Airline industry recovering from UK-related terrorist plot against U.S. passenger jets…Statewide average price of gasoline edges up two cents per gallon…New BioHouston facility to provide low-cost lab access for start-up companies…
U.S. Senator John Cornyn says Americans shouldn’t change their travel plans or lifestyles because of the thwarted United Kingdom-related terrorist plot against U.S. passenger jets. Airports across Texas have tightened security in response to word that British authorities foiled a terrorist plot involving commercial planes. Cornyn, during a stop in Austin, said this is not a time for people to withdraw within their doors, not travel–not do the things they would ordinarily do. Cornyn says it’s a time for us to remain vigilant during what he calls “really the challenge of our generation.” Houston Airport director Rick Vacar says this will be nowhere near the same as the disruptions of 9-11.
“Well, 9-11, we actually had the, you know, major fatalities and very spectacular events. This is significantly different from the standpoint that it was thwarted, so I don’t think it will have a very significant effect at all, in terms of travel. Certainly some nervousness for a few days while people settle into this, but after the learning curve, I think it’ll be fine.”
Next month is the fifth anniversary of the terrorist attacks–and U.S. air carriers had been recovering. Houston-based Continental Airlines saw its profit in the April-through June period nearly double from one year earlier. American Airlines parent AMR last month reported its most profitable second quarter in eight years. AMR is based in Fort Worth. Airline analyst Bob Mann with R.W. Mann in New York says the biggest effect might be felt by business travelers.
“The immediate financial impact is perhaps not so severe on the industry. Most of the travel in August is booked long in advance and it’s non-refundable, so it’ll be recaptured. My concern going forward would be if the travel policy that exists in the UK today–which is, in essence, you can board with your passport and your wallet only–if that were to translate into a generally applied policy, I think you’d see business travel, in particular, really pretty adversely affected. And that’s because business travelers really do not react well to the idea of, you know, checking their laptop, checking their Blackberry PDA, whatever–not having use of it in flight is not being productive–but also running the risk of those items could be damaged or lost or stolen, and have very little recourse.”
Southwest Airlines spokesman Ed Stewart concedes that the “hassle factor” was a problem in 2001, but he predicts less disruption this time. He says customers of Dallas-based Southwest called with questions about new security procedures, but there is no evidence yet of travelers changing their plans. Shares in airlines and travel companies rallied today, appearing to confirm analysts’ expectations that the economic impact of the discovery of a terrorist plot aimed at trans-Atlantic flights would be short-lived.
The statewide average price per gallon of gasoline edged up two cents this week–to reach $2.93. AAA Texas today reports problems with an Alaska oil pipeline, violence in the Middle East and the latest threat to airline security added uncertainty to the fuel market. The organization reports Corpus Christi had the lowest average price for self-serve regular, at $2.85 per gallon. Amarillo had the highest average, at $2.93 per gallon. The nationwide average this week for regular self-serve gasoline is $3.03 per gallon–or an increase of three cents.
BP says it will comply with a federal order to conduct rigorous tests of its Alaska oil pipelines to get constant updates on the pipes’ health. But it also indicates a shutdown caused by severe corrosion and leaks may not be as bad as feared. BP thinks it may be able to avoid shutting down its entire Prudhoe Bay oil field while 16 miles of new pipeline are installed. That would keep more than a third of the 400,000-barrel a day supply flowing. Oil continues to flow from the western side. And analysts say the shutdown of the eastern half is unlikely to cause short-term problems for refineries. They typically have 30-to-45-day stockpiles. One analyst says a prolonged shutdown could cause problems if refineries have to seek out crude elsewhere. Federal regulators late Thursday gave BP permission to keep the field’s Western line operating, but ordered it to conduct more rigorous pipeline inspections. BP also must pass a series of tests before restarting pipes it shut down.
ConocoPhillips is freeing itself from liability on crude oil deliveries out of Prudhoe Bay, Alaska. It’s the area where BP is shutting down production due to corrosion in its pipelines. Houston-based ConocoPhillips today declared force majeure. That clause in a contract frees one or both parties from liability when an extraordinary event outside of its control takes place. The net production impacts are estimated to be up to 125,000 barrels per day. Britain’s BP owns about 26 percent of the Prudhoe Bay field and is responsible for operating it for the other partial owners, which are Irving-based Exxon Mobil and ConocoPhillips. BP said it isn’t declaring force majeure on deliveries of oil, because its portion of crude from the field goes primarily to its own refineries in Washington and California.
