Obama’s Keystone XL decision will set tone for 2nd term

It’s a decision U.S. President Barack Obama put off during this year’s election campaign, but now that he’s won a second term, his next move on the proposed oil pipeline between Alberta and Texas may signal how he will deal with climate and energy issues in the four years ahead.

Obama is facing increasing pressure to determine the fate of the $7-billion Keystone XL project, with environmental activists and oil producers each holding out hope that the president, freed from the political constraints of re-election, will side with them on this and countless other related issues down the road.

Canada’s main pipeline network
Check out Canada’s proposed and existing pipeline routes

On its surface, it’s a choice between promises of jobs and environmental concerns. But it’s also become a proxy for a broader fight over U.S. energy consumption and climate change.

“The broader climate movement is absolutely looking at this administration’s Keystone XL decision as a really significant decision to signal that dirty fuels are not acceptable in the U.S.,” said Danielle Droitsch, a senior attorney with the Natural Resources Defense Council.

Once content with delays that have kept Calgary-based TransCanada Corp.’s proposed pipeline from moving forward at full speed, opponents of Keystone XL have launched protests in recent weeks at the White House and in Texas urging Obama to kill the project outright. On Capitol Hill, support for the pipeline appears to be gaining.

But Obama has shown little urgency about the pipeline, which would carry Alberta’s oilsands crude nearly 2,700 kilometres from Hardisty, Alta., to refineries on Texas’s Gulf Coast. The pipeline requires U.S. State Department approval because it crosses an international boundary.

The pipeline became an issue in the campaign, and Obama put it on hold while a plan was worked out to avoid routing it through Nebraska’s environmentally sensitive Sandhills region.

TransCanada revised the route, but that caused the lengthy environmental review process to start over. In the meantime, the company split the project into two parts, starting construction in August on a southern segment between Oklahoma and Texas even as it waits for approval for the northern segment that crosses the Canadian border.

Although the lower leg didn’t require Obama’s sign-off, he gave it his blessing in March anyway, irking environmental activists who see the pipeline as a slap to efforts to reduce oil consumption and fend off climate change.

“At a time when we are desperately trying to bend the emissions curve downwards, it is wrong to open up a new source of energy that is more carbon intensive and makes the problem worse,” wrote former U.S. vice-President Al Gore, now a Nobel Prize-winning climate activist, in an email.

New capacity not needed, report found

The pipeline’s proponents are touting access to affordable energy to try to find bipartisan appeal on the issue.

“It’s just a no-brainer,” Senator Mary Landrieu, a Louisiana Democrat, said. “Canada is going to export this oil. It’s either going to come to the U.S. or it’s going to go to Russia or China. Even Democrats that aren’t really excited about oil and gas development generally can figure that out.”

Protesters including U.S. actress Daryl Hannah, centre, denounce the planned Keystone XL pipeline outside the White House in August 2011. Protesters including U.S. actress Daryl Hannah, centre, denounce the planned Keystone XL pipeline outside the White House in August 2011. (Saul Loeb/AFP/Getty)

But critics point out that there’s abiding questions about how much of the oil piped to the U.S. would actually remain there. Oil companies’ own plans show they intend to export much of the refined products to Asia and Europe.

And it’s been hotly debated whether the increased oil-carrying capacity from the pipeline is even needed. A report commissioned by the U.S. government itself rebuts the idea, saying that there is already enough pipeline capacity to the U.S. to deliver petroleum from Western Canada until at least 2030.

The messy politics may demonstrate why Obama punted the decision until after the election. Now both sides are applying pressure with renewed vigour.

A TransCanada spokesman said the company expects a decision by the State Department, which is determining whether the pipeline is in the national interest, in the first quarter of 2013, and hopes to start construction on the upper portion shortly thereafter. The longer the decision drags on, the less realistic that timeline appears to be.

Officials in Nebraska are close to completing their own study of the revised route, with a public hearing planned for Tuesday ahead of a final decision by Gov. Dave Heineman.

With files from CBC News
© The Associated Press, 2012
The Canadian Press

Several dead, missing in Tokyo tunnel collapse

At least seven people are feared missing and several are dead after parts of a tunnel collapsed on a highway west of Tokyo, trapping vehicles as smoke from a fire inside initially prevented rescuers from approaching.

Local media reported at least three bodies had been found. However, officials said they could not confirm the exact number of people believed dead.

Video footage from cameras inside the tunnel, after the fire was extinguished, showed firefighters picking their way through cement roof panels that collapsed onto vehicles inside the Sasago Tunnel, about 80 kilometres outside the city.

