemstream Holdings, a company owned by J. Clifford Forrest.  Forrest also owns the Pennsylvania company (that also has Ohio operations) Rosebud Mining, which was located at the same address Chemstream Holdings listed for its headquarters. It appears that Portman has a solid lead in the race, and if I were part of the campaign, I'd probably not feature a mining company that had been linked (through an executive) to such a major recent environmental disaster.  

Despite the data (and the economic realities), claims of a war on coal continue. Even where there is some truth to the idea -- recent regulations are not especially coal friendly -- there are simply too many hurdles to overcome for coal employment numbers to go back to prior levels.  One can conceivably win a war on regulations, but technology and the marketplace are far less forgiving. It's time we embrace that reality.  

 

The "War on Coal" Is Really A Competition Issue

The Trump-Pence campaign has adopted a common West Virginia criticism of U.S. energy policy under the Obama administration that is known as the "war on coal." This phrase is used to describe the current administration's support for U.S. Environmental Protection Agency (EPA) policies to reduce greenhouse gas emissions (via the proposed Clean Power Plan) and other environmental protections that relate to consumption of fossil fuels, especially coal.  In the vice presidential debate Republican Mike Pence repeated the phrase several times, asserting that the EPA was killing coal jobs, especially in places like West Virginia and Kentucky.  The problem is that regardless of the EPA's goals, it is not environmental regulation that is coal's main challenge.  It is price. 

As Charlie Patton, president of West Virginia-based Appalachian Power explained, "Forget the clean power plan. You cannot build a coal plant that meets existing regulation today that can compete with $5 gas. It just cannot happen."  Cheap natural gas, made available by horizontal drilling and hydraulic fracturing in shale formations, has led to a significant increase in natural gas-fired electric power generation, most of which replaced coal as the fuel of choice. The shale gas boom, which started approximately in 2008, can account for most of this change.  Here's the U.S. electricity generation data by fuel (my chart using Energy Information Administration data) for 2006 to 2015):  

U.S. Electricity Generation, by fuel

Annual Total	Coal	Natural Gas	Renewables
2006	48.97%	20.09%	2.36%
2007	48.51%	21.57%	2.52%
2008	48.21%	21.43%	3.04%
2009	44.45%	23.31%	3.63%
2010	44.78%	23.94%	4.02%
2011	42.28%	24.72%	4.69%
2012	37.40%	30.29%	5.29%
2013	38.89%	27.66%	6.01%
2014	38.64%	27.52%	6.39%
2015	33.18%	32.66%	6.65%

 

Note the drop in coal begins modestly in 2008 and drops from 48.21% to 33.18% in 2015. In that time frame, coal lost 15.03% of the market, while natural gas increased 11.23%.  Renewable sources (not including solar and hydropower) increased 3.61% to 6.65% overall. That means that natural gas and renewables picked up 14.84% of the market -- or 98.7% of the market lost by coal. 

Coal production in my home state of West Virginia has declined from the peak of 158 million short tons in 2008 down to 95 million in 2015, with further decline expected for 2016.  And the state is feeling the devastating effect of lost jobs -- West Virginia was the only state in 2015-16 to lose a statistically significant number of jobs.  Tax revenues are down dramatically, and that decline, too, is expected to continue.  The harm to the state of these lost jobs is real, but there is no reasonable governmental policy that could change this decline, even if we wanted it to.  The reality is that natural gas is a cheaper option, it has long-term potential to work alongside renewables, and no energy proposal from any major candidate has suggested a proposal that would help coal take back marketshare from natural gas (despite promises to simply bring back coal jobs).  

Living in West Virginia, a place I love to live, it is easy to want hope.  We need hope, and we need a plan, but that plan has to include educating our workforce and expanding economic opportunities in other industries, not harkening back to another time that will never return. The reality is that the war on coal is not one that can be won. In the end, as a pricing problem, trying to win the war on coal is really trying to win a war on math.  It just can't happen. The numbers don't add up.  

