Tuesday PM May 11th, 2010

Congress probes Deepwater Horizon explosion…New hiring rises to highest level in more than a year…Home prices rise in nearly 60 percent of U.S. cities in first quarter…


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Congress opened hearings into the Gulf of Mexico oil spill, as the oil continues to gush from a damaged well. Copies of testimony, obtained by the Associated Press, indicate that executives of three companies involved are trying to shift responsibility to each other as they appear before two committees. Halliburton says it safely finished a cementing operation 20 hours before a Gulf of Mexico rig blew up. In testimony prepared for the Congressional hearing, Halliburton says it completed work on the well according to accepted industry practice and federal regulators. Halliburton Executive Tim Probert says a pressure test was conducted after the work was finished, and the well owner decided to continue. A copy of the testimony was obtained by the Associated Press. The cause of the April 20th explosion is under investigation, but lawsuits filed after the disaster claim it was caused when Halliburton workers improperly capped the well in a process known as cementing. Halliburton denies wrongdoing.

The CEO of the company that owned the oil drilling rig that exploded in the Gulf of Mexico says the accident was caused by a failure of its cementing, casing or perhaps both. Transocean CEO Steven Newman told the hearing that the explosion of the Deepwater Horizon rig was unusual because it happened after construction of the well was essentially complete. He said that the explosion that killed 11 workers could not have happened unless the cement, well casing–or both of those elements–failed. The rig sank and has been gushing oil into the Gulf. Newman dismissed suggestions that a blowout preventer owned by Transocean may have been a cause.

A judge in Houston has extended an order barring BP, Transocean and other parties in the Gulf oil spill from destroying documents, e-mails and other possible evidence in lawsuits. Judge Reece Rondon extended the order until May 25th. The order was initially granted April 30th on behalf of Stephen Stone, a BP employee who was on the offshore rig at the time of the April 20th explosion that left 11 workers dead. Stone’s attorney Brent Coon says he sought the order because in a previous case against BP, in a 2005 refinery explosion in Texas city, e-mails that served as evidence had been removed from the oil giant’s computers.

BP’s top lobbyist says the company does not view a $75 million federal cap on economic damages for oil spills as a limit to its obligations to people along the Gulf Coast. David Nagle, head of the company’s Washington office, says BP has so far paid $3.5 million in damage claims beyond cleanup costs. He says the company has received 4,700 claims so far and paid on 295 of them. A federal law caps liability to $75 million for economic damages beyond direct cleanup costs. Nagle, speaking to reporters ahead of Senate hearings today, say the limit is not “an effective cap in terms of what we’re spending.” But he declined to say whether BP would lobby against efforts to increase the cap to $10 billion.

The Obama administration is proposing to split up an Interior Department agency that oversees offshore drilling. The Associated Press has learned that Interior Secretary Ken Salazar will urge that the Minerals Management Service be split in two, as part of the administration’s response to the Gulf Coast oil spill. One agency would be charged with inspecting oil rigs, investigating oil companies and enforcing safety regulations, while the other would oversee leases for drilling and collection of billions of dollars in royalties. The minerals agency has long been accused of being too cozy with the oil and natural gas industry. Some critics say its dual roles collecting royalties and performing oversight are in conflict.

BP wants more than 70 lawsuits over the Gulf oil spill consolidated before a federal judge in Houston. The oil giant is asking the U.S. Judicial Panel on Multidistrict Litigation to have U.S. District Judge Lynn Hughes to hear pretrial matters for all the cases. Potential class-action lawsuits have been filed in every Gulf Coast state. Plaintiffs include commercial fishermen, business interests, property owners and others. BP and other companies operated the Deepwater Horizon drilling rig. It exploded April 20th and killed 11 people before sinking two days later. Lawyers for some plaintiffs want a New Orleans judge to hear the cases. The panel likely won’t make a decision until July.