Rescuers look for the injured among fallen roof panels in the Sasago Tunnel. Rescuers look for the injured among fallen roof panels in the Sasago Tunnel. (Kyodo News/Associated Press)

However, local media reported rescuers had suspended work out of fears of another collapse in the tunnel.

A woman who escaped from her rental car after it was trapped in the 4.3-kilometre-long tunnel told authorities she was unsure about the condition of five other people who had been in the vehicle with her.

Another two vehicles were known to be buried in the rubble, suggesting at least seven people were trapped inside.

The Fire and Disaster Management Agency issued a statement late Sunday saying five people were confirmed to have been in a car that burned inside the tunnel, and at least one other was in a truck.

The agency also said two people were confirmed injured, one of them moderately.

Executives for Central Japan Expressway Co. said the company was investigating why the concrete panels had given way. A check of the tunnel’s roof in September and October found nothing amiss, they told the Associated Press.

Approximately 150 panels fell from the roof, affecting about 110 metres of the tunnel.

Police vehicles, fire trucks and ambulances were massed outside the tunnel’s entrance. A man who said he saw the collapse and alerted authorities to the emergency told NHK television he managed to escape after he was ordered to flee.

The roof and windows of another vehicle parked on the roadside outside the tunnel were crushed, and the injured occupants reportedly taken to a hospital.

The Sasago Tunnel, which opened in 1977, is one of many along Japan’s mountainous lanscape. It is widely used, with tens of thousands of cars likely passing through in a single weekend, according to local media.

With files from the Associated Press

Slow growth could put £81bn dent in Chancellor’s plans

The grim news comes as the Chancellor’s independent watchdog, the Office for Budget Responsibility, prepares to run a torrent of red ink over its borrowing forecasts as growth disappoints – potentially leaving Mr Osborne to impose yet more austerity measures.

In March ‘s Budget the OBR pencilled in growth of 0.8 per cent this year, rising as high as 3 per cent in 2015. But the lingering impact of the eurozone crisis has prompted most forecasters such as the International Monetary Fund to dramatically slash growth predictions for the UK, with the Bank of England following suit earlier this month.

Reduced growth means a surge in government borrowing over the next four years to plug the revenue shortfall, according to City economists.

George Buckley, Deutsche Bank’s chief economist, said Mr Osborne may be forced to add a cumulative £45bn to the deficit, while Philip Shaw, Investec’s chief economist, said the damage could be as great as £81bn by 2015/16.

The extra borrowing puts the Chancellor under increased pressure in his attempts to balance the underlying current budget by 2017/18 – which he may do by pencilling in more spending cuts or tax rises at the end of the five-year period – as well as putting debt as a share of GDP on a downward course in 2015/16.

The OBR may also lower its estimate of long-term trend growth for the economy – estimated at 2.3 per cent in March – which would leave him with a bigger structural hole to fill.

“Rather than miss or drop his target we suspect he will resort to the fiscal ‘dark arts’ to meet his rule,” Mr Shaw said.

Alongside more cuts after the next election, other options available include bringing forward spending – so debt could be shown to be falling in 2015-16 – as well as privatisations such as the Royal Mint.

The £35bn in interest payments racked up by the Bank of England through its quantitative easing programme to boost growth are also being seized by the Treasury, flattering the public finances in the short term.

“The Chancellor does have some options to enable the OBR to conclude that he is on track to meet his fiscal rules, even though several of them are the budgetary equivalent of conjuring tricks,” Mr Shaw added.

Grandee lashes out

Michael Spencer, the City tycoon and Conservative donor, has hit out at the slow-moving coalition, saying the Government must throw its weight more firmly behind business. The founder of the brokerage Icap said: “The coalition is very much like a three-legged race, where Cameron and Clegg have had their legs tied together. I think that has deeply hampered decision-making.”

Centrica writes off £200m to quit nuclear power project

Centrica has the option of taking a 20 per cent stake in building nuclear power stations at Hinkley Point in Somerset and Sizewell in Suffolk alongside French group EDF.

However, chief executive Sam Laidlaw, right, is almost certain to confirm that Centrica will leave the project at the “final investment decision”in January, having spent virtually all its share of the £1bn in upfront costs that the companies had budgeted to the end of 2012.

This will mean that there is no British involvement left in the three consortiums established to build nuclear plants to bridge the country’s impending energy gap. EDF is likely to seek a new partner and was cheered last week when Hinkley Point was granted the UK’s first nuclear site licence in 25 years.

