Closing the Gulf Oil Leak -- Almost There

It's remarkable the way the Obama administration is demanding BP develop back-up plans for its back-up plans. The government is worried about more failures at BP's leaking oil well. It is right for the government to worry about the success of BP's efforts, and thus fair to expect the company to develop alternative plans should something else go wrong.

Ironically, when crafting emergency plans for the entire nation, the government ignores this piece of clear thinking. Unlike BP, at any time the government can declare success. It does exactly that.

Imagine BP declaring its efforts to cap the leaking well were successful while observers were recording the spreading of the oil slick across the Gulf waters. While tar balls are collecting on beaches. But Joe Biden has repeatedly announced the success of the Obama Stimulus Plan. Really? Even though the economy is in dire straits -- painfully evident to all -- Biden and other members of the Obama Administration are claiming we are on the mend. Please.

Who you gonna believe? The Obama Administration or your lying eyes?

BP Sets New Spill Target

Aims to Cap Well by July 27 Earnings; Backup Plans as Obama, Cameron Meet

BP PLC is pushing to fix its runaway Gulf oil well by July 27, possibly weeks before the deadline the company is discussing publicly, in a bid to show investors it has capped its ballooning financial liabilities, according to company officials.

At the same time, BP is readying a series of backup plans in case its current operations go awry. These include connecting the rogue well to existing pipelines in two nearby underwater gas and oil fields, according to company and administration officials.

Much of the additional planning has been pushed by the U.S. government, which has urged BP to develop what one official called the "backup to the backup plan." Both BP and the federal government are concentrating on their next steps, particularly because of uncertainty caused by the imminent hurricane season and the protracted political and financial damage caused by the endless spill.

Both BP and the Coast Guard continue to state publicly they're aiming to have a fix in place in early to mid-August. BP has discussed its backup plans only with administration officials, who in turn have briefed President Barack Obama.

The July 27 target date is the day the company is expected to report second-quarter earnings and will speak to investors. BP also wants to show progress by July 20, the day U.K. Prime Minister David Cameron is scheduled to visit the White House.

"In a perfect world with no interruptions, it's possible to be ready to stop the well between July 20 and July 27," said the head of BP's Gulf Coast restoration unit, managing director Bob Dudley, in an interview. He added that this "perfect case" is threatened by the hurricane season and is "unlikely."

On Wednesday, on a visit to the Discoverer Enterprise, the ship that's collecting oil from the well, Mr. Dudley got word of a nine-day period of clear weather starting Friday, a period that could prove critical to the effort.

BP is drilling two relief wells through which it will pump material designed to seal the leaking well. One is now 12 feet horizontally and 300 feet vertically from the target spot.

Billy Brown, president of Blackhawk Specialty Tools, a BP contractor helping with the relief-well process, said Wednesday the effort is progressing ahead of schedule.

Mindful of prior snafus, BP has quietly crafted backup plans. The first would force spewing oil to a depleted gas field on the ocean floor two miles away. The second would move the oil to an existing underwater oil field nine miles away. Both require laying flow lines, either flexible or hard steel piping, to connect the leaking well to existing wellheads on these older sites.

The engineers described their plans at a seven-hour meeting last week featuring BP engineers and Energy Secretary Steve Chu, held at BP's Houston crisis center. Mr. Chu said he told them: "Force yourself to think each one will fail." In an interview, he added: "We're in new territory full of perils, and nothing is a slam dunk."

BP's Mr. Dudley reviewed Wednesday the company's engineering work with retired Coast Guard Admiral Thad Allen, who heads the Obama administration's effort.

Flying by helicopter to the ship collecting oil, the two men discussed the backup options. All around the ship, 43 miles offshore, the ocean was tinged orange.

The stakes are huge for BP, which has lost nearly half of its market capitalization since the explosion aboard the Deepwater Horizon rig April 20.

The company's board is setting up a "Gulf of Mexico" committee for a few directors to delve deeply into the disaster's safety and financial implications.

When they announce earnings July 27, BP officials hope to provide investors with more information on the estimated liabilities from the Gulf spill.

One official said the company wants to be able to describe the oil spill as finite, not infinite, a moment that would allow it to start calculating the total potential liabilities under U.S. law.

To prepare Prime Minister Cameron to speak with Mr. Obama about one of the U.K.'s largest companies, British Ambassador to the U.S. Nigel Sheinwald last Friday attended BP briefings in Houston and New Orleans and then toured the damaged Florida coast. He also met Coast Guard officials.

