A Gamble on Gambling: Let Kentuckians Decide to Pull the Lever or Not

By: John Wathen, Staff Member

On February 23, 2012, the Kentucky Senate, in a 21-16 vote, rejected Senate Bill 151 regarding a constitutional amendment legalizing gambling in the Commonwealth.

[1]

  This was well short of the 23 votes required for passage of the amendment, as required by the Kentucky State Constitution.

[2]

  The amendment would allow no more than seven casinos in the state, require that casinos be at least 60 miles from any licensed horse track, and included a statement requiring tax revenues produced from gambling be used for “

purposes including job creation, education, human services, health care, veterans programs, local governments, public safety, and the support of the horse industry.”

[3]

  If the bill had passed the Senate, it would then have been proposed to the public at large through referendum, requiring a majority vote for passage, as required by the Kentucky Constitution.

[4]

Those in opposition to the amendment have argued that tax revenues from casinos are essentially regressive in nature, coming mainly from those individuals with less disposable income and thus with more to lose from a bad day at the tables.

[5]

  Additionally, they reference economists who have looked to other casino states, claiming that casinos are not reliable revenue streams and every dollar lost at a casino is a dollar that could have been spent on other products and services.

[6]

  They argue that a dollar spent at a casino is not really revenue generated, but simply a reapportionment of revenue from other, more productive industries.

[7]

  There is also a general concern for the high number of “at-risk” gamblers in the state, and social conservatives have expressed a belief that a number of negative collateral effects, such as poverty and increased crime, will accompany expanded gambling.

[8]

Proponents of the amendment, including Kevin Flanery, president of Churchill Downs, have long argued that the legalization of gambling is essential to Kentucky’s flagship horse-racing industry.

[9]

  They point to decreased track attendance and smaller purses as a sign that horseracing in Kentucky is in decline, and claim that tracks here simply cannot compete with less-regulated horse parks in other states.

[10]

  Supporters also argue that, much like the lottery, casino gambling would lead to increased state revenues for education, job creation, and other beneficial programs facing cutbacks in the face of the economic downturn.

[11]

Across the state, the issue of expanded gambling has long been a front-page contentious issue, with no clear consensus emerging. However, Kentuckians seem united on at least one issue; let the people decide with a referendum. According to two major polls, 80 percent of Kentuckians want a direct vote on gambling regulation.

[12]

 With such overwhelming numbers, the General Assembly should pass the amendment and let the people decide once and for all the future of gambling in the Commonwealth.

[1]

Gregory A. Hall,

Senate Rejects Casino Gambling Amendment,

Courier Journal, Feb. 23, 2012, http://pqasb.pqarchiver.com/courier_journal/access/2593895571.html?FMT=FT&FMTS=ABS:FT&type=current&fmac=e01bcbebf2d68207b328bf3f9076617f&date=Feb+23%2C+2012&author=&pub=&desc=Senate+rejects+casino+gambling+amendment.

[2]

Id

.

[3]

S.B. 151, Reg. Sess. (Ky. 2012).

[4]

Id

.

[5]

Time to Oppose Senate Bill 151, Bad Bet for Kentucky,

Catholic Conference of Ky. Blog (Feb. 19, 2012),

http://ccky.org/2012/02/time-to-oppose-senate-bill-151-bad-bet-for-kentucky/.

[6]

John Cheves,

Casinos No Cure-all for State Budgets, Economists Say,

Jan. 16, 2012, http://www.kentucky.com/2012/01/16/2030235/casinos-no-cure-all-for-state.html#storylink=misearch

[7]

Id

.

[8]

Supra

note 5.

[9]

Hall,

supra

note 1.

[10]

Id

.

[11]

Cheves,

supra

note 6.

[12]

Bradford Cummins,

The Winners and Losers of SB 151,

The Paulick Report, Feb. 24, 2012, http://www.paulickreport.com:8080/news/ray-s-paddock/the-winners-and-losers-of-sb-151/.

New Developments in Local Regulation of Hydrofracking

By: Travis Van Ort, Staff Member

There is a new twist in the debate over hydraulic fracturing (hydrofracking) and how to regulate the process.  In February, two courts in New York issued opinions that upheld local regulation of hydrofracking.

[1]

  A state Supreme Court judge in Ostego County ruled that the local municipality was “legally able to ban hydrofracking through its zoning law,” and another state Supreme Court judge, in Tompkins County, “found that state mining laws do not prevent local governments from enacting fracking bans under zoning laws.”

[2]

  This likely will not be the last word on the issue, as the New York rulings are expected to be appealed.

[3]

This is not the first attempt by a municipality to regulate or ban the use of hydrofracking within city or town limits.  For instance, in August, a court in West Virginia overturned the Morgantown city ordinance that prohibited hydrofracking within city limits; in the ruling, the judge indicated that the West Virginia Department of Environmental Protection has “exclusive control over [that] area of law.”

