Wednesday PM December 15th, 2010
by: Ed Mayberry, December 15, 2010 9:12:00 pm
The Justice Department has sued BP Exploration and Production and eight other companies in the Gulf oil spill disaster in an effort to recover billions of dollars from the largest offshore oil spill in U.S. history. The Obama administration's lawsuit asks that the companies be held liable without limitation for all removal costs and damages caused by the oil spill, including damages to natural resources. The lawsuit also seeks civil penalties under the Clean Water Act. An explosion that killed 11 workers at BP's Macondo well last April led to oil spewing from the company's undersea well—more than 200 million gallons in all, by the government's estimate. BP disputes the figure.
A bill moving toward approval in the Senate would increase by 60 days the amount of time the Interior Department has to conduct environmental and safety reviews of offshore drilling projects. The bill would extend the review period for offshore exploration plans from 30 days to 90 days. The Obama administration has said an extension is necessary to ensure projects are adequately reviewed. The agency responsible for offshore drilling was widely criticized after the Gulf oil spill for rushing through BP's permit for a deepwater well without sufficient environmental review. Senators Mary Landrieu, a Louisiana Democrat, and Lisa Murkowski, an Alaska Republican, oppose the extension, saying it would unnecessarily delay job-producing offshore energy projects.
President Barack Obama says he wants the House to approve the Senate-passed tax package without changes. The president called on the House to act “as soon as possible.” Obama made his remarks shortly after the Senate voted 81-19 in favor of an agreement that Obama struck with Senate Republican leader Mitch McConnell. House Democrats have denounced the deal because it would extend Bush-era tax cuts for two years to all taxpayers, including the wealthy. Many Democrats especially oppose new tax rates for the heirs of wealthy estates. Obama's remarks were the first time the White House has specifically insisted that the House leave the Senate bill intact.
President Obama says he and business leaders share a mission of building a stronger economy, and he is seeking their ideas to “seize the promise of this moment.” The president spoke just ahead of his meeting with more than 20 CEOs at Blair House, across Pennsylvania Avenue from the White House. The session is part of renewed outreach by the president to the corporate community, with whom he has had a difficult relationship. Obama said he wants to prod businesses to invest their cash and review ways to reform the U.S. tax system, among other topics. The president also took the opportunity to plug for a tax deal pending in Congress. He said he was convinced it would create jobs, even as it will again to the U.S. budget deficit.
The Dynegy board of directors has accepted billionaire investor Carl Icahn's bid to buy the company for $5.50 per share. Dynegy says it accepted an offer from Icahn Partners that valued the company at $665 million. Dynegy also holds $3.95 billion in debt. Icahn partners owns 9.9 percent of Dynegy, and the deal will go through if it is able to buy at least 50 percent of the company's stock. The firm will start a tender offer for Dynegy stock by December 22nd. An affiliate of the Blackstone Group agreed to buy Dynegy in August for $4.50 per share. It later raised its bid to $5. Dynegy management supported the deal, but shareholders rejected it. Icahn has agreed to step aside if a superior bid is made. Dynegy has set a deadline of January 24th for other bids.
People in Houston will pay more for almost 150 municipal services as the city deals with a nearly $30 million budget shortfall. The Houston City Council approved the higher fees, which are expected to generate about $6.5 million in additional revenue during the current fiscal year. Fees are going up for a range of services, including fire alarm renewal permits, parking meters, swimming pool inspections and permits for operating a taxi. The Houston Chronicle reports the average fee increase is about 25 percent. Some fees have not gone up since 1981. Mayor Annise Parker told council members that all Houstonians should not have to subsidize the costs for select permits, fees and services that are used by only a select few.
The Houston City Council has unanimously approved a ten-year tax abatement agreement with Emerson Process Management. Emerson is consolidating several facilities around Houston, and in Connecticut and Missouri. It expects to retain 210 jobs, transfer at least 144 jobs from its Fort Bend locations and create an additional 96 jobs. Emerson is purchasing a vacant facility in the Westchase business district for $15.3 million, investing an additional $13.8 million on improvements.
The Federal Transit Authority has notified Congress of its intent to grant Houston METRO $50 million for project development work on the North and Southeast light rail lines. The new METRO says it has been working more closely with the FTA since last September, when the FTA concluded that the prior administration had not followed appropriate procurement policies and procedures in entering into a contract to buy 103 rail vehicles.
The Port of Houston Authority commissioners postponed approval of the 2011 budget for more review. The port’s staff predicts the agency will bring in $206.2 million in revenue next year. That’s four percent more than in 2010.