 

Free Speech and Free Markets Go Together

I think, by now, most people have heard about Colin Kaepernick's protest, which he manifested by his refusal to stand for the national anthem before the 49ers' August 26 preseason game against the Green Bay Packers.  Kaepernick explained his actions as follows: 

I am not going to stand up to show pride in a flag for a country that oppresses black people and people of color. To me, this is bigger than football and it would be selfish on my part to look the other way. There are bodies in the street and people getting paid leave and getting away with murder.

Many were offended by his decision; others have applauded it.  What is it that makes people (particularly white people) so upset about someone choosing not to stand for the national anthem? I thought the anthem and flag were supposed to stand for freedom, which includes the freedom to dissent and disagree. It fascinates me that one football player could get this much press for deciding not to do something he was under no obligation to do (as his employer made clear). But it certainly explains why he did it. If nothing else, Colin Kaepernick reminded of us both of our ability to speak freely and that there are potential costs when doing so. He got people to talk about an important issue, and he used his platform to focus on a necessary conversation.

Free speech can, though, have consequences. And in many ways, it should. The Bill of Rights just protects our right to speech and limits the government's ability to impose consequences for exercising that right. The Denver Broncos' Brandon Marshall lost a credit union sponsorship for his actions in support of Kaepernick's protest. Personally, if I did business with that sponsor, they'd lose my money because I support his Marshall's right to protest and because I think the the protest, conducted in a peaceful way, raised issues worthy of discussion.  (I will note that the sponsor cut ties in what appears to be a respectful and above-board way. I just disagree with the decision).  That's the free market working in a (mostly) free country.  I don't have any problem with the sponsor acting as they did, either.  They, too, were exercising their rights (assuming they did not breach a contract, and I have seen no evidence they did). I am not mad the credit union made the decision it did; I just disagree with the decision, and I would let them know that by walking away. 

Most striking to me about this uproar is the apparently binary way so many people view protests. One can love this country and hate injustice. We can protest as we try to reach our ideals. And we can disagree about the method of protest or the ideals themselves. But let's consider the point and be respectful of one another as we try to work through our differences. Brandon Marshall stated this position especially well. He explained, "I'm not against the military. I’m not against the police or America. I’m just against social injustice.”

Businesses, like people, have the right to associate with those they choose, and consumers (in turn) have a right to respond.  That is not just free speech, it is how a free market operates. 

Th United States, to me, is a great, yet greatly flawed, nation. The flag (and our national anthem) can represent the best of this nation and its people. The song and flag, like almost anything related to this nation that is more than 200 years old, also has ties to some of our very worst history, including slavery. That is also a reality. We have real and significant remaining institution problems related to race and gender, even if we're better than we used to be.  

No matter what, the national anthem and the flag are neither bigger than, nor more important than, the citizens they are intended to represent. Speaking freely, even when it is not popular, is honoring the best of what the flag should represent, the best of this nation’s history, and (I sincerely hope) a sign of a great future. Free speech is not a liberal or conservative issue, and exercising our right to speak should be celebrated, whether you agree with the speech or not.  Free speech begets free markets. 

“All we say to America is, ‘Be true to what you said on paper.’ If I lived in China or even Russia, or any totalitarian country, maybe I . . . could understand the denial of certain basic First Amendment privileges, because they hadn’t committed themselves to that over there. But somewhere I read of the freedom of assembly. Somewhere I read of the freedom of speech. Somewhere I read of the freedom of press. Somewhere I read that the greatness of America is the right to protest for right.”
— Martin Luther King, Jr., Civil Rights Leader

 

“We are so concerned to flatter the majority that we lose sight of how very often it is necessary, in order to preserve freedom for the minority, let alone for the individual, to face that majority down.”
— William F. Buckley Jr., founder of National Review magazine

 

“We cannot have a society half slave and half free; nor can we have thought half slave and half free. If we create an atmosphere in which [people] fear to think independently, inquire fearlessly, express themselves freely, we will in the end create the kind of society in which [people] no longer care to think independently or to inquire fearlessly.”
— Henry Steele Commager, U.S. historian

 

Sustainability & Sustainable Business: Natural Gas Does Not Kill Renewables

I am traveling to the SEALS Annual Meeting today, which means my summer is over.  We start orientation next week at WVU College of Law, and I have absolutely no idea where the time went. 

