SEC Eases Debt Tender Offer Procedures
Two recent cases from the Southern District of New York may undermine the ability of companies with debt subject to the Trust Indenture Act (TIA) to engage in bondholder-approved restructuring of that debt, and create uncertainty as to the issuance of new TIA-qualified debt.
Three major legislative and regulatory proposals concerning technology in health care are in the works for 2015, each of them aiming to accelerate the growth of the already burgeoning health IT vertical by facilitating – and protecting – the electronic collection and sharing of health data.
21st Century Cures Initiative
On January 27, 2015, members of the House Energy and Commerce Committee, led by Chairman Fred Upton (R-MI) and Colorado’s own Diana DeGette (D-CO), released a discussion draft of potential bill language aimed at accelerating the discovery, development, and delivery of new medical drugs and devices. Elizabeth Farrar, health counsel for Rep. DeGette, said the bill’s sponsors have set an “aggressive timeline” for consideration of the bill, with a vote on the bill planned for May 2015.
On January 5, 2015, the Colorado Oil and Gas Conservation Commission (COGCC) amended Rules 522 and 523 governing enforcement and penalties. These amendments implement House Bill 14-1356, which the legislature adopted last April. Among other things, HB 14-1356 increases the daily maximum penalty per violation from $1,000 to $15,000, requires the COGCC to assess a penalty for each day of violation, and eliminates the previous cap of $10,000 in total penalties for violations not resulting in significant adverse impacts. As explained below, these amendments revise the way in which penalties are calculated and will significantly increase potential penalty amounts in many circumstances.
In addition to amending its enforcement and penalty rules, the COGCC also adopted uncontested amendments to more than 20 other rules. Many of these amendments only clarify existing rules, but some are substantive, including amendments to Rules 317.e (amending casing and cement program requirements), 317.r (adding an anti-collision evaluation requirement for certain offset wellbores), 317.s (adding fracture stimulation setback requirements), 319.a (amending plugging requirements), and 603.e (amending well control equipment requirements). A complete copy of the amended rules can be found online here. All of the amendments are likely to be published in the Colorado Register on January 25, which should make them effective on February 14.
We are now at the point in the calendar-year reporting cycle when most companies are about to commence Annual Report on Form 10-K and proxy preparation. Comments by the SEC Division of Corporation Finance staff on annual reports for the prior year, and the current year’s proxy statements, have generally become publicly available. This alert discusses frequently-made comments by the SEC to issuers in the restaurant industry.
1. Gift Card and Loyalty Programs
The staff is interested in how companies account for gift card and loyalty programs. A comment on this topic may ask for an explanation to the staff, and disclosure in the notes to the financial statements, of the applicable accounting policy. If a company sells gift cards to wholesalers, it should consider disclosing any associated commissions, discounts, and fees. If a company has a program that gives awards to frequent customers, it should consider describing how the program operates, its accounting policy regarding material assumptions, and how it determines the adequacy of its estimates at each balance sheet date.
After a period of relative stability, volatility in global oil prices has returned with a vengeance in recent weeks. Slow economic growth in many regions, OPEC inaction, and surging U.S. production have combined to cause a precipitous fall in the price of oil, which continues to hit new multiyear lows. The declines in oil prices have corresponded to similarly rapid decreases in the stock (and in some cases bond) prices of many energy producers. The following is a brief checklist of some of the key legal issues that upstream energy companies may want to consider as a result of the changing commodity price environment.
On July 31, 2014, the U.S. Environmental Protection Agency (EPA) published a request for information (RFI) on various changes to the Risk Management Program (RMP) under Section 112(r)(7) of the Clean Air Act, including completely replacing the current RMP rule and its sister regulation, the Process Safety Management (PSM) standard, with a new framework for regulating high-risk industries. The comment period associated with the RFI closed on October 29, 2014. EPA has published over 570 comments submitted by industry members, state and local agencies, public citizens, and non-governmental organizations in response to the RFI. This Client Alert analyzes the bulk of those comments for common themes that illustrate anticipated areas for programmatic revision. It further identifies certain ideological conflicts which must be resolved before any final rule can issue with broad-based support.
