Monday AM February 11th, 2008

Court strikes down environmental exemptions for power plants...RBC Cash Index notes dropping of confidence by economists...Reuters says Continental Airlines and United Airlines are in initial stages of merger talks...

A federal appeals court is rejecting a Bush administration environmental policy. The court is striking down a policy that would exempt power plants from certain environmental regulations. The rule was known as cap-and-trade. It would allow power plants that fail to meet emission targets to buy credits from plants that did, rather than having to install their own mercury emissions controls. The rule was supposed to take effect in two years. It was challenged by New Jersey and many other states. The Environmental Protection Agency defended the rule, saying it represented the nation's first attempt to control such emissions, and that it would reduce mercury emissions by 70 percent. The three-judge panel agreed with the states that the EPA doesn't have the authority to exempt the power plants. Environment America says it's thrilled with the decision because EPA's rule would have worsened mercury contamination in significant watersheds.


Now that Congress has approved a $168 billion stimulus measure, retailers and economists are among those saying it should help what ails the economy. The National Retail Federation, the main industry trade group, says it should provide particular benefit to lower-income consumers, who are seen as more likely to spend their tax rebates. It provides rebates of $600 to $1,200 to most taxpayers and $300 checks to disabled veterans, the elderly and other low-income people. Tax information provider CCH says 21 percent of Americans have indicated they'll spend the money, about half will pay down debt and others will save it. A Global Insight economistξsays the tax rebates, combined with the Federal Reserve's rate cutting, should help put the U.S. economy back on track next year. After President Bush provides his expected signature to the measure, the first rebate checks are expected in May.


Approval figures for President Bush and Congress appear to be directly related to the sagging economy. In the latest AP-Ipsos poll, President Bush has hit rock bottom--and even Republicans are beginning to turn on him. His latest overall approval rating now stands at only 30 percent, but the rating for Congress is even lower, at 22 percent. Bush's acceptance by his own party is also at its ebb, just 61 percent of Republicans surveyed give Bush positive reviews. His previous low was 65 percent, just last month. Bush's previous low in the poll came in November, when his approval rating was 31 percent. His current level is essentially even with that. Even though Congress is the institution people love to criticize as a whole, many still strongly support their own House and Senate members.


According to the RBC Cash Index, confidence dropped to a mark of 48.5 in early February, from 56.3 last month. The new reading is the worst since the index began in 2002 and surpassed the previous low reached in January. Heightened fears about shrinking job opportunities, the housing and credit crunches and the possibility of the country falling into recession are seen as the main impetus behind the pessimism. An increasing number of economists worry that interest cutting by the Federal Reserve and the tax rebate plan approved by Congress may not be enough to avert the first nationwide recession since 2001. Some economists believe the economy has already toppled into a recession. Over the past year, consumer confidence has deteriorated a lot. Last February, confidence stood at a buoyant 103. The index is based on results of the international polling firm Ipsos.


Houston-based Prosperity Bancshares is acquiring 1st Choice Bancorp of Houston in a $68.2 million cash-and-stock deal. 1st Choice opened in April 1999, and operates two Houston outlets.


Continental Airlines and United Airlines are in initial stages of merger talks, according to Reuters. Many airline experts say mergers are needed to help stabilize the volatile industry, which suffered some $35 billion in losses through 2006. The industry emerged from that five year slump, but is threatened by soaring fuel prices and a softening U.S. economy.

Northwest and Delta Air Lines have been talking about joining the two carriers, and people close to the talks say a deal could be announced as soon as next week. Such a combo would leapfrog Fort Worth-based American Airlines and the Air France-KLM tandem in passenger traffic. But the Associated Press reports the deal would also likely trigger a chain reaction of other deals, with unknown consequences for travelers. Of the so-called legacy U.S. airlines--those that existed before deregulation and operate hub-and-spoke route networks--Continental has been most profitable since the 2001 industry downturn. Continental Chief Executive Lawrence Kellner says he'd prefer to remain a stand-alone company--but doesn't want to fall behind if others start merging.


Executive search firms expect demand for top talent will expand, but at a slower pace in 2008. That's according to ExecuNet's Recruiter Confidence Index. According to January's survey of 238 executive recruiters, 47 percent are confident the executive market will improve during the next six months. That's down from 59 percent the previous month. ExecuNet says the top of the employment market often does not move in unison with the Labor department's payroll data. Many companies announcing layoffs continue to fill gaps in their executive teams.


A new study says the widespread use of ethanol instead of gasoline could actually increase greenhouse gas emissions. Researchers say past studies showing the benefits of using ethanol to combat climate change didn't take into account almost certain changes in land use. The study says farmers under economic pressure to produce biofuels will increasingly plow up more land and release much of the carbon that would have been stored in plants and soils. And they say globally, more grasslands and forests will be converted to growing crops to replace grains lost when U.S. farmers convert land to biofuels. Still, a group representing ethanol producers says the researchers' view of land-use changes is "simplistic'' and that the study "fails to put the issue in context.'' The study appears in Science magazine.