I will be keeping myself busy at the conference, where I am participating in a number of events, including a discussion group on Sustainability & Sustainable Business and one on White Collar Crime.  Today, I thought I'd write a little bit about the first subject, and engage in a bit of shameless self-promotion, as well. 

The intersection of sustainability and business is a significant part of my work.  My areas of focus are business law and energy law, and I have spent much of my research time looking at how companies respond to regulation, including the effects of environmental regulations.  (I also teach courses in Energy Law and Business Organizations, as well as a course called Energy Business: Law and Strategy, which merges the two subjects.)  

I was recently asked to submit a response to Prof. Felix Mormann's paper, Clean Energy Federalism, which appeared in the Florida Law Review.  His paper, which I think is well done, offers "two case studies, a novel model for policy integration, and theoretical insights to elucidate the relationship between environmental federalism and clean energy federalism." His article argues that renewable portfolio standards (mandates that require a certain percentage of electricity generated come from renewable energy sources) and feed-in tariffs (guaranteed payments for renewable energy that are independent of the market price) can be used together to find a "better, more efficient allocation of investor and regulatory risk."  

The recent influx of cheap natural gas from shale formations (using hydraulic fracturing and horizontal drilling) has lead some to believe that renewable energy goals like the ones Prof. Mormann proposes will be ineffective, or at least much weaker. Although cheap natural gas does change way the electricity market was expected to evolve, my response argues that the change does not necessarily make renewable energy goals unattainable or even less attainable.  My response, Natural Gas is Changing the Clean Energy Game, But the Game is Not Over, appears in the Florida Law Review Forum. Here's the abstract (and the paper is available here):      

In his article, Clean Energy Federalism, Professor Felix Mormann analyzes the keys facets of how energy law and environmental law intersect, as he considers how to implement a program to “decarbonize America’s energy economy.” In this forward-thinking piece, Professor Mormann considers the potential role of renewable portfolio (RPSs) and feed-in tariffs (FITs) and how concurrent implementation at the federal and state level could support a lower-carbon energy future. His conclusion—“that one clean energy policy (RPS) be implemented at the federal and another (FIT) at the state level”—is likely correct from a policy-optimization perspective. Still, as Professor Mormann acknowledges, such policies can face enormous political hurdles.

This Response acknowledges the enormous role fossil fuels still play in our electricity generation sector and notes that renewables still account for less than 15% of the overall U.S. generation market. The energy sector, though, can be expected to continue its diversification, in part because diversification is valuable for utility reliability and resilience, as well as for financial management purposes. With lower natural gas prices, fuel switching has continued at pace, with the bulk of the new natural gas generation replacing coal-fired generation. This is a positive development for those looking to displace coal, but the change to natural gas also delays at least some of the shifting to renewables.

This response argues that all is not lost because of that delay. The coal-fired generation that is displaced by natural gas could create at least some opportunity for a parallel increase in renewable electricity generation. Although some may believe that low natural gas prices undercut the option of bringing new renewable energy online, that does not need to be the case. Professor Mormann’s option is still a reality, and the likelihood of success is more a question of priority than opportunity.

 

Book Spotlight: Empire of the Fund by William Birdthistle

Professor William Birdthistle at Chicago-Kent College of Law is publishing his new book, Empire of the Fund with Oxford University Press.  A brief introductory video for the book (available here) demonstrates both Professor Birdthistle’s charming accent and talent for video productions (this is obviously not his first video rodeo). Professor Birdthistle has generously provided our readers with a window into the book’s thesis and highlights some of its lessons.  I’ll run a second feature next week focusing on the process of writing a book—an aspiration/current project for many of us.