In response to Executive Order 13650, entitled “Improving Chemical Facility Safety and Security,” was issued August 1, 2013 in response to several recent major chemical accidents, including the explosion at the West Fertilizer Facility in West, Texas. The Executive Order required numerous federal agencies to form a Chemical Facility Safety and Security Working Group (Working Group) to identify how to reduce the incidence of major chemical incidents at chemical facilities. On May 1, 2014, the Working Group issued its report to the President recommending a number of initiatives, including modernizing the RMP and PSM standards by May 1, 2015. EPA and the Occupational Safety and Health Administration (OSHA) both issued RFIs intended to assist in determining whether and how to modernize the RMP and PSM standards. Following-up on publication of the Working Group’s report and OSHA’s RFI, which signals that OSHA may apply an expanded PSM program to ammonium nitrate, reactive chemicals, and oil and gas drilling, servicing, and production facilities, EPA published its own RFI intended to improve and/or expand its RMP rule.
Today, EPA issued its long-awaited new National Ambient Air Quality Standard (NAAQS) proposal for ground level ozone, the federal health-based standard that states must decide how to meet. The new primary 8-hour ozone NAAQS, which EPA is proposing to set at between 65 and 70 parts per billion (ppb), represents a significant tightening of the standard from the current level of 75 ppb and would put a significant portion of the country in non-attainment. The agency is also taking comment on setting the primary NAAQS as low as 60 ppb, which could drastically expand non-attainment designations even further. The agency has also proposed tightening the secondary ozone standard, which exists to protect “public welfare” (as opposed to public health) values such as soils, water, crops, wildlife, weather, economic values, visibility and climate, and personal well-being.
Today’s proposal marks yet another substantial federal air quality action by EPA in a year that has seen, perhaps, as many significant air quality rules or court decisions as any on record. These include the U.S. Supreme Court’s validation of EPA’s Cross State Air Pollution Rule (CSPR), the Court’s ruling on the extent of EPA’s authority to regulate CO2 from stationary sources in the Utility Air Regulatory Group case, EPA’s proposed Clean Power Plan focusing on CO2 reductions from coal-fired power plants, the proposed reversal of EPA’s policy on affirmative defenses for startups, shutdowns, and malfunctions; and the Supreme Court’s recent acceptance of certiorari to review the legality of the Mercury Air Toxics Standard (MATS). Of these, it is perhaps the ozone NAAQS that poses the most serious and important consequences for businesses as well as state regulators, and even the EPA itself. A further lowering of the ozone NAAQS (it was last lowered in 2008) will significantly impact nearly every industrial sector, necessitating, in our view, widespread participation in EPA’s notice and comment process. Comments will be due 90 days after publication of the proposal in the Federal Register; although, given the significance and breadth of the rule’s potential impacts, it is possible the comment deadline will be extended. A final rule is expected by October, 2015.
On October 6, 2014, EPA issued a final rule updating its All Appropriate Inquiries (AAI) Rule to remove the previous reference to the outdated 2005 ASTM International (ASTM) Standard Practice for Phase I Environmental Site Assessments and replace it with a sole reference to the 2013 Standard, ASTM E1527-13. As discussed in our client alert of November 11, 2013, doubt existed for almost a year because, without express direction from EPA, prospective purchasers and others conducting site assessments were forced to choose between relying on the outdated 2005 version of the ASTM Standard, which was referenced in EPA’s existing AAI Rule, or relying on the revised, November 2013 Standard, despite its not being named in the AAI Rule, because it was more recent and more stringent.
Although no other substantive changes were made to the AAI Rule, parties conducting site assessments should be mindful of certain critical aspects and impacts of the final rule:
First, the new final rule is not effective until a year from now, October 6, 2015. After that date, compliance with the 2013 Standard, but not the 2005 Standard, will satisfy the AAI test at 40 C.F.R. Part 312, which allows prospective purchasers to qualify for liability protection under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for contamination found on a property during a Phase I site assessment.
After reaching water rights settlements, a number of Native American tribes find themselves with rights to more water than their reservations or pueblo communities presently need. As climate change exacerbates drought conditions in the western United States and demand for water increases, some tribes have leased these surplus water rights to public and private, non-Indian, users. Theoretically, this could be a boon for tribes, although the extent of the economic impact of water leasing is difficult to assess without an examination of each individual water lease. This paper attempts to illustrate the economic impact of Indian water rights leasing anecdotally, by examining the leasing efforts of one particularly successful tribe, the Jicarilla Apache Nation in northern New Mexico.