Hotel clerks along the Gulf Coast are busy answering calls about the massive oil spill and whether they will refund the money of vacationers who have booked rooms there. The answer is typically no. Phones are also steadily ringing for tourism officials hundreds of miles away at Atlantic Coast beaches like Hilton Head Island, South Carolina, as they delicately try to lure vacationers away without appearing to profit from the disaster. Balls of tar began washing up on an Alabama beach over the weekend. Vacationers who have already booked are tracking the spill online, and many have been told they’ll face a steep penalty for backing out.

New hiring rose in March to its highest level in more than a year while job openings moved up slightly, fresh evidence the job market is slowly improving. The Labor Department says employers hired 4.24 million people in March, up from four million the previous month. Job openings edged up by 47,000 to 2.69 million. Still, new hires and job openings remain well below pre-recession levels, as many employers are still cautious about adding to payrolls. The construction and retail industries reported the largest jumps in hiring, while manufacturing and government also reported gains. The increase in construction hiring is likely a rebound from February, when severe weather shut down many projects.

Inventories held by wholesalers rose for a third consecutive month in March while sales increased by more than double the expected amount. Rising demand is making businesses more confident about the future, a key development needed to sustain the recovery. The Commerce Department says wholesale inventories rose 0.4 percent in March, slightly lower than the 0.5 percent gain that had been expected. Sales shot up by 2.4 percent, more than double the 1.1 percent increase economists had forecast. It marked the 12th straight month that sales have risen at the wholesale level, an encouraging sign for the economic rebound. The hope is that businesses will step up their ordering and restock depleted shelves, giving a boost to factories and prompting them to rehire laid-off workers.

Home prices rose in nearly 60 percent of U.S. cities in the first quarter of this year, as the housing market started to stabilize thanks to billions of dollars in federal spending. The National Association of Realtors says the median sales price for previously occupied homes rose in 91 out of 152 metropolitan areas tracked in the January-March quarter versus a year ago. There were double-digit price increases in 29 cities. That’s a sharp improvement from the fourth quarter of last year, when prices rose in about 40 percent of cities. The national median price was $166,100, or 0.7 percent below the first quarter of last year. Sales of foreclosures and other distressed properties made up 36 percent of all sales in the first quarter.

A budget writer says Texas sales tax receipts in April rose by 1.4 percent over the same month last year. But State Representative Jim Pitts of Waxahachie says state revenues remain “well short” of predictions. The State Comptroller’s Office says collections in the first eight months of the current fiscal year are nearly $1.5 billion, or almost 12 percent, behind fiscal 2009. Pitts said the hole is too deep to meet targets for the budget year that ends August 31st. Members of the House Ways and Means Committee in April reviewed tax exemptions as legislators who will convene in 2011 prepare for an estimated budget shortfall of at least $11 billion.

Federal regulators say leaders for major securities exchanges have agreed in principle to a uniform system of “circuit breakers” that would slow trading during periods of intense market volatility. Securities and Exchange Commission Chairman Mary Schapiro says the heads of the biggest exchanges “agreed on a structural framework.” The agreement has been reached by leaders of six exchanges, including the New York Stock Exchange and NASDAQ. The absence of a uniform system is being looked at as a possible trigger for last week’s historic stock market plunge.

The owner of struggling movie rental chain Hollywood Video is planning to close its remaining stores and liquidate its assets. Movie Gallery filed a notice with the bankruptcy court in Virginia late last week that it will terminate its business operations after defaulting on a loan from one of its creditors. An agreement filed with the court says the move to close more than 1,900 remaining stores is in the “best interests” of the company and its creditors. The agreement does not specify a time line. It must be approved by a bankruptcy judge. The company filed for Chapter 11 bankruptcy in February. It had faced competitive pressure from movies-by-mail service Netflix, DVD kiosk company Redbox and delivery of movies and TV shows over the Internet.

U.S. airlines are doing better at staying on schedule. The government says that the airlines averaged an 80 percent on-time arrival rate in March. That’s an improvement on February’s rate, and better than March 2009. The Transportation Department says four flights were stuck on the tarmac for longer than four hours in March. New rules that took effect in late April now could hit airlines with big fines for delays of more than three hours.

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