Wednesday PM July 14th, 2010
by: Ed Mayberry, July 14, 2010 4:07:00 pm
The Obama administration has asked oil giant BP to stop work on a project meant to choke off the flow of oil spewing from its broken well in the Gulf of Mexico until the company answers questions from government scientists. An administration official, who asked not to be identified because of the sensitivity of the talks with BP, said the government was acting out of "abundance of caution," adding that until BP answers the questions the government is reluctant to move forward. The development was a setback for BP, which seemed be on track to place a temporary cap on the well following nearly three months of failed attempts to stop the spill, which has sullied beaches from Florida to Texas.
BP says it temporarily halted drilling on a relief well meant to permanently plug its Gulf of Mexico oil leak while it prepares to test a temporary cap on the well. Kent Wells, a senior vice president in the company, said at a morning news briefing they were delaying drilling by up to 48 hours on the well that is supposed to reach the broken one underground and plug it with mud and cement. Wells said it was a precaution. It was the latest delay for BP after it postponed testing of a new cap on top of the well by 24 hours late Tuesday. The cap is a stopgap measure designed to keep the oil in the well or funnel it to ships until the relief well is done.
The International Association of Drilling Contractors says it opposes the suspension on deepwater drilling, saying it abrogates lawful offshore leases. The suspension bars all drilling operations using subsea blowout preventers, as well as those using surface BOPs from floating facilities. A June 22nd court ruling lifted the earlier moratorium. The current suspension extends through November 30th.
Regulators are urging banks to make loans to creditworthy people and businesses whose livelihoods have been hurt by the Gulf oil spill. The agencies say: "banks can help customers recover financially and be better positioned to honor their obligations." They add that these efforts can also contribute to the health of local communities. The agencies making the plea include federal regulators, such as the Federal Reserve and the Federal Deposit Insurance Corporation, along with the conference of state bank supervisors.
A government investigation of the deadly explosion on the Deepwater Horizon oil rig is set to resume next week. The Coast Guard and Bureau of Ocean Energy Management, Regulation and Enforcement have scheduled five more days of hearings, from July 19th through July 23rd, at a hotel in the New Orleans suburb of Kenner. A panel of officials from each agency heard six days of testimony in May from rig workers, company executives, government regulators and others. A witness list for next week's hearings wasn't immediately released. The six-member panel is charged with trying to identify the cause of the blast and recommend ways to prevent future rig disasters.
Scientists are reporting early signs that the Gulf of Mexico oil spill is altering the marine food web by killing or tainting some creatures and spurring the growth of others more suited to a fouled environment. Near the spill site, researchers have documented a massive die-off of pyrosomes — cucumber-shaped, gelatinous organisms fed on by endangered sea turtles. Along the coast, droplets of oil are being found inside the shells of young crabs that are a mainstay in the diet of fish, turtles and shorebirds. And at the base of the food web, tiny organisms that consume oil and gas are proliferating. If such impacts continue, the scientists warn of a reshuffling of sea life that could over time cascade through the ecosystem and imperil the region's fishing industry.
The state's Emerging Technology Fund that was created to boost research and startup companies is out of money, at least for now. And the state has stopped taking applications for future awards. The Austin American-Statesman reports that the fund is tapped out. That's even though the governor's office has committed only about half of the $203 million the legislature appropriated for the fund. Governor Rick Perry's office blames slow federal payments for $50 million of the shortfall and a $50 million discrepancy in the appropriations process for the rest. The Emerging Tech Fund, along with the Texas Enterprise Fund, are two state accounts Perry champions as tools for helping to spur business investment and create jobs in the state.
Inventories held by businesses rose for a fifth consecutive month in May but sales dropped for the first time in more than a year. The Commerce Department says inventories edged up 0.1 percent in May. Sales dropped 0.9 percent, the first decline since March 2009 when they fell 2.1 percent. The drop in total business sales was further evidence that the recovery was slowing in the late spring. A separate report says sales at the retail level dropped for a second straight month in June.
Retail sales fell in June for the second straight month, raising new concerns about how much of a slowdown the economy will have to endure in the second half of this year. The Commerce Department says retail spending dropped 0.5 percent in June. That followed an even larger 1.1 percent fall in May. Excluding autos, spending was down a smaller 0.1 percent in June. Much of the weakness last month came from the drop in auto sales and a decline in gasoline prices. Excluding autos and gasoline, sales would have risen a slight 0.1 percent in June after having dropped one percent in May. Still, the lackluster performance of retail sales over the past two months is prompting fears that the fledgling recovery is in danger of stalling out.
Federal Reserve officials have a slightly dimmer view of the economy than they did in April, reflecting worries about how the European debt crisis could affect U.S. growth and job prospects. Fed officials say in an updated economic forecast that they think the economy, as measured by the gross domestic product, will grow between three and 3.5 percent this year. That's a downward revision from a growth range in their April forecast of 3.2 percent to 3.7 percent. The Fed's latest forecast sees the unemployment rate, now at 9.5 percent, possibly staying at that figure or in the best case falling to 9.2 percent. In the April forecast, the Fed had a slightly lower bottom number of 9.1 percent.
