Wednesday PM September 3rd, 2008

Traffic has been heavy today on the roads around the Louisiana coastline, as the cars, campers and SUVs of residents displaced by Hurricane Gustav head back home. While New Orleans won't officially open its doors until midnight, some suburbs are already welcoming residents back. Mayor Ray Nagin says those who do decide to return need to know that many homes are without electricity or working toilets and that a dusk-to-dawn curfew remains in effect. The director of The Governor's Office of Homeland Security said the goal is to have most of the nearly 8,000 evacuees who remain in Texas shelters back home by 6 p.m. Thursday. That includes Texas and Louisiana evacuees from the general population and those with non-medical special needs.


Oil prices have been dropping as concerns about slowing global demand continue to drive the price down. A stronger dollar is also a factor, as is the fact that Hurricane Gustav didn't cause much damage to oil installations in the Gulf of Mexico. The Minerals Management Service says virtually all oil and natural gas production remains shut down in the Gulf. Drillers and producers have been evaluating damage by air and deploying initial crews to their rigs and platforms. Without serious damage, oil and natural gas facilities should start up again in a day or two, and coastal refineries could resume production by the end of the week. MMS says it has reports of about four per cent of oil production being restored so far. Natural gas output stood at about eight per cent. Anadarko Petroleum, which is the largest independent deepwater producer in the Gulf of Mexico, has resumed production at two of its eight operated platforms.

The status of the Louisiana Offshore Oil Port still isn't known. Loop is a critical link in the nation's energy infrastructure, and any prolonged closure could severely disrupt crude imports and their shipment to refineries. Pipelines have been shut down because of lack of power, but emergency generators are being put into place.

Gasoline producers are working with local power providers and using emergency generators to bring up refineries along the Gulf Coast, according to Shell Oil's David Sexton.

image of speaker, click here for audio"We have two current refineries in Louisiana, both at Norco and Convent, Louisiana, that are currently shut down. They are shut down. Norco still has some power available to it. Convent does not have any power, therefore it's completely shut down. The refinery at Port Arthur, Texas, continues to run at reduced rates. We also have one chemical facility at Geismar, Louisiana. It is also currently down."

ConocoPhillips says both of its refineries in Louisiana—one near New Orleans—remain closed.

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Citgo Petroleum has asked the Energy Department for a loan of 250,000 barrels of oil from the Strategic Petroleum Reserve for use at their Lake Charles refinery, according to the Energy Department. President Bush said Monday companies can draw on the reserve in order to prevent disruptions in the nation's fuel supply.

At the pump, AAA says the average price for regular unleaded is down to $3.68 a gallon.


Two days after the storm, there are still thousands of homes in Louisiana without power—77,000 of them in New Orleans. Officials say they have no idea when electricity might be turned back on. Torrential rains and the threat of tornadoes slowed utility company efforts to rebuild broken transmission and distribution systems. Those disruptions have left nearly 1.2 million customers without power. Entergy has 1.2 million customers in Louisiana. It reported almost 743,000 outages in Louisiana alone this morning. It says outages expanded into Arkansas overnight, where 66,000 customers lost power. The Department of Energy reports 1.3 million outages in the three states. Utilities won't say when the bulk of power might be restored, but estimate it may be weeks in some instances. At least 15,000 hard hats from as far away as Massachusetts and Utah either were in Louisiana or were en route. That matches the kind of response seen when Hurricanes Katrina and Rita hit the area three years ago. CenterPoint Energy is providing damage assessment and power restoration with 237 employees and contractors helping Entergy in New Orleans, Cleco Utility Group in Lafayette, and American Electric Power in Longview.


AT&T mobilized nearly 2,000 personnel, including employees from half a dozen states in the southeast, to help restore communications and customer support across Louisiana, Alabama, Mississippi and Texas. The company says its wireless and landline networks continue to perform well. Before the storm's arrival, AT&T added capacity to its wireless network to accommodate an increase in traffic. It pre-staged equipment and personnel to quicken its response.