Support ships are seen near the Discoverer Enterprise drilling rig, right, as they continue the effort to recover oil from the Deepwater Horizon spill site on July 3, 2010 in the Gulf of Mexico off the coast of Louisiana.

At Wednesday's trip to the spill site, Mr. Dudley and Adm. Allen evaluated a prospect for controlling the spill—a newly designed cap to replace the leaky one currently directing oil to ships on the surface.

The risk: removing the old cap could exacerbate the spill in the short run.

At the administration's prodding, BP created a new device called an "autonomous subsea dispersant system." Environmental Protection Agency head Lisa Jackson told BP to create such a capability to monitor and measure chemicals used underwater to break up the oil. The large volume of dispersants used has concerned scientists and some government officials.

House Panel Notes Gaps In Cleanup Research. Access thousands of business sources not available on the free web. Learn More .In recent days, the company has installed new battery-powered equipment on the ocean floor that will inject dispersant into the flowing well. Typically, the dispersants are controlled by ships on the surface, but they may have to move if storms hit.

Separately, the BP-dominated consortium that operates the Trans-Alaska Pipeline, Alyeska Pipeline Service Co, said Chief Executive Kevin Hostler will retire in September.

Mr. Hostler, a former senior BP executive, had faced accusations from U.S. lawmakers that efforts to cut costs put the integrity of the pipeline at risk.

Government Motors, Government Housing, Government Healthcare

Government blabbers are preparing the public for the inevitable. What's that? The announcement informing the taxpayers about the New GM failing to repay the its bailout money. Of course that is only the start. The administration will probably whisper -- only if asked -- about the pension and healthcare benefits of the United Auto Workers that have been shifted to taxpayers.

Management at the New GM may have dreams of repaying the borrowed funds. But the new smaller company with its new smaller revenue stream and the high prospect of disastrous failure for the Chevy Volt, GM's electric vehicle that will sell like the Edsel, is likely to doom all possibilities of repayment.

The Obama administration hopes to recoup the cash given to GM with a sale of stock. Why would investors by the stock of the New GM? As with any company hoping to attract investors, GM must tell a convincing tale of a bright future.

Well, what lies ahead for GM? For starters, an extraordinarily competitive car market. Has the new GM got the goods? Or is the new management offering hype? Too soon to tell. The company seems to have a couple of good models in its portfolio. Is that enough to drive the value of GM's equity to a record high? Not too likely.

If the company lacks enough winning designs, lacks effective marketing, lacks sufficient quality and lacks the power to price its products competitively, is it possible for its stock to soar as high as the Obama administration dreams?

Is it possible for the New GM to pound out a reliable income stream like the tobacco companies? Philip Morris sells cigarettes to addicts. Business is good, but the number of customers is unlikely to grow much. However, investors enjoy big dividend payments. Meanwhile, the government receives huge tax payments from the tobacco companies and huge payments of sales taxes from smokers.

If only smoking was good for your lungs. But, that's another problem for voters and taxpayers. Too bad for GM that it has none of the aspects of tobacco that keep tobacco stocks afloat.

Creeping governmentalism. What's next? Housing. When will legislators decide it's time to relieve the private sector of the burden of foreclosed homes? Will taxpayers get the bill for the collapsed housing industry like they have been handed the bill for the collapsed auto industry? Cash for Clunkers was hugely popular. Has anyone in Washington begun to fantasize about Bucks for Buildings? Dollars for Domiciles?

As painful as a housing plan may be, it will cost pennies compared with the coming healthcare crusher.

Taxpayers face heavy losses on auto bailout

Taxpayers likely to face significant losses on $81 billion auto bailout, watchdog report says

Wednesday September 9, 2009

WASHINGTON (AP) -- Taxpayers face losses on a significant portion of the $81 billion in government aid provided to the auto industry, an oversight panel said in a report to be released Wednesday.

The Congressional Oversight Panel did not provide an estimate of the projected loss in its latest monthly report on the $700 billion Troubled Asset Relief Program. But it said most of the $23 billion initially provided to General Motors Corp. and Chrysler LLC late last year is unlikely to be repaid.

"I think they drove a very hard bargain," said Elizabeth Warren, the panel's chairwoman and a law professor at Harvard University, referring to the Obama administration's Treasury Department. "But it may not be enough."

The prospect of recovering the government's assistance to GM and Chrysler is heavily dependent on shares of the two companies rising to unprecedented levels, the report said. The government owns 10 percent of Chrysler and 61 percent of GM. The two companies are currently private but are expected to issue stock, in GM's case by next year.

The shares "will have to appreciate sharply" for taxpayers to get their money back, the report said.

