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Wednesday PM April 16th, 2008

More stringent design standards ordered for offshore drilling and production platforms…United and Continental Airlines signal consolidation interest following proposed pairing of Delta and Northwest…Federal immigration agents raid Pilgrim’s Pride plants…

A federal agency has imposed more stringent design standards for offshore oil and gas drilling platforms in the Gulf of Mexico. The changes ordered by the Minerals and Management Service come in response to hurricanes of 2004 and 2005. The agency is requiring platforms to be higher above water. It’s also encouraging the movement of critical equipment to higher decks and outlining methods for finding weak spots on platforms. Damage to oil and natural gas infrastructure in 2004 and 2005 included the destruction of 123 fixed structures and one floating facility, as well as significant damage to dozens of other structures. After those hurricanes, the MMS, the American Petroleum Institute and members of the offshore industry collaborated to improve the standards by which gulf structures are designed and assessed. API policy adviser Andy Radford says major oil companies already have been modifying their structures and raising them higher above the water as the industry moves farther out into deeper portions of the Gulf.

United Airlines and Continental Airlines each are signaling interest in industry consolidation in the wake of the proposed pairing of Delta and Northwest. They are increasingly seen as a potential pairing that would leapfrog the Delta-Northwest team as the world’s largest carrier. The two airlines remain publicly mum about their preferences for a partner. But it’s clear the Delta-Northwest agreement has broken the logjam on consolidation and breathed new urgency into talks between United and Continental on how they could combine. Marrying Chicago-based United to Houston-based Continental would create a company with a combined $35 billion in revenue and nearly 100,000 employees. But Wall Street is skeptical about such a pairing. Airline unions also have said that no deal will go through unless they are fairly compensated.

Some members of Congress are blasting the proposed merger of Delta and Northwest. House Transportation Committee Chairman James Oberstar says the plan to create the largest airline in the world is the worst development in aviation history since deregulation 30 years ago. And the head of the Aviation Subcommittee, Jerry Costello, warns that consumers won’t like the effect. Both he and Oberstar warn it could force other airlines into mergers that would create “three global mega carriers.” They say low-cost airlines wouldn’t be able to compete. The CEOs of both Delta and Northwest will defend the proposed deal at a House hearing next week. Senators want to see how the merger would affect service to smaller cities and rural areas. Congress has little power to stop the transaction and most experts believe the Justice Department will approve it.

Passengers who get bumped from airline flights will be eligible to get twice as much compensation from U.S. airlines. A new Transportation Department rule set to take effect next month covers travelers forced onto another flight that takes them to their U.S. destination more than two hours after their original arrival time. They’ll be paid the full price of their fare up to $800. The government also unveiled several more initiatives intended to decrease air travel delays, including a plan to reroute planes through Canadian air space to avoid summer storms.

Federal immigration agents raided Pilgrim’s Pride poultry plants in five states. The raids are a crackdown on an alleged scam to provide fake IDs for illegal immigrant workers. Julie Myers is Assistant Secretary for Immigration and Customs Enforcement. She tells the Associated Press that more than 100 people were expected to be arrested on criminal charges related to identity theft. She says it’s unclear how many more would be detained on immigration charges at the plants in Texas, Arkansas, Florida, Tennessee and West Virginia. Agency spokeswoman Kelly Nantel had estimated at least 100 such administrative arrests. There’s no comment yet from Pittsburg-based Pilgrim’s Pride. The company has about 55,000 employees and operates dozens of facilities mostly across the south and in Mexico and Puerto Rico.

The Energy Department says crude oil inventories fell last week for the second straight week. That surprised analysts, who were looking for an increase in crude supplies in the U.S. Inventories dropped 2.3 million barrels, now six percent below
year-ago levels. Gasoline inventories dropped by 5.5 million barrels, a bigger-than-expected decline. Demand for gasoline was about one percent lower than a year ago.

Britain’s prime minister is in the U.S. for talks on the economy, trade and shoring up U.S.-British relations. It’s Gordon Brown’s second U.S. visit since replacing Tony Blair last June. Brown has spoken of the “special” bond the U.S. and Britain share. He told ABC that relations between the U.S. and all of Europe will likely get closer in the coming years, especially as divisions over the Iraq war wind down. He attended a United Nations session, meeting with New York’s mayor, and talking with investment executives on Wall Street. Looking ahead to next year, Brown hopes to also meet with John McCain, the presumptive Republican presidential nominee, and Democratic party rivals Hillary Rodham Clinton and Barack Obama.

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