Empire of the Fund is segmented into four digestible parts:  anatomy of a fund describing the history and function of mutual funds, diseases & disorders addressing fees, trading practices and disclosures, alternative remedies introducing readers to ETFs, target date funds and other savings vehicles, and cures where Birdthistle highlights his proposals. For the discussion of the Jones v. Harris case alone, I think I will assign this book to my corporate law seminar class for our “book club”.  As other reviewers have noted, the book is funny and highly readable, especially as it sneaks in financial literacy.  And now, from Professor Birdthistle:

Things that the audience might learn:

The SEC does practically zero enforcement on fees.  [pp. 215-216]  Even though every expert understands the importance of fees on mutual fund investing, the SEC has brought just one or only two cases in its entire history against advisors charging excessive fees.  Section 36(b) gives the SEC and private plaintiffs a cause of action, but the SEC has basically ignored it; even prompting Justice Scalia to ask why during oral arguments in Jones v. Harris?  Private plaintiffs, on the other hand, bring cases against the wrong defendants (big funds with deep pockets but relatively reasonable fees).  So I urge the SEC to bring one of these cases to police the outer bounds of stratospheric fund fees.

The only justification for 12b-1 fees has been debunked.  [pp. 81-83]  Most investors don't know much about 12b-1 fees and are surprised by the notion that they should be paying to advertise funds in which they already invest to future possible investors.  The industry's response is that spending 12b-1 fees will bring in more investors and thus lead to greater savings for all investors via economies of scale.  The SEC's own financial economist, however, studied these claims and found (surprisingly unequivocally for a government official) that, yes, 12b-1 fees certainly are effective at bringing in new investment but, no, funds do not then pass along any savings to the funds' investors.  I sketch this out in a dialogue on page 81 between a pair of imaginary nightclub denizens.

Target-date funds are more dangerous than most people realize.  [pp. 172-174]  Target-date funds are embraced by many as a panacea to our investing problem and have been extremely successful as such.  But I point out some serious drawbacks with them.  First, they are in large part an end-of-days solution in which we essentially give up on trying to educate investors and encourage them simply to set and forget their investments; that's a path to lowering financial literacy, not raising it (which may be a particularly acute issue if my second objection materializes).  Second, TDFs rely entirely on the assumption that the bond market is the safety to which all investors should move as they age; but if we're heading for a historic bear market on bonds (as several intelligent and serious analysts have posited), we'll be in very large danger with a somnolent investing population

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"Socio-Economics: Challenging Mainstream Economic Models and Policies"

The University of Akron Law Review recently published its Symposium on Law and SocioEconomics.  You can find a full list of the contributions here (Volume 49, Issue 2).  As one of the organizers of the symposium, I had the honor of writing a conclusion to the issue, titled Socio-Economics: Challenging Mainstream Economic Models and Policies.  I provide the abstract below, and you can read the entire piece here.

At a time when many people are questioning the ability of our current system to provide economic justice, the Socio-Economic perspective is particularly relevant to finding new solutions and ways forward. In this relatively short conclusion to the Akron Law Review’s publication, Law and Socio-Economics: A Symposium, I have separated the Symposium articles into three groups for review: (1) those that can be read as challenging mainstream economic models, (2) those that can be read as challenging mainstream policy conclusions, and (3) those that provide a good example of both. My reviews essentially take the form of providing a short excerpt from the relevant article that will give the reader a sense of what the piece is about and hopefully encourage those who have not yet done so to read the entire article.

Energy Policy: Trump Won't Let Facts Get in the Way of A Good Sound Bite

Donald Trump was in my home state of West Virginia recently, and he promised to bring back coal jobs: 

And West Virginia. And we’re going to get those miners back to work. I’ll tell you what. We’re going to get those miners back to work . . . 

Let me tell you, the miners in West Virginia and Pennsylvania which was so great to me last week and Ohio and all over, they’re going to start to work again. Believe me. You’re going to be proud again to be miners.

How he plans to do this is not clear, but part of it will be to attack the EPA's Clean Power Plan.  Okay, but that's a relatively recent development, and was certainly not the cause of the decline in coal production since the last production peak in 2008. The primary cause: cheap and abundant natural gas from horizontal drilling and hydraulic fracturing. 

