Thursday PM October 21st, 2010
by: Ed Mayberry, October 21, 2010 10:10:00 pm
A federal judge has ruled that the Interior Department improperly issued new safety rules after it imposed a moratorium on deep water drilling in the aftermath of the Gulf oil spill. Tuesday's ruling by U.S. District Judge Martin Feldman says the rules imposed in a June 8th notice to offshore operators can't be enforced because the government issued them without soliciting public comment. Last month, the Interior Department announced it was replacing the June 8th safety rules with new guidelines. Feldman struck down the Interior Department's first moratorium on deep water drilling in June, but he hasn't decided whether officials were justified in imposing a second moratorium on July 12th. The Obama administration lifted the second ban earlier this month.
Chevron may be one of the first companies to ask permission to drill new wells in the Gulf of Mexico since the moratorium was lifted. The San Ramon, California, oil giant plans to file an application for drilling permits in the next several days for various deepwater projects in the Gulf. The government says it hasn't received any new applications for drilling permits since the Interior Department lifted the ban earlier this month. A Chevron spokesman didn't specify which projects would be included in the application. But the company said it will devote $7.5 billion toward two new fields in about 7,000 feet of water off the Louisiana coast. Projects at those depths were halted for several months following an explosion on a BP operation that killed 11 people and led to the largest offshore oil spill in U.S. history.
Fewer people applied for unemployment benefits last week, but the drop wasn't enough to reverse a big increase the previous week. The Labor Department says initial claims for unemployment benefits fell by 23,000 to a seasonally adjusted 452,000. The decline comes after the department substantially revised the previous week's figure to show a rise of 26,000. That was double the increase initially reported. The revision occurred after several states that had estimated their totals from two weeks ago subsequently found that claims were higher than estimated. As a result, even with last week's drop, claims are slightly higher than earlier this month.
A private research group says its gauge of future economic activity rose modestly in September, suggesting the economy will grow slowly into next year. The Conference Board says its index of leading economic indicators increased 0.3 percent last month. It edged up 0.1 percent in August, slower than the initial 0.3 percent estimate. The index had grown steeply since April 2009 on the strength of the stock market, record-low interest rates and a rebound in manufacturing. But the rate of expansion tapered off this summer as U.S. economic growth slowed. The sluggish economy is bolstering the Federal Reserve's case for to buy Treasury bonds to boost the economy. Investors expect fed policymakers will approve that program at their November 2nd-3rd meeting.
The federal regulator for mortgage buyers Fannie Mae and Freddie Mac says rescuing the two companies could cost as much as $363 billion over the next three years, more than double the current total. The federal housing finance agency projects the two companies could end up costing taxpayers $221 billion to $363 billion through 2013. Fannie and Freddie have already received $148 billion from the government. They have been operating under federal control for more than two years after nearly collapsing because of the housing bust. It's the first time the agency has released a public estimate of the taxpayer tab. The combined bailout of the two companies is on track to be the largest of the financial crisis.
Rates on 30-year fixed mortgages rose slightly from their lowest level in decades, inching up to a national average of 4.21 percent. Mortgage buyer Freddie Mac says the average rate for 30-year fixed loans was up from 4.19 percent the previous week. That was the lowest level on records dating back to 1971. The average rate on 15-year fixed loans rose to 3.64 percent. That was up from 3.62 percent a weak earlier, the lowest weekly average on records dating back to 1991. Rates have been falling since April. The latest declines are largely because investors have been buying up Treasury bonds in anticipation of the Federal Reserve's likely move to buy Treasurys to stimulate the economy. That demand lowers Treasury yields, which mortgage rates tend to track.
Texas health officials have closed a San Antonio food processing plant and ordered a recall of all products shipped since January amid concerns over possible contamination. The order from the Department of State Health Services affects Sangar Produce & Processing. Sangar President Kenneth Sanquist, Jr., declined comment, referring questions to the company's attorney. A message left with the Uresti law firm was not immediately returned. Sanquist earlier defended the safety of the company's produce. The agency says lab tests on chopped celery found listeria monocytogenes, which can cause severe illness. DSHS is investigating ten listeriosis cases, including five deaths. Six cases were linked to celery from the Sangar plant, affecting consumers in Bexar, Travis and Hidalgo Counties.
Toyota says it is recalling 1.53 million Lexus, Avalon and other models, mostly in the U.S. and Japan, for brake fluid and fuel pump problems. Toyota said it will recall about 740,000 cars in the U.S. and 599,000 in Japan. The world's biggest automaker has recalled more than ten million cars and trucks worldwide over the last year for a variety of problems, including sticky gas pedals.
Defense contractor BAE Systems says it expects the British government's military spending cuts to have a modest impact on earnings. BAE said the cuts--including the early retirement of the Harrier aircraft fleet--are expected to knock a penny off underlying earnings per share, which last year were 40.7 pence per share. BAE said, however, that the U.S. defense market continues to generate a number of business opportunities. BAE Systems builds military vehicles at its factor in Sealy.
United Continental Holdings says its two airlines both posted profits in their last quarters as independent airlines. United Airlines had a profit of $387 million. A year earlier it lost $57 million. Continental Airlines turned a profit of $354 million. A year earlier it lost $18 million. The Chicago-based company runs United and Continental Airlines. Those two were separate companies until October 1st, the day after the quarter ended. Eventually they will be combined into a single airline called United. The company will report combined results for the two airlines starting next quarter. The airline business has been benefiting from a resurgence of travel demand, and higher fares.
Southwest Airlines is making money as more people travel on the nation's largest discount airline. Southwest earned $205 million in the late-summer third quarter compared with a loss of $16 million in the same quarter last year. Traffic rose about five percent, which along with higher average fares pushed revenue up about 20 percent. CEO Gary Kelly says the outlook for October is excellent too. Dallas-based Southwest joins United, Continental, Delta, American, US Airways and JetBlue in posting third-quarter profits as the airlines benefit from higher fares and growing travel demand coming out of the recession.
A computer glitch last night delayed some Continental flights from Bush Intercontinental Airport. The hour-long was corrected by about 9 p.m., affecting about 40 departing flights, as we as other Continental flights across the nation.
American Airlines and sister carrier American Eagle next year will add flights to Shanghai, China, and nine U.S. destinations from Los Angeles. Parent company Fort Worth-based AMR says it will add 33 round trips at Los Angeles International Airport beginning April 5th. By spring 2011, American and American Eagle will offer 153 daily departures at LAX--a 28 percent increase from today's schedule. The new U.S. destinations are: Albuquerque, New Mexico; Boise, Idaho; El Paso; Houston; Oklahoma City; Phoenix; Salt Lake City; Sacramento, California; and Tucson, Arizona. American also is adding more daily flights between LAX and Dallas, Miami, Chicago, Las Vegas and Orlando, Florida. American Eagle is expanding its terminal at LAX to add four more gates at a cost of about $20 million. Construction is expected to be completed by the end of 2011, giving American Eagle ten gates at LAX. The company said that the Los Angeles expansion is part of its “cornerstone” network strategy that focuses more flying to and from the markets of Chicago, Dallas-Fort Worth, Los Angeles, Miami and New York.