[4]

The rulings in New York raise three important concerns:  the first two are practical concerns and the third is a policy concern.  First, the banning of hydrofracking in areas where natural gas companies have already bought land or acquired leases for the purposes of drilling may expose the regulating municipality to liability.  A company that is a party to the Tompkins County case indicated that it may “pursue a ‘takings’ claim against the town” for taking private property without just compensation.

[5]

  The company claims it has spent over $5 million to secure land leases in the area.

[6]

The second concern is the potential chilling effect local regulation could have on drilling for natural gas, at least in New York.  New York overlies three important shale gas plays – the Marcellus, the Utica, and the Devonian shales

[7]

– and if these Supreme Court decisions are upheld on appeal, local regulation could inject a significant level of uncertainty into natural gas drilling in New York.  One of the attorneys in the aforementioned cases suggested that “[n]o company will invest in leases if they can just be abrogated by a town board vote,” and “[t]hese decisions could be the kiss of death for the drilling industry coming [to New York State].”

[8]

  While the complications from local regulation may not be as dire as has been suggested, it seems likely that increased local regulation or banning of hydrofracking will lead to a decrease in interest in exploiting the gas under New York State and a decrease in drilling.  Since more than 20 local governments have already banned or limited hydrofracking

[9]

and others are attempting to implement a ban,[10] this is no small concern.

The last concern is a policy concern.  Given the importance of natural gas, especially shale gas (which requires hydrofracking to be commercially viable), to meeting US energy needs now and in the future,

[11]

these types of local level restrictions have the potential to severely complicate the extraction of gas in some of the key shale gas plays.  The US Energy Information Agency (EIA) suggests that in the future the US could produce more natural gas than it consumes.

[12]

  If the US is unable to produce as much gas as the EIA predicts because of local level bans or restrictions on hydrofracking, any shortfall between domestic production and consumption will have to be made up either through conservation and efficiency programs, the substitution of domestically produced sources of energy like coal, or energy imports.

[1]

Brian Nearing,

Local Drill Ban Wins 2

nd

Victory

,

Times Union

, Feb. 24, 2012, http://www.timesunion.com/default/article/Local-drill-ban-wins-2nd-victory-3360224.php.

[2]

Id.

[3]

See id.

[4]

Charles Young,

Judge Denies Injunction to Uphold Fracking Ban

,

The Daily Anthenaeum

, Aug. 23, 2011, http://www.thedaonline.com/news/judge-denies-injunction-to-uphold-fracking-ban-1.2550997#.T1Gc93meqRd.

[5]

Mireya Navarro,

New York Judge Rules Town Can Ban Gas Hydrofracking

,

N.Y. Times

, Feb. 21, 2012, http://www.nytimes.com/2012/02/22/nyregion/town-can-ban-hydrofracking-ny-judge-rules.html.

[6]

Id.

[7]

See What is Shale Gas and Why is it Important?

, U.S.

Energy Info. Agency

,  Feb. 14, 2012, http://www.eia.gov/energy_in_brief/about_shale_gas.cfm.

[8]

Nearing,

supra

note 1.

[9]

Glenn Coin,

Central New York Municipalities Take Steps to Control Hydrofracking

,

The Post-Standard

, Aug. 21, 2011, http://www.syracuse.com/news/index.ssf/2011/08/central_new_york_municipalitie.html.

[10]

Jordan Carleo-Evangelist,

Albany Gas Drill Foes See Veto-proof Vote

, Times Union, Feb. 24, 2012, http://www.timesunion.com/default/article/Albany-gas-drill-foes-see-veto-proof-vote-3359000.php.

[11]

See What is Shale Gas and Why is it Important?

,

supra

note 7.

[12]

Id.

Should Tobacco be Included in Free Trade Agreement?

By: Joe Schuler, Staff Member

In November 2011, leaders from nine countries reached an agreement on a broad outline for a Trans-Pacific Partnership.

[1]

The announced purpose of the agreement was to enhance trade between the partner countries, promote innovation, economic growth, and retain and create jobs.

[2]

The countries involved are Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam, and the United States.

[3]

Because the agreement was in the form of a broad outline, it necessarily left details open to further negotiation. One such detail is the scope of the agreement, namely whether tobacco will be covered or excluded. This issue has led to a sharp debate among tobacco farmers and manufacturers, and public health advocates. 

Organizations like the Campaign for Tobacco-Free Kids and the American Medical Association argue that tobacco should not be included in the ban, meaning member nations would remain free to impose tariffs on tobacco imports.

[4]

They argue that exclusion would support the worldwide campaign to reduce smoking.

[5]

  On the other hand are tobacco farmers who fear the economic consequences of being left out.

[6]

Today’s tobacco farmers rely more heavily on exports than ever before, selling the majority of their crop overseas.

[7]

More than 80% of Kentucky’s tobacco crop is exported to other countries, which the U.S. Department of Agriculture estimates amounted to more than $238 million in 2010.

