The Urethane Blog

SABIC CEO Sees Growth in Chemicals Sector by Year End

March 31 (Reuters) - The world's largest chemicals company Saudi Basic Industries Corp's 2010.SE (SABIC) chief executive sees growth in the sector globally by the end of 2009, with good signs of growth in China and the United States already, he told television station CNBC.

SABIC's Chief Executive Officer Mohamed Al Mady said he sees some improvement in prices and that "the first quarter looks good."

In January, SABIC's fourth-quarter profit plunged more than 95 percent to 311 million riyals due to a drop in demand for petrochemical products. The company said the fall in demand for petrochemical products, particularly specialty plastics, had a strong impact on the performance of SABIC affiliates outside Saudi Arabia.

Al Mady, however, said, "We are bullish on plastics for the future... plastic will always be with us."

Shuaa Capital analyst Laurent-Patrick Gally said: "SABIC CEO comments seem to suggest a gradual global recovery for the petrochemical sector may be underway."

A potential recovery of the petrochemical sector and SABIC's earnings, along with expectations of a continued recovery into 2010, should provide material share price appreciation for mid- to long-term investors, the analyst said.

http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSBNG11280520090331

Dow and Alstom Combine to Capture CO² Emissions

Alstom, a world leader in power generation, and The Dow Chemical Company (NYSE:DOW), a global gas treating industry leader, announce the design and construction of a pilot plant to capture carbon dioxide (CO_²) from the flue gas of a coal-fired boiler at the Dow-owned facility in South Charleston, West Virginia, USA.

Alstom will design, construct and operate the pilot plant, which is expected to capture approximately 1,800 tons per year of CO_²from flue gas using Alstom’s and Dow’s advanced amine technology. Dow will provide the site and utilities, as well as the chemicals and its amine technology expertise for this project. The pilot plant is expected to be operational by 3Q 09.

“We are thrilled to be part of this groundbreaking project in CO_²capture,” said Janet Giesselman, President and General Manager of Dow Oil & Gas. “This technology has immense potential—for the local community, industry, environment and our business. Developing advanced amine technology will provide sustainable energy solutions now and into the future.”

“Coal, which represents over two thirds of the world’s power generation, is and will continue to be an essential part of the world’s energy mix,” said Philippe Joubert, Alstom Executive Vice President and President of Alstom Power. “But only by reducing its CO_² output can coal remain a viable source of power generation. Our cooperation with Dow further demonstrates our leadership and commitment in this field, as well as providing the validation we need to launch our amine-based CO_² capture technology on a commercial scale.”

All the coal used in the pilot will be sourced locally in West Virginia. By constructing a facility capable of capturing CO_², Alstom and Dow will help assure that coal remains an important and sustainable part of the United States’ energy security.

This project is an important element of Dow’s 2015 sustainability goals. According to Vice President of Sustainability, Neil Hawkins, “Dow is committed to providing solutions that improve energy efficiency, promote renewable energy, improve the environmental performance of our existing energy sources, and enable carbon capture and sequestration. Dow is a leader in bringing these solutions forward.”

In 2008, Dow and Alstom entered into a Joint Development Agreement to develop advanced amine technology for CO_²capture. Currently, Alstom is working with Dow to develop a commercial offering of an advanced amine-based scrubbing technology for industrial sources that produce exhaust or flue gases containing CO_² and high levels of oxygen. The new process will significantly reduce the amount of energy required for CO_² separation and capture. The West Virginia pilot plant will validate this new technology.

ACC Advocacy Letter

From: ACC President 
Sent: Friday, March 27, 2009 4:23 PM
To: Executive Contact Network
Cc: Executive Contact Network - Copy List
Subject: ACC ADVOCACY UPDATE

 

Advocacy Update

March 27, 2009

 

Dear Friends and Colleagues:

 

The federal budget and tax issues continued to dominate ACC activities this week.   As we have noted in previous communications to you, the proposed FY 2010 federal budget could cost our industry as much as $120 billion over the next ten years, and increase taxes on our sector as much as 53 percent.  We are pleased with the engagement of ACC member companies in voicing the impact that this egregious, flawed and misguided federal budget proposal has on our industry.  Please remember that we can provide tools for you to use in legislator and public outreach (letters, articles, budget calculator), and they can be found athttps://memberexchange.americanchemistry.com. 