Anadarko Petroleum has closed on its $16.4 billion buyout of fellow oil and natural gas producer Kerr-McGee. The move came after shareholders for Oklahoma-based Kerr-McGee agreed to the deal. Houston-based Anadarko announced the agreement in June. The deal calls for Kerr-McGee to be combined with Anadarko subsidiary APC Acquisitions–but for Kerr-McGee to be the surviving Corporation under Anadarko.
Electronics retailer RadioShack announced plans to reduce its work force by up to 16 percent. RadioShack says most of the cuts will happen at its Fort Worth headquarters. RadioShack will eliminate from 400 to 450 positions across its support functions at the headquarters, distribution centers and call centers in Tarrant County. Overall that group has about 2,800 employees. RadioShack says the move is meant to reduce overhead expenses and improve the company’s long-term competitive position in the marketplace. Employees will be notified in early September. RadioShack is still working out severance packages. In other cost-cutting measures, RadioShack has closed 480 underperforming stores, consolidated its distribution centers and liquidated slow moving merchandise.
More than 350 life science professionals at BioHouston’s annual meeting were shown close-up details of a new Houston facility that will give start-up companies low-cost lab access for testing potential company-building discoveries. BioHouston CEO Jacqueline Northcutt Waugh says there have been roadblocks for start-up companies.
“Ten years ago, a company could have a scientific discovery and they could go out to a venture capital and raise $3 million. And they’d probably spend most of that $3 million on building a management team, you know, acquiring an office space, building out wet labs and buying all brand-new equipment. And they’d spend about $3 million and they still wouldn’t, you know, they wouldn’t have gotten them as far as their investors wanted before they invest.”
Waugh says most companies burn through start-up money just setting up an infrastructure.
“Now the investors are requiring animal or human data before they invest. So what we’ve gotta do is we’ve gotta figure out a way that these companies can acquire some data–you know, do the work that they need to do, do the experiments that they need to do–to get the data on a very cost-efficient basis. And not spend $3 million to go start up a business, that they can actually spend a few thousand dollars and get in immediately to the wet labs, share wet labs, share equipment, and produce the data that they can then, in turn, take to investors.”
The resource center, within a mile of the Texas Medical Center, will provide access to not only wet lab bench space, but the office space, equipment, high-speed Internet, phones, mail service and other tools needed to open a business. More than a dozen start-ups will be using the BioHouston Resource Center by the end of the year.
Two Illinois towns won’t be scrambling to fund environmental studies and other work to try to win the first near-zero emissions power plant. Illinois will provide another $730,000 to Tuscola and Mattoon–which are finalists for the $1 billion FutureGen project. The money comes on top of a $17 million grant from a clean coal technology fund to be used for incentives to lure the project to Illinois. Two sites in Texas are the other finalists–areas near Jewett and Odessa. FutureGen promises about 1,300 jobs during its construction and another 150 permanent jobs once it’s built. The site is set to be chosen late next year by the FutureGen Alliance, a consortium of coal and power companies that is developing the project with the Energy Department.
Four Texas sites have made the first cut in a bid to be home to a proposed federal lab that would study the nation’s most dangerous disease threats. Three of the Texas sites are in San Antonio. Brooks Development Authority and Brooks City-Base Foundation, the Southwest Foundation for Biomedical Research and the Texas Research and Technology Foundation are among 18 finalists in 11 states. They’re being considered by the Department of Homeland Security for the $450 million national bio- and agro-defense facility. Texas A&M University in College Station also remains in the running, according to the department’s announcement this week. By the end of the year, the department will narrow the list of finalists further, with the final selection expected in early 2008. Initial plans are for 250 full-time lab workers to develop countermeasures against human and animal diseases that could be used as terrorist weapons.