[8]

It seems clear that growers and manufacturers alike are fearful that, as tobacco use continues to decline domestically, they must increasingly rely on exports.

The issue has received the attention of more than 50 U.S. Senators and Representatives of tobacco-producing states, who signed letters expressing their concerns to U.S. Trade Representative Ron Kirk.

[9]

Senate Minority Leader Mitch McConnell, R-Ky., urged Kirk to consider the economic impact an exclusion would have on the state and national economies, citing Kentucky’s 9.5 percent unemployment rate.

[10]

The Kentucky General Assembly has also weighed in, with both the Republican led Senate and Democrat led House approving a resolution supporting the inclusion of tobacco and tobacco products.

[11]

The General Assembly, and others, argue that the U.S. should abide by its long-held policy of comprehensive trade agreements, and that no agricultural products or commodities should be removed due to public policy.

[12]

Health groups have countered that the U.S. has signed onto an international treaty to reduce tobacco use.

[13]

That means that this debate is likely to continue to heat up until the full terms of the agreement are announced, and when that happens it is sure to have major policy implications.

[1]

Press Release, Office of the US Trade Representative, Trans-Pacific Partnership Agreement (November, 2011),

available at

http://www.ustr.gov/about-us/press-office/press-releases/2011/november/trans-pacific-partnership-leaders-statement

.

[2]

Id.

[3]

Id.

[4]

James R. Carroll,

Tobacco

’

s status in trade deal contested; Kentucky growers urge crop

’

s inclusion,

Courier-Journal, March 14, 2012,

available at

http://www.courier-journal.com/article/20120313/NEWS01/303090146/Tobacco-s-status-in-trade-deal-contested-Kentucky-growers-urge-crop-s-inclusion?odyssey=tab%7Cmostpopular%7Ctext%7CFRONTPAGE

[5]

Id.

[6]

Franco Ordonez,

Tobacco Growers fear trade deal will harm exports,

Sacramento Bee, Feb 28, 2012,

available at

http://www.sacbee.com/2012/02/28/4297695/tobacco-growers-fear-trade-deal.html

.

[7]

Id.

[8]

Id.

[9]

Id.

[10]

Id.

[11]

Supra,

note 4.

[12]

Id.

[13]

Id.

Is Organic Really Better?

By: Vanessa Rogers, Staff Member

You may want to think twice the next time you walk down the grocery store in search of organic products. Recent studies have discovered that high concentrations of Arsenics have been found in organic products.[1] Arsenic is a chemical that has been linked to cancer, chronic diseases, and developmental effects.[2] Many organic products substitute organic brown rice syrup as a healthier alternative to high fructose corn syrup.[3]  This substitution may however, prove to be not so “healthy.” Organic brown rice syrup has high levels of arsenic.

Many organic products use brown rice syrup as a main ingredient; such products include baby milk formulas, cereal bars, and high energy performance products.[4]  One study found that two out of 17 tested baby formulas contained a level of inorganic arsenic that was at or above the current United States drinking water standard.[5] The formulas were more than 20 times the inorganic arsenic concentrations in infant formulas that did not contain organic brown rice syrup.[6] In addition one cereal bar contained 12 times the legal limit for drinking water of 10 parts per billion, and energy performance foods tested at eight to 17 times the limit.[7] Although it is true that numerous products have trace amounts of arsenic, many are concerned about the effect that such high levels can have on infants during their development stage.[8]

So what does this mean for rice plants and the agriculture industry?  For now it has no effect.  There are currently no United States regulations applicable to arsenic in food despite the fact that studies show arsenic may introduce significant concentrations of inorganic arsenic to an individual’s diet.[9] If however, the government begins to implement regulatory limits, the agriculture industry may be affected. The industry will be forced to find a substitute for brown rice syrup or find a way to remove the arsenic qualities that are deeply rooted in the soil from past pesticides. Until that time comes, as you make your purchases remember that organic does not always mean better.

[1] Brian P. Jackson, Vivian F. Taylor, Margaret R. Karagas, Tracy Punshon & Kathryn L. Cottingham,

Arsenic, Organic Foods, and Brown Rice Syrup,

Environmental Health Perspectives

,  5http://ehp03.niehs.nih.gov/article/fetchArticle.action?articleURI=info%3Adoi%2F10.1289%2Fehp.1104619#Ahead of Print (AOP) (February 16, 2012).

[2] Linda Carroll,

High Arsenic Levels Found in Organic Foods, Baby Formula

,

Msnbc.com

, http://todayhealth.today.msnbc.msn.com/_news/2012/02/16/10425025-high-arsenic-levels-found-in-organic-foods-baby-formula (February 16, 2012).

