Tuesday PM July 22nd, 2008

Offshore drillers brace for Dolly's wind and waves…BP settles with remaining plaintiffs in latest BP civil trial…Senate moving ahead with plan to curb speculation in oil markets blamed for high oil prices…

Companies have been evacuating workers from offshore drilling rigs and production platforms in the western Gulf of Mexico, as Hurricane Dolly strengthens. Shell, Rowan Companies, Diamond Offshore, Noble Corporation, Devon Energy and Pride International have removed employees from their facilities in the past couple of days. Ensco International and Hercules Offshore plan evacuations. New industry guidelines call for shallow-water rigs and platforms to be raised higher from the water to avoid hurricane waves. More anchors keep deepwater floating rigs in place. Oil refineries on the Gulf Coast north of the storm’s expected path are monitoring the weather for unexpected turns, although they have not halted fuel production.

Texas has mobilized National Guard troops and coastal residents prepared for the hurricane. An intermediate advisory from the National Hurricane Center says a NOAA plane found Dolly’s maximum sustained winds had increased to near 70 miles-per-hour, with higher gusts. Hurricane warnings are in effect for parts of the Texas and Mexico coasts. Dolly is expected to generate up to 15 inches of rain and coastal storm surge flooding of four to six feet above normal high tide levels. Governor Rick Perry has activated 1,200 National Guard troops and other emergency crews. Perry also ordered 250 buses to be staged in San Antonio, plus fuel teams are ready to keep gas stations supplied and to help stranded motorists.

The last four plaintiffs in the latest civil trial from the BP Texas City refinery explosion have settled their claims. The plaintiffs settled for undisclosed amounts late Monday in the ninth week of the trial. Six cases had earlier been settled out of court. Two other trials ended in settlements before jurors could deliberate, but this one lasted long enough for BP to mount a defense. Plaintiffs’ attorney Brent Coon says the trial exposed overwhelming documentation proving advance knowledge of potential tragedy.

image of speaker, click here for audio“And hopefully, at the end of the day, our ability to expose a lot of that has caused BP to reflect and make many necessary changes to their infrastructure and to their culture. And I think it resulted in the purging of an entire, you know, really their entire organization. The executive administration from the plant manager to Chicago to London all changed, and I think that the primary reason for that was due to the conduct that was exposed in our investigation.”

BP has said its goal from the beginning has been to fairly compensate people harmed by the blast. The 2005 explosion killed 15 people in a trailer 121 feet away and injured scores more. BP has set $2.1 billion aside to settle blast-related litigation. Seven cases are still pending out of some 4,000 claims filed, and State District Judge Susan Criss has set a last trial date in September. She says attorneys believe only two disputed claims could end up going to trial.

The Senate has voted to move ahead with a Democratic plan to curb speculation in oil markets that has been blamed by some for the recent run-up in oil prices. The 94-0 vote clears a procedural hurdle for the legislation, which would require the government to set limits on trading in oil markets by investors and speculators. The rapid increases in oil prices have coincided with big increases in trading volume on oil future markets and lots of investment in oil by pension and hedge funds. Democrats say much of the recent price increases are due to speculation. Republicans said the bill would have little effect and that Congress should spur production by lifting a ban on offshore drilling along the Atlantic and Pacific coasts and the eastern Gulf of Mexico. Senate Majority Leader Harry Reid says tighter controls on speculation in the oil markets will help lower prices at the gas pump.

Treasury Secretary Henry Paulson is urging Congress to quickly approve a support package for Fannie Mae and Freddie Mac. Paulson says the package is needed to make sure the two mortgage giants maintain their critically important role in housing finance. Meanwhile, Treasury officials confirm bank examiners from both the Federal Reserve and the Comptroller’s office are checking Freddie and Fannie’s books. Paulson tells the New York Times he thinks that’ll bring an important signal of confidence for the markets. The House could vote on it as part of a larger housing rescue package as soon as Wednesday.

Congress’ top budget analyst says a federal rescue of troubled mortgage giants Fannie Mae and Freddie Mac could cost taxpayers as much as $25 billion. But Peter R. Orszag, director of the Congressional Budget Office, predicted in a letter to lawmakers Tuesday that there’s a better than 50 percent chance the government will not have to step in to prop up the companies by lending them money or buying stock.

Approval of a massive mortgage rescue bill could hinge on whether the government can limit how well executives at Fannie Mae and Freddie Mac are compensated. Pennsylvania Senator Bob Casey, a Democrat, says huge bonuses and high salaries offered to executives make it fair to “question the prudence” of offering taxpayer help when the companies have made so many suspect decisions. Casey calls for capping the companies’ executive pay “at reasonable levels” if they used the line of credit or need Treasury to step in and buy their stock. Casey also said their boards should sue to recover recent bonuses. Last year, Freddie Mac’s chairman and chief executive earned nearly $20 million while the company’s stock lost half its value.

Dallas oilman T. Boone Pickens today asked a Congressional panel to “clear the path” for his plan to boost use of wind and natural gas for U.S. energy needs, reducing U.S. dependence on foreign sources of oil. Pickens is asking Congress to update regulations over transmission lines for wind-generated power. He’s planning to build the world’s largest wind farm on about 200,000 acres in the Texas panhandle. Pickens has leased hundreds of thousands of acres for a giant wind farm in west Texas, where he plans to erect 2,700 turbines and produce energy for urban areas such as Dallas and Fort Worth. Pickens envisions thousands of wind turbines in the country’s midsection and says they would provide 20 percent of the nation’s electricity needs. He also sees natural gas taking the place of gasoline and diesel fuel in transportation.

State investigators said Texas drivers who recently bought gas at hundreds of Sunmart stations probably were shortchanged. A weekend investigation found 990 Sunmart pumps were rigged to favor the company by as much as one-tenth of a gallon for every five gallons sold. Texas Agriculture Commissioner Todd Staples says that he “strongly suspects this was an intentional act.” Pumps found to be in violation were immediately shut down by state inspectors. Sunmart, the operating name for petroleum wholesale, didn’t immediately return calls seeking comment. Staples says his office began investigating Friday, after noticing a spike in violations. The statewide investigation found that 990 of Sunmart’s 1,704 fuel pumps were found to be cheating consumers. Staples says the company could be fined as much as $100,000.

Nationwide figures show that traffic deaths are dropping as gas prices climb. The National Safety Council reports a nine-percent drop in motor vehicle deaths through May, compared with the same time period last year. Researchers say that includes an 18-percent drop in March and 14 percent in April. Preliminary figures obtained by the Associated Press show some states reporting 20 percent declines in traffic deaths–or more. No one is saying for certain why road fatalities are decreasing, but the drop comes as Americans cut back sharply on driving because of record-high gas prices. The last time road deaths fell this quickly and this sharply was more than 30 years ago: during the Arab oil embargo of 1973-1974. After states raised the drinking age to 21 from 1982-1983, traffic fatalities fell 11 percent.

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