Monday PM October 5th, 2009
by: Ed Mayberry, October 5, 2009 9:10:31 pm
The U.S. Supreme Court has let stand a court ruling that the Obama administration says will cost taxpayers at least $19 billion. The ruling dealt with royalties on energy leases in the Gulf of Mexico. The justices declined to hear the government's appeal of a ruling favoring Houston-based Anadarko Petroleum regarding eight deepwater leases Anadarko holds in the Gulf. The 5th U.S. Circuit Court of Appeals in New Orleans ruled the Interior Department couldn't collect royalties from the leases, even as oil prices rose and companies began posting huge profits. The leases were obtained between 1996 and 2000 by Kerr-McGee, which Anadarko later acquired. The case revolves around a 1995 law that gave oil and natural gas producers a break from paying royalties at a time when energy prices were extremely low. The law waived all royalty payments until a specific amount of oil and gas was produced. The case is department of the Interior v. Kerr-McGee Oil and Gas, 09-54.
AccuFleet International is laying off 87 workers beginning December 1st, according to the Houston Business Journal. The Houston aircraft cleaning firm notified the Texas Workforce Commission in a letter dated September 29th that it would be laying off 23 warehouse workers and 64 aircraft cleaners from its Bush Intercontinental Airport location.
Sealy-based BAE Systems is appealing a decision by the U.S. Army to go with a Wisconsin contractor for military vehicles—a decision that could affect some 3,000 Texas jobs. The Sealy production facility has produced more than 56,000 FMTV's, or Family of Medium Tactical Vehicles, in the past 17 years. More than 40 vehicles are produced each day at the plant on I-10--many of them bound for Iraq and Afghanistan. Congressman Michael McCaul appeared at a recent employee rally at the Sealy plant, and Dennis Morris with BAE Systems says there are other champions of their cause.
"There's something to what we're saying, because I don't think people like Congressman McCaul and Senator Cornyn and Senator Kay Bailey Hutchison would be putting themselves behind us if they didn't feel there was something there, as well. And they're asking the army some very hard questions right now, as they should. People, one, I think are very moved by the fact that they're getting support they are from people like Congressman McCaul and Senator Cornyn and Senator Kay Bailey Hutchison. We have work here for over another, for over a year--all the way through next year. Everybody here knows the work they have to do has to continue, and they have to continue to do the best job because of who they're doing this for, which is the men and women in uniform."
Morris says the Army selected the Wisconsin firm based soley on price, which was only part of the stated evaluation criteria. He says a competitor would have to start from scratch and outfit a facility to begin producing the trucks.
A private trade group says its measure of the U.S. service sector grew in September for the first time in 13 months. The Institute for Supply Management says its service index hit 50.9 last month, up from 48.4 in August. Analysts polled by Thomson Reuters had expected a reading of 50, the dividing line between growth and contraction. The index, which tracks more than 80 per cent of the country's economic activity, including hospitals, retailers, financial services companies and truckers, hasn't grown since August 2008. The new orders index, an indicator of future activity, jumped to 54.2 in September, the first growth reading in a year.
Venezuela's state oil company says it has taken control of ConocoPhillips' stake in a joint natural gas venture with Chevron. State-run Petroleos de Venezuela, or PDVSA, says it will form a joint venture with Chevron to exploit the offshore reserves that are expected to produce some 750 million cubic feet of gas per day. PDVSA will have a 61 per cent stake, while Chevron will have a 39 per cent stake. Chavez's government nationalized four heavy oil projects in 2007, seizing control of ConocoPhillips' operations after the companies failed to agree on terms for a minority stake. ConocoPhillips later filed for arbitration to recover its assets.
The American Gas Association says plentiful domestic supplies and lower wellhead prices will drive bills down this winter. Some utilities are telling their customers they'll pay at least 20 per cent less for natural gas than they did a year ago. That's because prices were sharply lower when utilities bought gas in the spring and summer and put it into storage. The association's Chris McGill says almost 3.6 million cubic feet of natural gas are in storage. That's about 16 per cent above the five-year average and what was on hand this time last year.