[3] Brian P. Jackson, Vivian F. Taylor, Margaret R. Karagas, Tracy Punshon & Kathryn L. Cottingham,

Arsenic, Organic Foods, and Brown Rice Syrup,

Environmental Health Perspectives

,  5http://ehp03.niehs.nih.gov/article/fetchArticle.action?articleURI=info%3Adoi%2F10.1289%2Fehp.1104619#Ahead of Print (AOP) (February 16, 2012).

[4] 

Id.

[5] 

Id

. at 8-9.

[6] 

Id

. at 8.

[7] Linda Carroll,

High Arsenic Levels Found in Organic Foods, Baby Formula

,

Msnbc.com

, http://todayhealth.today.msnbc.msn.com/_news/2012/02/16/10425025-high-arsenic-levels-found-in-organic-foods-baby-formula (February 16, 2012).

[8] 

Id

.

[9] Brian P. Jackson, Vivian F. Taylor, Margaret R. Karagas, Tracy Punshon & Kathryn L. Cottingham,

Arsenic, Organic Foods, and Brown Rice Syrup,

Environmental Health Perspectives

,  13http://ehp03.niehs.nih.gov/article/fetchArticle.action?articleURI=info%3Adoi%2F10.1289%2Fehp.1104619#Ahead of Print (AOP) (February 16, 2012).

Energy Indolence is becoming more likely, but will it impact foreign affairs?

By: Phillip Robinette, Staff Member 

Energy independence has been seen as a highly valued, yet difficult to achieve, goal for the United States for many years.

Its importance has crossed party lines, yet for many it seemed unlikely to be accomplished. With the price of gas increasing to new heights, as of March 5

th

the mean price for a gallon of gas was $3.79, slowly increasing towards the record high of $4.21, 

this topic is more appropriate now than ever.[1] 

This view has been challenged recently.

As of right now only 37.8% of our crude oil comes from domestic production.[2]

Now some believe this seemingly unobtainable goal is within reach for Americans.

Energy economist Phil Verleger stated his belief that the US will not even have to import any crude oil within a decade.[3]

Vergler attributed this development to small companies started by American entrepreneurs utilizing new techniques such as hydraulic fracturing and horizontal drilling which have opened up large amounts of gas and oil that were previously trapped under layers of shale.[4]

As of right now production is around half a million barrels a day of oil but reports are that this number is steadily increasing.[5]

These optimistic predictions are not without their detractors.  Dan Kammen from the University of California, Berkely claims that achieving 100% domestic energy production may be a step in the wrong direction.  He argues that we need to continue focusing on renewable energy methods, i.e. solar, wind and geothermal.[6]  A large incentive for reaching energy independence is that the US would no longer have to engage with potentially hostile Middle Eastern countries.  However, 

some claim this is not true because the US still needs to ensure the security of oil imports of its allies, ensuring protection for Israel and the continuing need to protect the balance of power in the region.[7]  Despite these detractions

,

energy independence seems to be a more and more realistic outcome.  If this future will help alleviate the necessity of foreign engagements is something that only the future can tell.

[1] http://www.npr.org/2012/03/06/148087543/whats-behind-these-high-gas-prices

[2] 

Id

.

[3] http://www.npr.org/2012/03/07/148036966/is-u-s-energy-independence-finally-within-reach

[4] 

Id

.

[5] 

Id

.

[6] 

Id

.

[7] http://www.riskwatchdog.com/2012/03/06/us-energy-independence-geopolitical-consequences/

Contraceptive Vaccine for Horses: A Cash Cow?

By: Kate Remias, Staff Member

The Environmental Protection Agency has officially registered the first contraceptive vaccine for use in horses, with The Humane Society of the United States (HSUS) sponsoring the registration.

[1]

  The vaccine was registered under the brand name ZonaStat-H but is commonly known as porcine zona pellucida (PZP) and is touted as a “win-win-win” by HSUS President and CEO, who indicates it will be good for horses, the environment, and taxpayers.

[2]

This vaccine is making headlines across the Nation because of its potential to mitigate the problems associated with the approximately 12 million unwanted horses in the United States.

[3]

The HSUS estimates the vaccine’s use could save taxpayers millions of dollars over the next decade.

[4]

A U.S. Geological Survey indicated PZP could save as much as $7.7 million annually.

[5]

Wayne Parcell, President and CEO of the HSUS, posted in his blog–hosted on the HSUS website–that using PZP could save taxpayers tens of millions over the next decade.

[6]

The question obviously becomes: which is it? Unfortunately, the answer could be none of the above.  To determine if PZP will really save taxpayer money, we must compare the cost of administering the vaccine with the tax dollars the vaccine will save.

Data on cost and pricing for ZonaStat-H was not as readily available as I anticipated, but there is data available on PZP. In 2006–when PZP was being used to control deer population–the cost per dose was between $10 and $25, but was predicted to decrease as production became more efficient.

[7]

In 2008, however, PZP still cost $21 per dose when used on mares.

[8]

The problem with these figures is that they do not appear to fully impute all costs of producing the vaccine. The Science and Conservation Center is the boutique operation producing the PZP currently registered as ZonaStat-H.