Some additional developments this week include:

 

BUDGET/TAX

Discussions continued on Capitol Hill regarding what should or should not remain in the budget, as Congress works through the President’s budget proposal.  The House and Senate Budget committees put together their respective budget resolutions this week – and their plans are similar to the Obama Administration budget but with less spending and fewer details.  While the committee proposals do not include the climate policy laid out in the Administration’s budget (which had called for a cap-and-trade system with 100% auction of emission allowances), they still are short sighted as they force our industry to contribute excessive and burdensome taxes in areas for which we have already paid.

 

We made Hill visits and met with our allies in opposition to imposition of new Superfund taxes, and we began concerted educational efforts on the Hill with respect to the LIFO (“Last In, First Out”) inventory accounting and the severe economic detriment from LIFO repeal.  Also, ACC was among 200 companies and associations signing a letter to House and Senate Leadership that pointed out repercussions from changes to rules that allow deferral of U.S. tax on earnings of foreign subsidiaries.    We will keep you posted on our continued advocacy in this important area.

 

ENERGY/CLIMATE

In his primetime news conference this week, President Obama was optimistic about prospects for signing major climate legislation this year.  And, as you may know, the White House Office of Management and Budget last Friday started its review of the proposed EPA “endangerment finding,” which cites global warming as a risk to public health and welfare.  EPA’s action might represent added pressure on Congress to pass a climate bill.    In addition, the House Ways and Means Committee held a hearing on ways to avoid carbon “leakage” – the transfer of energy-intensive manufacturing production, emissions and jobs to nations with less stringent controls – as a result of climate legislation.   We will keep fighting this battle to ensure that our industry’s environmental accomplishments and energy efficient innovations help shape the climate debate.

 

POLITICAL AFFAIRS

Grassroots -To have a strong leadership role in the current political advocacy climate, we at ACC are working on a robust new direction in our political affairs. In the coming week, I will be seeking your help to complete our next step in building a comprehensive political infrastructure with a strong grassroots capability.  We will be mailing each of our members a spreadsheet of its company facilities and affiliated locations with approximate number of employees—all garnered from public sources. We will need your help in ensuring we get this right.  We ask that you review and correct  your draft company profile and identify contacts for each location.  Once the profiles are amended with your input, we will sort the information by  state/federal legislative districts  and be better equipped to advocate with you and for you in key legislative districts.  I greatly appreciate your help on this, as I think it will be a significant resource in our enhanced political advocacy.

 

AmeriChem PAC-Since my last update, AmeriChem PAC has participated in events for Republican Whip, Eric Cantor, VA; House Transportation and Infrastructure Ranking Member, John Mica, R-FL; senior Republican on the House Homeland Security Committee, Dan Lungren, R-CA; and freshmen Congressman Bill Foster, D-IL and Congresswoman Debbie Halvorson, D-IL. 

And our fundraising efforts are in full swing.  I want to acknowledge the terrific effort of Quinn Stepan, Jr., a member of the ACC Board of Directors, who undertook a campaign to educate his employees on the benefits of AmeriChem PAC and the political activities supported by its contributors.  As a result, AmeriChem PAC received 48 contributions from Stepan employees.

 

Next week, each of you will receive information about AmeriChem PAC and how you can become involved.  I urge you to carefully review and consider these materials.  If you have any questions, please contact Shana Myers atshana_myers@americanchemistry.com. 

 

STATE AND LOCAL AFFAIRS

An ACC-led  coalition  this week removed adverse  language from a Suffolk County, New York BPA ban bill. (Last week, Suffolk County became the first jurisdiction in the U. S. to pass a law directed at unfilled beverage containers such as baby bottles and sippy cups.)  Changes that ACC succeeded in securing included the elimination of legally problematic unfounded health allegations and removal of cans from the bill, particularly infant formula. Also a similar bill banning BPA in children’s products was stopped in Washington State by a Senate Committee  after passing the House.

