Water worries threaten U.S. push for natural gas

October 1, 2009

Thu Oct 1, 2009 8:26am EDT

By Jon Hurdle

PAVILLION, Wyoming (Reuters) – Louis Meeks, a burly 59-year-old alfalfa farmer, fills a metal trough with water from his well and watches an oily sheen form on the surface which gives off a faint odor of paint.

He points to small bubbles that appear in the water, and a thin ring of foam around the edge.

Meeks is convinced that energy companies drilling for natural gas in this central Wyoming farming community have poisoned his water and ruined his health.

A recent report by the Environmental Protection Agency suggests he just might have a case — and that the multi-billion dollar industry may have a problem on its hands. EPA tests found his well contained what it termed 14 “contaminants of concern.”

It tested 39 wells in the Pavillion area this year, and said in August that 11 were contaminated. The agency did not identify the cause but said gas drilling was a possibility.

What’s happened to the water supply in Pavillion could have repercussions for the nation’s energy policies. As a clean-burning fuel with giant reserves in the United States, natural gas is central to plans for reducing U.S. dependence on foreign oil.

But aggressive development is drawing new scrutiny from residents who live near gas fields, even in energy-intensive states such as Wyoming, where one in five jobs are linked to the oil and gas industry which contributed more than $15 billion the state economy in 2007.

People living near gas drilling facilities in states including Pennsylvania, Colorado, New Mexico and Wyoming have complained that their water has turned cloudy, foul-smelling, or even black as a result of chemicals used in a drilling technique called hydraulic fracturing, or “fracking.”

The industry contends drilling chemicals are heavily diluted and injected safely into gas reservoirs thousands of feet beneath aquifers, so they will never seep into drinking water supplies.

“There has never been a documented case of fracking that’s contaminated wells or groundwater,” said Randy Teeuwen, a spokesman for EnCana Corp (ECA), Canada’s second-largest energy company, which operates 248 wells in the Pavillion and nearby Muddy Ridge fields.

Read the rest of this entry »

Advertisements

CFTC moves to rein in small ETF investors: report

August 22, 2009

Sat Aug 22, 2009 12:18pm EDT

CHICAGO (Reuters) – Exchange-traded funds or ETFs have become a top target in U.S. regulators’ efforts to rein in excessive speculation in oil and other commodity markets, The Wall Street Journal reported on Saturday.

Commodity ETFs, which came into existence in 2003, offer one of the few avenues for small investors to gain direct exposure to commodity markets. The funds pool money from investors to make one-way bets, usually on rising prices.

Some say this causes excessive buying that artificially inflates prices for oil, natural gas and gold.

Commodity ETFs have ballooned to hold $59.3 billion in assets as of July, according to the National Stock Exchange, which tracks ETF data.

The Commodity Futures Trading Commission has said it seeks to protect end users of commodities, and that cutting out individual investors is not the goal.

“The Commission has never said, ‘You aren’t tall enough to ride,'” CFTC Commissioner Bart Chilton was quoted as saying in the WSJ article. “I don’t want to limit liquidity, but above all else, I want to ensure that prices for consumers are fair and that there is no manipulation — intentional or otherwise.”

Limiting the size of ETFs will result in higher costs for investors, the WSJ reported, because legal and operational costs have to be spread out over a fewer number of shares. Investors range from individuals to banks and hedge funds with multimillion-dollar positions.

The CFTC is currently considering a host of measures to curb excessive speculation, including position limits in U.S. futures markets. Many U.S. lawmakers called for greater regulation of some commodity markets after a price surge last year sent crude oil to a record high of $147 a barrel in July 2008.

(Reporting by Matthew Lewis; Editing by Toni Reinhold)


GM details plans to wipe out current shareholders

May 5, 2009

Tue May 5, 2009 8:01pm EDT

By Kevin Krolicki

DETROIT (Reuters) – General Motors Corp (GM) on Tuesday detailed plans to all but wipe out the holdings of remaining shareholders by issuing up to 60 billion new shares in a bid to pay off debt to the U.S. government, bondholders and the United Auto Workers union.