[9]

The Center has three scientists and they only make a few thousand doses of the vaccine a year, with each batch taking about 25 hours over the course of week to make.

[10]

  So let’s assume they make 2,000 doses, which allegedly cost around $21 each, that’s a total cost of $42,000. The full cost of each vaccine needs to impute the cost of the scientist’s time, the cost of the facility, the Center’s overhead costs, the costs of the chemical components, etc. It seems impossible that that a cost figure around $21 accounts for anything besides the chemical ingredients to make PZP. Furthermore, when you account for the costs to actually administer the vaccine, cost estimates quickly rise to between $200 and $300 per dose.

[11]

Ok so it’s an expensive dose, but how does it compare to the taxpayer savings that will be generated? Since 1971 the Bureau of Land Management (BLM) has been charged with wild horse and burro management.

[12]

  In 2011, BLM budgeted approximately $64 million for wild horse and burro management.

[13]

  In 2012 their plan is to shift horse and burro management to focus on fertility control, moving away from federally funded wild horse preserves.

[14]

  So how much taxpayer dollars will this shift save? None. The 2012 budget requests an increase of $12 million for horse and burro management in order to facilitate the new plan.

[15]

I’m having a hard time finding where these tax dollars are going to be saved. None of this is an argument against the potential utility of PZP, nor is it intended to deny the severity of the unwanted horse population. To the contrary, PZP appears to be an instrumental step in a positive direction. My point is only that if the President and CEO of the HSUS is going to blog about the tens of millions of taxpayer dollars which will be saved, perhaps Mr. Parcell should give the taxpayers the respect of tweeting some financials supporting that position. (@KJEANRL)

[1]

Environmental Protection Agency Announces First Fertility Control Vaccine Approved for Wild Horses in the United States: Wildlife managers join The Humane Society of the United States in support of action

,

Humane Soc’y U.S.

(Feb. 17, 2012), http://www.humanesociety.org/news/press_releases/2012/02/EPA_Announces_First_Fertility_Control_Vaccine_for_Wild_Horses.html.

[2]

Id.

[3]

Brittany Wooley,

Horse Overpopulation Addressed b  Locally Produced Wildlife Contraceptive Vaccine

,

Q2 KTVQ.com

(Feb. 16, 2012, 1:46 PM), http://www.kpax.com/news/mt-company-helping-with-horse-over-population/.

[4]

Environmental Protection Agency Announces First Fertility Control Vaccine Approved for Wild Horses in the United States: Wildlife managers join The Humane Society of the United States in support of action

,

Humane Soc’y U.S.

(Feb. 17, 2012), http://www.humanesociety.org/news/press_releases/2012/02/EPA_Announces_First_Fertility_Control_Vaccine_for_Wild_Horses.html.

[5]

EPA Approves New Horse Contraceptive

Vaccine,

GreatFallsTribune.com

(Feb. 17, 2012, 10:00 PM),  http://www.greatfallstribune.com/article/20120218/NEWS01/202180310/EPA-approves-new-horse-contraceptive-vaccine.

[6]

Wayne Parcell,

Humane Population Management – For Horses and Other Mammals

,

Wayne Parcelle: A Humane Nation

(Feb. 17, 2012, 10:50 AM)

, 

http://hsus.typepad.com/.

[7]

Frequently Asked Questions on IMMUNOCONTRACEPTION

,

Wildlife Fertility Control: The Cutting Edge of Science,

http://www.pzpinfo.org/pzp_faqs.html (last modified Sept. 14, 2006).

[8]

Dorinda Troutman,

PZP – Equine Contraceptive,

Rocky Mountain Rider Magazine,

http://www.rockymountainrider.com/articles/pdfs/0508%20PZP%20Equine%20Birth%20Control.pdf (last visited Feb 29, 2012).

[9]

EPA Approves New Horse Contraceptive

Vaccine,

GreatFallsTribune.com

(Feb. 17, 2012, 10:00 PM),  http://www.greatfallstribune.com/article/20120218/NEWS01/202180310/EPA-approves-new-horse-contraceptive-vaccine.

[10]

Id.

[11]

Id.

; Dorinda Troutman,

PZP – Equine Contraceptive,

Rocky Mountain Rider Magazine,

http://www.rockymountainrider.com/articles/pdfs/0508%20PZP%20Equine%20Birth%20Control.pdf (last visited Feb 29, 2012).

[12]

16 U.S.C.A. § 1331 et seq. (West 2012).

[13]

Bureau Highlights

,

Bureau of Land Management,

http://www.blm.gov/pgdata/etc/medialib/blm/wo/Communications_Directorate/public_affairs/news_release_attachments.Par.11093.File.dat/BLM_fy2012_budget_in_brief.pdf (last accessed Feb. 29, 2012).

[14]

Id.

[15]

Id. 