In my former home state of North Dakota, Trump was telling voters he would rescind President Obama’s climate change rules and work to make the Keystone XL pipeline a reality to ship petroleum from Canada’s oil sands to the U.S. Gulf Coast refineries.  Further, Trump has stated that he would relax regulations that limit coal leases on federal lands and reduce hydraulic fracturing regulations on federal lands.  

It appears, then, that his plan to support the coal, oil, and natural gas industries will be to lower costs.  That should increase supply, right?  The problem for each industry, though, is that excess supply has lowered prices so much that all three areas are cutting back on activity (and jobs). Reducing governmental restrictions would lower costs even more, which is not likely to increase jobs or production in the current climate. Any such change might increase margins for existing activities, but it would not likely incentivize a change in behavior that would lead toward the state goals of increased employment. As the Financial Times recently explained:

One of the factors behind that [oil market] collapse was Saudi Arabia’s strategy of continuing to produce at high levels above 10m barrels per day, rather than cutting output to ease the glut of oil. 

More oil (or gas or coal) equals lower prices.  Lower taxes and regulations equals lower cost of exploration and production, which leads to? More oil (or gas or coal) and lower prices.  Even worse, low prices tend to encourage automation, which is particularly not good for jobs. 

One can debate whether there is value in reducing these kinds of regulations, but one needs to explain how greater supply and lower prices is going to help any of these industries in the way the policies are purporting to (or another justification is needed). But then, Trump has not explained how he intends to implement any of his promises or how any of his proposals would work.  

Newsflash: Just saying something, no matter how confidently and assertively it is said, doesn't make it true. I sure hope a majority of voters recognize this come November.   

Top Five Best Beers "Created" By Law

Beer is good.  It's an opinion based on serious research.  A lot of beer laws are not good.  They often restrict beer distribution, limits sales, and generally make it harder for us to access good beverages.  

There have been some benefits of these restrictions.  The main one, probably, is that it provided the storyline for Smokey and The Bandit: 

Big Enos (Pat McCormick) wants to drink Coors at a truck show, but in 1977 it was illegal to sell Coors east of the Mississippi River without a permit. Truck driver Bo "Bandit" Darville (Burt Reynolds) agrees to pick up the beer in Texas and drive it to Georgia within 28 hours. When Bo picks up hitchhiker Carrie (Sally Field), he attracts the attention of Sheriff Buford T. Justice (Jackie Gleason). Angry that Carrie will not marry his son, Justice embarks on a high-speed chase after Bandit.

(Note that IMDB's description -- "The Bandit is hired on to run a tractor trailer full of beer over county lines in hot pursuit by a pesky sheriff." -- seems to have confused the film with the Dukes of Hazzard.  Crossing state, not county, lines was the issue and Rosco P. Coltrane was not part of the Bandit films.  I digress.)  

In my home state of West Virginia, getting craft beer, until 2009, was hard. Beer with more than 6% ABV could not be sold in the state. All beer in the state is "non-intoxicating beer" but the definition was raised from 6% so that it now includes (and allows) all malt-based beverages between 0.5% and 12% ABV.  

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Business Judgment Rule Protected?

Short post today:  I spent Business Organizations today whining that Benefit Corporations dilute the business judgment rule for regular corporations.  I do this, in part, because I hate it, but I also do it because students can see (I think) how the concept of the business judgment rule works in practice. 

I left class to find that Coca-Cola is providing paid leave for new fathers, not just new mothers.  I fully support this, and think it is both wise and moral.  The report notes: 

Coke said one motivation is to help it recruit and retain millennials.

This makes total sense to me. And I think it good business.  But I still hope the reason to say this is that it is (in the Board's judgment) good business, and not because the board thinks they otherwise need to justify such a decision. 

Legislated Discrimination Is Terrible for Business

My home state in West Virginia is struggling.  The economy is struggling because two of the state's main industries -- coal and natural gas -- are facing falling production (coal) and low prices (gas). Severance taxes for the state account for approximately 13% of the budget, and both are down dramatically. Tax revenues for the state were down $9.8 million in January from the prior year and came up $11.5 million short of estimates.  For the year-to-date, the state collected $2.29 billion, which is $169.5 million below estimates. Oddly enough, state sales and income taxes for January both exceeded estimates, but not enough to offset other stagnation in the state.  

