Tuesday PM October 12th, 2010
by: Ed Mayberry, October 12, 2010 7:10:00 pm
The Obama administration is lifting the six-month moratorium on deep water oil drilling in the Gulf of Mexico that was imposed after the BP oil spill. The administration has been under heavy pressure from the industry and others in the region to lift the ban on grounds it has cost jobs and damaged the economy. A federal report said the moratorium likely caused a temporary loss of 8,000 to 12,000 jobs in the Gulf region. Drilling is unlikely to resume immediately. Officials say drilling companies will have to meet a series of new safety regulations before they can resume operations. Under the new rules, a professional engineer has to independently inspect and certify each stage of the drilling process. The head of the agency that oversees offshore drilling says it will take “at least a couple of weeks” for permits to be approved. Interior Secretary Ken Salazar says companies that “play by the rules and clear the higher bar” can resume operations.
BP says it plans to start deep-cleaning Alabama's beaches next week. Company spokesman Ray Melick says the process will begin as soon as a weekend of concerts and boat races wraps up in Baldwin County. Melick says the company doesn't want to interfere with the tourist season. The process includes moving heavy tractor equipment along the shoreline, where oil could be located and removed from as deep as 24 inches below the surface. A pair of free concerts, by Bon Jovi and Brad Paisley, is planned for this weekend in Gulf shores, along with the powerboat races thunder on the Gulf. Orange Beach Mayor Tony Kennon says he asked BP to start the process after Labor Day in order to ensure that the beaches are clean by January 1st.
The head of Royal Dutch Shell says that his company would never have made the mistakes that led to BP's devastating Gulf of Mexico oil spill. But Shell CEO Peter Voser acknowledges that the industry as a whole is not prepared to deal with a spill of that size. Voser told an oil conference in London that from what he knows today. “Shell clearly would have drilled this well in a different way and would have had more options to prevent the accident from happening.” But Voser adds that there are lessons to be learned from the Deepwater Horizon explosion for the whole industry. Oil industry officials are trying to shift the spotlight from the Gulf spill at the gathering--stressing the growing importance of Iraq for oil supplies.
Governor Rick Perry has given Houston's business community an update on Texas' economy in a speech titled “State of the State,” prompting his Democratic gubernatorial opponent to accuse him of using his government office for political gain. Perry made his speech to the Greater Houston Partnership, repeating his mantra that Texas has weathered the recession better than any other state. Asked about the name of the speech, normally preserved for an official address to the state legislature, Perry brushed it off as semantics. Democrat Bill White's campaign accuses Perry of blurring the lines between politics and government. He says Perry is using groups like the Greater Houston Partnership as a “political stage” ahead of the election.
Public housing issues more than two years after Hurricane Ike will get another look in Galveston. A town hall meeting is set for Wednesday night. Galveston Mayor Joe Jaworski says the spending debate involves $500 million in community development block grant funds for Ike recovery programs. Ike hit Galveston on September 13th, 2008, with a 16-foot storm surge. State officials say Ike was the costliest natural disaster in Texas history. Overall damage topped $29 billion. More than three dozen people were killed. Recovery officials have said that duplexes will be the first of nearly 570 units planned to replace public housing destroyed when Ike made landfall.
You may have heard about major banks freezing foreclosures in certain states. But for millions of homeowners across the country, it's business as usual. Bank of America has halted foreclosures in 50 states to address paperwork problems, but three other banks have done so only in 23 states. Other banks holding millions of mortgages have not suspended any foreclosures. In the other 27 states, judges don't have to review foreclosures. A homeowner must sue the bank for that to happen. Legal experts say that means paperwork mistakes and fraud are even harder to discover. On top of that, banks mean different things when they say they're halting foreclosures. Ally Financial's GMAC mortgage unit, for example, is still initiating foreclosures nationwide.
OPEC has slightly upped its forecast for oil demand in 2010 and 2011, but notes that much of the growth hinges on China's economic growth as the world economy struggles to emerge from its worst recession in decades. The Organization of the Petroleum Exporting Countries—supplier of about 35 percent of the world's oil--projected that oil demand would hit 85.59 million barrels and 86.64 million barrels per day in 2010 and 2011, respectively, increasing in both cases by 80,000 barrels a day. OPEC is scheduled to meet this week, but appears unlikely to change its output quotas. It says a rally in government aid in the first half of 2010 helped oil demand grow and that China accounted for almost half of the world's total oil demand growth.
Governor David Paterson says the global microchip consortium International Sematech will move a subsidiary to upstate New York from Texas, adding 100 more jobs to its existing operations. He says the state will invest $20 million and $80 million will come from the company to relocate International Sematech Manufacturing Initiative to the University at Albany's College of Nanoscale Science and Engineering. ISMI is a subsidiary created in 2003 to help chip makers reduce costs. State officials says it's the final piece in Sematech's relocation from Austin, where it was founded in 1988. The deal to move its headquarters and other operations was announced in 2007. The state approved borrowing $300 million to help fund the relocation and Sematech promised to invest another $300 million.