Contractual Relationships Between Agricultural Growers and Commodity Buyers

By: Robert Proudfoot, Staff Member

On February 8, 2012, Diamond Foods released the results of its Audit Committee Investigation Findings regarding the accounting of crop payments to walnut growers and it found: 1) the payments were accounted for in the wrong fiscal accounting periods by $20 million in 2010 and $60 million in 2011, and 2) internal control over financial reporting had material weaknesses.

[1]

  As a result of the internal audit findings, CEO Michael J. Mendes and CFO Steven M. Neil were placed on administrative leave

[2]

, Procter & Gamble called off its $2.35 billion sale of Pringles

[3]

to Diamond Foods, and Diamond shares are trading around $24 a share, off from September 2011 highs of $90.  So, what went wrong?  In nutshell, Diamond Foods and their walnut growers had a vague contract that did not 1) have a proper escalation clause of higher market prices, 2) explicitly state when payments would be made and how they would be accounted for, and 3) adequately prepare both parties for being adverse parties with adverse interests after being a collective cooperative for  almost 100 years.

Diamond Foods was founded in 1912 as a walnut cooperative to market and sell walnuts collectively and voted to convert to a for-profit company and go public in 2005.

[4]

 While many growers opted to partake in the IPO by signing long-term contracts to sell exclusively to Diamond Foods

[5]

, some immediately started voicing concerns about inherent adverse interests presented between a for-profit company and its commodity suppliers (i.e. the company wants the lowest price possible to increase earnings whereas the growers desire the highest price for their crop).

[6]

 While growers did receive stock in the newly converted for-profit company with potential for capital gain and dividend income, this did not completely offset the adversity of the parties.

[7]

  The long-term walnut agreement signed by growers as a condition for receiving shares

[8]

in Diamond Foods was summarized in its 2011 Annual Report:

[Diamond Foods] have entered into long-term Walnut Purchase Agreements with growers, under which they deliver their entire walnut crop to us during the Fall harvest season and we determine the minimum price for this inventory by March 31, or later, of the following calendar year. The final price is determined no later than the end of the Company’s fiscal year. This purchase price will be a price determined by us in good faith, taking into account market conditions, crop size, quality, and nut varieties, among other relevant factors. Since the ultimate price to be paid will be determined subsequent to receiving the walnut crop, we must make an estimate of price for interim financial statements. Those estimates may subsequently change and the effect of the change could be significant.

[9]

Under this contract, Diamond Foods received the walnut crop in the fall, made its first payment in March the following year and a final make-up payment, as determined by Diamond Foods, almost a full year after the growers tendered their goods.   Frustrated from their unequal bargaining power and years of payments below market price, the growers unsuccessfully attempted to form a class action to sue for breach of contract, claiming the contract was one of adhesion and unconscionable.

[10]

  California state law requires that all nut sales be in writing and state the full purchase price,

[11]

unless both parties agree to waive this requirement, as were the case with walnut growers having long-term grower contracts with Diamond Foods.

[12]

  This ambiguity in contract price led to grower discontent when walnut prices skyrocketed from increased demand.

[13]

  The ambiguity also allowed Diamond Foods to temporarily exploit the uncertainness of payment terms to manipulate the payments’ accounting by pushing their reporting to next fiscal year to improve annual earnings.

[14]

The recent implosion of Diamond Foods once again demonstrates the importance of strong, clear contracts between agricultural growers and commodity buyers—especially for converted cooperatives that are now publicly traded for-profit companies.

[1]

Diamond Foods Announces Audit Committee Investigation Findings

,

Diamond Foods

(Feb. 8, 2012), http://phx.corporate-ir.net/phoenix.zhtml?c=189398&p=RssLanding&cat=news&id=1658627.

[2]

Diamond Foods,

supra

note 1.

[3]

Diamond Foods Issues Statement Regarding Ter

mination of Pringles Transaction

,

Diamond Foods

(Feb. 15, 2012), http://phx.corporate-ir.net/phoenix.zhtml?c=189398&p=RssLanding&cat=news&id=1661222.

[4]

Shermain D. Hardesty,

The Conversion of Diamond Walnut Growers

, 23

Journal of Cooperatives

40, 40-41 (2009),

available at

http://purl.umn.edu/56901.

[5]

Shermain D. Hardesty,

The Bottom Line on the Conversion of Diamond Walnut Growers

, 8

Agric. and Res. Econ. Update

(Univ. of Cal. Giannini Foundation), no. 4, at 1, 11 (2005)

available at

http://sfp.ucdavis.edu/cooperatives/reports/giannini_diamond.pdf.

[6]

Holman W. Jenkins,

Accounting for Nuts: Blame a misalignment of incentives for the scandal at Diamond Foods

,

Wall Street Journal

(Feb. 10, 2012), http://online.wsj.com/article/SB10001424052970203824904577214853918682554.html.

[7]

Hardesty,

supra

note 4, at 50-51.

