Archive for August, 2011

More Dirt on Monsanto

Photo by Peter Blanchard. Some rights reserved.

American biotechnology giant Monsanto has taken a lot of slack in recent years for their controversial industrialization of genetically modified food and artificial growth hormones. In the last decade, a handful of critically acclaimed documentaries have taken on Monsanto for all different types of malpractice: Food, Inc. criticized Monsanto for unfairly pursuing legal action against international farmers accused of saving and reselling or replanting Monsanto-patented seeds. The Corporation featured a doctor attempting to expose the criminality of Monsanto-sanctioned Posilac, a growth hormone used by Monsanto for producing extra milk in dairy cattle. 2004’s The Future of Food took on Monsanto directly and frequently for their international stranglehold on farms and farmers, and for their influence over the US government.

With all the bad press, then, it comes as little surprise that the Atlantic called Monsanto “the worst-performing stock of 2010,” a claim that is supported by a bullet-point list of bad news the company received over a period of just a few weeks, a list which includes a halved income, plummeting herbicide sales, and a Justice Department investigation for antitrust violations. Yet even still, Monsanto, along with Dupont, Syngenta, and Groupe Limagrain (“the big four” of food production) is responsible for 75% of seeds sold internationally. Pretty crazy!

Well, a series of WikiLeak cables released last week are sure to cause further commotion, as they show evidence that the US government funded “biotechnology outreach programs” in a number of developing countries, while it is also suggested that Craig Stapleton, former US ambassador to France, recommended pressuring European countries not already supporting the sale of GMO foods.Food Whistleblower has links to these WikiLeaks documents.

Controlling Weather Control

Photo by Marc Veraart. Some rights reserved.

In the midst of the coverage of Hurricane Irene, one post from the New York Times in particular caught my eye. As folks struggled to wrap their heads around a potentially massive hurricane making landfall in New York and the potential subsequent devastation, the post drew attention to “Category 7,” a 2007 work of fiction about a fictionalized hurricane of unprecedented strength unleashed (purposefully!) onto NYC by an evil master of “secret, cutting-edge weather science.”

While so-called “weather warfare” is officially banned (the Convention on the Prohibition of Military or Any Other Hostile Use of Environmental Modification Techniques – an international treaty adopted in 1976 – formally prohibited such activities), more innocuous weather modification techniques are surprisingly common. Cloud seeding is a process used to increase precipitation, reduce hail, or eliminate fog by means of spraying tiny particles such as silver iodide into the sky to trigger cloud formation.

Most weather modification licensing and regulation happens at the state level. For a good example of weather modification laws, you can see Title 9, Chapters 301 and 302 of Texas’ Agriculture Code. However, federal level law requires certain weather modification activities to be reported to the National Oceanic and Atmospheric Administration (NOAA): “Any person intending to engage in any weather modification project or activity in the United States shall provide a report of his intention, to be received by the Administrator at least 10 days before the commencement of such project or activity.” (see 15 CFR Part 908)

A 2009 congressional bill (S. 601) would have established a Weather Mitigation Research Program within the National Science Foundation, and authorized a “research and development program to improve the understanding of processes relating to [weather modification activities].” While today’s weather modifications are mostly limited to those serving agricultural purposes, future activities are likely to focus on mitigating climate change and its effects (like deadly hurricanes!). A recently released GAO report assessed “climate engineering technologies, focusing on their technical status, future directions for research on them, and potential responses.”

Interested in reading more about weather control? Check out this great piece in Harper’s Magazine, Disaster aversion: The quest to control hurricanes by Rivka Galchen.

Crouching NOA, Hidden EIS: Last Week In Environmental Impact Statements

While Federal agencies are required to prepare Environmental Impact Statements in accordance with 40 CFR Part 1502, and to file the EISs with the EPA as specified in 40 CFR 1506.9, the EPA doesn’t yet provide a central repository for filing and viewing EISs electronically. Instead, each week they prepare a digest of the preceding week’s filed EISs, which is published every Friday in the Federal Register under the title, “Notice of Availability” (NOA).