Energy experts at Rice University's Baker Institute for Public Policy say new fuel economy standards in the Energy Independence and Security Act of 2007 will not be sufficient alone in cutting U.S. oil imports. A document from the forum says energy independence may not even be a worthwhile goal. The bill mandates an increase in average fuel economy standards to 25 miles per gallon for new cars by 2020. Passenger fleet improvements are required by 2011. But the authors of the Baker document say that's not enough to lower U.S. oil imports. And they say it's not plausible to eliminate 12 million barrels a day in imports.


Valero Energy says unbudgeted downtime at its refineries last year cost it $2 billion in lost revenue. The San Antonio-based company expects disruptions to production exceeding industry standards again this year. Valero's Port Arthur refinery reported at least 31 malfunctions in 2007. A fire at the refiner's Sunray plant in February and a power failure in December caused further plant idling.


Montgomery Energy Partners of Houston is partnering with Minnesota-based Denali Energy to develop a 1,000-megawatt wind power project in northwest North Dakota. The Hartland Wind project will initially use 333 turbines to produce 500 megawatts. Montgomery Energy is an affiliate of Navasota Energy Partners of Houston.


Belo Corporation is expected to announce it's closed a deal to spin off its four newspapers--including the Dallas Morning News--into a new company. When the deal closes, Belo shareholders will get one share of the new A.H. Belo Corporation for every five Belo shares they owned on January 25th. Shares of A.H. Belo are scheduled to begin regular trading this morning on the New York Stock Exchange. After the spin-off is complete, A.H. Belo will own the Dallas paper and the Providence Journal, the Press-Enterprise in Riverside, California, and the Denton Record-Chronicle, plus their Web sites. Dallas-based Belo also owns 20 television stations.


Houston dry material handler Dover Equipment has merged with South Carolina-based Modern Equipment, according to the Houston Business Journal. The company will become MEI/Dover. Modern Equipment is a dry and liquid bulk material handler.


More than $115 million for hospital expansion and health services for veterans in Texas has been approved by the U.S. Department of Veteran Affairs. The funding will be spent on construction and projects at veterans facilities throughout the state. Nearly $49 million is scheduled to be spent in Waco on additions that include a rehabilitation center for the blind. Money for the projects was included in the sweeping spending bill passed by Congress in December. The funding approval was announced by U.S. Senator Kay Bailey Hutchison and Congressman Chet Edwards. Veterans facilities in Houston, Amarillo, Big Spring, Dallas and San Antonio will also see improvements under the approved spending plan.


Alliance Data Systems has dropped its lawsuit against affiliates of the Blackstone Group. The suit had been filed over the collapse of Blackstone's $6.4 billion acquisition of the Dallas-based credit card services provider. Alliance Data says Blackstone is committed to closing a deal but adds there's no assurance that a buyout would be completed. Blackstone agreed last May to pay $81.75 per share for Alliance Data. But last month, it notified Alliance that it couldn't close the deal because of objections from the U.S. Comptroller of the Currency, which regulates a bank owned by Alliance. Alliance alleged in the lawsuit that Blackstone didn't work hard enough to get the regulators' approval for the buyout. Alliance says that since it sued, Blackstone has promised to work toward closing the acquisition and to work with Alliance on settling the regulatory issues.


Heritage Auction Galleries is offering refunds after finding out some Hollywood memorabilia items sold in April were bogus. Dallas auction house President Greg Rohan says: "it's mortifyingly embarrassing.'' The items were sold as the Ann Sothern Collection and included a whiskey flask purportedly owned by Errol Flynn, a Humphrey Bogart engraved cigarette case and Lash la Rue's bullwhip. Eleven people paid more than $30,000 for 22 objects. The items were supposedly owned by late actress Sothern, who was a 1940s movie star. The items were consigned to Heritage by La Prop and Wardrobe, based in Meridian, Mississippi. Rohan says the auction house accepted La Prop's claim that the collection was authentic without expert review. He says that was a breakdown in company protocol. John Tarter of La Prop declined comment.


In Madison, Wisconsin, the afternoon newspaper, the Capital Times, will shift to an Internet edition in a transition that could be the first of its kind in the struggling industry. The 17,000-circulation newspaper announced the changes to staff and in a story published on its Web site Thursday. The moves include publishing twice-weekly free print editions. The changes will result in job cuts and a buy-out program. The Capital Times began publishing in 1917. The paper's editor says while he is saddened by the actions taking effect at the end of April, they were necessary to keep the paper viable in the face of declining circulation.


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