[8]

Hardesty,

supra

note 4, at 44.

[9]

Diamond Foods 2010 Annual Report

,

Diamond Foods

, at 18 (Sept. 15, 2011), http://www.sec.gov/Archives/edgar/data/1320947/000119312511249300/d232533d10k.htm.

[10]

Walnut Producers of California v. Diamond Foods, Inc, 114 Cal.Rptr.3d 449, 454 (Cal. Ct. App. 2010).

[11]

Cal. Agric. Code § 62801 (West 1983)

[12]

Walnut Producers of California

, 114 Cal. Rptr.3d at 462-63.

[13]

John Jannarone, Hidden Flaw in P&G’s Diamond Deal, Wall Street Journal (Sept. 27, 2011), http://online.wsj.com/article/SB10001424052970204831304576595000985103090.html.

[14]

 Jenkins,

supra

note 6.

E-Waste: Damaging to the Environment and Earth’s Natural Resources - Advocating for E-Waste Producer Responsibility Legislation

By: Breck Norment, Staff Member

Electronics manufacturers continue to make impressive strides in the development of technology.

[1]

  Light-weight and thin flat screen television models have begun to completely replace the traditional and obsolete “tube-style” television.  Cell phone companies indirectly encourage consumers to buy new cell phones through incentives such as upgrades in return for continued loyalty with a particular carrier.   

Consumers focus their attention on acquiring these new electronics, but likely spend little time considering how to properly dispose of their old equipment.

Thus, a new environmental and natural resource problem is spawned:

Electronic waste, or E-Waste.

[2]

Used consumer electronics are overcrowding landfills and “represent the fastest growing segment of local solid waste in our country.”

[3]

Foreign countries without the capacity to safely handle the problem also bear the burden as they receive tons of used electronic waste from the United States.

[4]

Electronic waste is not only harmful to the environment, but is also a waste of “valuable materials, such as precious metals and rare earth minerals, which can be recycled.”

[5]

For example, “for every one million cell phones recycled, 75 pounds of gold, 772 pounds of silver, 33 pounds of palladium, and more than 35,000 pounds of copper can be recovered.”

[6]

These statistics and the sheer amount of used electronic waste in landfills leads to the need to recycle the valuable natural resources found in these discarded products.

“Recycling these components conserves materials, prevents air and water pollution, and reduces greenhouse gas emissions that occur during extraction, manufacturing and processing.”

[7]

The federal government has not yet mandated that E-Waste be recycled, despite several attempts to pass a federal law.

[8]

At least 65 percent of the states, however, have either already passed E-Waste legislation or have at least considered such legislation in 2011.

[9]

Perhaps the most logical approach has been taken by almost all of the states:

requiring manufacturers to foot the bill for recycling the electronics (the Producer Responsibility Approach).

[10]

Although a federal law is not on the books yet, the Responsible Electronics Recycling Act of 2011 “has been introduced in both the House and Senate.”

[11]

The states without current E-Waste laws should strive to pass such legislation, and the federal government should continue to work at establishing nationwide standards that will increase the recycling and conservation of these valuable materials found in used electronics while decreasing the harmful effects that used electronics have on the environment and our health.

[12]

[1]

California Department of Toxic Substances Control,

Electronic Hazardous Waste (E-Waste)

, 2007, http://www.dtsc.ca.gov/hazardouswaste/ewaste/.

[2]

Environment News Service,

Obama’s New E-Waste Task Force Spurs Recovery of Metals, Minerals

, Nov. 16, 2010, http://www.ens-newswire.com/ens/nov2010/2010-11-16-092.html.

[3]

Id

.

[4]

Id

.

[5]

Id.

[6]

Id.

[7]

Id.

[8]

U.S. Environmental Protection Agency,

Wastes – Resource Conservation – Common Wastes & Materials – eCycling

,

Nov. 2, 2011,

http://www.epa.gov/osw/conserve/materials/ecycling/rules.htm

.

[9]

Electronics Take Back Coalition,

States are Passing E-Waste Legislation

,

http://www.electronicstakeback.com/promote-good-laws/state-legislation/

.

[10]

Id.

[11]

Olga Khazan,

Boosted by regulations, a small business opens its own lobby shop

,

The Washington Post

, Feb. 13, 2012,

http://www.washingtonpost.com/business/on-small-business/boosted-by-regulations-a-small-business-opens-its-own-lobby-shop/2012/02/09/gIQAxoaR2Q_story.html

.

[12]

See

fn. 2,

supra.

High Gas Prices: Desperate Times, but No Call for Desperate Measures

By: Collier Marsh, Staff Member

Americans have been getting used to high gas prices for a while.  Despite taking significant strides to decrease dependence on foreign oil, in the last few weeks Americans again are watching gas prices rise.

[1]

  Experts say that record oil prices may drive the price of gas to five dollars per gallon this summer.

