Wednesday PM May 19th, 2010

Monitoring the Gulf of Mexico oil slick: from Louisiana to Florida, and now discussions with Cuba…Consumer prices decline for first time in 13 months…Southwest Airlines says outlook for 2010 much better than a year ago, if fuel prices don't spike…

Scientists are anxiously awaiting signals about where the massive oil slick in the Gulf of Mexico may be heading next. And federal officials acknowledge the government could have been more aggressive in overseeing the drilling, while efforts to contain the spill are proving increasingly difficult. Fears are growing that the gushing well could spread damage from Louisiana to Florida. Interior Secretary Ken Salazar told a senate panel that his agency had been lax in overseeing offshore activities and that may have contributed to the disastrous spill.

NOAA says a small portion of the oil slick has reached the co-called Loop Current in the form of light to very light sheens. The Loop Current is an area of warm water that comes up from the Caribbean, flowing past the Yucatan Peninsula and into the Gulf of Mexico. From there, it generally curves east across the Gulf and then flows south parallel to the west Florida Coast, as it flows between Florida and Cuba it becomes the Florida Current through the Florida Straits, where it finally joins the Gulf Stream as it travels up the Atlantic Coast. Lars Herbst is with the Minerals Management Service.

"Overflights yesterday did show that there's some light sheen--some light oiling--that are feeling the effects of the Loop Current. And that oil's going to move slowly with the Loop Current and we actually expect most of that to dissipate or probably degrade or weather before it actually would even come close to threatening the South Florida area, the Straits of Florida. It takes a long time to get there from that location. Estimates vary a little bit, but in the neighborhood of ten days. So we have a lot of time to watch it, to see if there's any changes. He other thing to keep in mind is that the bulk of the oil is still way away to the northwest of the Loop Current. Nothing's changed drastically over the last couple of days, and we're going to continue to monitor and watch it daily and report out every day what the situation is."

BP says it hopes to start the next phase of its effort to halt the flow of oil on Sunday or early next week. BP hopes to start involves shooting heavy mud into crippled equipment on top of the well to stem the flow of oil and gas—the "top kill" method. The company's engineers hope to quickly follow it up by aiming cement at the well to permanently keep down the oil. Engineers could also use another strategy called the "junk shot," which involves shooting knotted rope, pieces of tires and golf balls into the blowout preventer. Crews hope they will lodge into the nooks and crannies of the device to plug it.

A U.S. State Department official says U.S. and Cuban officials are holding "working level" talks on how to respond to the Deepwater Horizon. The talks are the latest sign that concern is growing that strong water currents could carry the slick far from the site of the spill, possibly threatening the Florida Keys and the pristine white beaches along Cuba's northern coast. They are also a rare moment of cooperation between two countries locked in conflict for more than half a century. The official spoke to the Associated Press on condition of anonymity due to lack of authorization to comment publicly.

A 20,000 gallon supertanker plane that could be used to drop dispersant on the Gulf of Mexico to break up oil from a blown well has been doing test runs in Waco. The Evergreen Supertanker 747 spent time at Texas State Technical College, the same airport where then-President George W. Bush would arrive on Air Force One to visit his nearby ranch. The Waco Tribune-Herald reports that the jet, which arrived last week, in at least one practice flight was just 100 feet above the runway and dropped water on a target. Flight Engineer Don Paulsen says the jet, owned by Oregon-based Evergreen International Aviation, has been flown to Gulfport, Mississippi, for possible use by BP. BP leased the well that blew April 20TH, killing 11 workers, and sending millions of gallons of oil into the water.

An attorney is asking a panel of federal judges to quickly consolidate more than 100 lawsuits filed against BP and other companies involved in the oil spill. Louisiana lawyer Daniel Becnel says that legal chaos could break out in five Gulf Coast states if the lawsuits aren't combined. The panel of judges, based in Washington state, has indicated it will not decide until July. Becnel wants them to take another look at that decision considering the number of lawsuits that have been filed. Many lawsuits are potential class actions that could include tens of thousands of plaintiffs. They've been filed by fishermen, seafood businesses, hotels, restaurants, resorts and other interests claiming economic losses from the oil spill.