Governor Rick Perry has been named chairman of the Interstate Oil and Gas Compact Commission at their meeting in Biloxi, Mississippi. IOGCC was founded in 1935 as a multi-state agency to protect state regulation of oil and gas resources. The agency is now focuses on keeping regulation of carbon sequestration and hydraulic fracturing at the state level.
Former Federal Reserve Chairman Alan Greenspan predicts that the unemployment rate will push past ten per cent and stay at that level for a while. "Pretty awful" is how Greenspan describes Friday's report that the unemployment rate has risen to 9.8 per cent. He says the growing number of Americans who have been out of work six months or longer is of particular concern because jobless workers lose skills over such a long period. Greenspan says he would advise President Barack Obama to focus on getting the economy going, but not to go too far. He says a second economic stimulus is not called for because less than half of the current stimulus is in effect and because the nature of the recovery is not yet clear. Greenspan spoke Sunday on ABC's This Week.
Finance ministers from the Group of Seven are warning against "complacency" as the economy claws its way out of the global recession. In the closing statement after meeting in Istanbul, the ministers from the U.S., Japan, Germany, France, Britain, Canada and Italy warned the recovery remains "fragile" as unemployment continues to rise. They say government stimulus efforts have worked, but it's too soon to start winding those measures down. Treasury Secretary Timothy Geithner says the U.S. will only start pulling out of its "extraordinary" policy measures when conditions stabilize and growth strengthens. And, he adds that "exit will not be like flipping a switch." Geithner also noted the role the U.S. currency could play in the global recovery. The greenback's recent slide has some worried it could drag down growth. Geithner says a strong dollar is "very important" for the U.S.
A new report contends the credibility of the government's $700 billion financial rescue program was damaged by claims a year ago that all of the initial banks receiving support were healthy. Special Inspector General Neil Barofsky generally finds the government acted properly in October 2008 as it scrambled to implement the Troubled Asset Relief Program to avert the collapse of the U.S. financial system. But the report says then-Treasury Secretary Henry Paulson and other officials were wrong to contend at an October 14th press conference that all nine institutions receiving the first round of support were sound. Barofsky says the fact that some institutions soon required billions in additional assistance highlighted the inaccuracy of that claim and raised questions about the whole effort. Commenting on Barofsky's report, the Federal Reserve generally supports the findings. But Assistant Treasury Secretary Herbert Allison, Jr., says any critique should take into consideration the unprecedented circumstances facing financial regulators at the time.
Analysis of health care legislation suggests even with the government subsidies, middle-class Americans would struggle to pay for health insurance. The legislation requires that all Americans get insurance. But new tax credits to help with premiums won't go far enough for many who have to purchase their own coverage through insurance exchanges. A new online tool from the Kaiser Family Foundation says a family of four with a $63,000 annual income would pay more than $7,000 to buy its own insurance, after about $4,000 in tax credits. The calculator is only a rough guide and the legislation remains a work in progress. Lawmakers acknowledge the problem--Democratic Senator Tom Carper says he realizes it's going to be a "heavy lift" for some, but Congress is working to "make sure it's not an impossible lift." Congress is trimming subsidies to meet President Barack Obama's target of $900 billion over ten years--which means premiums will be higher than under earlier Democratic proposals. The White House says it's premature to draw any conclusions and says making health insurance affordable "is the whole point" of the revamp.
The nation's nursing homes are perilously close to laying off workers, cutting services--possibly even closing--because of a perfect storm wallop from the recession and deep federal and state government spending cuts. Industry experts say a new Medicare rate adjustment will cut about $16 billion from nursing homes over the next ten years. That comes atop state-level cuts that already had the nation's 16,000 nursing homes reeling. Congress may also slash billions more in Medicare funds in the name of health care reform. The funding crisis comes as the nation's baby boomers age ever closer toward needing nursing home care, surging beyond the 1.85 million people in nursing homes last year.