A research firm is raising its holiday spending forecast for the second time in a matter of weeks as more data shows a bigger-than-expected surge in buying in November. That early surge is likely to offset a disappointing start to December. Shoppertrak says it now expects holiday sales to rise four percent over last year, up from a previous projection of 3.2 percent made in mid-November. The original estimate was for a 2.9 percent increase. Shoppertrak says November's revenue rose 5.8 percent compared with a year ago as stores successfully pulled in shoppers with discounts. Shoppertrak had expected 3.7 percent. However, it seems that and a Midwest snowstorm left shoppers with a bit of a hangover. Sales for the week ended Saturday fell 0.4 percent compared with last year.
Inflation remained tame as consumer prices barely increased last month. The Labor Department says the consumer price index rose 0.1 percent in November, less than the previous month's rise of 0.2 percent. In the past year, prices have moved up 1.2 percent. Outside volatile food and energy prices, core consumer prices rose 0.1 percent, the first increase in four months.
U.S. factory output grew for the fifth straight month, adding to evidence that manufacturing remains an engine of economic growth. The Federal Reserve says output by the nation's factories, utilities and mines increased 0.4 percent in November, after falling 0.2 percent in October. Factories produced 0.3 percent more goods for consumers and businesses, after boosting output by the same amount a month earlier. The strongest factory gains came from big-ticket items expected to last for several years. Output by auto factories fell unexpectedly. Production by utilities rose 1.9 percent last month, while mines produced 0.1 percent less. Manufacturing has been a bright spot through most of the recovery. November's report confirms that the sector remains strong.
Builders are feeling pessimistic over the housing market's prospects in the near future. The National Association of Home Builders, a private trade association, says its reading of builder sentiment remained unchanged in December at 16. Readings below 50 indicate negative sentiment about the market. The last time the index was above 50 was in April 2006. The report reflects a survey of 416 residential developers nationwide. The reading for current sales conditions was unchanged at 16. The index measuring foot traffic from prospective buyers slipped one point to 11, while the index for sales expectations over the next six months held steady at 25.
Applications for mortgages fell last week as higher mortgage rates chased borrowers away. The Mortgage Bankers Association says overall applications for loans declined 2.3 percent from the previous week. Refinance applications slipped 0.7 percent, while purchase applications dropped five percent from the previous week. Rates on both 30-year and 15-year mortgages increased to the highest levels in at least six months. Mortgage rates have risen in the last five weeks as investors took money out of Treasurys. The sell-off has been fueled by the White House's recent tax-cut proposal. That has increased their yields, which mortgage rates tend to track. Before that, mortgage rates had been at or near their lowest levels in decades since spring.
Some Texas homeowners will be paying more for coverage in 2011. Allstate Insurance has notified the Texas Department of Insurance that it will increase homeowner rates statewide by at least 5.4 percent. The rate hikes by Allstate take effect January 20th. The Texas Department of Insurance says that the agency will review the Allstate rate filings to make sure they are justified. The company cited rising costs, including coverage for homeowners along the Texas Coast where hurricanes and other storms threaten the region. Allstate's planned rate hike will mean the average consumer paying about $64 more annually.
The Internal Revenue Service is making it riskier to cheat on your taxes. The tax agency increased the number of returns it audited by nearly 11 percent this year. Statistics show that wealthy taxpayers were most likely to be targeted. In all, the IRS examined more than 1.58 million individual returns in the budget year that ended in September, up from 1.43 million the year before. The IRS collected $57.6 billion through enforcement actions, an 18 percent increase from the previous year. Overall, a little more than one percent of returns were audited, either by mail or in person. More than eight percent of the returns with incomes above $1 million were audited.
A federal aviation panel is making recommendations on how to fix some of the thorniest problems confronting the airline industry, including a call for government financial aid in equipping planes for a new air traffic control system. A list of tentative recommendations provided by the Department of Transportation also includes several items on the airline industry's wish list, including rethinking the way the industry is taxed. One politically sensitive proposal calls for the department to re-examine subsidies for commercial air service to small communities. Another could lead to a requirement that young children be secured in child seats when flying.
