Thursday PM May 27th, 2010

The Coast Guard says BP is having some success slowing the Gulf of Mexico oil leak by injecting mud but the fix isn't done yet. Coast Guard Lieutenant Commander Tony Russell says reports that Admiral Thad Allen, who is overseeing the operation, had called the procedure a success were incorrect. He said Allen said that the flow of mud was stopping some of the oil and gas but had a ways to go before it proved successful. BP spokesman Tom Mueller says the effort that started Wednesday to plug the blown-out with mud, called a top kill, was continuing.

Marine scientists have discovered a massive new plume of what they believe to be oil deep beneath the Gulf of Mexico, stretching 22 miles from the leaking wellhead northeast toward Mobile Bay, Alabama. The discovery by researchers on the University of South Florida College of Marine Science's Weatherbird II vessel is the second significant undersea plume recorded since the Deepwater Horizon exploded on April 20th. David Hollander, Associate Professor of Chemical Oceanography at the school, says the thick plume was detected just beneath the surface down to about 3,300 feet. He says it's more than six miles wide. Scientists say they are worried the undersea plumes may be from chemical dispersants used to break up the oil a mile under the surface.

Scientists say the spill has now leaked far more oil than the Exxon Valdez disaster--maybe even three-and-a-half times as much. That makes the Gulf spill by far the worst in U.S. history. U.S. Geological Survey Director Dr. Marcia McNutt says that a government task force estimates that anywhere from 500,000 gallons to a million gallons a day has been leaking. BP and the Coast Guard had put the flow at about 210,000 gallons per day. The new government estimate means at least 19 million gallons and maybe as much as 39 million gallons have leaked in the five weeks since an oil rig exploded and sank. Exxon Valdez spilled about 11 million gallons. BP is trying to plug the leak and says it has siphoned off about 924,000 gallons.

Interior Secretary Ken Salazar says the head of the troubled agency that oversees offshore drilling has resigned. Salazar announced the news at a Congressional hearing where Minerals Management Service Director Elizabeth Birnbaum was scheduled to testify. She did not appear. Birnbaum and her agency have endured scathing criticism in the weeks since the Gulf oil spill over alleged lax oversight of drilling and what President Obama has called an overly cozy relationship with industry. Salazar said that Birnbaum resigned on her own terms and of her own volition.

President Barack Obama says he was wrong to believe oil companies were prepared to deal with a worst-case offshore spill. Obama said at a news conference that he wants to explore ways the federal government could develop a team to directly respond to oil spills and not have to rely on oil companies. He says federal regulators under his watch should have shown a "greater sense of urgency" about tightening oversight of oil and gas. The government has come under growing criticism for a perception it's deferring to BP--something Obama strongly denies. He decried what he called a "scandalously close relationship" between regulators and oil companies and said that must be stopped. Obama says the federal government needs to look at getting the technology that would allow it to work at the bottom of the sea to plug oil leaks like the Gulf of Mexico spill. The president says right now only BP and other oil companies have that Technology--and that's why the White House has to rely on BP to try to fix the disaster. Some proposed drilling lease sales off the coasts of Alaska and Virginia and the Gulf Coast will be delayed or canceled.

An environmental group is asking a federal appellate court to halt 49 offshore drilling plans in the Gulf of Mexico that were approved without full environmental review. The Center for Biological Diversity's lawsuit names Interior Secretary Ken Salazar and the Minerals Management Service, which oversees offshore oil and gas drilling leases. It challenges exploration and drilling plans approved within the past 60 days that were exempted from full environmental analyses required under the National Environmental Policy Act. BP received a similar exemption before a blowout on its Deepwater Horizon platform last month killed 11 workers and triggered a massive spill. The lawsuit was filed in the Fifth Circuit Court of Appeals in New Orleans.

Coast Guard Admiral Thad Allen has approved portions of Louisiana's $350 million plan to try to protect its coastline from the Gulf of Mexico oil spill with a wall of sand. Allen announced that about half of the proposed 86-mile network of sand berms could move forward. He said other sections would not help keep the oil out and could have interfered with cleanup. Louisiana Governor Bobby Jindal was at East Grand Terre Island, a barrier island west of the mouth of the Mississippi River, when the Coast Guard sent out a news release on the berm proposal. Jindal said he had not been contacted by the Coast Guard or the Army Corps of Engineers and did not know which sections of berm were approved.

Seven workers helping to clean up the Gulf oil spill remain hospitalized after they reported dizziness, headaches and nausea while working on boats off the Louisiana coast. West Jefferson Medical Center spokeswoman Taslin Alfonso says that doctors believe the likely cause is chemical irritation and dehydration from long hours working in the heat. Alfonso said the workers told doctors they believe chemicals used to break up the oil made them sick. Authorities say the workers became ill Wednesday while cleaning up oil in Breton Sound, southeast of New Orleans. Officials ordered all 125 commercial boats working the cleanup there to leave the area. It was not clear whether boats have returned.

Some groups focused on protecting wetlands will try to come up with ways to avoid future disastrous Gulf of Mexico oil spills and offer the suggestions to Congress. America's Wetland Foundation and its offshoot, America's Energy Coast, were formed to deal with issues threatening Texas, Louisiana, Mississippi and Alabama. Then the April 20th Gulf of Mexico disaster happened, leaving 11 workers dead after a BP rig blew out. Foundation Chairman R. King Milling on Wednesday asked participants, at a meeting in Galveston, to work together in coming months to develop proposals to help deal with future disasters. Jim Quackenbos of Cajun Maritime says he is concerned that federal reaction to the current spill will damage the oil industry.


