Wednesday PM May 5th, 2010

BP caps one of three leaks in Gulf; other mitigation methods underway, including chemical dispersants and containment dome…Congress gears up for hearings on rig explosion and oil leak…Some surviving workers suing BP and Transocean…


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The Coast Guard says BP has managed to cap one of three leaks at a deepwater oil well, but the work is not expected to reduce the overall flow of oil into the Gulf of Mexico. Coast Guard Petty Officer 1st Class David Mosley says the work Tuesday night should reduce the number of leak points that need to be fixed on the ocean floor. BP officials have said that fewer leaks will make it easier to drop a containment box on the breach.

The massive oil leak in the Gulf of Mexico has become the testing ground for a new technique where chemicals are shot deep undersea. It’s an effort to stop oil from reaching the surface. Crews battling the spill, following an April 20th rig explosion, already have dropped more than 156,000 gallons of the concoction–a mix of chemicals known as “dispersant”–to try to break up the oozing oil. The technique has undergone two tests in recent days that the Coast Guard is calling promising. There are plans to apply even more of the chemicals. More than 230,000 gallons of dispersant is available, and more is being manufactured by Nalco Company of Naperville, Illinois, for use in the Gulf. Neither Nalco, operator BP, rig owner Transocean of Houston or the Coast Guard have specified how much of the chemical brew is needed.

The best short-term solution for bottling up the oil spill threatening sea life and livelihoods along the Gulf Coast is a specially built giant concrete-and-steel box designed to contain the oil for siphoning. A spokesman for BP says it would be deployed on the seabed by tomorrow. Such domes have never been tried at this depth–about 5,000 feet–because of the extreme water pressure. The dome, if all goes well, could be in use early next week to start funneling the oil into a tanker.

An executive with BP is saying there has been an unconfirmed report of oil washing ashore on a small Louisiana island. BP Chief Operating Officer Doug Suttles says that more than 20 boats have been dispatched to Chandeleur Island to look for the oil, but so far haven’t been able to find it. The Associated Press reports that the oil washed ashore at the mouth of the Mississippi river along the Louisiana coast. Officials are saying the weather has improved significantly in the Gulf, allowing crews to lay more containment equipment as well as repair the booms that were damaged in rough weather. Officials say they also hope to be able to again burn some of the oil offshore now that the winds have eased.

BP executives tell members of a Congressional committee that in the worst-case scenario a leaking well could spew up to 60,000 barrels of oil into the Gulf of Mexico. The well has been leaking about 5,000 barrels a day–or 210,000 gallons–into the Gulf since an explosion April 20th on an offshore drilling rig. Representative Ed Markey of Massachusetts says industry officials told the House Energy and Commerce Committee that the worst-case scenario is 60,000 barrels a day, or 2.5 million gallons. He says committee members were told a more likely scenario if the leak gets worse is 40,000 barrels, or 1.7 million gallons. In an exploration plan filed with the government in February 2009, BP said it had the capability to handle a “worst-case scenario” it described as a leak of 162,000 barrels per day from an uncontrolled blowout.

The Senate Environment and Public Works Committee plans to hold a hearing on the Gulf oil spill next Tuesday, adding to a crowded calendar of oil hearings. Committee Chairwoman Barbara Boxer of California says the hearing will examine the spill’s impact on the economy and environment. Officials from BP, Halliburton and Transocean are expected to testify. The Senate Energy and Natural Resources Committee and the House Energy and Commerce Committee also plan hearings on the spill next week. And the Senate Commerce Committee will also hold a hearing, but no date has been set yet.

The White House backs raising the liability limit on how much BP will have to pay for the oil spill. BP is responsible for all cleanup costs under the Oil Pollution Act. But Press Secretary Robert Gibbs says economic damages like lost wages or dwindling tourist dollars could easily top the act’s $75 million cap. Democratic Senator Robert Menendez is co-sponsoring a bill that would raise the liability limit to $10 billion and make it retroactive so it will apply to the huge spill. Gibbs says the administration supports the move to raise the limit retroactively. BP CEO Tony Hayward says the cap doesn’t matter because the company will honor all legitimate claims.

Some of the 115 surviving workers are suing Transocean and BP. Three workers say they were kept floating at sea for more than ten hours while the rig burned uncontrollably. They’re seeking damages. Transocean spokesman Guy Cantwell defends the company’s response–saying 115 workers did get off alive. Two wrongful death suits also have been filed.

An executive with BP says the company has announced $25 million grants for four Gulf Coast states affected by the oil spill. BP Chief Operating Officer Doug Suttles says that he hopes the grants will help Louisiana, Mississippi, Alabama and Florida cut through red tape to get money to communities and people impacted by the spill. Suttles also said there have been more than 10,000 volunteers and about 3,500 have been trained to help with the cleanup. He says they are offering to pay the volunteers but some have refused the money. Officials have received more than 1,000 applications for boats to join in the cleanup, and already have about 500 boats in the program. Over 1,000 people have also showed up to remove debris from beaches that could be affected.

