Wednesday PM December 12th, 2007

Federal Reserve coordinating with worldwide central banks to deal with credit crunch...ExxonMobil wants floating LNG terminal off New Jersey coast...Plaintiffs question tax consultant about appraisal cuts at BP Texas City plant before 2005 explosion...

The Federal Reserve has announced it is coordinating with other central banks to deal with a global credit crunch. The central bank says it had reached an agreement with the European central bank as well as the Bank of England, the Bank of Canada and the Swiss National Bank to address what it calls "elevated pressures'' in credit markets. The Fed says it is creating a temporary auction facility to make funds available to banks and is also setting up lines of credit with the European central bank and the Swiss central bank that could be used for additional resources. The action is another step by the Fed to deal with a serious credit crunch stemming from the tightening of bank lending standards in the wake of multibillion-dollar losses from defaults on mortgage loans.

ExxonMobil, the country's biggest oil company, wants to anchor a floating liquefied natural gas terminal 20 miles off the coast of New Jersey. Exxon says the receiving terminal would cost more than $1 billion to build and be able to supply about 1.2 billion cubic feet of natural gas per day, enough for more than five million residential customers, to New York and New Jersey. If regulators approve the terminal, the company says it would go into operation in the middle of the next decade. Exxon is working on three other liquefied natural gas terminal projects near Sabine Pass, Texas, in Wales, and off the Adriatic coast of Italy. Exxon has run into opposition from residents and environmentalists at some proposed sites in the United States.

A tax consultant testified that BP sought to lower the Texas City refinery's appraised value in 2003 because old equipment hadn't been upgraded or replaced. In the second civil trial from the March 2005 explosion, plaintiffs pointed out that the Galveston County Appraisal District cut the plant's appraised value from $1 billion to $500 million, reducing the company's tax bill by $12 million. The testimony was to bolster allegations that BP knew the plant was in critical need of upgrades and repairs in the years leading to the explosion that killed 15 people. BP acknowledges budget cuts, but disputes the link between cutbacks and the accident.

A revamped energy tax package targeting major oil companies for higher taxes has been unveiled in the Senate, according to the Houston Chronicle. The $21.8 billion energy bill would seek $9.4 billion from the five major oil companies over ten years. The funds would help promote alternative energy and help mitigate carbon dioxide emissions.

McAllen business leaders boisterously voiced their opposition to a planned fence along the U.S.-Mexico border. Meanwhile, federal government officials methodically took comment from the public about a draft environmental impact statement assessing the potential effects of proposed fencing in the Rio Grande Valley. Several hundred people attended the hearing at the McAllen Convention Center, where protesters held signs reading "protect our border and wildlife'' and "stop terrorism not tourism.'' The open house was the first of three meant to gather public input on the draft statement. The 530-plus page document is meant to lay out the environmental consequences of proposed fencing that spans 21 different sections of the valley and totals about 70 miles. At the event, four stations were set up with poster-sized maps and bullet points. Officials from agencies like the U.S. Border Patrol on hand to answer questions. The heavily populated Rio Grande Valley has been the center of opposition to the planned combination of steel fence and "virtual fencing'' designed to stop illegal immigration and smuggling. Landowners and government officials complain it'll cut them off from the Rio Grande and its fresh water and do little to stop illegal immigration and smuggling. Federal officials say that without immigration reform legislation, the fence is the only acceptable way to secure the border.

Trucking companies have won a victory with federal regulators maintaining existing limits on drivers' hours. Regulators opted not to endorse a court order sought by consumer advocates that would have required one less hour behind the wheel each day. The Federal Motor Carrier Safety Administration issued an interim final rule that maintains the current 11-hour driving limit. It requires truckers to rest for ten hours. A District of Columbia appeals court had delayed until after Christmas a requirement that would reduce the continuous driving limit to ten hours with eight hours of rest. The agency's administrator John Hill said its data show that the number of crashes involving fatigued drivers has remained constant in recent years, and that crashes in the 11th hour of driving have been negligible. Consumer advocates sued to reduce the amount of time truckers can stay behind the wheel continuously because they say the industry is putting the public at risk.

Student lending giant Sallie Mae is slashing its profit forecast for the remainder of this year and all of 2008. It is hoarding cash to offset bad loans, feeling the effects of a new law that reduced federal subsidies to student lenders. Sallie Mae also says it has failed to renegotiate a buyout with an investor group that balked several months ago at its original $25-billion offer for the company. Sallie Mae, also known as SLM Corporation, says J.C. Flowers & Company "does not wish to pursue these opportunities.''

Russian oil company Lukoil reports its profit for the third quarter rose just over two percent. Houston-based ConocoPhillips owns nearly seven percent of Lukoil after buying a stake for about $2 billion in 1994. The company benefited from an increase in the ruble against the U.S. dollar and climbing oil prices. Net income for the three months through September 30th rose to $2.48 billion--from $2.43 billion in the same period one year earlier. Sales rose 17 percent. Production of petroleum products at Lukoil refineries also increased.

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