Enron investors seeking to recover $40 billion in losses tied to the energy trader’s collapse won a delay in the trial of their fraud claims against former bankers until April 2007. U.S. district Judge Melinda Harmon postponed the October 16th trial to allow investors time to combine claims against investment firms and lenders, including Merrill Lynch and Toronto-Dominion Bank. The new trial date is April 9th.
Food service company Aramark is being acquired by an investment group led by its longtime chief executive for $6.3 billion, plus the assumption of about $2 billion in debt, in a deal expected to close by early next year. Aramark has contracts with various public facilities here in Houston, and has some 240,000 employees serving clients in 20 countries. Philadelphia-based Aramark, which provides food services, facilities management and uniform apparel to hospitals, schools, stadiums and arenas, will become a private company after the transaction closes.
Houston-based MI SWACO is acquiring Aberdeen, Scotland-based Specialized Petroleum Services Group Limited, which specializes in wellbore clean-up solutions. The operations will be joined under the newly-formed well-bore assurance and productivity business unit.
July’s Purchasing Manager’s Index of 60.4 is the lowest recorded in 2006, furthering a trend of slow decline over the past four months, according to the National Association of Purchasing Management. The PMI is based on a monthly survey of some 80 purchasing executives in oil and gas exploration and production, manufacturing, engineering and construction, chemicals, distribution, business and financial services and healthcare. The report says Houston’s economy continues growing, but at a less fervent rate than earlier in the year, expressed in part by the sales component. The eight components of the PMI also include production, employment, purchases, prices paid and inventory levels.
Business inventories rose at a faster-than-expected pace in June. That was as consumers slowed their spending for a variety of products, including automobiles. The Commerce Department says inventories surged eight-tenths of one percent. Business sales during the month were up a tepid two-tenths. The inventory-to-sales ratio stood at 1.26, which measures the number of months it would take for a firm to sell out its inventory.
Despite the pressure caused by rising gasoline prices, the Commerce Department says retail sales roared back to life last month. The increase of 1.4 percent is much stronger than expected and was broadly based. The best showing in six months came after a June decline. Sales rose at stores selling electronics and appliances, building and garden supplies, health and beauty goods, and furniture. Sales also went up at bars and restaurants. Even auto dealerships saw improvement. Says economist Mark Zandi with Moody’s Economy.com: ”Consumers appear to be hanging tough and are doing their part to ensure that the economic expansion remains intact.”
A new state-funded survey released today says most Hurricane Katrina evacuees still living in Texas don’t have jobs–and nearly half live in households with incomes of less than $500 a month. The survey by the Texas Health and Human Services Commission found that about a quarter of a million Katrina victims still live in Texas. The agency paid about $650,000 for the survey of 6,400 evacuees. Results show that 41 percent of the evacuees living in Texas reported household income of less than $500 a month. Eighty-one percent of evacuees are black, 59 percent are still jobless, and most are low-income, with at least one child at home. Officials say the results will help the commission, the Texas Education Agency and the Texas Workforce Commission better estimate caseloads and the need for expanded budgets as they lay out appropriations requests to the legislature this fall.
Governor Rick Perry says the state should resume a program that provides discounts for poor electricity customers. In a letter to the Texas Public Utility Commission, Perry asks the agency to submit a budget proposal that includes the discount program. The program was created in 1999 as part of an electric deregulation law. It provides rate discounts of ten percent for low-income Texans. The discount is financed by a fee on electric bills–typically about 65 cents per bill. But recent state budgets have redirected the generated funds to other areas of the budget. State Representative Sylvester Turner earlier sent a letter to the governor, lieutenant governor and the Speaker of the House asking for the immediate reinstatement of moneies to the System Benefit Fund. Governor Perry says the state should restart the discount or stop collecting the fees that are meant to fund it. Three of Perry’s opponents in the November election–Democrat Chris Bell and Independents Kinky Friedman and Comptroller Carole Keeton Strayhorn–have also said the discount should be restored.