The state of California says a partnership led by an Irvine-based private equity firm and a Texas real estate firm has the winning bid to buy 11 state properties for $2.3 billion. The Department of General Services selected the partnership called California First on Monday. Ron Diedrich, the department's acting director, says California first's offer will generate more than $1.2 billion for the state's general fund. About $1 billion of the sale will be used to pay off bonds on the buildings. Governor Arnold Schwarzenegger and lawmakers included the sale as part of the state budget last week. The 11 parcels contain 24 separate buildings that the state plans to lease back, including the Ronald Reagan Building in Los Angeles and the San Francisco Civic Center.
The Supreme Court won't stop Utah from enacting a tax that hits only adult-oriented businesses. The high court refused to hear an appeal from Denali, which wanted to overturn a decision by the Utah Supreme Court. That court upheld a 2004 decision by the Utah legislature to enact a ten percent tax on sexually explicit businesses in an effort to pay for sex offender treatment. The tax covered everything a sexually explicitly business sold--admission, t-shirts and hamburgers included. A group of strip clubs challenged the constitutionality of the law, saying it was overly broad and violated their first amendment rights. But the state's Supreme Court upheld the tax.
A new program to pump up the economy through the purchase of government debt dominated Federal Reserve officials' discussions at their September meeting. Minutes of the closed-door deliberations suggest Federal Reserve Chairman Ben Bernanke and his colleagues were closing in on a consensus to launch such a program to rejuvenate the economy and help lower unemployment. Members, however, didn't settle on how big the program should be or exactly how it should be structured.
The Federal Reserve's new vice chairwoman warns that record-low interest rates may give companies an incentive to take excessive risks that could be bad for the economy. Janet Yellen has supported the Fed's policy of ultra-low interest rates to bolster the economy and to help drive down unemployment. Her remarks, which don't change that stance, may be aimed at tempering critics. They worry she'll want to hold rates at record low levels for too long, which could inflate new bubbles in the prices of commodities, bonds or other assets. Yellen, who was sworn in as the Fed's second-highest official last week, makes clear she is aware of the risks. She made her remarks to a meeting of economists in Denver Monday.
Bank and debit card issuer TCF has sued Federal Reserve Chairman Ben Bernanke and the Fed's board of governors, saying regulations limiting the fees a bank can charge retailers for debit card transactions are unconstitutional. The lawsuit filed in federal court in South Dakota says recent banking reforms direct the fed to adopt debit fee regulations based only on the processing costs of authorizing, clearing and settling transactions. Minnesota-based TCF National says those costs amount to a fraction of the total costs required to manage the debit card system. TCF Financial Chairman and CEO William Cooper says the amendment affects one percent of the nation's banks, giving thousands of unaffected banks an unfair advantage.
The government says just one flight stuck on the tarmac for more than three hours in August, as the peak summer travel season wound down. U.S. airlines also were better at getting travelers to their destinations on time. The nation's airlines reported an on-time rate of 81.7 percent in August, better than the month before and a year ago. Airlines didn't cancel more flights to avoid fines for lengthy tarmac delays. Transportation Secretary Ray LaHood says it's a sign the rule limiting the time airplanes can spend on the tarmac is working. August was the fourth month the rule was in effect. Sixty-six flights were delayed for more than three hours in August 2009.
United Airlines has started moving its operations center employees into a new home--the Willis Tower in Chicago, formerly known as the Sears Tower. United on October 1st formally combined with Continental to become the world's largest airline. United currently plans to occupy 12 floors at Willis Tower, three more floors than the company announced in August 2009. After the move to Willis Tower is complete, United expects to employ more than 13,000 people in Chicago. Eventually, Continental's operations center in Houston will close, with those functions moved to Willis Tower. The combined airline will be run from United's current headquarters in Chicago. United Continental Holdings will continue to run the airlines separately while it combines their operations.
Entergy says the Justice Department is conducting a civil investigation of competitive practices of its regulated power units. The New Orleans-based company disclosed the investigation prior to the opening of financial markets. Entergy says the investigation involves Entergy Arkansas, Entergy Gulf States Louisiana, Entergy Louisiana, Entergy Mississippi, Entergy Texas and Entergy New Orleans. The investigation also covers Entergy Services. According to Entergy, the Justice Department investigation involves power procurement, dispatch and transmission system practices, along with utility policies. Entergy says it believes its operations “have satisfied all applicable laws and regulation”--and the company is cooperating with the probe.