The last of 4,164 claims against BP for the 2005 Texas City refinery explosion has been dismissed in a Galveston state district court for lack of evidence. However, one plaintiff whose state case was dismissed earlier is appealing the ruling. A federal civil case is pending. And some victims are fighting BP's $50 million federal court plea deal for violation of the Clean Air Act. Three state cases went to trial, but the cases were settled before a verdict.


Halliburton plans to hire 13,000 to 14,000 workers this year to meet rising demand from customers seeking to tap new sources of petroleum. The oil field services provider says about 8,000 hires have already been made. Halliburton CEO Dave Lesar says the plan would about match the hiring pace last year for the Houston- and Dubai-based company. Halliburton employs about 55,000.

A former chief executive of KBR is pleading guilty to federal bribery and kickback charges in connection with the company's work in Nigeria from 1995 to 2004. The Justice Department says Albert "Jack" Stanley entered a guilty plea in federal court in Houston to conspiring in a decade-long scheme to bribe Nigerian government officials in return for engineering and construction contracts. Under his plea agreement, Stanley faces a sentence of seven years and payment of $10.8 million in restitution.


The Environmental Protection Agency says another federal agency may be low-balling the economic benefits of increasing fuel economy standards for cars and trucks. Echoing criticism previously voiced by Democrats and environmentalists, the EPA says the Transportation Department would have been better off using higher estimates for future gasoline prices when it proposed increasing the average fuel economy. The department's plan calls for raising fuel economy to 31.6 miles per gallon by 2015. The proposed fuel economy increase was based in part on estimates that gas would range from $2.04 a gallon to $3.37 a gallon, averaging $2.42 a gallon in 2016.


Brazil's foreign minister says his country is likely to press the World Trade Organization to take action against U.S. tariffs on ethanol imports. Foreign Minister Celso Amorim says Brazil "has a very strong case and there is a good chance" that the nation will urge the WTO to take action against the U.S. The U.S. places a 54 cents-a-gallon tariff on ethanol imported from Brazil, where the fuel is made from sugarcane. American producers mostly use the more costly corn to make the fuel.


GMAC Financial Services says it will close 200 retail offices and lay off about 5,000 employees as part of plan to scale back its mortgage lending and servicing operations due to the downturn in the housing market. GMAC says the layoffs will reduce the work force at its Residential Capital subsidiary by 60 per cent. Some 3,000 employees may receive word of the cutbacks this month. Other cutbacks are expected to take place by the end of the year. The Fort Washington, Pennsylvania-based company also says it will stop making mortgage loans through external, wholesale brokers.

General Motors says it is extending its employee discount offer through the end of the month. GM says it will offer employee pricing to consumers on nearly all 2008 models and most 2009 models through September 30th. The program's two-week run was previously set to expire Tuesday. Employee discounts generally are ten per cent below the invoice price but vary by model. The Detroit automaker says the discount covers all 2008 GM vehicles in stock except medium-duty trucks. It is also discounting several 2009 vehicles, including many Chevrolet models, Silverado pickups and Hummer H2 and H3 sport utility vehicles.

General Motors says August U.S. sales dropped on lower demand for both trucks and cars, but still got a boost from heavy sales incentives. Total sales were down 20 per cent from a year earlier. However, compared to July, GM sales rose 31 per cent.

Ford says its August sales dropped more than 26 per cent as U.S. economic woes and high gas prices continued to batter the auto industry. The company also doesn't expect a sales rebound in the second half of the year. It said Wednesday that it plans to cut 50,000 more vehicles from its production plan in the second half of the year. Ford's sales decline was expected by industry analysts who predicted continued bad times for the U.S. auto industry. Ford said its Ford, Lincoln and Mercury car sales dropped nearly nine per cent, while truck sales were off more than 32 per cent.