Centrica fears it cannot make the financial numbers work, as the cost of reactors has gone up from £4.5bn to £7bn each. It is likely to focus on US expansion instead.

Mulberry fights back with expansion strategy

The Somerset-based group will also develop its clothing line, worn by the Duchess of Cambridge this week, and produce new fashion products to expand its market reach.

The brand, which issued a profit warning in October – its second this year – that sent its shares tumbling by more than a fifth, will step up its global store expansion. It is eyeing up new stores in France and Germany and across the US, as well as new Asian stores.

Mulberry has already begun to reduce the number of retailers that it sells to on a wholesale basis. The reason behind the move to full-price stores is to control margins.

Margins will be a key focus for investors when the chief executive, Bruno Guillon, unveils half-year results to October this week. Mr Guillon, who has been at the brand famous for its Alexa and Del Rey handbags for eight months and was previously at LVMH and Hermès, will lay out his new strategy.

The profit warning led analysts to reduce their forecasts for the year to next March to £31m – below last year’s £36m. But Mr Guillon is expected to explain the warning as a blip – a necessity to scale back the cheaper elements of the brand and refocus on the high end. Its handbags retail at upwards of £600.

With sales of £168m last year, the group also plans to focus on more UK-made products, which make up only a fifth of sales.

The group has hired Carl Barbato as its new head of the US, based in New York. The brand opened a new store in San Francisco this summer and is also looking for shops in Chicago, Los Angeles and Boston.

In the UK, it has doubled the size of its Edinburgh store, opposite Harvey Nichols, and is searching for another in London. Mulberry will also focus on opening stores in top international airports.

The group’s shares started to recover last week, and fears of a wider slowdown of Chinese sales have largely been calmed by better recent figures.

Goldman Sachs expects China to continue to grow as a consumer of luxury goods. It predicts the luxury goods industry to grow 8.5 per cent a year to $1trn by 2025.

According to the trading house Banc De Binary, luxury retail shares have outperformed both mid-market and budget retail shares over the past 12 months. Luxury goods share prices have grown by an average of 16 per cent, compared to 11 per cent for mid-market retailer shares in the last year.

Marine firm investors attack David Ross

Minority shareholders, acting together through various online investor chatrooms, have accused him of attempting to take over the London listed business on the cheap.

They have written, as individuals, to the Takeover Panel and the Financial Services Authority, accusing Mr Ross of “abusing his position with a view to personally taking the company private at a ridiculously low price”.

Mr Ross responded this weekend. He said: “I have spent a year of my life trying to sort out a situation which I always said I would make no money out of.”

He pointed out that Cosalt is now a company whose value is half that of its pension fund liabilities, and that when he made a takeover bid for it last year, he declared the shares had no value.

He said: “I wanted to safeguard the jobs at Cosalt. Keep the company going and save the heritage of the business.”

Cosalt was created as a co-operative by fishing vessel owners in Grimsby in 1873 as the The Great Grimsby Coal, Salt and Tanning Company. It provided the salt for preserving fish, the coal for power, and the tanning for sails and ropes to much of the North-east fishing port, extending to other ports around the UK.

The business was bought out by one of the original fishing vessel owners, Carl Ross, grandfather of David and owner of the Ross frozen foods brand. The company floated on the stock market in 1971. With the decline of Britain’s fishing industry, Cosalt – after a brief and somewhat unsuccessful diversion into building caravans – has become a serious supplier of marine and safety equipment, largely to the offshore oil and gas industry.

David Ross joined the company in 2007, taking over from his father as chairman. He was forced to stand aside for a year as chairman between December 2008 and December 2009 after revelations that he had pledged shares in Carphone Warehouse against loans for his private property empire without disclosing the fact, which appeared to breach UK listing rules.

In October 2011, the company issued a profits warning, and the following month announced that Mr Ross was considering a takeover bid and had secured some of its loans.

The bid came at just 0.1p a share, valuing Cosalt at £14.4m, and was later doubled to 0.2p a share. This ended up with Mr Ross increasing his stake from 43 per cent to 56 per cent but unable to push through a full takeover.

Mr Ross’s bidding vehicle, Oval, lent cash to Cosalt, which at the last count amounted to £6m.

In the meantime, two former employees were taken to court over alleged fraud, and settled out of court for a payment of £2m. The company reported the matter to the police, but only, according to aggrieved shareholders, after the court case had been settled. Under Scottish law, the company said, it was important to seek redress before any criminal proceedings took precedent.

