HBLR Online Volume 3 (2012-2013)

HBLR Online is a portal to timely pieces about recent developments in business law. As an important forum for opinion and scholarship, HBLR Online is designed to be a cutting edge guide to developments in the field of business law. HBLR Online also provides opportunities for student members to develop their own editing and writing skills. Accordingly, HBLR Online will contain pieces by students as well as outside contributors.

Why Are Foreign Investments in Domestic Energy Projects Now Under CFIUS Scrutiny?
Stephen Heifetz and Michael Gershberg (May 13, 2013)
CFIUS now actively reviews and sometimes alters transactions that result in foreign control of U.S. energy companies. There are three primary drivers behind this recent scrutiny. 

The Federal Reserve’s Supporting Role Behind Dodd-Frank’s Clearinghouse Reforms
Colleen Baker (April 20, 2013)
Although largely overlooked, failures in PCS systems both domestically and internationally exacerbated the financial crisis of 2008. The Federal Reserve’s critical and significant role in responding to some of these disruptions has similarly been largely overlooked.

Unreasonable Delays: CFIUS Reviews of Energy Transactions
Joshua C. Zive (April 18, 2013)
Unfortunately, delays and burdens associated with CFIUS are playing an increasingly significant and frustrating role in energy transactions. These delays frustrate the intended role of CFIUS review and make it unnecessarily difficult for energy transactions to be designed and executed in an efficient manner.

Clearinghouse Hope or Hype? Why Mandatory Clearing May Fail to Contain Systemic Risk
Sean J. Griffith (April 17, 2013)
Clearinghouses may not be the last and best solution to the problem of systemic risk and that further regulatory experimentation may be desirable. Policy-makers should strive instead for a structure that fosters diversity and experimentation.

Margin Costs of OTC Swap Clearing Rules
Paul Watterson, Joseph Suh & Craig Stein (April 12, 2013)
Clearing requirements affect margin requirements, a key mechanism used to mitigate counterparty risk. New clearing rules may substantially costs for users of cleared derivatives because of the higher margin delivery requirements applicable to such transactions.

Regulation of Cross-Border Swaps
David Felsenthal and Lily Chu (April 04, 2013)
We do not believe that there is any simple, one size-fits-all remedy for regulation of cross-border swaps. We propose therefore that each transaction-level requirement be considered separately, and that specific rules be adopted for each type of transaction-level requirement.

Credit Default Swaps: Dubious Instruments
Charles W. Murdock (March 30, 2013)
Derivatives and other “innovative” financial instruments such as CDOs and synthetic CDOs were largely responsible for the collapse of the economy in 2008. There is little justification for the existence of CDSs and especially naked CDSs. The issue raised CDSs need to be examined in light of how they add or detract from our overall long-term prosperity.

Deterring Disruption in the Derivatives Markets
Matthew Kluchenek and Jacob Kahn (March 18, 2013)
Dodd-Frank Act amendeded section 4c(a) of the CEA to add three types of prohibited transactions deemed to be “disruptive of fair and equitable trading.” Market participants in the ever-growing commodities and swaps markets should not take comfort in the CFTC’s delay in filing suit. 

Toward an Economic Model for the Taxation of Derivatives and Other Financial Instruments
David S. Miller (March 14, 2013)
On January 24, the Chairman of the House Ways and Means Committee, released the discussion draft of a bill that would tax derivatives under a mark-to-market system of taxation. This proposal would replace our entire federal system of taxing derivatives with a radically different but infinitely simpler model that would finally correspond to economic reality. 

From Reaction to Prevention: Product Approval as a Model of Derivatives Regulation
Saule T. Omarova (March 11, 2013)
This article outlines the contours of a regulatory scheme based on mandatory pre-market government licensing of complex financial instruments, including derivatives. This model of product approval regulation explicitly aims to control the amount and types of risk being introduced into the financial system. 