The Federal Reserve says the nation is struggling with slow economic growth and still-high prices despite the recent drop in energy costs. The Fed's new snapshot of business conditions underscores the toll the housing, credit and financial debacles are taking on consumers and businesses alike. Given the fragile situation, Fed Chairman Ben Bernanke and his colleagues are all but certain to leave a key interest rate alone at two per cent when they meet next on September 16th, and probably through the rest of this year.


The Commerce Department says factory orders rose more than expected in July. The gain was led by surging demand for commercial aircraft as well as heavy machinery, iron and steel. The 1.3 per cent increase follows the even bigger 2.1 per cent increase in June. It's the fifth straight rise in orders. Manufacturers have seen the sharp slowdown in the U.S. economy offset by strong gains in foreign demand, helped by a weaker dollar making their products more competitive overseas. The July strength was led by a 28 per cent jump in commercial aircraft. Excluding the volatile transportation category, factory orders were up one per cent.


The credit-rating firm Fitch Ratings has analyzed a crop of so-called option adjustable-rate mortgages taken out between 2004 and 2007 and concludes that most of them will recast to higher payments next year or in 2010. That's sooner than homeowners expected. The loans were taken out in the final years of the housing boom and the higher monthly payments will be kicking in sooner than the homeowners had expected. Fitch says that's going to mean another spike in mortgage defaults beginning next year. Also known as pay-option loans, they let borrowers make a lower payment, but the unpaid amount gets tacked on to the principal. And with a price slump, borrowers can end up owing more than the home is worth. Fitch Ratings estimates $29 billion in loans will recast upward by the end of next year and another $67 billion worth the following year.


A state audit report shows most employees at the five agencies of the Texas Health and Human Services Commission don't get required training. The reports says that lapse exposes the commission to a lack of employee productivity and litigation. The commission employs about 50,000 workers and has an annual payroll of about $2.2 billion. Commission spokeswoman Stephanie Goodman said most of the employees had finished the training--but hadn't properly notified their supervisors of completion. The state auditor's office also found that the commission has continued to pay 1,229 terminated employees over the past two years. Those payments amounted to more than $738,000. Goodman says more than half of the overpayments have been recovered and the agency is working to recover the rest.


Oil and gas company Rex Energy says it intends to sell its assets in New Mexico and Texas. The company says it will use the proceeds to fund exploration projects. Most of the assets for sale are in the Permian basin. The company will fund ventures in the Marcellus shale region as well as alkali-surfactant-polymer projects in the Illinois basin.


Twenty-one conventions, trade shows and other events and meetings have been booked by the Greater Houston Convention & Visitors Bureau for October. More tan 104,815 attendees will spend an estimated $102 million in Houston during the month. Conventions include the Instrumentation, Systems and Automation Society's 2008 annual EXPO from October 14th through the 18th at Reliant Park. The Toyota Center hosts Women of Faith's Infinite Grace Conference on October 24th and 25th. And the International Quilt Festival & Market is set for the George R. Brown convention Center from October 125th through November 2nd. More than 50,000 delegates are expected, and the event could bring an estimated $48.7 million to the local economy.


Delta Air Lines' regional subsidiary Comair had the worst on-time performance in July among airlines surveyed by the Transportation Department. But overall, the department says the nation's airlines were on time more often in July than compared to a year ago. It also says customers filed fewer complaints about their baggage. Ranked second-worst in on-time performance in July was JetBlue Airways at 64.6 per cent. United Airlines was third-worst at 68.25 per cent. Fort Worth-based American Airlines was fourth-worst at 69.51 per cent. American had been worst in June. Regional carrier Pinnacle Airlines had the best on-time rate in July compared to a year ago, at 85.6 per cent. Among legacy carriers, Northwest Airlines had the best on-time performance in July at 79.51 per cent--good for seventh best overall. Among discount carriers, Dallas-based Southwest Airlines was best at 83.05 per cent--good for third best overall.


 

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