The unusual plan, which was detailed in a filing with U.S. securities regulators, would only need the approval of the U.S. Treasury to proceed since the U.S. government would be the majority shareholder of a new GM, the company said.

The flood of new stock issuance that could be unleashed has been widely expected by analysts who have long warned that GM’s shares could be worthless whether the company restructures out of court or in bankruptcy.

The debt-for-equity exchanges detailed in the filing with the Securities and Exchange Commission would leave GM’s stock investors with just 1 percent of the equity in a restructured automaker, ending a long run when the Dow component was seen as a bellwether for the strength of the broader U.S. economy.

GM shares closed on Tuesday at $1.85 on the New York Stock Exchange. The stock would be worth just over 1 cent if the first phase of GM’s restructuring moves forward as described.

Once GM has issued new shares to pay off its debt to the U.S. government, bondholders and its major union, it said it would then undertake a 1-for-100 reverse stock split.

Such a move would take the nominal value of the stock back to near where it had been before the flood of new shares. But in the process, GM’s existing shareholders would see their stake in the 100-year-old automaker all but wiped out.

Read the rest of this entry »


Arch Coal Attracts Soros as Peabody Lures Citadel

November 24, 2008

By Arijit Ghosh and Christopher Martin

Nov. 24 (Bloomberg) — Billionaire investor George Soros, Citadel Investment Group LLC and T. Rowe Price Group Inc. are snapping up coal mining shares, taking advantage of the cheapest valuations in five years as demand for electricity rises.

Soros bought 2.9 million Arch Coal Inc. (ACI) shares last quarter for a 2 percent stake in the second-largest U.S. coal producer, filings with the Securities and Exchange Commission show. Citadel, the Chicago-based hedge fund, and Invesco Ltd. in Atlanta bought 3.5 million shares of Peabody Energy Corp. (BTU), the biggest miner. T. Rowe reported purchasing stock in Peabody, Arch, Consol Energy Inc. (CNX) and Indonesia’s PT Bumi Resources.

While coal, the cheapest fuel for power, is up 88 percent in Pennsylvania, shares of the companies that mine the mineral have slumped along with the rest of the commodities industry. Now, investors are betting that Peabody, which traded at 3.7 times projected 2009 earnings as of Nov. 21, and Arch at 2.5 times are cheap because coal use will increase. The valuations were at more than a 54 percent discount to the MSCI World/Energy Index.

“Coal is the best commodity to get into right now,” said Daniel Rice, manager of BlackRock Advisors Inc.’s $1.5 billion Global Resources Fund in Boston, which is among the largest holders of Peabody and Arch. “It’s a lot less sensitive to downturns because it’s needed for basic power generation, and demand is growing.”

Crude oil in New York has dropped 43 percent this year compared with a 6.1 percent decline in Australian coal prices.

Consol surged $4.08, or 20 percent, to $24.88 in New York Stock Exchange composite trading. Peabody climbed $2.82, or 15 percent, to $21.57 and Arch Coal rose $1.40, or 11 percent, to $13.70.

Electricity Demand

Demand for electricity in major economies, where coal is used to generate 52 percent of power, will increase 3.3 percent by 2010, according to a UBS AG report on Nov. 17. Global coal use will rise 2 percent a year through 2030, led by China and India, the Paris-based International Energy Agency said Nov. 6.

Read the rest of this entry »


Is the era of easy credit over for the long haul?

October 12, 2008

Sunday October 12, 9:48 pm ET
By Adam Geller, AP National Writer

As easy credit dries up, a nation reliant on debt navigates a new financial landscape

An inflatable gorilla beckoned from the roof of Don Brown Chevrolet in St. Louis, servers doled out free bowls of pasta and a salesman urged potential customers to “come on up under the canopy and put your hands on” a new set of wheels.