We’ve done the dirty work for you. Below, we’ve located and linked to the EISs referenced in last week’s NOA. Please note that some of these documents can be very large, and may take a while to load.

You can read any available EPA comments on these EISs here.

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 EIS No. 20110272, Draft EIS, FWS, AK, Arctic National Wildlife Refuge Project, Draft Revised Comprehensive Conservation Plan, Wilderness Review, Wild and Scenic River Review, Implementation, Fairbanks, AL, Comment Period Ends: 11/23/2011, Contact: Sharon Seim 907–456–0501.

EIS No. 20110273, Final EIS, FERC, CA, Kilarc-Cow Creek Hydroeletric Project, (FERC Project No. 606) Proposes to Surrender the License for Operation Project, Old Crow Creek and South Cow Creek, Shasta County, CA, Wait Period Ends: 09/26/2011, Contact: Leonard Tao 1–866–208–3372.

EIS No. 20110274, Draft EIS, USFS, CA, Barren Ridge Renewable Transmission Project, Construction and Operation, Application to the USFS for a Special Use Authorization and to BLM for Right-of-Way Grant, Kern and Los Angeles Counties, CA, Comment Period Ends: 10/25/2011, Contact: Robert Hawkins 707–562–8699.

EIS No. 20110275, Second Draft Supplement (Vol 1, Vol 2), FWS, CA, Southern Sea Otters (Enhydra lutris nereis) Translocation Program, Updated Information to the DSEIS 2005, San Nicolas Island, Southern California Bight, CA, Comment Period Ends: 10/24/2011, Contact: Lilian Carswell 805–644–1766.

EIS No. 20110276, Draft EIS, BLM, AZ, Lower Sonoran and Sonoran Desert National Monument, Resource Management Plan, To Provide Guidance for Managing the Use of Public Lands and Provide a Framework for Future Land Management Actions, Maricopa, Pinal, Pima, Gila and Yuma Counties, AZ, Comment Period Ends: 11/23/2011, Contact: Penny Foreman 653–580–5528.

EIS No. 20110277, Draft Supplement, USFS, CO, San Juan Plan Revision, Updated Information, San Juan Public Lands, Draft Land Management Plan (DLMP), Implementation, San Juan National Forest, Archuleta, Conejos, Dolores, Hinsdale, LaPlata, Mineral, Montezuma, Montrose, Rio Grande, San Juan and San Miguel Counties, CO, Comment Period Ends: 10/11/2011, Contact: Shannon Manfredi 970–385–1229.

EIS No. 20110278, Final EIS, NPS, AK, Nabesna Off-Road Vehicle Management Plan, Implementation, Wrangell-St. Elias National Park and Preserve, AK, Wait Period Ends: 09/26/2011, Contact: Bruce Rogers 907–822–7276.

EIS No. 20110279, Final Supplement, MMS, AK, Chukchi Sea Planning Area, Oil and Gas Lease Sale 193, Revised Information, Analyzing the Environmental Impact of Natural Gas Development and Evaluate Incomplete, Missing, and Unavailable Information, Chukchi Sea, Alaska Outer Continental Shelf, AK, Wait Period Ends: 09/26/2011, Contact: Tim Holder 703–787–1744.

EIS No. 20110280, Final EIS, NOAA, NC, Gray’s Reef National Marine Sanctuary (GRNMS) Research Areas Designation, Establish a Research Area, Implementation, NC, Wait Period Ends: 09/26/2011, Contact: George Sedberry 912–598–2345.