Two more former ERCOT managers are going to prison over a security scam for products and services not delivered. A judge in Georgetown today sentenced 38-year-old Christopher Uranga and 54-year-old Kenneth Shoquist. Urgana is a former Director of Information Technology Operations and Corporate Security for the Electric Reliability Council of Texas. He was sentenced to seven years in prison for engaging in organized criminal activity and misapplication of fiduciary property. Urgana also must pay just over $500,000 in restitution. Shoquist, who is ERCOT’s former Chief Information Officer, must serve eight years in prison for engaging in organized criminal activity and commercial bribery. Shoquist must repay $120,000. Former In-House Security Manager Carlos Luquis this month was sentenced to 12 years in prison after being convicted on two felony theft and misappropriation charges. Sentencing is pending for two other former employees. Another defendant awaits trial.
A Fort Worth legislator has asked Attorney General Greg Abbott to investigate a poorly performing stock purchase by the Employees Retirement System of Texas. The board purchased 80,000 shares of stock in Kinetic Concepts. The San Antonio medical equipment company was founded by Republican donor James Leininger. The investment is a fraction of the $22 billion trust. A jury last week found Leininger’s company failed to prove that another medical group infringed on its patents. Shares of Kinetic then fell more than 40 percent. Democratic House member Lon Burnam estimate the drop cost the retirement system about $1.5 million. A spokeswoman for the trust disputed the estimate. A Leininger aide says there’s no merit to Burnam’s complaint–and calls it a political attack. Abbott’s office will review Burnam’s letter.
Several ground crew workers in Houston got sick today from fumes while dealing with an item in the cargo hold of a Continental Airlines jet. Authorities say no passengers were affected on the flight that had just arrived at Bush Intercontinental Airport from Fort Myers, Florida. Hazardous materials teams were called to the scene. At least three workers required medical attention–mainly for eye irritation. Officials were looking at whether the fumes were associated with some U.S. Postal Service packages being unloaded.
New estimates released today show Texas cotton producers enduring drought conditions will be lucky if their crop falls 40 percent short of last year’s record. Texas is forecast to produce just 5.2 million bales this year. That’s down from 8.5 million bales harvested last year, according to the U.S. Department of Agriculture. Drought and hot temperatures across the state continue to wreak havoc on all types of agriculture. As much as 58 percent of all Texas crops are in poor to very poor condition, the latter meaning any harvest is unlikely, according to the Texas Cooperative Extension. Though no official drought loss amount is available, experts believe the figure for 2006 alone could reach $3 billion. Drought losses in previous years in Texas, according to the extension: 2002–$316 million, with drought lingering into 2003; 2000–$1.096 billion; 1999–$223 million; 1998–$2.1 billion; and 1996–$2.1 billion.
Texas will lift some trucking rules to allow the emergency delivery of hay to feed livestock as the drought continues. Governor Rick Perry announced he’s directed the Texas Department of Transportation to temporarily waive certain trucking restrictions. Perry says the U.S. Department of Agriculture has estimated a 77 percent loss in hay production in Texas. Tex-Dot is expected to suspend permitting rules and legal height restriction for round hay bales, and associated permit fees, for carriers hauling the livestock feed. The suspension–for those rules only–will run until October 31st. Also, truckers hauling loads exceeding 14 feet high must contact Tex-Dot to get an expedited route. A similar order earlier this year from Perry expired April 30th.
The South Texas Civil Rights Project has sued ORC Industries on behalf of one of the nonprofit’s former employees. The suit filed in Brownsville accuses the company–which makes garments for the federal government–of fraud and labor law violations. The lawsuit filed yesterday on behalf of Cesar Arizmendi alleges the rate he was paid was artificially low, in some cases just $2 an hour. ORC Industries says it doesn’t comment on pending lawsuits, but that it’s strived to carefully follow the laws and regulations that govern employment and operations. The Brownsville Herald reports ORC is allowed to pay some disabled employees less than the federal minimum wage because the majority of its employees are disabled. Disabled workers like Arizmendi are paid by the piece–based on the number of garments they can produce.
The number of rigs actively exploring for oil and natural gas in the United States this week rose by 23 to 1,728. Of the rigs running nationwide, 1,409 were exploring for gas and 315 for oil, Houston-based Baker Hughes reported today. Four were listed as miscellaneous. A year ago, the rig count was 1,429. Baker Hughes has kept track of the count since 1944. The tally peaked at 4,530 in 1981, during the height of the oil boom. Several record lows were set in 1999, bottoming out at 488. Of the major oil- and gas-producing states, Texas gained 19 rigs.