Archive for August, 2010

U.S. officials saw drilling ban costing jobs: report (Reuters)

Friday, August 20th, 2010 | Finance News

WASHINGTON (Reuters) – Senior U.S. officials expected the deepwater drilling ban to cost about 23,000 jobs and hold up $10.2 billion in investments, The Wall Street Journal reported on Friday, citing federal documents.

The Obama administration issued the initial moratorium in late May after the huge BP Plc oil spill in the Gulf of Mexico. The ban spurred opposition from oil companies and local lawmakers who said it would exact a heavy toll in jobs and hurt crude production in coming years.

After a federal judge threw out the original ban partly on grounds it was economically unjustified, the Interior Department issued a new moratorium on July 12, barring new oil drilling in the Gulf of Mexico through November 30.

The Journal said new documents shed light on the Obama administration's deliberations on the economic impact of its drilling moratorium.

According to the documents, the top offshore drilling regulator, Michael Bromwich, told Interior Secretary Ken Salazar the halt on new drilling "will have a significant economic impact on direct and indirect employment in the oil and gas industry, as well as other secondary economic consequences," the newspaper said.

A federal regulatory agency memo predicted the moratorium would affect about 9,450 workers in "lost direct employment" and 13,797 more in jobs lost through indirect effects, according to the newspaper.

U.S. officials signaled previously they expected serious economic ramifications from the moratorium.

In July, federal forecasters predicted a cut in oil production in 2011 by 82,000 barrels per day, or almost 30 million barrels, due to delayed or canceled drilling caused by the moratorium.

The Journal said the Justice Department filed the disclosed documents in the latest round of litigation over the federal drilling ban in a New Orleans federal court.

The latest lawsuit was filed on Tuesday by Ensco Plc challenging the new moratorium as mostly the same as the first ban the U.S. court put on hold.

The Obama administration has defended the need for suspending deepwater drilling, saying it gives officials more time to investigate the cause of the BP disaster, issue new safety regulations and improve oversight.

(Reporting by Alina Selyukh; Editing by Peter Cooney)

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Regulators close well-connected ShoreBank (Reuters)

Friday, August 20th, 2010 | Finance News

CHICAGO (Reuters) – Regulators on Friday seized notable Chicago-based community development bank ShoreBank after Wall Street backers failed to rescue the institution, and its deposits will be taken over by a newly-chartered bank.

ShoreBank, a privately owned bank with a national reputation for its philanthropic activities, had received multi-million dollar investment commitments from Goldman Sachs, Citigroup, JPMorgan and Bank of America, as well as from General Electric.

But the bank, which was put on the ropes when the recession hit its lower-income borrowers especially hard, was unable to secure the funds it was seeking from the government's Troubled Asset Relief Program, or TARP, it needed to match private-sector pledges.

ShoreBank's deposits will be taken over by a newly-chartered institution called Urban Partnership Bank. Its 15 branches also will shift to the new bank.

The Federal Deposit Insurance Corp said the bank had $2.16 billion in assets and $1.54 billion in deposits.

It is one of the larger banks to fail in recent months and the 114th FDIC-insured institution shut down so far this year.

Regulators expect the closures to peak this quarter, as the community bank industry continues to struggle under the weight of poor-performing loans, many tied to commercial real estate.

Attempts to rescue ShoreBank have played out in the media for months, with lawmakers and watchdogs questioning whether special treatment was being given to the bank.

ShoreBank is located on Chicago's South Side near the home base of President Barack Obama and some of his top aides, and the bank has promoted on its website connections to Obama.

The bank has some prominent supporters with strong ties to Washington, including Ellen Seidman, former director of the U.S. Office of Thrift Supervision, and Eugene Ludwig, former U.S. Comptroller of the Currency.

ShoreBank has received national recognition over the years for its efforts to extend loans to low-income communities and environmental cause.

But bank activity with a philanthropic bent has not been profitable lately. For the quarter ending March 31, ShoreBank reported a $17.1 million operating loss, compared with an operating profit of $384,000 in the year-earlier period.

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Dominion, Marathon Oil pay $6.9 million settlement (AP)

Friday, August 20th, 2010 | Finance News

HOUSTON – Marathon Oil Co. and Dominion Oklahoma Texas Exploration and Production Inc. will pay $6.9 million to resolve claims the two Houston-based energy companies separately underpaid natural gas royalties to the government and Native Americans, the Department of Justice said Friday.

Most of the $2.2 million paid by Dominion Oklahoma Texas and $4.7 million by Marathon will be distributed to federal, state and American Indian accounts affected by the underpayments, the department said in an announcement from Washington. More than $1.8 million will go to heirs of a whistleblower who filed a lawsuit more than a decade ago in Beaumont.

Companies are required to report to the Interior Department each month the value of natural gas produced from their federal and Indian leases. A percentage of that value is paid as royalties.

The government contended the companies made improper deductions from royalty values and violated the False Claims Act by underpaying the royalties.

Assistant Attorney General Tony West said mineral royalties provide an important source of income for Native Americans, the federal government and several states.

The man who filed a lawsuit over the issue in 1998, Harrold Wright, has died, and his heirs will receive payment under the whistleblower provisions of the False Claims Act. The law allows private citizens to file actions on behalf of the United States and share in any recovery.

Wright's suit alleged a number of energy companies systematically underpaid royalties. Settlements with other companies have already been reached. Burlington Resources agreed to pay $105.3 million. Shell paid $56 million. Chevron, Texaco and Unocal agreed to $45.5 million, and Exxon Mobil settled for $32.3 million.

Messages left with the energy companies and the law firm representing the Wright estate were not immediately returned.

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