For example, GM's market value would have to reach $67.6 billion, the report said, a "highly optimistic" estimate and more than the $57.2 billion GM was worth at the height of its share value in April 2008. And in the case of Chrysler, about $5.4 billion of the $14.3 billion provided to the company is "highly unlikely" to ever be repaid, the panel said.

Administration officials have previously said they want to maximize taxpayers' return on the investment but want to dispose of the government's ownership interests as soon as practicable.

"We are not trying to be Warren Buffett here. We are not trying to squeeze every last dollar out," Steve Rattner, who led the administration's auto task force, said before his departure in July. "We do want to do well for the taxpayers but the most important thing is to get the government out of the car business."

Greg Martin, a spokesman for the new GM, said the company is "confident that we will repay our nation's support because we are a company with less debt, a stronger balance sheet, a winning product portfolio and the right size to match today's market realities."

Flight Plan for the Auto Industry

When it comes to commercial aviation, there are two certainties -- bankruptcy and better airplanes. Warren Buffett said it would have a favor to every airline investor if someone had shot down the Wright Brothers on their big day at Kitty Hawk. Instead, airlines have come and gone while engineers have designed better and better aircraft over the last 100 years.

However, it appears that Boeing now believes the creative destruction of capitalism may pose too big a threat and that a little relief is in order. How much lighter and more fuel efficient can aircraft become? To ensure its future the company has proposed a plan to improve the entire aviation industry with a mix of private and public capital. It's interesting to see this development in an industry in which every airline has gone bankrupt, and it is especially interesting considering the bankruptcies of Chrysler and GM. Nevertheless, a hundred years of existing on the edge of failure has led to extraordinary developments in aviation.

For much of the last 50 years most of the auto industry was insulated from the harsh discipline of the markets. However, those days are gone. The painful and transforming experience of the aviation industry over the last century shows that the domestic auto industry can respond with equal or greater success. No doubt it will survive and probably begin producing some great cars and trucks soon. But it's all about giving the customers what they want. Not what politicians and bureaucrats want.

MAY 23, 2009

How Boeing Fights Climate Change
The efficiency of jets has increased by 70% over the past 50 years.

Addressing climate change is a particularly difficult challenge for commercial aviation. While technologies like batteries work for cars, they don't work for airplanes that require powerful propulsion systems. The good news is that there are things we can do to significantly reduce the carbon footprint of commercial planes -- and we're well on our way.

At Boeing, we're tackling carbon emissions on three fronts.

First, we are working to make each new generation of airplane lighter and more fuel efficient. There's plenty of incentive to develop more efficient airplanes.

Historically, fuel has been the airlines' second-biggest operating expense next to labor. Last year, with oil reaching $140 a barrel, fuel costs even outstripped labor costs, rising to 40% of total airline operating expenses. So airlines have demanded increased efficiency from airplane and engine manufacturers. And manufacturers have responded big time.

Over the past 50 years, the efficiency of commercial jets has risen an astounding 70%. This means that carbon emissions per mile flown have dropped 70% -- all without a regulatory requirement for greenhouse gas emissions.

That said, we believe properly structured regulations could be useful. It's not often that an industry asks for additional regulation, but Boeing, GE and other airplane and engine manufacturers are convinced that a fuel-efficiency standard for new airplanes is an effective way to drive the development of fuel-saving technologies.

Specifically, we're advocating for an efficiency standard for new airplane designs. An efficiency standard would be straightforward and easier to implement than a standard for aircraft operators. And it would help ensure that we continue to see the kind of technological and environmental breakthroughs we pioneered with the 787. The International Civil Aviation Organization should define the new standard, just as it successfully established global standards for both airplane noise and oxides of nitrogen emissions.

While it's important to make airplanes more efficient, it's also critical that the system in which they fly is modernized. That's why our second major initiative is the work we're doing to improve air-traffic management.

Fortunately, the technologies needed to give controllers and pilots a more precise picture of weather conditions and airplane positions, and the networking technologies needed to instantaneously share that information, already exist.

Precision information, commonly shared, safely enables such fuel-saving and emissions-reducing operational changes as continuous, low-power descents, more direct routing, closer spacing, and curved approaches to landing. The challenge is getting the government to make the Federal Aviation Administration's plan for implementing these technologies, called NextGen, a priority.

The government should commit long-term funding to ensure that it's completed as swiftly as possible.

Third, we have been testing various advanced, sustainable biofuels with the goal of finding renewable fuels for aviation that don't compete with food crops for land and water and that emit 50%-80% less carbon than petroleum.