Southwest Airlines will order 20 new, larger versions of the Boeing 737 that could pave the way for the all-domestic airline to offer international flights. CEO Gary Kelly says that Southwest will change an existing order with Boeing to get new 737-800 jets beginning in early 2012. The airline plans to add international service when it completes the purchase of Airtran Airways, which flies to Mexico and the Caribbean. Kelly says the new plane could be used to fly to Hawaii, Alaska, Canada, Mexico and the Caribbean. The new jets have 175 seats, 38 more than the largest planes in Southwest's current fleet, which means potentially more revenue per flight. Kelly said Southwest would retire older planes as it gets the new ones, and doesn't plan to expand its fleet. The airline did not disclose financial terms of the switch, but the bigger plane is more costly. Boeing lists the average price of a 737-800 at $80.8 million, compared to $67.9 million for the 737-700. However, aircraft manufacturers routinely give discounts to good customers. Southwest operates a fleet of more than 400 planes, all various models of the one-aisle 737. It's a short- to medium-range jet that Boeing began producing in the late 1960s and has updated many times since. For years, the reliance on one type of plane was seen as strength at Southwest because it kept things simple. It was cheaper to train pilots and mechanics to work on just one type of plane. Southwest's union pilots and flight attendants approved purchasing the larger plane. It could mean more jobs because an extra cabin attendant will be required on flights using the 737-800. Southwest, based in Dallas, carries more U.S. passengers than any other airline, although it ranks behind the combined United and Continental, as well as Delta and American in traffic. The other carriers all operate international flights.
AAA said that holiday travel is expected to rise 3.1 percent during the Christmas-to-New Year's period. AAA says more than 92 million people are expected to travel 50 miles or more from home during that stretch. Travel spending is expected to rise 3.5 percent above last year. Most travelers will drive to their destinations. AAA projects that almost 2.8 million people will travel by air, which is up by 2.8 percent from the same period last year. AAA's forecast is based on economic forecasts and research by the firm global insight.
Houston Endowment has awarded $5 million to the University of Houston for increasing the number of doctoral students it graduates annually. The grant money will help doctoral programs in chemical engineering, electrical and computer engineering, civil engineering, economics, psychology, creative writing, biology and biochemistry, chemistry, Earth and atmospheric science, pharmaceutics, health and human performance and biomedical engineering.
Chase customers who don't earn a lot or rely on government benefits may soon have to pay a monthly fee on their checking accounts. The bank started notifying customers this month that direct deposits will have to be at least $500 to qualify for a waiver on the $6 monthly fee. The change, which goes into effect starting February 8th, applies to basic checking accounts. Chase said the $500 monthly requirement is for a single direct deposit; multiple direct deposits that add up to $500 will not qualify for the waiver. The monthly fee can still also be avoided if customers make five or more debit card purchases in a statement period.
Chrysler is recalling more than 367,000 minivans to address potential accidental air bag deployments. Volkswagen is recalling more than 228,000 vehicles to address potential fuel leaks. Chrysler says its recall affects 2008 model year Chrysler Town and Country and Dodge Grand Caravan minivans. The automaker says water could leak near the heating and air conditioner drain. That could cause the air bag warning light to go off and deploy the air bag by accident. Volkswagen says its recall affects 2007-2009 model year Golf, Jetta, Jetta Sportwagen, Rabbit and 2006-2010 new Beetle small cars. VW says a small plastic tab in the windshield wiper fluid reservoir could rub against a fuel supply line under the hood. A fuel leak could develop and lead to fires.
Ford is expanding a recall of its Windstar minivans over concerns that their rear axles can corrode and break. The automaker says it is adding 37,000 minivans to the recall, which was announced in August. The addition brings the total number of Windstars covered to 612,000 in the U.S. and Canada. The original recall included vans sold in the 1998 to 2003 model years in 21 U.S. states and Canada where heavy road salt can cause the axles to rust. The expansion includes 2003 model year vans with heat-treated axles and vans registered in Utah. Ford spokesman Wes Sherwood says the automaker has found that vans in Utah or with heat-treated axles can also develop cracks.
The government is outlawing drop-side cribs after the deaths of more than 30 infants and toddlers in the past decade. The Consumer Product Safety Commission has voted unanimously to ban the manufacture, sale and re-sale of the cribs, which have a side rail that moves up and down, allowing parents to more easily lift their child from the crib. Around for decades, drop-side cribs have come under scrutiny in recent years because of malfunctioning hardware, sometimes cheaper plastics, or assembly problems that can lead to the drop-side rail partially detaching from the crib. When that happens, it can create a dangerous “V”-like gap between the mattress and side rail where a baby can get caught and suffocate or strangle.
Drought conditions in Texas are back, and they weren't gone long. The U.S. drought monitor map for this week shows that about 85 percent of the state is abnormally dry or worse. Pastures are brown and fields planted with grains to feed cattle aren't coming up. About four percent is in extreme drought, the second-driest designation on the map. Dry conditions are expected to worsen in the next six weeks and persist through at least February, weather officials said. The wildfire threat could be high in the spring. The culprit is La Nina, a weather pattern that typically means less than normal rainfall and above normal temperatures. In February, officials declared the end of a devastating drought that began in September 2007; agriculture losses reach an estimated $3.6 billion.