The state has long been known as a coal state, and that industry has dominated the legal and political landscape.  West Virginia has been criticized for having a legal system that is "anti-business," with the United States Chamber of Commerce finding stating that West Virginia is the 50th ranked state in terms of the fairness of its litigation. (See PDF here.) CNBC (with input from the National Association of Manufacturers) also ranked West Virginia last in terms of business competitiveness, so the starting point is not good.  

Now, the West Virginia legislature is considering the state's Religious Freedom Restoration Act, which many (including me) see as about legalizing specific forms of discrimination, and not promoting or supporting religion.  And some religious groups agree.  As the Catholic Committee of Appalachia’s West Virginia Chapter explains: 

We appreciate the background of 1993 federal act with the same name, and the history leading up to it, with its pertinence to protecting Native American sacred lands and religious practices from governmental infringement. With the U.S. Supreme Court’s decision that RFRA would only be applicable to federal actions, we can recognize, also, the value of an argument for versions of a law to be passed at the local level. However, the primary motivation behind West Virginia’s bill #4012, and others like it, seems not to be the protection of legitimate religious exercises, but securing the ability of religious groups to discriminate against marginalized populations on the basis of religious convictions.

Just as important for purposes of this post, many West Virginia businesses oppose the bill.  Local Embassy Suites and Marriott hotels representatives spoke out against the bill, and the Charleston (WV) Regional Chamber of Commerce and Generation West Virginia, along with several city mayors, have opposed the bill, as well.  They have good reason.  When the state of Indiana passed a similar bill, Indianapolis promptly lost as many as twelve conventions and estimates around $60 million.  Ouch. As one mayor said, West Virginia legislators need to "Get out of the way." 

Morgantown, home to my institution, was the state’s second city to pass an LGBT non-discrimination ordinance in February 2014. West Virginia University’s faculty senate also unanimously yesterday approved a resolution condemning the bill. And there was a chance to make clear the intent of the bill was not intended to be used as a way to discriminate against someone based sexual orientation through a proposed amendment making that clear. Unfortunately, the amendment was deemed “not germane.”

Beyond coal, natural gas, chemicals, and timber, tourism is one of our state's main industries. It's also a great one. From whitewater rafting to skiing to hiking, the state is a great place for outdoor activities.  Craft breweries and a few great local restaurants are helping make the state a destination.  Unfortunately, the debate about this bill, especially in the wake of the backlash in Indiana, is hurting the state's ability to make build up it's tourism industry by making many people feel unwelcome.  

It's really too bad as a local restaurant, Atomic Grill, made international news for how they responded to comments about their waitresses and has been lauded for their response to other intolerance in their restaurant.  

I don't like this bill because, to me, it's either a tautology or an attempt to discriminate through legislation.  But beyond that, it's stupid, terrible way to promote business in the state.  We spend enough time trying to get people to come visit -- and when people do, they almost always like it. It really is a great place in so many ways.  At a time when the entire state is looking at 4% budget cuts across the board -- when we need to be building bridges to broader audiences -- the state's legislature is screwing around with bills that have zero economic upside and reinforce stereotypes about the people of our state.   

Being pro-business means being pro-consumer, which really means being pro-people.  This bill is none of those.  We need to do better, and it's disappointing our time and our money are being wasted like this.  

The Stock Market and Oil: What's in a Correlation?

The Wall Street Journal yesterday reported that oil and stocks are working together closer than they have in twenty-six years.

Oil and stock markets have moved in lockstep this year, a rare coupling that highlights fears about global economic growth.

As oil prices tumbled early in 2016, global equities recorded one of their worst-ever starts for a new year. On Monday, oil and stocks were lower again. The S&P 500 index was down 0.7% in midday New York trading, and Brent crude futures, the global benchmark, were down $1.37 a barrel, or 4.3%, to $30.81. That followed a joint rebound on Friday.