We have conducted test flights using mixtures of standard jet fuel and several different sustainable biofuels, among them fuels made from algae and camelina (a plant that produces seeds that aren't used for food). All performed extremely well in flight.

What's more, we have demonstrated that these and other sustainable biofuels have a lower freeze point than petroleum -- a very important characteristic for aviation. They also can have higher energy content per gallon.

We're confident that sustainable biofuels will be price competitive with petroleum in the long-term. But government help -- consistent with international trade agreements -- is needed to get an aviation biofuels industry up and running.

One proposal is that government could provide loans to refiners to make biofuels competitive when the price of petroleum is low and get repaid when the price of petroleum is high. We hope government officials will seriously consider such ideas because biofuels, in our view, are the ultimate answer to aviation's carbon-emissions challenge.

These three initiatives represent the best path forward for reducing aviation's carbon footprint. Establishing an international fuel-efficiency standard, modernizing air-traffic management, and commercializing an aviation biofuels industry would seriously address the issue of climate change. Our industry is eager to take on this challenge, but we need government help to make it happen.

Mr. Carson is president and CEO of Boeing Commercial Airplanes.

Obama, the New Screaming Ray Nagin

It's becoming painfully clear that Obama depends on fear to get his way. It's his big stick, his lever. Telling citizens the end is near. That's his game and people are falling for it.

His attitude exudes contempt for Americans, as though Americans are such hapless fools they will believe him no matter how preposterous his claims. As though he's thundering away, terrorizing ignorant villagers about the evil that has taken root in the land and in the people and that the only path to safety and health involves an exorcism that will cost more than anyone understands. He's bamboozling as fast as he's able. The Great Bamboozler. Welcome to the O-conomy of Obama.


Obama's Rhetoric Is the Real 'Catastrophe'

In 1932, automobile production shriveled by 90%.

President Barack Obama has turned fearmongering into an art form. He has repeatedly raised the specter of another Great Depression. First, he did so to win votes in the November election. He has done so again recently to sway congressional votes for his stimulus package.

In his remarks, every gloomy statistic on the economy becomes a harbinger of doom. As he tells it, today's economy is the worst since the Great Depression. Without his Recovery and Reinvestment Act, he says, the economy will fall back into that abyss and may never recover.

This fearmongering may be good politics, but it is bad history and bad economics. It is bad history because our current economic woes don't come close to those of the 1930s. At worst, a comparison to the 1981-82 recession might be appropriate. Consider the job losses that Mr. Obama always cites. In the last year, the U.S. economy shed 3.4 million jobs. That's a grim statistic for sure, but represents just 2.2% of the labor force. From November 1981 to October 1982, 2.4 million jobs were lost -- fewer in number than today, but the labor force was smaller. So 1981-82 job losses totaled 2.2% of the labor force, the same as now.

Job losses in the Great Depression were of an entirely different magnitude. In 1930, the economy shed 4.8% of the labor force. In 1931, 6.5%. And then in 1932, another 7.1%. Jobs were being lost at double or triple the rate of 2008-09 or 1981-82.

This was reflected in unemployment rates. The latest survey pegs U.S. unemployment at 7.6%. That's more than three percentage points below the 1982 peak (10.8%) and not even a third of the peak in 1932 (25.2%). You simply can't equate 7.6% unemployment with the Great Depression.

Other economic statistics also dispel any analogy between today's economic woes and the Great Depression. Real gross domestic product (GDP) rose in 2008, despite a bad fourth quarter. The Congressional Budget Office projects a GDP decline of 2% in 2009. That's comparable to 1982, when GDP contracted by 1.9%. It is nothing like 1930, when GDP fell by 9%, or 1931, when GDP contracted by another 8%, or 1932, when it fell yet another 13%.

Auto production last year declined by roughly 25%. That looks good compared to 1932, when production shriveled by 90%. The failure of a couple of dozen banks in 2008 just doesn't compare to over 10,000 bank failures in 1933, or even the 3,000-plus bank (Savings & Loan) failures in 1987-88. Stockholders can take some solace from the fact that the recent stock market debacle doesn't come close to the 90% devaluation of the early 1930s.

Mr. Obama's analogies to the Great Depression are not only historically inaccurate, they're also dangerous. Repeated warnings from the White House about a coming economic apocalypse aren't likely to raise consumer and investor expectations for the future. In fact, they have contributed to the continuing decline in consumer confidence that is restraining a spending pickup. Beyond that, fearmongering can trigger a political stampede to embrace a "recovery" package that delivers a lot less than it promises. A more cool-headed assessment of the economy's woes might produce better policies.