September 2014

Following are some pictures from my adventures so far, as described in my prior posts on my Bakken Oil trip in western North Dakota, here and here. Thanks to co-blogger Haskell Murray for the suggestion.

 This is a picture of one of the mudrooms from a crew camp near Dickinson, ND, in Dunn County:

Mudroom

This is a VIP room in the same facility. It has a private bath, while other rooms are smaller and share a jack-and-jill style bathroom. 

VIP

This is the sign for the guest laundry — No Greasers. 

NoGrease

This is a picture of the crude oil site for loading oil on the tanker cars.  

OIlfield

A crude storage tank: 

CrudeStorage

Most of the oil coming out of North Dakota, 1 million barrels a day, is shipped by rail: 

Railcars

This is North Dakota crude. It comes from the ground a little more orange in color, but mellows to this over time.  It’s not thick; it almost like iced tea. 

NDCrude

Flaring natural gas remains a problem, though some gathering is underway to help reduced the amount of flaring in the state. 

Flare

Finally, some pictures from Theodore Roosevelt National Park:

TRPark1

TR2

Ttpan

TRHorses

Daniel K. Tarullo, the Fed governor overseeing regulatory policies, testified before the Senate Banking Committee on Tuesday and signaled the central bank’s intent to increase special capital requirements for the largest banks to 11.5 percent.  The Fed’s plans are more conservative than new international regulations that require 9.5 percent reserves.  The eight banks currently deemed globally significant and therefore subject to the requirements are: Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, State Street and Wells Fargo.   The market reacted negatively to the news, dropping the stock price of the institutions. 

Even if banking regulations aren’t in your immediate wheel house of interest, an increase in reserves of 3% means about 17B for a bank like Goldman which would pad its reserve through measures like selling stock, holding on to profits or cutting its business operations.  The impact of these regulations could be felt all areas of business (perhaps why these particular banks are considered to be globally significant institutions). These changes will certain spark a lot of debate both in the academic and the practice worlds.

-Anne Tucker

This experience has been rather remarkable, and I’m only two days in to the trip.  We covered a lot of miles today, and not all of it was related to the oil and gas business. I started the day with a run, at a misty 43 degrees, after a high of 85 yesterday.  This is not relevant, other than to saw I was a bit cold this morning.  

 Target Logistics Dunn County Lodge

A few visits of interest today: First:  Target Logistics Dunn County Lodge, which is a crew camp site.  These are often know as “man camps.” They prefer “workforce housing.” I’ll stick with crew camps. 

It was was an impressive site for quickly built housing. The facility provides housing that does not take away from the local community, and deals with parking, water, and utility issues, as well as other resource issues.  The site has about 600 beds, and costs about $8-$10 million to build. They plan about a 20-month payoff for the build, which they met. Impressive. 

Prices are geared to be market competitive. The average is about $120 per night, which includes all food and utilities, though companies negotiate their own deals.  The people who…

Today marked the first day of several meeting with people from North Dakota to discuss the oil boom and how it has impacted the state.  I lived in the state, and I loved it, so I think I am a little more connected than many to what’s happened here.  That said, I lived on the other side of the state from the oil boom, and I only spent five (largely great) years in North Dakota, so while I’m informed, I have hardly “lived the boom.”  I’ve just been watching and trying to pay attention. 

A few things I was told tonight struck me as significant: 

1. Housing costs are still a huge issue. Building a new house in Dickinson can run upwards of $250 per square foot. A one-bedroom apartment can easily run $1300.

2. In 1997, there were 698 hotel rooms in the city, largely for tourism jumping off for the North Dakota Badlands.  By 2004, that number was 754.  As of 2013, that number has increased to 1632. (The number is true of 2014, too.) 

3. In 2005, the average daily rate for a hotel room was $53.96

By 2008: $68.95

2009: $75.57

2010: $87.59

2011: $109.52

2012 :$124.03…

Last week, I posted my observations (musings?) relating to a colloquy that I had with Tennessee Governor Bill Haslam at an event sponsored by the C. Warren Neel Corporate Governance Center on The University of Tennessee’s Knoxville campus.  At almost the same time, and not at all related to my attendance at that event, I picked up a reprint of a recent article, CEOs and Presidents, authored by Tom Lin at Temple.  Tom and I often work in overlapping fields.  In particular, both of us have shown interest, from different perspectives, in substantially similar issues relating to corporate executives. 