Last week Cosalt issued a trading statement stating that it was “in continuing discussions with David Ross, the group’s pension trustees and its banks to secure a long-term financing solution”.

A spokesman told The Independent on Sunday: “The accounts cannot be signed off because no agreement has been reached with either the company’s banks or the pension fund trustees. They want to reach a solution but it is not easy.”

Shares in Cosalt were suspended at 0.83p on the London stock market on 1 May when it announced it was unable to publish the report and accounts for 2011 within the four months required under UK listing rules.

Both the Takeover Panel and FSA declined to confirm they were investigating either Cosalt or Mr Ross.

Fears of failure for Bank lending scheme

Threadneedle Street launched the Funding for Lending Scheme (FLS), which allows financial institutions to access cheap funds in return for maintaining or increasing lending, in August. Some 30 lenders, including all the UK’s biggest banks and mutuals except HSBC, signed up.

The Bank, which took stock of the banks’ lending levels at the end of June, will publish figures on how much participants have increased credit in first three months of the FLS.

Despite initial hopes that the scheme would help the financial system to grow net lending by as much as £80bn or 5 per cent, analysts are more pessimistic.

Jens Larsen, the chief European economist at RBC Capital Markets, said: “Given that we are just two or three months into the scheme, it is likely to be something more in the order of £10bn.”

FLS works by allowing participating banks to swap eligible collateral for Treasury bills, short-term debt which is effectively as good as cash. For lenders maintaining or growing lending, the charge is 0.25 per cent plus Bank rate of 0.5 per cent. For banks whose lending declines, the fee increases by 0.25 per cent for each 1 per cent fall in lending, up to a maximum fee of 1.5 per cent.

Interest rates on mortgage loans have fallen as a result of the scheme, although figures from the Bank showed a 0.2 per cent rise in the rate charged on new corporate loans in October, leaving the average rate at the highest since January 2009. Savings rates have also suffered as banks use the cheaper funds from the Bank rather than attract retail deposits.

China Nov official factory PMI hits seven-month high

Fri Nov 30, 2012 8:35pm EST

BEIJING (Reuters) – China’s official manufacturing purchasing managers’ index rose to a seven-month high of 50.6 in November from 50.2 in October, the National Bureau of Statistics said on Saturday.

The headline figure is in line with an economist poll by Reuters this week, and confirms a trend toward recovering growth in the world’s second-largest economy.

A PMI reading below 50 suggests growth slowed, while a number above 50 indicates accelerating growth.

While growth accelerated for large firms for the third month in a row, medium and smaller companies saw a retrenchment, with the decline more pronounced for the smaller firms, the NBS said in an accompanying statement.

“The improving numbers are mostly because of government investment. From the second quarter the government has unleashed a lot of projects, and that has started to be felt in the economy, but it’s not a very healthy recovery yet,” said Dong Xian’an, economist with Peking First Advisory.

The HSBC China flash PMI – which gathers more data from smaller, privately-held firms that have a strong export focus – signaled that November growth in the manufacturing sector had quickened for the first time in 13 months with a reading of 50.4 when it was published last week, reflecting a steady uptick in the economy.

China’s economic health has improved since September, with an array of indicators from factory output to retail sales and investment showing Beijing’s pro-growth policies are starting to gain traction.

Analysts said the end of a destocking cycle and a greater pace of investment would keep driving up domestic demand, and extend the recovery trend into the final quarter of this year.

Smaller and private firms are still pleading for greater access to credit and investment incentives, which have gone disproportionately to the state sector, particularly since the financial crisis of 2008-2009.

China’s annual economic growth dipped to 7.4 percent in the third quarter, slowing for seven quarters in a row and leaving the economy on course for its weakest showing since 1999.

Given the recent signs of recovery, many analysts expect the economy to snap out of its longest downward cycle since the global financial crisis, and start to trend upwards in the fourth quarter.

But economists also warn of downside risks from still cloudy external markets. The European debt crisis and listless U.S. economy continue to crimp demand from China’s two largest trade partners.

China’s central bank has moved cautiously in easing monetary policy to underpin economic growth, wary of reigniting inflation and fanning property prices which are still high.

It cut interest rates twice in June and July and lowered banks’ reserve requirement ratio by 150 basis points in three stages since last November, but has refrained from further cuts since July. The authorities have opted to inject liquidity via open market operations to pump short-term cash into money markets.