 

SECURITY

Earlier this week at ACC’s Chemsecure Conference in Houston, 160 ACC members and attendees were given the opportunity to hear first-hand from Department of Homeland Security (DHS) staff and inspectors about the next steps required to meet their obligations under the Chemical Facility Anti-Terrorism Standards (CFATS).  DHS provided hands-on demonstrations of the site security plan that all regulated facilities must submit and explained expectations for meeting deadlines. 

 

OTHER ACC ACTIVITIES

Clean Drinking Water - To mark World Water Day earlier this week, ACC has partnered with a coalition of international health groups to highlight the global need for access to safe drinking water. This partnership, including CSIS, Population Services International (PSI) and Proctor & Gamble’s Children’s Safe Drinking Water Program, worked with GOOD magazine to produce a “cutting edge” video series.  These videos are getting great traction on You Tube (over 850,000 total views so far) and in other digital and social media venues.  All the videos drive viewers to www.worldH2Oday.org, where you can sign a petition to support increased U.S. aid to global water programs.

 

Global Advocacy- On Monday, ACC Board Chairman Dave Weidman, Richard Paton, President and CEO of the Canadian Chemical Producers’ Association and I held a media conference, on behalf of the International Council of Chemical Association (ICCA), to highlight the global chemical industry’s product stewardship accomplishments.  We discussed ICCA’s upcoming report on product stewardship which will be delivered at the International Conference on Chemicals Management (ICCM-2) on May 11-15 in Geneva. The report will detail industry’s progress in implementing the Global Product Strategy and the Responsible Care® Global Charter.  We also discussed ACC’s chemicals management advocacy.

 

 

Thank you again for your great engagement on the budget and other issues.  Congress will be in recess over the next few weeks, so this update will be sent again after Congress reconvenes.  Of course, we will send regular updates on issues as needed over the next few weeks.  Please feel free to call if you have any questions or if we can help in any way.

 

Sincerely,

Cal

 

Cal Dooley

President and CEO

American Chemistry Council

1300 Wilson Blvd.

Arlington, VA 22209

 

Investment Advisor Information

• THE INTELLIGENT INVESTOR
• MARCH 28, 2009

The Fight Over Who Will Guard Your Nest Egg

A power struggle in Washington will shape how investors get the advice they need.

On one side are stockbrokers and other securities salespeople who work for Wall Street firms, banks and insurance companies. On the other are financial planners or investment advisers who often work for themselves or smaller firms.

Heath Hinegardner

Brokers are largely regulated by the Financial Industry Regulatory Authority, which is funded by the brokerage business itself and inspects firms every one or two years. Under Finra's rules, brokers must recommend only investments that are "suitable" for clients.

Advisers are regulated by the states or the Securities and Exchange Commission, which examines firms every six to 10 years on average. Advisers act out of "fiduciary duty," or the obligation to put their clients' interests first.

Most investors don't understand this key distinction. A report by Rand Corp. last year found that 63% of investors think brokers are legally required to act in the best interest of the client; 70% believe that brokers must disclose any conflicts of interest. Advisers always have those duties, but brokers often don't. The confusion is understandable, because a lot of stock brokers these days call themselves financial planners.

Brokers can sell you any investment they have "reasonable grounds for believing" is suitable for you. Only since 1990 have they been required to base that suitability judgment on your risk tolerance, investing objectives, tax status and financial position.

A key factor still is missing from Finra's suitability requirements: cost. Let's say you tell your broker that you want to simplify your stock portfolio into an index fund. He then tells you that his firm manages an S&P-500 Index fund that is "suitable' for you. He is under no obligation to tell you that the annual expenses that his firm charges on the fund are 10 times higher than an essentially identical fund from Vanguard. An adviser acting under fiduciary duty would have to disclose the conflict of interest and tell you that cheaper alternatives are available.