I commend Tom’s article to you.  It provides a lucid and engaging comparison of CEOs and Presidents (as the title suggests).  (His analysis is, of course,  significantly more rich and nuanced than the reflections I shared in my earlier post.)  But Tom’s piece doesn’t stop there.  It goes on to critique the desirability of the “President as CEO” model based on the harms posed to both corporations and democracies and also highlights some important lessons we can learn from his study.

I do want to challenge Tom on one provocative statement that he makes in the article, however.  After critically commenting on the dangers of (among other things) government reliance on private industry and values in the accomplishment of its objectives, he observes that “[g]overnment and corporations are not actual or conceptual substitutes for one another, but are complements of one another.”  He lists examples and avows that both government and private industry are optimized when they collaborate.  

I’m currently flying at about 30,000 feet on my way to Dickinson, North Dakota.  Regular readers know I do much of my research in the energy sector and that the impacts of horizontal drilling and hydraulic fracturing have had on the local, regional, national, and global economies are an interest of mine.  This trip marks my first return to North Dakota since I left the University of North Dakota School of Law in the summer of 2012, and it will be my most extended trip to the Bakken oil patch in the western part of the state. 

I have the benefit of traveling with a group from West Virginia University, and we’re gathering information for a variety of applications, all of which I hope will help us plan for a more sustainable economic and environmentally viable energy future.  The trip is scheduled to include meetings with government officials (state and local), industry representatives, landowners, farmers, educators, and others.  I’m looking forward to this rare opportunity to hear so many different perspectives from people living in the heart of the U.S. oil boom. 

Over the last few years, I have written about the challenges and opportunities related to the shale oil and…

One thing that distinguishes excellent lawyers (or excellent academics, for that matter) is the ability to see more than one side of a legal question—to marshal all the arguments for and against a position, and weigh their relative strengths.

A lawyer drafting a contract needs to foresee the various ways a contract might be interpreted and try to minimize the ambiguities. A lawyer advising a client about regulatory compliance needs to understand the different ways the applicable statutes and regulations might be read. A lawyer litigating a case needs to anticipate her opponent’s best arguments and the weaknesses in her own arguments to be an effective advocate.

But how does one teach open-mindedness to law students? It’s a problem on exams. Students often fixate on one view and ignore any arguments against their chosen positions.

It’s also a problem in the classroom. Once some students have taken a public position, it’s very hard to get them to concede that any argument against that position has validity. And some students come to class having already formulated a position about a particular case or policy issue, making the task even harder.

I have been teaching for over 25 years, and I’m still…

Since Delaware decisions like Boilermakers Local 154 Ret. Fund v. Chevron Corp., 73 A.3d 934 (Del. Ch. 2013) and ATP Tour, Inc. v. Deutscher Tennis Bund, 91 A.3d 554 (Del. 2014), there have been renewed calls for corporations to amend their charters and/or bylaws to require that shareholder lawsuits – including securities lawsuits – be subject to individualized arbitration.

This is actually a big interest of mine – I’m currently working on a paper concerning the enforceability of arbitration clauses in corporate governance documents.  Critically, I do not believe these decisions support the notion that arbitration provisions can control securities claims – at best, they suggest that arbitration provisions in corporate governance documents can control governance claims (i.e., Delaware litigation – concerning directors’ powers and fiduciary duties).

[More under the cut]

Last Monday, at Vanderbilt Law School, I attended a presentation by Jesse Fried (Harvard Law) on his new article, The Uneasy Case for Favoring Long-Term Shareholders (Yale Law Journal, forthcoming). 

The paper’s abstract describes the thought-provoking thesis:

This paper challenges a persistent and pervasive view in corporate law and corporate governance: that a firm’s managers should favor long-term shareholders over short-term shareholders, and maximize long-term shareholders’ returns rather than the short-term stock price. Underlying this view is a strongly-held intuition that taking steps to increase long-term shareholder returns will generate a larger economic pie over time. But this intuition, I show, is flawed. Long-term shareholders, like short-term shareholders, can benefit from managers destroying value — even when the firm’s only residual claimants are its shareholders. Indeed, managers serving long-term shareholders may well destroy more value than managers serving short-term shareholders. Favoring the interests of long-term shareholders could thus reduce, rather than increase, the value generated by a firm over time.

I provide more information about the paper and offer a few thoughts after the break.