A new White House report says last year's $862 billion stimulus law has now "saved or created" between 2.5 million and 3.6 million jobs. That's up from 2.2 million to 2.8 million in the last quarterly report from the White House Council of Economic Advisers. Christina Romer, head of the council, says in Congressional testimony that every $1 from the stimulus bill is matched by $3 in private money. She says the law "appears to be stimulating private investment and job creation at a time when the economy needs it most." President Barack Obama has traveled the country telling voters that as bad as things are, they'd be worse without the stimulus. He acknowledges the message is a tough sell.
President Barack Obama and Senate Democrats are revving up for a series of votes in the coming weeks that they hope will put Republicans on the spot. Those votes include a fresh extension of jobless benefits and a plan to use bailout cash to spur new small business lending. Press Secretary Robert Gibbs says it will show voters whose side Republican lawmakers are on — Wall Street and the wealthy, or American families struggling to get by. For example, by seeking a fresh extension of jobless benefits, Democrats will point out that Republicans have insisted on spending cuts elsewhere while not demanding the same thing for renewing the Bush tax cuts. The administration hopes the votes can also help rally a liberal base that, according to a new flurry of surveys, is less than excited about Obama's leadership.
One of the administration's top legislative priorities now appears to have smooth sailing in the Senate. Democrats have cobbled together the 60 votes they need to overcome a Republican filibuster, setting the stage for Senate approval in the next day or two of a huge overhaul of the nation's financial regulations. Senate Majority Leader Harry Reid says the measure will fix what he called the greed on Wall Street. Most Republicans warn the bill will perpetuate too big to fail. They also believe it will make lending more expensive. Reid made a point of thanking three Republicans who broke with their party to support the measure and give Democrats the votes they needed. Reid hopes for a vote on Thursday.
A government watchdog says airline fees for checked bags and other services are complicating things for consumers trying to find the best deal on airfare. The Government Accountability Office recommended in a report that the government improve the disclosure of airlines, not only by airlines, but also by travel booking services. Besides checked bags, airlines have recently been charging for services that were traditionally included in the price of a ticket, such as seat selection, extra leg room, blankets, pillows, beverages and meals. GAO said that if the 7.5 percent tax on airline tickets was applied to fees as well, the government could have raised $186 million last year just from checked bags.
British Airways, Fort Worth-based American Airlines and Iberia have won European Union regulatory approval for plans to share more of their lucrative trans-Atlantic routes. The companies say that will help them cut costs. The three airlines made a legally binding promise to the European Commission that will see them give up valuable take-off and landing slots at London Heathrow. That should allow rivals to start new routes between London and New York, Boston, Dallas-Fort Worth and Miami. European regulators says this offer eliminates antitrust worries that the new deal would allow the three companies control lucrative trans-Atlantic routes and hike prices.
Applications for home loans dipped last week even though consumers were able to refinance at the lowest rates in decades. The Mortgage Bankers Association says overall applications decreased nearly three percent from a week earlier. That incorporates an adjustment for the Independence Day holiday. Applications to refinance home loans were down 2.9 percent. Applications taken out to purchase homes fell 3.1 percent, the lowest level since December 1996. The average rate for a 30-year fixed loan sank to 4.57 percent last week, according to Freddie Mac. That was the lowest since the mortgage company began keeping records in 1971.
A leading natural gas driller says it will disclose the precise chemicals it injects into a lucrative Appalachian reserve. Range Resources wants to allay concerns over water contamination and defuse growing controversy about the industry's secrecy over the chemicals. Officials at the Fort Worth-based company said they would post the information on the company's Website and send it to regulators in Pennsylvania, where range has permits to drill hundreds of wells into the Marcellus shale formation. The chemicals are mixed with water and sand and forced deep into the earth to break up shale and release natural gas. Range says the amount of the chemical mix that federal regulators consider hazardous in a concentrated form is 0.04 percent of the total.
A new breed of renewable technology is displacing the iconic windmills that have pumped well water on American rangeland for more than a century. An increasing number of western ranchers are pulling down their old windmills and converting to solar-powered systems to pump well water for livestock in areas without surface water. Solar-powered pumps have been available for more than 20 years, but some agriculture officials and ranchers say the increasing efficiency and durability of solar systems have now made them a primary option for new wells. Windmills are unlikely to disappear from the landscape. Many ranches that have relied on windmills for generations have the know-how and equipment to keep their windmills operating.
All 16 private insurance companies that participate in a federal crop insurance program have signed off on a plan designed to cut their subsidies by $6 billion over the next ten years. The U.S. Department of Agriculture announced the agreements. The USDA's Risk Management Agency had sought the reductions because it contended the crop insurance companies were making excessive profits. Industry groups had resisted the cuts, saying the companies needed to maintain high reserves in case of widespread crop disasters, but they ultimately accepted the deal. The agency says $4 billion of the savings will go toward reducing the federal deficit, while $2 billion will support risk management and conservation programs for farmers. Farmers' premiums won't change.