If brokers had to take cost and conflicts of interest into account in order to honor a fiduciary duty to their clients, their firms might hesitate before producing the kind of garbage that has blighted the portfolios of investors over the years.

Richard G. Ketchum, chairman of Finra, has begun openly using the F-word: fiduciary. "It's time to get to one standard, a fiduciary standard that works for both broker-dealers and advisers," he told me. "Both should have a fundamental first responsibility to their customers."

When I asked whether Finra should be that single regulator, Mr. Ketchum replied: "Do we have the infrastructure and would we do a good job? We think yes."

Others disagree. "It would be lethal if Finra becomes the only regulator," retorts Tamar Frankel, a professor of securities law at Boston University. "Finra has an inherent conflict of interest, because it's the same people regulating themselves."

In testimony to the Senate in the past week, SEC Chairwoman Mary Schapiro said the agency is considering "whether to recommend legislation to break down the statutory barriers" that impose different regulations on brokers and advisers.

Ms. Schapiro stepped down earlier this year as head of Finra to lead the SEC. In 2005, when she was vice chairwoman of Finra's predecessor, Ms. Schapiro wrote a scathing letter to the SEC calling "this much-vaunted fiduciary duty ... imprecise and indeterminate."

When I asked her now if she still held that view, Ms. Schapiro replied: "I wear a new hat now. I completely get that I work for America's investors, so my perspective has changed. I think investors would rationally say that they prefer fiduciary duty as the standard of care. And they are entitled to have their interests come first, always."

Ms. Schapiro said it is too early to say who should be the lead regulator if brokers and advisers are brought under the same set of rules.

Ms. Schapiro sounds sincere, and they say there is no zeal like that of the convert. Here is hoping she means what she now is saying, and that Congress -- and the investing public -- will hold her to it. It is high time for everyone who says "Trust me" to be held to the highest standard.

Write to Jason Zweig at intelligentinvestor@wsj.com

http://online.wsj.com/article/SB123819596242261401.html#mod=WSJ_myyahoo_module

Lyondell Board of Directors in Court

• MARCH 27, 2009, 12:45 PM ET

Good Faith, Bad Faith? Sizing Up the Big Lyondell Decision

A small group of shareholders sued in both Texas and Delaware, claiming that the Lyondell board violated its duty to shareholders by not doing enough to research the deal after Basell’s first overture and then by accepting the deal too quickly once the deadline was imposed. The Texas court ruled the merger could go forward, but the shareholders pressed their lawsuit for damages in the Delaware courts.

The Delaware trial court — the Court of Chancery — granted summary judgment for both Lyondell and Basell, but didn’t grant summary judgment for the Lyondell directors, holding instead that couldn’t conclude, on the limited record before him, that the directors “acted appropriately under the circumstances of this case” and that an “unexplained inaction” — the two months in which the company did very little — allowed an inference that the directors may have shirked their fiduciary duties.

The directors, represented by Richards, Layton & Finger’s Dan Dresibach and Tom Beck, with an assist from Skadden’s Ed Welch and Ed Micheletti (representing Lyondell) appealed the denial of summary judgment to the Delaware Supreme Court.

The long and the short? The directors are off the hook. According to Pace University Law Professor Andrew Lund, the decision was notable for a couple of reasons. First, the court held that the duties put forth in the famed 1986 Revlon decision, did not apply to the Lyondell board during the two month period of relative inactivity. “The problem with the trial court’s analysis,” reads the opinion, “is that Revlon duties do not arise simply when a company is ‘in play.’ The duty to seek the best available price applies only when a company embarks on a transaction . . . that will result in a change of control.” In other words, Revlon kicks in when a board starts a negotiation to sell the company.

Okay, so what about the week-long period after hearing about the offer? Did the directors fail in their duty of good faith to the shareholders? Lund points to a pivotal section late in the opinion in which the court explains: “Only if [the directors] knowingly and completely failed to undertake their responsibilities would they breach their duty of loyalty. The trial court approached the record from the wrong perspective. Instead of questioning whether disinterested, independent directors did everything that they (arguably) should have done to obtain the best sale price, the inquiry should have been whether those directors utterly failed to attempt to obtain the best sale price.”