The correlation between the price of Brent and the S&P 500 stock index is at levels not seen in the past 26 years. January isn’t over yet, but over the past 20 trading days—an average month—the correlation is 0.97, higher than any calendar month since 1990 . . . .

And today, stocks rebounded with the 3.4% increased in the price of oil to $31.38 a barrel. And yeah, that's still low.   

The correlation may not be a strong as reports indicate, though.  Some reports suggest that the correlation is not nearly as close as it seems. As this analysis explains, "[e]ven if correlations between assets are trending higher that doesn’t mean that the outcomes have to be even remotely similar. While stocks are down around 8% this year, oil has fallen nearly 20%." 

There is some indication that oil and stocks now tend to correlate, even though for a long time, stocks and commodities seemed to operate independently. According to this 2012 study,

The changes in commodity price correlation and volatility have profound implications for a wide range of issues, from commodity producers’ hedging strategies and speculators’ investment strategies to many countries’ energy and food policies. We expect these effects to persist so long as index investment strategies remain popular among investors. 

It's hard to predict what this correlation can mean, or whether one is driving the other.  Certainly a spike in oil supply demand could cause an increase in oil prices, and that demand would like help support the stock market.  But oil prices could stay low, and we could still see the market go up if other indicators make investors happy.  

One correlation that it seems you can always count on: low oil prices means more car and truck sales.  And by that, it usually means SUV and truck sales.  

Sales of trucks and sport utility vehicles are rapidly outpacing sales of all other vehicle types in the U.S. as consumers ditch four-door sedans and flock to a seemingly endless selection of small, midsize and gargantuan SUVs. According to 2015 sales data released by the world’s top automakers on Tuesday, trucks and SUV sales dominated last year.

We'll see how long it lasts. As they say, the cure for low prices is low prices, and the cure for high prices is high prices.  For now oil and gas are low -- the market will fix that one way or another soon enough.   

 

2016 AALS Section Meetings

The AALS Annual meeting starts today in New York.  The full program is available here, and listed below are two Section meeting announcements of particular interest to business law scholars:

Thursday, January 7th from 1:30 pm – 3:15 pm the SECTION ON AGENCY, PARTNERSHIP, LLC’S AND UNINCORPORATED ASSOCIATIONS, COSPONSORED BY TRANSACTIONAL LAW AND SKILLS will meet in the Murray Hill East, Second Floor, New York Hilton Midtown for a program titled:

"Contract is King, But Can It Govern Its Realm?"  

The program will be moderated by Benjamin Means, University of South Carolina School of Law.  Discussants include:

• Joan M. Heminway, University of Tennessee College of Law
• Lyman P.Q. Johnson, Washington and Lee University School of Law
• Mark J. Loewenstein, University of Colorado School of Law
• Mohsen Manesh, University of Oregon School of Law
• Sandra K. Miller, Professor, Widener University School of Business Administration, Chester, PA

BLPB hosted an online micro-symposium in advance of the Contract is King meeting.  The wrap up from this robust discussion is available here.

Friday January 8th, from 1:30 pm – 3:15 pm join the SECTION ON BUSINESS ASSOCIATIONS AND LAW
AND ECONOMICS JOINT PROGRAM at the Sutton South, Second Floor, New York Hilton Midtown for a program titled:

 "The Corporate Law and Economics Revolution Years Later: The Impact of Economics and Finance Scholarship on Modern Corporate Law".  

The program will be moderated by Usha R. Rodrigues, University of Georgia School of Law, and feature the following speakers:

• Frank Easterbrook, Judge, U.S. Court of Appeals for the Seventh Circuit, Chicago, IL
• H. Kent Greenfield, Boston College Law School
• Roberta Romano, Yale Law School
• Tamara C. Belinfanti, New York Law School
• Kathryn Judge, Columbia University School of Law
• K. Sabeel Rahman, Brooklyn Law School

At the conclusion of the program, the officers of the Section on Business Associations would like to honor 13 faculty members
for their mentorship work throughout the year. 

I hope to see many of you in New York soon!

-Anne Tucker