EPA Exceeds Its Authority By Revoking Mountaintop Removal Permit

By: Raabia Wazir, Staff Member

Environmentalist cheered in January 2011 when the U.S. Environmental Protection Agency (EPA) revoked one of the largest mountaintop removal permits ever authorized in Appalachia on grounds that the mine would result in unacceptable damage to streams and wildlife and violate the Clean Water Act.[1] The US Army Corps of Engineers originally issued the §404 permit for the Spruce No. 1 mine project in Logan County, W.V., in January 2007 and the Mingo Logan Coal Company (a subsidiary of Arch Coal, Inc.) began construction shortly thereafter.[2] The permit covered 2,278 acres and allowed for the burial of approximately 7.48 miles of streams beneath 110 million cubic yards of excess spoil.[3]

The revocation of the permit by the EPA marked the first crackdown by the Obama administration to limit mountaintop removal mining by retroactively vetoing old permits. It is also only the second time that the agency has canceled a water permit for a project of any kind after it was issued since the Clean Water Act was passed by Congress in 1972.[4] The decision led to an uproar from the industry and its supporters, many expressing fear that all mine sites were now vulnerable to losing their permits.[5]

In March 2012, the Federal District Court of District of Columbia ruled that the agency exceeded its authority under the Clean Water Act by revoking the permit. Judge Amy Bergman Jackson wrote in her opinion, “The EPA resorts to magical thinking. It posits a scenario involving the automatic self-destruction of a written permit issued by an entirely separate federal agency after years of study and

consideration. Poof!”[6] She further argued that permit revocation is unreasonable because it “[sows] a lack of certainty into a system that was expressly intended to provide finality." The Judge continued, "Every construction project involving waterways could be subject to an open-ended risk of cancellation.”[7]

The agency has yet to announce whether they plan to appeal the ruling.

_______________________________________________

[1] Kate Sheppard,

EPA Halts "Destructive and Unsustainable" Mining Operation

, Blue Marble, Jan. 13, 2011, http://motherjones.com/blue-marble/2011/01/epa-rejects-spruce-no-1-permit.

[2]

Spruce No. 1 Mine

, U.S. Environmental Protection Agency

. (April 2, 2012, 5:00 PM), http://www.epa.gov/region03/mtntop/spruce1.html

[3] Final Determination of the U.S. Environmental Protection Agency Pursuant to § 404(c) of the Clean Water Act  Concerning the Spruce No. 1 Mine, Logan County, West Virginia (2011),

available at:

http://water.epa.gov/lawsregs/guidance/cwa/dredgdis/upload/Spruce_No-_1_Mine_Final_Determination_011311_signed.pdf

[4] Stephen Power & Kris Maher,

EPA Blasted as It Revokes Mine's Permit

,

Wall Street Journal

, Jan. 14, 2011,

available at

:

http://online.wsj.com/article/SB10001424052748703583404576079792048919286.html

.

[5] Erik Eckholm,

Project’s Fate May Predict the Future of Mining

,

N.Y. Times

, July 14, 2010,

available at

:  http://www.nytimes.com/2010/07/15/us/15mining.html.

[6] Mingo Logan Coal Co. Inc. v. U.S. E.P.A., No. 10–0541, 2012 WL 975880 (D.D.C. March 23, 2012),

available at

: http://wvgazette.com/static/coal%20tattoo/SpruceMineRuling.pdf

[7]

Id.

Federal Government Initiates Commenting Period for Potential OCS Lease Sale in Cook Inlet, Alaska

By: Elizabeth Watson, Staff Member

On March 27, 2012, the Bureau of Ocean Energy Management (BOEM), the bureau within the Department of the Interior that “

manages the exploration and development of the nation's offshore resources,”[1] with an eye toward environmental concerns, published in the Federal Register a request for interest (RFI) regarding oil and gas exploration and drilling in the Cook Inlet Planning Area of Alaska.[2]  The request initiates a 45 day comment period in which any individual, including private citizens and oil and gas corporations, may submit comments about “geologic and economic information,” “environmental, biological, archaeological, and socioeconomic conditions,” and any other impact that may occur if a proposed federal lease Sale 244 in 2013 were to occur in the Cook Inlet.[3]  While industry interest is a main goal of the request for information, BOEM also voices particular interest in comments from “tribal, local, and state governments, Federal agencies, and the general public,” concerning the best ways to proceed in evaluating applicable laws, including: The Outer Continental Shelf Lands Act (OCSLA), the National Environmental Policy Act (NEPA), and the Endangered Species Act (ESA).[4]  

While Alaska’s state leasing program sees much success in this region, with the most recent sale in 2011 covering 575,202 acres, “there are currently no active Federal OCS leases in Cook Inlet.”[5]

Thus, through commenting, BOEM seeks to gauge the “renewed interest in exploring for and developing additional hydrocarbon resources . . . both offshore and onshore.”[6]

All comments must be received by May 11, 2012, and the Federal Register outlines different commenting and disclosure requirements for individuals versus interested corporations.[7]

In the Federal Register, BOEM emphasizes that after the commenting period and review of environmental impact considerations, the bureau will “then decide on whether to proceed with further evaluation of this special interest sale.

This RFI does not indicate a decision to include Sale 244 in the Proposed Final OCS Oil and Gas Leasing Program for 2012-2017 (Final Program) or to lease in the Cook Inlet Planning Area.”[8]

And, without sufficient industry interest, evidenced through commenting, the sale will not proceed.[9]

With renewed industry interest, one expects to see many more comments received from the industry during this time than the meager three comments received in a past federal lease sale of this area in 2008, which had no industry nominations.[10]

Additionally, expect more push back from those representing environmental concerns, such as the protection of the Beluga Whale population in the Cook Inlet.[11]

[1] 

Bureau of Ocean Energy Management,

http://www.boem.gov/ (last visited April 1, 2012).

[2] 77 Fed. Reg. 18,260, 18,260.

[3] 

Id.

at 18,261.

[4] 

Id.

at 18,260.

[5] 

Id.

at 18,261.

[6] 

Id.

at 18,260.

[7] 

See id.

at 18261-62.

[8] 

Id.

at 18260.

[9] 

Id.

at 18261.

[10] 

Id.

[11] 

See

Patti Epler,

New drilling operation begins in Alaska’s Cook Inlet

,

Alaska Dispatch

(Aug. 22, 2011), http://www.alaskadispatch.com/article/new-drilling-operation-begins-alaskas-cook-inlet?page=0,0. 

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.