United Airlines Chairman and CEO Glenn Tilton will give up cash severance of $4.6 million in exchange for restricted shares worth the same amount if his airline combines with Continental. Tilton will be chairman of the combined airline if the merger goes through. But he’s giving up his CEO job, which would have entitled him to severance and accelerated vesting of options and shares. A company filing says he has agreed to modify that deal. The company also said it has promised payments to its other top five executives if they lose their jobs after the merger. If antitrust regulators and shareholders approve, the combined airline would be the largest in the world. The companies are aiming to close the deal by the end of 2010.

After a 61 percent increase in March, the number of planned job cuts announced by American employers fell in April. Cuts will be 43 percent fewer than the previous month—the lowest job-cut figure since July 2006. The report was released by Challenger, Gray & Christmas. Overall job cuts are on the decline, but downsizing in the government and non-profit sector continues unabated.

New shopping data for April show consumers bought less clothing and footwear than a year earlier but opened their wallets for electronics, major appliances and status goods. The month’s rainy weather contributed to the mixed results in the latest numbers from Mastercard Advisors’ SpendingPulse. The figures, which include transactions in all forms including cash, signal that spending is recovering but remained sensitive in April to one-time factors. It’s the ninth-straight month that online sales rose compared with a year earlier.

A private trade group says the service sector expanded in April, but at a slower pace than expected. The Institute for Supply Management, a trade group of purchasing executives, says its service sector index read 55.4 in April, the same level as in March. It’s the fourth straight month of growth. Economists polled by Thomson Reuters had expected a stronger reading of 56. A level above 50 indicates growth. The service sector accounts for 80 percent of U.S. jobs in areas such as health care, retail and financial services. It has lagged the much smaller manufacturing sector in recovering from the recession. ISM says jobs measure contracted for the 28th straight month.

British playwright Lucy Prebble’s “Enron” will not be repeating its London success on Broadway. The New York production will shut down on May 9th—just 12 days after opening. The play earned four Tony nominations, but is closing with just 15 regular performances. The original UK production continues in London’s West End.

A Houston natural gas company says it is halting development of a liquefied natural gas terminal near the mouth of the Columbia River in Oregon. NorthernStar Natural Gas President Paul Soanes says that extended delays in state and federal permits led to the decision. The company started work on the Bradwood Landing project near Astoria six years ago with hopes of building the first deepwater port for LNG tankers on the West Coast and a pipeline to send it throughout the state. The project won federal approval, but state officials opposed it, saying the new energy source was not needed and posed environmental problems.

Officials in both parties say Senate Democrats have agreed to jettison a $50 billion fund that Republicans attacked repeatedly as risking future Wall Street bailouts. That appears to clear one of the key obstacles to approving tougher U.S. government controls over the financial industry. A formal announcement was held up pending a review by key lawmakers and the Obama administration. The emerging agreement was designed to assure that any future taxpayer costs arising from the liquidation of big firms in the future would be temporary and on a case-by-case basis. The agreement marked a retreat by Democrats, who had protested bitterly in recent days that Republicans were inaccurate with claims that the multi-billion-dollar fund would serve as a source for future bailouts.

The executives who led Bear Stearns before the big Wall Street firm’s implosion two years ago are saying they did all they could to keep it afloat before it fell victim to an unstoppable run on the bank. James Cayne, who was Bear Stearns’ CEO until January 2008, and Alan Schwartz, who succeeded him are to testify Wednesday before the bipartisan panel investigating the roots of the crisis. In prepared testimony, Cayne says the firm’s collapse “was due to overwhelming market forces that Bear Stearns…Could not resist.” Bear Stearns was the first Wall Street bank to collapse in the recent financial crisis. The Congressionally chartered Financial Crisis Inquiry Commission is looking at Bear Stearns as a case history of what it calls the “shadow” banking system–a network of financial institutions and markets operating outside of the regulatory structure.

Advocates of raw milk hope legalization of sales in Wisconsin will lead to broader acceptance of unpasteurized milk and approval of sales in other states. Wisconsin Governor Jim Doyle has indicated he will sign a bill the legislature passed late last month allowing farms to sell raw milk directly to consumers through 2011. Wisconsin would be the 20th state to allow such sales. Sally Fallon Morell is president of a nonprofit group that advocates drinking raw milk. She says Wisconsin is the best state in the country for legalization of raw milk because it’s “America’s Dairyland.” Raw milk opponents, meanwhile, say the more states that legalize sales, the greater the chance of people becoming sick from contaminated milk.

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