The Private Role in Public Fracturing Disclosure and Regulation
Hannah J. Wiseman (February 08, 2013)
Recent domestic growth in oil and gas natural gas production from shales and sandstones called “tight” formations—largely enabled by a modified technology called slickwater hydraulic fracturing—has driven both economic growth and environmental concerns. Public concerns have often focused on the chemicals used in the fracturing process, yet federal regulations requiring disclosure of chemicals are weak. In the midst of initial “threats” of federal intervention, industry—along with state regulators—developed a website that enabled chemical disclosure. State regulations later mandated disclosure through this website, or allowed it as one option within a mandatory disclosure regime. Independently, gas companies also have begun to experiment with less toxic fracturing chemicals and to take other substantive efforts toward identifying and limiting the risks of tight oil and gas development. This example of a public-private effort to enhance informational access in fracturing, and to make limited substantive changes, may offer important lessons for other oil and gas regulation moving forward.

Sixth Circuit Pushes Back on EPA Oil and Gas Source Aggregation Under the Clean Air Act
William Bumpers and Paulina Williams (January 04, 2013)
On August 7, 2012, the United States Court of Appeals for the Sixth Circuit (Sixth Circuit) issued an opinion that has significant Clean Air Act (CAA) regulatory implications for oil and gas development projects. In Summit Petroleum Corp. v. EPA, the court vacated an Environmental Protection Agency (EPA) determination that Summit Petroleum Corporation’s natural gas sweetening plant and sour gas production wells spread over forty-three square miles constituted a single stationary source for CAA permitting purposes. The Summit Petroleum case is encouraging for oil and gas developers whose operations are often spread over substantial areas, though EPA indicates it does not intend to extend the decision’s reach beyond the Sixth Circuit at this time.

Shale Gas Development: The Implications of the Shale Gas Revolution for the Natural Gas Industry
Mark R. Haskell and Levi McAllister (December 03, 2012)
Shale gas has the potential to create new producing regions, but it requires the creation of new infrastructure or the redesign and redeployment of existing infrastructure to access markets. Shale gas also carries with it the potential for the transformative disruption of existing supply and transportation networks. This article explores some of the implications of the “shale gas revolution.”

America’s Natural Gas: From Shale Gas to LNG Exports
Susan Sakmar (November 24, 2012)
According to the U.S. Energy Information Administration’s (EIA) Annual Energy Outlook 2012, U.S. natural gas production is expected to increase almost twenty-nine percent from 21.6 trillion cubic feet in 2010 to 27.9 trillion cubic feet in 2035. Much has been written about shale gas being either an “energy game changer” or an environmental hazard depending on whom you ask. In contrast, far less attention has been focused on whether the U.S. should export its newfound abundance of shale gas as liquefied natural gas (LNG) to foreign countries.

SPACs and the JOBS Act
Usha Rodrigues (October 02, 2012)
Consider the story of the emerging growth company (EGC), or “Initial Public Offering (IPO) on-ramp,” provision of the Jumpstart Our Business Startups Act (JOBS Act). In its first few months on the books, this provision had effects far different from what its drafters envisioned. The JOBS Act’s IPO on-ramp was intended to ease regular companies’ path to going public; instead, it has inadvertently made it easier for the average investor to get a taste of private equity via special purpose acquisition corporations (SPACs). This piece will briefly describe SPACs, the IPO on-ramp, and how shell companies have taken advantage of a legislative provision intended to bring cash-hungry young companies directly to market. This piece will close with a few thoughts on lessons the story of SPACs’ interaction with the JOBS Act may offer regarding the increasingly indistinct line that divides public and private investment.

The Lessons from Libor for Detection and Deterrence of Cartel Wrongdoing
Rosa M. Abrantes-Metz and D. Daniel Sokol (October 01, 2012)
This essay explores the use of econometric screens, either by enforcement authorities or firms themselves, as a tool to both improve detection of potential price fixing cartel behavior and police illegal firm behavior.

Complexity of Regulation
Chester S. Spatt (June 16, 2012)
While our financial system is itself very complex, our financial regulators would benefit in many cases by designing simple and robust approaches that build off of basic principles and that emphasize the role and importance of economic incentives and markets. While I recognize that to some degree complexity in financial structure breeds complexity in regulation, often the causality is reversed. Complexity in regulation leads to complexity in financial structures and systems, particularly in light of the efforts of market participants to mitigate the costs and complications induced by regulation, including attempts to engage in regulatory arbitrage.