Amended Notices

EIS No. 20110174, Draft EIS, USFS, 00, George Washington National Forest Land and Resource Management Project, Implementation, Alleghany, Amherst, Augusta, Bath, Botetourt, Frederick, Highland, Nelson, Page, Rockbridge, Rockingham, Shenandoah, and Warren Counties, VA and Hampshire, Hardy, Monroe, and Pendleton Counties, WV, Comment Period Ends: 10/17/2011, Contact: Karen Overcash 540–265–5175. Revision to FR Notice Published 06/03/2011: Extending Comment Period from 09/01/2011 to 10/17/2011

This Week in Environmental Disclosure

As we’ve posted in the past, public companies must generally disclose environmental legal proceedings in their annual, quarterly, and current reports to the SEC, and whether or not those proceedings have a material effect on the company’s financial position. Today we’ve pulled some disclosures of environmental liabilities from recent filings of interest.

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  • ARCHER DANIELS MIDLAND CO | Form 10-K | 8/25/2011

During the year ended June 30, 2011, $91 million was spent specifically to improve equipment, facilities, and programs for pollution control and compliance with the requirements of various environmental agencies.

On July 31, 2009, the United States Environmental Protection Agency (U.S. EPA) issued a Notice of Violation indicating that one of the Company’s facilities in Memphis, Tennessee, may have violated section 311(j) of the Clean Water Act relating to a release of product that occurred on January 2, 2008. The Company and the U.S. EPA have reached an agreement to resolve this matter with the payment of a penalty of approximately $120,000.

  • CARPENTER TECHNOLOGY CORP | Form 10-K | 8/24/2011

In June 2002, we were named as a defendant in a lawsuit filed by a group of plaintiffs in the District Court for the Eastern District of Pennsylvania titled Boarhead Farm Agreement Group v. Advanced Environmental Technology Corporation et. al. (since amended to include the individual members). The suit alleges that we and the other named defendants contributed to damages caused at Boarhead Farms, a Superfund site located in Bridgeton, Pennsylvania. The Boarhead Farms site was the home of a now defunct chemical and waste hauling company that we and many other companies engaged to dispose of certain wastes during the 1970’s. The plaintiff group was individually named as PRP’s for the Boarhead site in the EPA’s “Record of Decision” in November 1998. Their June 2002 lawsuit against various defendants, including Carpenter, sought contributions for a portion of costs incurred for various site cleanup activities as well as contributions to future cleanup efforts. The suit went to trial in June 2008. Prior to trial, all of the named co-defendants, except for Carpenter, reached an out of court settlement with the plaintiffs. We denied the claims made by the plaintiff group. On August 18, 2008, the Court awarded the plaintiffs judgment against us for 80 percent of the plaintiffs’ past costs of remediating the site, including prejudgment interest from June 18, 2002 to January 1, 2008, and held us liable for 80 percent of future costs of the cleanup activities at the site. We appealed the Court’s decision and oral arguments took place before the United States Court of Appeals for the Third Circuit on December 17, 2009. On April 12, 2010, the Court of Appeals for the Third Circuit vacated the previous judgment by the District Court and remanded the case for further proceedings. As of June 30, 2011 and June 30, 2010, we recorded a liability related to this case of $21.8 million. On July 19, 2011, we entered into a settlement agreement providing for a dismissal of the lawsuit against us and a complete release in our favor by all parties to the litigation, in exchange for a payment by us of $21.8 million. On August 16, 2011, the settlement was Approved by the Court.

  • INTERNATIONAL RECTIFIER CORP /DE/ | Form 10-K | 8/22/2011

In December 2010, the owner by foreclosure of a property in El Segundo, California has notified the Company of its claim that the Company is a potentially responsible party for the remediation of hazardous materials allegedly discovered by that owner at the property. The Company has also been contacted by the California Department of Toxic Substances Control in respect of such notice. The Company intends to vigorously defend against the claims asserted in the notice.