The state of Texas is investing $600,000 through the Texas Enterprise Fund in Cardiovascular Systems for the creation of a facility in Pearland to manufacture their arterial disease treatment system. The investment will create 100 jobs, generating $23 million in capital investment. CSI's Diamondback 360 is a minimally-invasive catheter used to treat peripheral artery disease.
A professor at the University of Texas Health Science Center in Houston has received a $26 million federal stimulus grant to pinpoint genetic factors affecting the risk of heart, lung and blood diseases. Dr. Eric Boerwinkle and his colleagues have been awarded 47 federal stimulus grants totaling about $49 million.
Texas helped send man to the moon, but can the Lone Star State cure cancer? A new state agency is ready to spend upward of $3 billion over the next decade trying. That would make the Cancer Prevention and Research Institute of Texas the nation's second-largest source of cancer research funding, behind only the National Cancer Institute. Lance Armstrong, the cycling champion and cancer survivor, helped sell the plan to Texas voters in 2007 through a bond measure. The first wave of funding is expected to be handed out by spring. Institute leaders say the money will gamble on high-risk research and attract big-name scientists to Texas. But a sagging economy has some skittish about future funding. State lawmakers already did not fully fund the institute over the first two years, leaving $150 million on the table.
Alamo Drafthouse Cinemas is converting its two Houston facilities at West Oaks Mall and in Katy into franchisee-operated properties, according to the Houston Business Journal. Triple Tap Ventures plans to develop at least seven new locations throughout the state. Austin-based Alamo Drafthouse Cinemas currently has seven locations, with two additional theaters planned for this fall. The company offers full food and beverages at its theaters.
Newly released statistics show that Internet advertising in the U.S. fell five per cent in the second quarter as the recession continued to crimp marketing budgets. It was the second consecutive quarterly decline in internet advertising, extending the medium's first slump since the aftermath of the dot-com bust in 2002. The $5.43 billion spent on Internet ads during the three months ending in June compared to $5.75 billion at the same time last year, according to the Interactive Advertising Bureau, and PricewaterhouseCoopers. Advertising has fallen much farther for newspapers, magazines and broadcasters, where the second-quarter declines ranged from 12 per cent to 29 per cent.
The Federal Trade Commission will require bloggers to clearly disclose any freebies or payments they get from companies for reviewing their products. It's the first time since 1980 that the commission has revised its guidelines on endorsements and testimonials, and the first time the rules have covered bloggers. But the commission stopped short of specifying how bloggers must disclose any conflicts of interest. The FTC said its commissioners voted 4-0 to approve the final guidelines, which had been expected. Penalties include up to $11,000 in fines per violation. The rules take effect December 1st.
New guidelines from the FTC will require advertisers using customer testimonials to clearly disclose results consumers can typically expect. The FTC's associate director for advertising practices, Mary Engle, says guidelines mean advertisers can't hide behind disclaimers when they show atypical results. Companies using testimonials had long been showing customers with atypical results, along with a disclaimer saying that's not what other consumers should expect. They were never required to tell consumers what they should expect, until now. Engle says consumers should no longer see ads with "atypical" results without hearing from the advertiser what they can expect. The guidelines were last updated in 1980.
On Wednesday, the Federal Reserve provides consumer credit data for August. On Thursday, investors will get a fresh look at the retail sector as it gears up for the important holiday shopping season. Retailers will report their sales results for September. Thursday also brings some new data on the labor market with the weekly jobless claims report from the Labor Department. Other reports on Thursday include wholesale trade inventories for August from the Commerce Department and weekly mortgage rates from Freddie Mac. Rounding out the week, on Friday the Labor Department provides more employment data with its job openings report, and labor turnover survey for August, and the Commerce Department releases international trade for August.