[2]

  So today, we find ourselves asking, what else we can do to slow the rise in gas prices and reduce the strain on our economy?

Meanwhile, in the far northwest of the United States, the United States Geological Survey (USGS) has announced a significant discovery.  On February 24, 2012, the USGS announced estimates of the “technically recoverable” onshore oil and gas resources contained in the shale of Alaska’s North Slope.

[3]

  These estimates indicate that there are as much as two billion barrels of oil and up to 80 trillion cubic feet of gas within North Slope shales.

[4]

  There have not been any attempts to produce oil or gas from the shale of the North Slope due to economic and infrastructure considerations.

[5]

  But other shales of the Untied States have been drilled for oil and gas and have been the subject of significant controversy.

[6]

  Hydraulic Fracturing is a common method to remove natural gas from shale, and opponents complain of significant health effects due to water contamination and air pollution, noise pollution and harm to nearby wildlife.

[7]

  Concerned citizens and organizations have responded through litigation and local governments have established laws and ordinances to restrict the use of these techniques.

[8]

  The issues that have surrounded the drilling of shale in other areas of the United States are arguably inapplicable to the shale in the North Slope.  The North Slope is remote with no significant human population that would be threatened by the potential negative effects of oil and gas production.

Despite the differences, we should not rush to drill in the North Slope.  Gas prices are rising today due to fears that Iran may disrupt the supply of oil

[9]

and speculators have responded by buying up oil reserves and driving the price up.

[10]

  As always, the speculation will subside and questions will be answered.  We should not rush to harvest our untapped resources without completing our due diligence.  As President Obama has noted, “there are no quick fixes to this problem … we can't just drill our way to lower gas prices.”

[11]

In the meantime, we should be confident that the steps we have taken will be sufficient.  As the president also stated, “we've got to have a sustained 'all of the above' strategy that develops every available source of American energy … oil and gas, but also wind and solar and nuclear and biofuels and more.”

[12]

  We will see more spikes in gas prices in the future, but they will subside over time, while damage to our environment will last much longer.  So let’s not rush to develop this new source of fuel until we are ready to do it the right way.  

[1]

Eamon Javers,

What can US do to halt rising gas

prices? Not much

, CNBC (Feb. 27, 2012, 1:40 PM),

http://www.cnbc.com/id/46542758

,

[2]

Id.

Dave Duncan,

Surviving High Gas Prices

,

Wall Street Journal Blogs

(Feb. 27, 2012, 10:54 AM),

http://blogs.wsj.com/wsjam/2012/02/27/surviving-high-gas-prices/

[3]

USGS Releases First Shale-Oil and Shale-Gas Resource Potential Assessment for the Alaska North Slope, US D

epartment of the Interior (

Feb. 24, 2012), available at

http://www.doi.gov/news/pressreleases/USGS-Releases-First-Shale-Oil-and-Shale-Gas-Resource-Potential-Assessment-for-the-Alaska-North-Slope.cfm

[4]

Id.

[5]

Id.

[6]

See,

John Rawlins, Marcellus Shale: Feuding over fracking

,

ABC 6 Action News (Aug. 6, 2010)

http://abclocal.go.com/wpvi/story?section=news/special_reports&id=7596610

,

See also,

John Marchese,

Fracking with Pennsylvania: The Marcellus Shale Debate

,

Philadelphia magazine, (

Jun. 2011)

http://www.phillymag.com/articles/fracking_with_pennsylvania_the_marcellus_shale_debate/

[7]

PEHSU Information on Natural Gas Extraction and Hydraulic Fracturing for Health Professionals,

Pediatric Environmental Health Specialty units,

(Aug 2011), available at

http://www.propublica.org/documents/item/250048-pehsu-information-concerning-effects-on-children

[8]

See

,

Ohio AG Wants Tougher Fracking Laws,

Ohio News Network

(Feb. 9. 2012, 8;09 AM),

http://www.onntv.com/content/stories/2012/02/09/story-mike-dewine-fracking.html

Eric Niller,

Small Town Gets Court to Ban Fracking

,

Discovery News

(Feb. 24, 2012, 8:26 AM), news.discovery.com/earth/dryden-ny-fracking-122402.html#mkcpgn=rssnws1

Dan Wiessner,

New York fracking lawsuit could set drilling precedent

,

Reuters (

Sept

. 9, 2011,  7:04

PM),

http://www.reuters.com/article/2011/09/19/newyork-fracking-suit-idUSS1E78D29G20110919

[9]

Dave Duncan,

Surviving High Gas Prices

,

Wall Street Journal Blogs

(Feb. 27, 2012, 10:54 AM),

http://blogs.wsj.com/wsjam/2012/02/27/surviving-high-gas-prices/

[10]

Eamon Javers,

What can US do to halt rising gas prices? Not m

uch

, CNBC (Feb. 27, 2012, 1:40 PM),

http://www.cnbc.com/id/46542758

,

[11]

Id.

[12]

Id.