The official PMI generally paints a rosier picture of the factory sector than the HSBC PMI because the official survey focuses on big, state-owned firms, while the HSBC PMI targets smaller, private companies. There are also differing approaches to seasonal adjustment between the two surveys.

This year’s final HSBC PMI reading is due to be published at 0145 GMT on Monday.

(Reporting By Lucy Hornby; Editing by Daniel Magnowski)

Boeing, engineers tentatively agree to resume talks

Fri Nov 30, 2012 9:39pm EST

(Reuters) – Boeing Co (BA.N) and the union that represents its 23,000 engineers tentatively agreed to resume labor talks on Tuesday, after their negotiations on a new contract ended abruptly on Thursday.

But tension rose as the two sides sparred over efforts to engage a federal mediator to help them reach a new labor contract.

Boeing said late on Friday that the union had declined its offer to attend meetings with the Federal Mediation and Conciliation Service in Washington, D.C., on Monday.

The Society of Professional Engineering Employees in Aerospace (SPEEA) said it had contacted the mediator before Boeing did, and was waiting for Boeing to confirm dates for meetings next week that it had arranged.

“We told SPEEA we’d like to start meeting with a federal mediator Tuesday in Seattle,” Boeing spokesman Doug Alder said. “We are still working out the details with SPEEA and the mediator.”

SPEEA’s chief said the union was willing to meet, too, and with a different mediator if necessary.

“I’ve responded that we have a mediator assigned to us … but if Boeing is dissatisfied with that mediator, they need to take that up with FMCS not us,” Ray Goforth, SPEEA executive director, said.

“We also don’t see the need to meet in a hotel. I offered to meet on Boeing property if that would make them comfortable.”

The two sides have been negotiating since April to replace a labor contract that expired November 25.

The union has balked at a Boeing contract that it says would cut the growth rate of compensation of professional and technical employees. Boeing says its latest offer is much improved over its initial proposal and reflects a tough competitive environment.

Talks broke down Thursday after Boeing said it wanted a mediator.

The dispute comes as Boeing looks to speed up jet production from 52 a month to about 60 a month by the end of next year. A walkout by the union could stop production.

Peter Arment, an analyst with Sterne, Agee Leach, expressed hope that the dispute would be resolved with mediation. He noted strikes by SPEEA were rare, with the last one occurring in 2000.

“There’s still time for this to be resolved long before it would affect Boeing’s commercial aircraft production,” Arment said.

Shares of Boeing edged down 3 cents to $74.09 in Friday trading.

(Reporting by Alwyn Scott in New York and Karen Jacobs in Atlanta; Editing by Lisa Von Ahn and Eric Walsh)

AMR wants keep control over bankruptcy through March 11

Fri Nov 30, 2012 5:06pm EST

NEW YORK (Reuters) – American Airlines’ bankrupt parent has asked a judge to extend by six weeks, through March 11, the period in which it has the exclusive right to propose a plan to exit bankruptcy.

The request, made jointly with its creditors’ committee, was filed on Friday in U.S. Bankruptcy Court in Manhattan. The current exclusive window is set to end on January 28.

AMR Corp (AAMRQ.PK) filed for bankruptcy a year ago in hopes of reducing labor costs and returning to profitability.

Its smaller competitor, US Airways Group Inc (LCC.N), is making a push to acquire it out of bankruptcy. AMR said earlier this year it would prefer to exit as a standalone company, but is discussing merger options, including with US Airways.

Friday’s filing is a sign that discussions with creditors on how to bring AMR out of bankruptcy are progressing cooperatively, if a bit slower than initially expected.

“American and the (creditors’ committee) believe that the proposed extensions will facilitate the expedition of the chapter 11 cases and benefit all parties in interest,” the filing said.

Sean Collins, a spokesman for American, said in a statement that the company “has made significant progress in its restructuring.”

“The work, while progressing well, takes time,” he said.

The exclusivity period bars creditors and other parties from proposing their own plans for how AMR should exit bankruptcy.

That effectively blocks US Airways from making a hostile bid, as any merger plan unveiled during exclusivity would have to be proposed by AMR itself.

AMR’s pilots union, in the midst of bitter contract talks with the company, supports a US Airways merger and called Friday’s extension request a sign that “things are proceeding in a positive way.”

“We assume that the strategic alternative talks, which include US Airways, are functional,” union spokesman Dennis Tajer said.

A hearing on the extension request is set for December 19.

The case is In re AMR Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15463.

(Reporting by Nick Brown; editing by Tim Dobbyn and Matthew Lewis)