Lund explains that given this language, it’s going to be hard for shareholders going forward to make “good faith” claims against corporate boards in such circumstances. “It all but eviscerates the ability to bring such a claim.”

Lund also says that the court didn’t need to go this far; it could have just made its Revlon ruling as it pertained to the two month period, and sent the case back to the Chancery court to apply the Revlon analysis to the one-week period. “But the court swung for the fences,” says Lund, by articulating this new “good faith” standard, particularly the “completely” and “utterly” adverbs. “It’s not going to make the plaintiffs’ bar very happy.”

http://blogs.wsj.com/law/2009/03/27/good-faith-bad-faith-sizing-up-the-big-lyondell-decision/

The New Kind of Reporting

The Price of Fame

Foam manufacturing CEO unloads in Continental Towers

by Carrie Reed, published Mar 27, 2009 · ShareThis

 

Continental Towers

Mr. Goldschneider

Michel Goldschneider and wife, Mary, sold their condo at 301 E. 79th St. in Yorkville to Constance Esposito for $693,000 on March 11. 

Unit#36F is one of 538 in the Continental Towers, built in 1974.

Mr. Goldschneider is the marketing, sales and trading CEO of Zebulon Industries, a supplier and manufacturer of polyurethane foam and coatings.

Previously, he had worked with Revlon and Nysco International.

He earned a degree in finance from the University of Pennsylvania and MBA in marketing and finance from Brussels Ecole De Commerce Solvay Ingenieur Commercial.

He is also fluent in French, Flemish and German.

Mrs. Goldschneider is a publisher at The Economist.

She has a master’s degree in English literature and a MBA in marketing.

There were 291 condo sales in Yorkville in 2008, with a median sales price of $677,000. 

http://manhattan.blockshopper.com/news/story/1000015728-Foam_manufacturing_CEO_unloads_in_Continental_Towers/

Obama Has The Bad Habit of Always Being Late

I've worked for people like that over the years, and I think they just feel people should wait for their presence . . . probably insecurity.   No good managers do it.

Bankers, Obama in Uneasy Truce

By JONATHAN WEISMAN, DAMIAN PALETTA and DAN FITZPATRICK

Getty Images

Northern Trust CEO Rick Waddell, Wells Fargo CEO John Stumpf, PNC CEO James Rohr and Bank of America CEO Ken Lewis answered questions after meeting with President Obama at the White House on Friday.

WASHINGTON -- The nation's top bankers walked away from a summit with President Barack Obama pledging broad support for his bank-bailout program and efforts to revive the economy, but the meeting failed to resolve tensions over executive pay and the president's tough rhetoric of recent weeks.

The highly unusual meeting, which came after weeks of public feuding between Democrats in Washington and banks, brought President Obama face to face with 15 of the nation's top bank executives, including the heads of J.P. Morgan Chase & Co., Bank of America Corp., Wells Fargo & Co., Citigroup Inc. and Morgan Stanley. All of the banks have received federal bailout cash -- in some cases after being told they must -- and some have openly bristled over mounting public criticism of their pay and their banks' lending.

That was one topic of discussion Friday at a meeting all sides described as cordial. According to participants, some of the chiefs told the president they want to return their bailout money later this year, but Mr. Obama told them that regulators would permit such a move only if the banks were truly healthy. This account of the meeting is based on interviews with participants, White House aides and others familiar with the gathering.

For his part, Mr. Obama told the group that bankers should be more modest in their compensation and spending practices, participants said. The bankers responded that the administration should try to cool its anti-Wall Street rhetoric.

More

• List of CEOs at Meeting
• Lewis Against Reinstating Banking Divide

The economy was also discussed, attendees said, with Bank of America CEO Kenneth Lewis and Northern Trust's Rick Waddell expressing cautious optimism that the downturn is either at or near the bottom of the cycle. There was agreement that despite the tension of recent weeks, the White House needs investors to implement its banking and housing programs, and the financial system needs the government for capital.