But sitting across from a salesman in a quiet back room, Adrian Clark could see it would not be nearly that easy. This was the ninth or tenth dealership for Clark, a steamfitter looking for a car to commute to a new job. Every one offered a variation on the discouragement he was getting here: Without $1,000 for a downpayment, no loan.

“It’s just rough times right now,” Clark said. “Rough times.”

For Clark, and for a nation of consumers heavily dependent on credit, there are growing signs that those rough times could prove to be more than just a temporary problem, that they could be the beginning of a stark, new reality.

Is America’s long era of easy credit over?

Experts say that even when the current credit crunch eases, the nation may finally have maxed out its reliance on borrowed cash. Today’s crisis is a warning sign, they say, that consumers could be facing long-term adjustments in the way they finance their everyday lives.

“I think we’re undergoing a fundamental shift from living on borrowed money to one where living within your means, saving and investing for the future, comes back into vogue,” said Greg McBride, senior analyst at Bankrate.com. “This entire credit crunch is a wakeup call to anybody who was attempting to borrow their way to prosperity.”

A prolonged period of tighter credit is ahead, experts say.

Read the rest of this entry »


Key tax pieces of Senate bailout bill

October 1, 2008

Wed Oct 1, 2008 3:56pm EDT

(Reuters) – To improve chances of passing a $700 billion financial industry bailout package, Senate leaders have agreed to combine it with a package of tax breaks for renewable energy, businesses and middle class workers.

The roughly $150 billion cost of the tax package is partially offset by some revenue raising measures including one that would change the tax treatment of deferred compensation paid through offshore tax haven accounts.

Major tax provisions in the bill include the following:

* Extends Alternative Minimum Tax relief for some 24 million middle class taxpayers through 2008. Includes some additional AMT relief for people who exercised company incentive stock options.

* Extends provision allowing homeowners who do not itemize their taxes to take a deduction up to $1,000 for state and local property taxes.

* Extends through 2009 a provision allowing some taxpayers to take a deduction for state and local sales taxes.

Read the rest of this entry »


Gold prices post biggest 1-day gain ever

September 17, 2008

Wednesday September 17, 4:31 pm ET
By Stevenson Jacobs, AP Business Writer

Gold makes biggest 1-day gain ever as investors flock to safe-haven assets

NEW YORK (AP) — Gold prices exploded Wednesday — posting the biggest one-day gain ever in dollar terms — as fears of more credit market turmoil unnerved investors and triggered a flood of safe-haven buying.

Gold for December delivery rose as much as $90.40, or 11.6 percent, to $870.90 an ounce in after-hours trading on the New York Mercantile Exchange after jumping $70 to settle at $850.50 in the regular session. That was the biggest one-day price jump ever; gold’s previous single-day record was a $64 gain on Jan. 29, 1980. In percentage terms, it was gold’s largest one-day advance since 1999.

The huge rally came after the government moved overnight to rescue troubled insurer American International Group Inc. (AIG) with an $85 million bailout loan. The Federal Reserve stepped in after AIG, teetering on collapse from losses tied to the subprime crisis and the credit crisis, failed to find adequate capital in the private sector.

The emergency measure came a day after Lehman Brothers Holdings Inc. (LEH), a 158-year-old investment bank, filed for bankruptcy after failing to find a buyer.

Fearing more tightening of credit markets, investors reacted swiftly and began dumping stocks and socking money into gold, silver and other safe-haven commodities. Gold is especially attractive during times of crisis because the metal is known for holding its value.

Jon Nadler, analyst with Kitco Bullion Dealers Montreal, said buying accelerated as rumors spread across trading floors that another financial firm may be in trouble.

“The psychology right now has everyone asking, ‘Who’s next?,” Nadler said. “If another big bank falls, we could see an implosion and that has people very worried.”

A weaker dollar also boosted gold prices. A falling greenback encourages investors to shift funds into hard assets like gold and other commodities that are bought as hedges against inflation and weakness in the U.S. currency.

Read the rest of this entry »


%d bloggers like this: