Tuesday PM June 15th, 2010

BP and other oil majors appear before Congressional committee; BP given go-ahead to begin oil burn…End of incentives blamed for slowdown in home sales…Latest version of Microsoft’s Office now available to consumers and small businesses…


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The head of BP America is telling Congress that despite the catastrophic oil spill, the U.S. cannot do without oil from the Gulf of Mexico. BP America chairman and president Lamar McKay told a House panel in prepared testimony that America’s economy, security and standard of living “significantly depend upon domestic oil and gas production.” He said that companies have operated in the Gulf safely and reliably. The Associated Press obtained a copy of his remarks prior to delivery. McKay warned that reducing energy production without consumption would shift jobs offshore–and put millions of additional barrels onto tanker ships that travel across oceans.

Two Congressmen reviewing oil spill response plans of the nation’s five largest oil companies say they are nearly identical–and are all unprepared for an oil spill. Representative Ed Markey, chairman of a House energy panel, said the plans “cite identical response capabilities and tout identical ineffective equipment.” The committee looked at plans of BP along with those of ExxonMobil, Chevron, ConocoPhillips and Shell Oil. Markey said at a hearing that two plans list the phone number for the same dead expert, and three include references to protecting walruses–which don’t live in the Gulf. Committee Chairman Henry Waxman called them “cookie cutter plans,” and said they are as unprepared as BP was to respond to a spill.

The CEO of ExxonMobil tells Congress that the Gulf oil spill wouldn’t have happened if BP had properly designed its deepwater well, followed procedures, trained its employees and conducted adequate tests. Exxon’s Rex Tillerson was testifying on Capitol Hill with other oil company executives before the House Energy and Commerce Committee. He told lawmakers the 1989 Exxon Valdez tanker spill changed the way his company operated. In prepared testimony, Tillerson wrote that Irving-based Exxon doesn’t go ahead with operations “if we cannot do so safely.”

BP now has the go-ahead to start burning oil and gas piped up from the damaged well. It’s part of the company’s effort to more than triple how much crude it is keeping from pouring into the Gulf. Federal authorities late yesterday gave the company permission to use a new technique. It involves pumping oil from the busted wellhead to a special ship on the surface. There, it will be burned off, rather than collected. BP announced that it hopes to trap as much as 2.2 million gallons of oil a day by the end of June as it deploys additional containment equipment.

Presidential spokesman Robert Gibbs says the administration is ready to take over the handling of oil spill damage claims from BP if the British company doesn’t set up an “independent entity” to do it. Speaking from Washington, Gibbs said the oil giant’s claims processing work has been unsatisfactory. He noted that Obama “has the legal authority” to make the claims process independent. And Gibbs also said “the best way to prevail upon BP is to take the claims process away from BP.” Interviewed on CBS’s The Early Show, Gibbs pledged “the president will either legally compel them or come to an agreement with BP to get out of the claims process, give that to an independent entity.”

Billionaire oilman T. Boone Pickens is urging investigators to leave BP alone for now while the oil company works to stop the spewing oil. “I don’t know (if BP was negligent in the blowout), but I don’t like the investigation going on when we’re trying to fix the problem,” Pickens told reporters, “because nobody’s going to run off. We’ve got plenty of time to investigate it.” Government estimates put the total amount of crude spilled into the Gulf of Mexico at between 40.7 million and 114.5 million gallons. A containment cap has been placed over the damaged well, siphoning off some of the oil spewing out from 5,000 feet below the ocean’s surface.

Kevin Costner will have a role to play in the cleanup of the Gulf. A spokesman for BP says the company has contracted with the actor and a company called Ocean Therapy Solutions to use 32 of their centrifuge machines. They are designed to separate oil from water. The BP spokesman says, “we recognized they had potential and put them through testing.” He says the testing was done in shallow and deep water, and that the company was “very pleased by the results.” Costner has tens of millions of dollars invested in the centrifuge. He has said it can clean oil from more than 200-thousand gallons of water a day.

The oil spill is affecting the oyster supply, but not because of contamination from crude. A leading restaurant operator says there are edible oysters in the Gulf, but no one to harvest them. Lucien Gunter, who operates Acme Oyster House, says a thousand oystermen have been idled by BP in anticipation of being needed to clean up oil. Gunter says he has seen oyster prices go from $23 dollars a five-pound gallon to $53, even though most of the oyster beds are open. Gunter says he expects oysters to top their post-Katrina high of $74–a cost that the restaurants are mostly not passing on.

Homebuilders are losing confidence in the housing market now that government incentives that spurred home sales have ended. The National Association of Home Builders says its housing market index fell to 17 in June, sinking five points after two straight months of increases. It was the lowest level since March. Builders had been more optimistic earlier in the year when buyers could take advantage of tax credits of up to $8,000. Those incentives expired on April 30th, although buyers with signed contracts have until June 30th to complete their purchases. Without the credits, “the reduction in consumer activity may have been more dramatic than some builders had anticipated,” said Bob Jones, a homebuilder from Bloomfield Hills, Michigan.

The Federal Reserve has adopted rules aimed at protecting credit card customers from getting socked by lofty late payment charges and other penalty fees. The new rules will bar credit card companies from charging a penalty fee of more than $25 for paying a bill late. They prohibit credit card companies from charging penalty fees that are higher than the dollar amount associated with the customer’s violation. They also ban so-called “inactivity” fees when customers don’t use the account to make new purchases and they prevent multiple penalty fees on a single late payment. The rules take effect on August 22nd.

The outgoing president of the United Auto Workers says the union will keep fighting for legislation that makes it easier for workers to organize. In his final speech after eight years leading the union, Ron Gettelfinger urged members to back union-friendly candidates in November. He says conservatives showed their contempt for the UAW when they opposed the government’s bailout of General Motors and Chrysler. The UAW members will choose a new president next week. Longtime vice president Bob King is expected to be elected. But he does face a challenge from workers angry about wage concessions that Gettelfinger agreed to.

Two companies that top a list of worse-than-average complaint records in 2009 are being investigated by the Texas Department of Insurance. The Dallas Morning News reports on its analysis of department figures. Complaints against Loya Insurance and Old American County Mutual included delays in processing claims, unsatisfactory offers or settlements, denial of claims and liability issues. Loya Vice President Edgar Meza says many complaints involve market value of vehicles and coverage. Meza says complaints against Loya are down this year and the company takes such complaints seriously. Dallas-based Old American County Mutual had a complaint index more than three times worse than a typical company. Old American did not immediately comment.

The latest version of Microsoft’s Office software is now available to consumers and small businesses. The most basic bundle of Word, Excel, Powerpoint and OneNote, called Office Home and Student 2010, will cost $150. The programs can be installed on as many as three home computers. There are more expensive versions that include the Outlook e-mail program and one that adds Publisher, a desktop publishing program, and Access, a database. For the first time, Microsoft is also launching free Web-based versions of the four core Office programs. They will have fewer features than the desktop software.

American Airlines expects second-quarter unit revenue to rise between 16.5 percent and 17.5 percent from a year earlier. The airline said in a Securities and Exchange Commission filing that revenue from cargo and other services will rise between 11.8 and 12.8 percent compared with the second-quarter of 2009. Parent AMR expects to end the second quarter with a cash and short-term investment balance of approximately $5.5 billion.

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