"I think there are very few financial institutions who would not say we've made mistakes and that we feel awful bad about the mistakes we have made," Mr. Lewis said after the meeting. But "at some point you have to stop focusing on the past, and focus on the present."

Said Robert Kelly, CEO of Bank of New York Mellon: "Our interests are very much aligned with the administration's."

The meeting, held in the White House East Wing, was no-frills: The bankers were served no food, just offered glasses of water. But there were a few touches that aimed at lightening the mood. J.P. Morgan CEO James Dimon jokingly offered Treasury Secretary Timothy Geithner a check for $25 billion -- the amount his bank owes the government.

Camden Fine, head of the Independent Community Bankers of America, gave Mr. Obama a foam Ben Bernanke doll and suggested the president squeeze the Federal Reserve chairman during stressful moments.

The backdrop of the meeting was as notable as its content. Many participants have been openly hostile toward Democratic initiatives in Washington.

Getty Images

Lloyd Blankfein of Goldman Sachs, Kenneth Chenault of American Express, Kenneth Lewis of Bank of America and Edward Yingling of the American Bankers Association walked down the driveway at the White House.

Two weeks ago, in a speech at Stanford University, Wells Fargo & Co. chairman Richard Kovacevich called the administration's new bank stress tests for Troubled Asset Relief Program recipients "asinine." On Friday, Wells Fargo was represented by its CEO, John Stumpf, who didn't apologize for the bank chairman's comments but did emerge from the White House to declare: "The basic message is, we're all in this together."

A president who has made a public display of shunning lobbyists seated the heads of two financial trade groups at the meeting. The president entered the room a few minutes late, after making a round of calls to the governors of North Dakota and Minnesota and the mayor of Fargo, N.D., to discuss the Red River flood.

Mr. Obama sat at the center of the long table, with Mr. Geithner on one side of him and Christina Romer, chairman of the Council of Economic Advisers, on the other. Across from them were National Economic Council director Lawrence Summers and White House senior adviser Valerie Jarrett, who heads business outreach.

The president talked up his efforts to overhaul financial regulations and give more power to an agency to oversee risks in financial markets. He appealed to the chief executives to see their bonus payments through the prism of Americans struggling to make ends meet. He noted he was the first new president not to redecorate the Oval Office. "There are still stains on the carpet," he said.

The president turned to Mr. Dimon of J.P. Morgan Chase for his opinion of the economic situation, according to White House aides and meeting participants. Mr. Dimon said banks alone weren't responsible for the financial crisis, citing also the cost of the war in Iraq, the ballooning trade deficit and volatile energy markets. He praised the administration's financial plan so far, calling it an "overwhelming force" of action.

Mr. Dimon also argued that more regulation, as Mr. Geithner proposed earlier this week, isn't necessarily the right way to go. "The question isn't more or less," Mr. Dimon said. "The question is [whether it is] good."

Several bankers said their institutions will be healthy enough to pay back most, if not all, the bailout funds by the end of this year, a pledge the president greeted cautiously. Mr. Obama made clear he didn't want banks emptying their coffers to get out from under the strictures of the Troubled Asset Relief Program if that meant paring back their lending.

The bankers pledged to work constructively with the administration on a host of fronts, from selling bad assets to proposed new public-private partnerships to overhauling the financial regulatory system. CEO Richard Davis of U.S. Bancorp later called that system "old, antiquated and kind of creaking."

Mr. Lewis said he would be in a position to pay back TARP money later in the year. He mentioned some encouraging comments made recently by West Coast customers of his bank as an example of how the downturn could be nearing a bottom.

CEO James Rohr of PNC Financial Services Group Inc. said he told the president his Pittsburgh-based bank's loans were up in the fourth quarter, and "we are very much in the lending business." Mr. Rohr said the president "did not ask us to make loans we wouldn't otherwise make, which is good."