In November 2007, the Company was named as one of approximately 100 defendants in Angeles Chemical Company, Inc. et al. v. Omega Chemical PRP Group, LLC et al., No. EDCV07-1471 (TJH) (JWJx) (C.D. Cal.) (the “Angeles Case”). Angeles Chemical Company, Inc. and related entities (“Plaintiffs”) own or operate a facility (the “Angeles Facility”) which is located approximately one and a half miles down gradient of the Omega Chemical Superfund Site (the “Omega Site”) in Whittier, California. Numerous parties, including the Company, allegedly disposed of wastes at the Omega Site. Plaintiffs claim that contaminants from the Omega Site migrated in groundwater from the Omega Site to the Angeles Facility, thereby causing damage to the Angeles Facility. In addition, they claim that the EPA considers them to be responsible for the groundwater plume near the Angeles Facility, which Plaintiffs contend was caused by disposal activities at the Omega Site. Plaintiffs filed claims based on CERCLA, nuisance and trespass, and also seek declaratory relief. Plaintiffs seek to require the defendants to investigate and clean-up the contamination and to recover damages. The case has been stayed by the court pending the Environmental Protection Agency’s completion of its remedial investigation. The Company previously entered into a settlement with other parties associated with the Omega Site pursuant to which the Company paid those entities money in exchange for an agreement to defend and indemnify the Company with regard to certain environmental claims (the “Omega Indemnification”). In that agreement, it was estimated that the Company’s volumetric share of wastes sent to the Omega Site was in the range of 0.08 percent. The Company believes that much, if not all, of the risks associated with the Angeles Case should be covered by the Omega Indemnification. In addition, the Company has tendered the complaint to several of its insurance carriers, one of which has agreed to defend under a reservation of rights. Therefore, the Company does not expect its out-of-pocket defense costs to be significant. In addition, in light of the Omega Indemnification, the potential for insurance coverage and the fact that its volumetric share of Omega Site wastes was less than 0.1 percent, the Company does not believe that an adverse judgment against the Company would be material.

IR and Rachelle Laboratories, Inc. (“Rachelle”), a subsidiary of the Company that discontinued operations in 1986, were each named a potentially responsible party (“PRP”) in connection with the investigation by the United States Environmental Protection Agency (“EPA”) of the disposal of allegedly hazardous substances at a major superfund site in Monterey Park, California (“OII Site”). Certain PRPs who settled certain claims with the EPA under consent decrees filed suit in Federal Court in May 1992 against a number of other PRPs, including IR, for cost recovery and contribution under the provisions of the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). The Company has settled all outstanding claims that have arisen against IR relating to the OII Site. No claims against Rachelle have been settled. The Company has taken the position that none of the wastes generated by Rachelle were hazardous.

Counsel for Rachelle received a letter dated August 2001 from the U.S. Department of Justice, directed to all or substantially all PRPs for the OII Site, offering to settle claims against such parties for all work performed through and including the final remedy for the OII Site. The offer required a payment from Rachelle in the amount of approximately $9.3 million in order to take advantage of the settlement. Rachelle did not accept the offer.

D&O Insurance May Cover Subpoena “Claims” in Fracking Investigation

Photo by alancleaver_2000. Some rights reserved.

Dickstein Shapiro gives companies under investigation a light at the end of the tunnel with their recently published legal alert, which suggests that directors & officers that are the subjects of subpoenas may indeed be able to recoup costs related to the subpoenas from their D&O insurance companies.

The alert specifically addresses a situation in New York, where the Attorney General has subpoenaed three energy companies as part of an investigation into hydraulic fracturing disclosure. The subpoenas – which made headlines a few days ago in the New York Times – were sent under the authority of the Martin Act (NY General Business Law Article 23-A, sections 352-353), which gives an AG  “extraordinary powers” (according to Wikipedia) when fighting financial fraud.

The specific disclosure the AG is interested in relates to potentially misleading reports to investors regarding the prospects and profitability of the companies’ natural gas wells. One of the companies’ larger investors is New York State itself, which has invested more than $45 million of its pension money with the companies under investigation.

According to Dickstein Shapiro, the costs of “responding to and defending” such investigations could cause the target companies “to incur significant sums of money, perhaps millions of dollars.” Yet the firm sees cause for optimism.

A recent 2nd Circuit decision, MBIA Inc. v. Federal Insurance Co., held that a subpoena constitutes a “claim” covered under the D&O policy in question, where “claim” is typically defined to include “a formal or informal administrative or regulatory proceeding or inquiry commenced by the filing of a notice of charges, formal or informal investigative order or similar document.” (emphasis added) The 2nd Circuit agreed (with a district court’s previous decision) that a subpoena is “at absolute minimum, a ‘similar document’.”

Libya and the Case of the Falling Oil Prices

Photo by Vicki & Chuck Rogers. Some rights reserved.

An editorial piece that ran in the New York Times this week takes a look at the current conflict in Libya and how it is affecting global oil prices. Brent crude oil fell 1.2% to $107.27 a barrel following the rise of conflict between rebel forces and the troops loyal to Libya’s leader, Col. Muammar el-Qaddafi that began in February of this year, and though Saudi Arabia has responded by increasing its rate of production to a whopping 10 million barrels a day, Libya’s rank in oil exportation is nothing to sneeze at.

Libya houses the largest oil reserves in Africa and ninth largest worldwide. Prior to this year’s conflicts, the country exported 1.3 million barrels of oil a day, but the production of crude oil has been shut down almost entirely since fighting broke out. As such, European oil companies and, by extension, American oil naturally have a large stake in these reserves, and would stand to benefit from a ceasefire, though a June study from the International Energy Agency estimated that it would take years, even once the conflict is resolved, to climb back to the rate of production seen before February.

Though Una Galani and Reynolds Holding, authors of the editorial, are quick to point out that “any price slump is likely to be less severe than in 2008, when oil prices crashed by more than $100 a barrel in six months,” thanks mainly to demand from rapidly growing countries like China, the uncertainty of Libya’s situation leaves room for concern.

Though Michelle Bachmann made a campaign promise this week to get American gas prices back under $2/gallon, her supporters may not want to hold their breaths too long: as Aaron Smith at E2 begins his article, “Brent crude oil prices are easing but don’t expect that to translate into sharply lower U.S. gas prices anytime soon.”

“Green Value” and Mortgage Collateral

Image by Oldmaison. Some rights reserved.

In a recent article, law firm Dewey & LeBoeuf addresses head-on how the only-recently-ubiquitous “green” metrics, terminology, and technology in real estate and development have affected building valuation, and, specifically, how one can hedge the risks when green value is lost.

The Dewey & LeBoeuf piece discusses two general ways that “green” that can add value to a building:

First, green “value genera­tors,” that is, green financial benefits, key directly to a building’s cash flow or capital value. Second, green “market enhancers,” such as green ratings or other green attributes, are perceived to add market value even if they do not key directly to cash flow or capital value.

The article then goes on to detail several specific examples, most of which center around the well-known and commercially acknowledged LEED standards. For instance, building owners should be happy to learn that some cities and states offer tax breaks for LEED-qualified construction (value generator), while potential buyers or tenants may be more likely to rent or buy LEED-certified buildings due to their perceived environmental friendliness or potential savings in utilities (market enhancers).

The flip side of these “green” values is that losing something like a LEED certification can be devastating to a building’s worth. As Dewey & LeBoeuf go on to explain,

Failure to achieve a green rating can reduce collateral value in ways “usual” defaults do not. Why? Typically loss of mortgage value follows a real estate market decline when borrowers and tenants go broke and vacancies or defaults wipe out cash flow.

Green defaults are different. The borrower may be paying debt service in a good market, but property value dives with loss of the green rating. Standard mortgage remedies do not protect against such a loss.

Dewey & LeBoeuf recommends due diligence as a lender’s first line of defense, but in the event that a green rating is lost, lenders are urged to “require a third-party guaranty for some or all of the cash flow” or “require the borrower to provide cash collateral or a letter of credit which burns off as the abatement declines.” For further details, check out the full article.

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