A lawsuit claims that the owner of sunken oil rig in the Gulf of Mexico inflated its stock by telling shareholders that safety issues with blowout preventers had been resolved. The federal court suit, filed in New Orleans, seeks damages from Transocean and its CEO Steven Newman. Transocean owned the Deepwater Horizon drilling rig, which exploded on April 20th and sank, leading to a massive oil spill in the Gulf. The blowout preventer, which was supposed to cap the well at the site, failed to activate. Newman has blamed the accident on a failure of drilling cementing, casing or perhaps both, he dismissed suggestions from a U.S. Senate Committee that the blowout preventer may have been a cause.

Environmental groups are asking the federal government to take over all monitoring and testing related to the spill. In remarks prepared for Congressional testimony, National Wildlife Federation President Larry Schweiger says too much information is in the hands of BP's many lawyers and too little is being disclosed to the public. His group and nine others asked President Barack Obama to order more direct federal oversight. They want the government to release the results of all tests conducted so far. BP did not immediately answer a call and e-mail requesting comment.

The Obama administration is proposing to split up an Interior Department agency into three parts. Interior Secretary Ken Salazar announced the change a week after he proposed splitting the Minerals Management Service in two. The original plan would have created one entity charged with inspecting oil rigs, investigating oil companies and enforcing safety regulations, and another to oversee leases for drilling and collection of billions of dollars in royalties. The new plan would keep those two bureaus and add a third to oversee development of offshore drilling. The minerals agency has long been accused of being too cozy with the oil and natural gas industry.

Republicans at a House hearing say the Obama administration deserves much of the blame for the oil spill. John Mica says the administration issued "basically a carte blanche recipe for disaster" in approving the Deepwater Horizon and other wells. The Florida Congressman says "it's government's responsibility to set the standards." He pointed to Interior Secretary Ken Salazar's acknowledgment that his agency could have more aggressively monitored the offshore drilling industry. Mica also said the spill could have been contained more quickly if the Coast Guard and other agencies had a better plan. The chairman of the committee holding this morning's hearing took issue with the criticism. Minnesota Democrat James Oberstar said the drilling was approved early in the Obama administration and that decisions were made by career officials. At other hearings, the Interior Secretary said blame rests with both industry and the government, and promised an overhaul of federal regulations.

Senate Democrats are calling for the Obama administration to improve inspections of deepwater oil rigs. In a letter to President Barack Obama, Senate Majority Leader Harry Reid and other Democrats urged immediate and enhanced inspections of all offshore drilling rigs and platforms that could pose a significant environmental threat. The lawmakers said the oil companies should pay for the emergency inspections, not taxpayers.


Consumer prices declined in April for the first time in 13 months while core inflation rose over the past year at the slowest pace in 44 years. The Labor Department reports that consumer prices edged down 0.1 percent last month, reflecting a big fall in energy prices. Core inflation, which excludes volatile food and energy, was flat in April. Over the past 12 months, core inflation is up just 0.9 percent, the smallest increase since 1966. The recession in 2007 and 2008 has banished inflation for the time being, giving the Federal Reserve leeway to keep interest rates at historic lows to help jump-start economic growth. Some economists worry about the possibility of deflation, a destabilizing period of falling prices.


The number of homeowners who missed at least one payment on their mortgage surged to a record in the first quarter of the year, a sign that the foreclosure crisis could worsen. The Mortgage Bankers Association says more than ten percent of homeowners had missed at least one mortgage payment in the January-March period. That number was up from 9.5 percent in the fourth quarter of last year and 9.1 percent a year earlier. Those numbers are adjusted for seasonal factors. More than 4.6 percent of homeowners were in foreclosure, also a record. But that number was up only slightly from the end of last year.


Construction could begin within days on 20 public housing duplexes in Hurricane Ike-recovering Galveston. Galveston Housing Authority commissioners have awarded a $2.75 million contract to Guaranteed Builders, which constructed the original Oaks development. The Galveston County Daily News reports that the duplexes will be the first of nearly 570 units replacing public housing destroyed when Ike slammed the island on September 13th, 2008. Authority spokesman Justin Herter says construction could begin this month, in a project expected to take six to nine months. The contract was awarded Monday. The housing authority has about $4 million from the U.S. Department of Housing and Urban Development for the Ike rebuilding.


The CEO of Southwest Airlines says the outlook for 2010 is much better than a year ago but could be spoiled by high fuel prices. Gary Kelly said at the company's annual meeting that traffic and revenue trends are improving and May bookings are looking strong. Kelly says fuel prices are the biggest threat facing the low-fare carrier. A shareholder asked Kelly about speculation that Warren Buffett might be interested in the company. Kelly says he hasn't heard anything about interest by Buffett, but it's a public company and people buy and sell the shares all the time.


Federal Reserve officials have a slightly brighter view of the economy than they did at the start of the year. Fed officials say in a new forecast that they think the economy can grow between 3.2 percent and 3.7 percent this year. That's an upward revision from a growth range of 2.8 percent to 3.5 percent in their January forecast. The Fed's latest forecast sees the unemployment rate, now at 9.9 percent, dipping to between 9.1 percent and 9.5 percent by year's end. In the January forecast, the Fed didn't think unemployment would dip below 9.5 percent this year. The Fed prepared the latest forecast for its April meeting.

Federal Reserve officials were divided over when the Fed should start shedding some of its vast portfolio of mortgage securities. Minutes of the Fed's April meeting show Fed officials expressed wide-ranging views about when and how the Fed should go about selling some of the $1.25 trillion of mortgage securities bought during the crisis. Most Fed officials preferred strategies that would "eventually" lead to the sale of mortgage securities to shrink the fed's $2.3 trillion balance sheet. But they differed on the timing and the details. Separately, some officials worried the European debt crisis could shake Wall Street and possibly slow the U.S. recovery.


Senator Christopher Dodd has decided not to seek a compromise on a contentious provision in the Senate's sweeping financial regulation bill. Dodd, the chairman of the Senate Banking Committee, will not seek to delay a requirement in the bill that banks spin off their lucrative business in complex securities known as derivatives. Dodd is floating a proposal that would have put off the requirement for two years. That requirement is in underlying legislation pending in the senate to impose new rules on Wall Street. Dodd spokeswoman Kirstin Brost says that the Senator would not seek a vote on his alternative proposal. Dodd had sought to break an impasse over how to regulate derivatives. But Senator Blanche Lincoln, an Arkansas Democrat who has insisted on the spinoff measure, indicated she would oppose Dodd's effort. And the financial industry promptly signaled it would not support the effort.


Imprisoned Russian tycoon Mikhail Khodorkovsky says he has ended his hunger strike after one day. He declared the hunger strike to draw attention to what he claims are improper court rulings. He said Russia's courts are ignoring a legal change initiated by President Dmitry Medvedev that allows people charged with white-collar crimes to be released on bail. Khodorkovsky issued a statement saying his appeal "has achieved its purpose" and he was ending the strike after Medvedev's spokeswoman said the president had been informed. Khodorkovsky is serving an eight-year sentence for tax evasion and is on trial on charges of embezzling more than $25 billion worth of oil from subsidiaries of Yukos, his former company. Both cases are politically tinged.


Cigarette makers are cutting contracts with tobacco farmers as smoking continues to decline in the United States. University of Kentucky economist Will Snell says his state, the nation's top producer of burley tobacco, could lose a fourth of its contracts this year. Many contracts also have been lost in North Carolina, South Carolina, Tennessee and Virginia. The cutbacks mean farmers who've lost contracts might not be able to pay mortgages, and rural communities could lose jobs and income as farmers have less money to spend. Some top tobacco companies acknowledge cutting contracts, but won't say by how much. An R.J. Reynolds spokesman says they're just doing what any business would do to keep supply in line with demand.


Bio photo of Ed Mayberry

Ed Mayberry

Local Anchor, All Things Considered

Ed Mayberry has worked in radio since 1971, with many of those years spent on the rock 'n' roll disc jockey side of the business...