The CEOs of United and Continental Airlines are telling Congress their merger will be good for consumers, airline employees and the small communities that rely on them for service. United's Glenn Tilton told the Senate Judiciary Committee that the new airline will improve its profitability through efficiencies, not higher fares. Senator John Cornyn of Texas says he's worried about three things:

"The 3,000 Texans who work for Continental in Houston are in jeopardy of losing their jobs. Second, the merger will have an impact on competition, especially with regard to routes to and from Houston. But my information is that the new United will be the only airline flying non-stop from Houston's Bush Intercontinental Airport to Washington, D.C., Los Angeles and San Francisco. On each of these routes, the merger eliminates a competitor and leaves Houston-based travelers with fewer choices." Continental's Jeffery Smisek pledged that the nearly 150 small communities and metro areas served by the carriers won't lose service. Other witnesses said the merger will likely diminish competition. Similar concerns about competition were raised by the 2008 merger of Delta Air Lines and Northwest Airlines, but the Bush administration's Justice Department quickly approved the deal.

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Governor Rick Perry met with the Governor Rodrigo Medina of Nuevo Leon in Austin to discuss security and economic competitiveness. Governor Perry says Texas has a shared interest with Mexico to protect communities and strengthen economies. Texas shares a border of 1,200 miles with Mexico, and is Mexico is the state's largest trading partner. More than $56 billion in Texas products were exported last year, and more than $115 billion in Mexican goods imported. Texas is the top exporting state in the U.S., and sends 34 percent of its exports to Mexico.


The number of newly laid off workers filings claims for unemployment benefits dropped last week but the level still remained higher than expected, indicating only modest improvements in the job market. Applications for unemployment benefits fell by 14,000 to 460,000 last week. Economists had expected the level would fall further to 455,000. The decline came after claims had risen by a revised 28,000 in the previous week, the largest gain in three months. The latest level of claims is slightly higher than it was at the start of the year, underscoring that the nation's workers are still facing tough times even though the overall economy is growing again after enduring the worst recession since the 1930s.


The economic rebound last quarter turned out to be slower than first thought, one of the reasons unemployment is likely to stay stubbornly high this year. The government says the economy grew at a three percent annual rate from January to March as consumers and businesses spent slightly less. That was weaker than an initial estimate of 3.2 percent growth. The new reading, based on more complete information, also fell short of economists' forecast for stronger growth of 3.4 percent. The economy grew at a 5.6 percent in the final quarter of last year.


Mortgage rates have fallen to the lowest level of the year as European turmoil caused investors to pour money into the safe haven of U.S. government securities. Mortgage company Freddie Mac says the average rate on a 30-year fixed rate mortgage dipped to 4.78 percent this week from 4.84 percent a week earlier. It was the lowest level since early December, when rates fell to a record-low of 4.71 percent. Persistent economic worries in Europe have sent yields for ten-year and 30-year Treasury bonds to their lowest levels of 2010. Rates on 30-year home loans often rise and fall in line with the ten-year note.


Banks borrowed less from the Federal Reserve's emergency lending program over the past week, a further signal that credit markets are improving. The Fed said that banks averaged $4.3 billion in borrowing for the week that ended Wednesday. That is down from $5.1 billion last week. Loans from the central bank's emergency lending program, known as the discount window, surged to a high of $110 billion a day during the height of the financial crisis in the fall of 2008. Banks found their customary sources of credit frozen.


Analysts don't expect a temporary shutdown of the Trans-Alaska Pipeline System due to an oil spill this week to have much effect, if any, on crude prices and gas supplies. Energy economist Doug Reynolds says even a week idled, in the global scheme, shouldn't affect those things much. The 800-mile line was shut down Tuesday, after what its operator characterized as several thousand barrels of oil spilled into a tank and overflowed into a containment area.


One of President Barack Obama's top advisers says it would be a mistake for the U.S. to rapidly wind down fiscal stimulus measures to bring down the deficit. Christina Romer, head of the White House Council of Economic Advisers, advocates further measures such as fiscal relief for state and local governments and extension of emergency benefits for the long-term unemployed. She says those are ways the U.S. aims to add oxygen to the "nascent economic recovery." Romer spoke during an annual meeting of the Paris-based Organization for Economic Cooperation and Development.


Treasury Secretary Timothy Geithner says the U.S. and Europe are in "broad agreement" on the need for regulatory reform of the financial system and is stressing his commitment to "a strong global framework of reforms." Geithner spoke after meeting with German Finance Minister Wolfgang Schaeuble. European countries agreed this month on a ŠäŒ750 billion (nearly $1 trillion) loan backstop for governments in danger of defaulting on debt--coupled with efforts to cut budget deficits. Geithner welcomed Germany's "leadership role" in putting together that package. He said all countries understand the need to cut deficits and are working closely together "to make sure that we are strengthening and reinforcing (the) global recovery."


For the third time this year, Congress is scrambling to stave off a hefty pay cut to doctors treating Medicare patients. The 21.3 percent cut will take effect June 1st unless Congress intervenes. Recurring uncertainty over Medicare fees is making doctors take a hard look at their participation in the program. If the problem is allowed to fester, it could undermine key goals of President Barack Obama's health care overhaul, which envisions using Medicare to test ideas for improving the quality of care for all Americans. Doubts about Medicare's stability can also create political problems for democrats in the fall elections, since polls show seniors are worried about the impact of the remake on their own care.


 

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