Tuesday PM June 12th, 2007

Bush administration declines to back Enron shareholders before Supreme Court...Cal Dive International to acquire Horizon Offshore in $628 million deal...Houston area employers expect brisk hiring pace during third quarter, according to Manpower...

The Bush administration has decided not to back shareholders suing Wall Street banks for damages over the 2001 collapse of Enron. The administration rejected a Securities and Exchange Commission recommendation in a key Supreme Court case involving the Wall Street banks. The case pits cable TV company Charter Communications against a shareholder that accused it of securities fraud. It raises an issue known as scheme liability: whether shareholders also can collect damages from investment banks, attorneys and accountants believed to have aided fraud by their corporate clients. The high court's ruling in the case could determine whether the Enron plaintiffs' $40 billion lawsuit against the investment banks can proceed. That case is stalled by a federal appeals court ruling in March. The shareholders contend in the suit that Merrill Lynch, Barclays and Credit Suisse should be held equally liable as Enron as participants in the fallen energy company's massive accounting fraud. The Justice Department's solicitor general filed no friend-of-the-court brief by Monday's deadline--and he represents the administration in Supreme Court cases. That puts the White House at odds with the federal agency that oversees securities markets, as well as with dozens of states and several consumer and investor advocates.


Cal Dive International has agreed to buy Horizon Offshore in a $628 million deal. That will combine two Houston offshore oil construction businesses. The combined company will have more than 2,000 employees.


Plans for what would have been the nation's largest offshore wind farm--off south Texas--have been canceled. The developer says the multi-billion dollar project didn't make economic sense. John Calaway is chief development officer for Babcock & Brown, which is an Australian investment bank. Calaway says the company last month notified Texas that it's giving up its 30-year lease on nearly 40,000 acres in the Gulf of Mexico off Padre Island. Calaway was CEO of Houston-based Superior Renewable Energy when the agreement was announced. Superior was acquired last summer by Babcock & Brown. Babcock is proceeding with an onshore wind farm in Kenedy County. That more than $700 million venture calls for 157 turbines on thousands of acres.


Houston area employers expect to hire at a brisk pace during the third quarter, according to the Manpower Outlook Survey. Some 44 percent of the companies interviewed plan to hire more employees, and seven percent expect payroll reductions. Another 43 percent expect to maintain current staffing levels. Job prospects appear best in construction, non-durable goods manufacturing, transportation/public utilities, wholesale/retail trade, finance/insurance/real estate, education and services. Nationwide, some 29 percent of those polled forecast an increase in hiring activity.


Federal energy analysts have revised their forecast for gasoline prices for the summer--and the news is not good for consumers. In its monthly short term energy outlook, the Energy Information Administration sees an average summer price of $3.05 a gallon. That's nine cents more than an earlier forecast--and 21 cents more than the average prices last summer. Factors in the higher summer average include the average monthly price peaking at $3.15 cents a gallon during May--higher than previously forecast--and price increases expected later in the summer. The EIA says the average retail price of gasoline is expected to fall further this month and next--and then rise again in August.

The International Energy Agency has raised the prospect of a global oil crunch this year. The energy security watchdog for the Organization for Economic Cooperation and Development cites a recipe of higher-than-expected demand and below-par supply from the Organization of Petroleum Exporting Countries and other producers. In its monthly oil market report, the IEA warns that demand could outstrip OPEC's ability to boost its output.


The sixth and final defendant in an ERCOT contract fraud and bribery scheme has been sentenced today to 12 years in prison. A judge in Georgetown sentenced 46-year-old Stephen C. Wallace for his role in the scam targeting the Electric Reliability Council of Texas. ERCOT is the state's main electric grid. Wallace earlier pleaded guilty to misapplication of fiduciary property related to the scheme uncovered in 2004. Wallace, who was an ERCOT program director, also must pay $800,000 in restitution. A judge in Austin sentenced Wallace to ten years behind bars for felony theft. The Texas Attorney General's Office says the sentences will be served concurrently. Three co-defendants have been sentenced to prison. Another served 90 days in jail and was put on probation. The sixth man is serving probation.


Officials say hostage takers in Nigeria's restive oil heartland have released 13 captives, including three Americans. The militants said earlier they were releasing the hostages on "humanitarian grounds,'' while indicating they would continue attacks despite conciliatory efforts from Nigeria's new president. The freed hostages are the latest of some 200 foreigners, mostly oil workers, who have been kidnapped in a year and a half of rising violence in the region where Africa's biggest oil producer pumps its crude. With the release Monday, nearly two dozen captives are known to still be in captivity across Nigeria's south.


The Senate is debating a range of energy issues that could impact electric utilities, oil companies, automobile makers and ethanol producers. Democratic leaders say they intend to keep their campaign promise of a comprehensive energy policy proposal to reduce the country's dependence on foreign oil. In tackling the Renewable Fuels, Consumer Protection, and Energy Efficiency Act of 2007, they'll consider controversial proposals that mandate greater use of renewable energy and improve vehicle fuel efficiency. Lawmakers are also likely to review proposals staunchly opposed by the White House. One would allow the federal government to sue OPEC for engaging in competitive behavior. Another would punish U.S. energy companies found to have overcharged consumers for gasoline.


More money coming in than going out has the federal budget deficit running sharply lower through the first eight months of this fiscal year. The Treasury Department says the deficit through May came to 148.5 million--down more than 34 percent from a year ago. The red ink entry for last month was up nearly 58 percent--to $67.7 billion. But officials say that's because the Internal Revenue Service was more efficient in processing tax returns this year. That means more tax money was collected in April with less left to be counted in May. For the budget year ending September 30th, the Congressional Budget Office is projecting a federal deficit of $177 billion--down almost 29 percent from last year's shortfall, which had been the lowest in four years.


A compromise Texas transportation bill has been signed into law by Governor Rick Perry. The measure--which takes effect immediately--freezes some new privately financed toll road projects for two years. Perry says the plan gives local governments more authority to build new toll roads--while keeping toll revenue for more projects in the area is was collected. Perry vetoed the first transportation bill lawmakers sent him, saying it would shut down road construction, kill jobs and prevent access to federal highway money. The compromise imposes limits on comprehensive development agreements, which are used in contracts for private-public road building. CDA's are meant to let the Texas Department of Transportation complete road-building projects more quickly and cheaply by using a single contract for the design and construction tasks.


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