Goldman Sachs Group Inc. chief Lloyd Blankfein expressed greater caution than some about the economy's near-term future. He warned of the difficulty in harmonizing administration policies such as fiscal stimulus spending with those of other countries, especially in Western Europe where inflation concerns limit government's room for maneuver.

Separately, a regulatory filing Friday showed that Goldman spent $58 million to buy two of its top executives out of some of the firm's unprofitable in-house funds. The buyouts were at an undisclosed discount to the funds' current value.

—Robin Sidel, Aaron Lucchetti and Jessica Holzer contributed to this article.

Write to Jonathan Weisman at jonathan.weisman@wsj.com, Damian Paletta atdamian.paletta@wsj.com and Dan Fitzpatrick at dan.fitzpatrick@wsj.com

Carbon Tax is About Political Power

Put aside for a moment the fact that this tax would be horrible for Americans, and look at the power struggles in Camelot for control over it . . . it's like those stupid "Coke" and "Coke Zero" infringement commercials in real life.

Markey Taps FERC Over CFTC as U.S. Carbon Market Fuels Turf War 

By Tina Seeley

March 27 (Bloomberg) -- U.S. Representative Edward Markey says his committee should be in charge. No, says fellow Democrat Collin Peterson, this one should fall under my panel.

Markey and Peterson are jockeying for control of the biggest regulatory plum to hit Washington in years: a proposed system for trading carbon-dioxide permits that would be one of the world’s largest derivatives markets.

Depending on which lawmaker prevails, the market would be monitored by the Federal Energy Regulatory Commission, which is overseen by a subcommittee headed by Markey, or the Commodity Futures Trading Commission under the supervision of the Peterson-led House Agriculture Committee.

The winning agency would set the rules for a market that could reach $1 trillion in trades annually by 2020, according to New Carbon Finance, a London research firm. The victor also would influence the operations of companies from American Electric Power Co., the biggest U.S. producer of electricity from coal, to Goldman Sachs Group Inc., which would compete with other banks to handle companies’ carbon portfolios.

“All the big financial firms would look to provide services to their clients to help them manage their risks in the carbon market,” said Tim Profeta, director of Duke University’s Nicholas Institute for Environmental Policy Solutions in Durham, North Carolina.

The maneuvering is under way even as President Barack Obama’s climate-change goals await congressional action. The proposal, part of his projected $3.6 trillion budget for 2010, would create a cap-and-trade program to limit greenhouse gas emissions. Polluters would buy and sell government-issued emissions permits on a market.

‘Real Opportunity’

“Some believe this will create the largest new derivatives market in the world,” Senator Debbie Stabenow, a Michigan Democrat, said at a hearing last month. “It’s a real opportunity to design a transparent, efficient carbon market.”

An indication of whether FERC or the CFTC has the upper hand could come as early as next week, when a trade group including American Electric Power, Goldman and trading firm Natsource LLC may issue its recommendation.

“Most of the financial players in the market probably have more experience dealing with the CFTC, while a lot of the energy companies have more experience with the FERC,” said Dirk Forrister, who heads a panel studying the issue for the group, the International Emissions Trading Association. He is also a managing director of Natsource, a New York fund manager and carbon-credit buyer.

Michael DuVally, a Goldman Sachs spokesman in New York, declined to say which agency his company will support.

“We haven’t taken any public position” on which agency should be the regulator, said Pat Hemlepp, a spokesman for Columbus, Ohio-based American Electric.

Markey, Wellinghoff

Massachusetts Representative Markey, who heads the House Energy and Environment Subcommittee, says FERC’s experience makes it the obvious choice.

“The Federal Energy Regulatory Commission has the historical expertise in the energy and electricity marketplace, and it is the proper venue for that regulatory responsibility,” Markey told reporters on March 3.

FERC’s chairman, Jon Wellinghoff is less enthusiastic. “I have a little bit of trepidation about a carbon market,” Wellinghoff said in an interview. “It really goes beyond the traditional boundaries of what FERC has regulated in the past. There’s a number of other federal agencies that may be in a better position to oversee that.”

If Congress does give his agency the role, “I assure you we will do a very good job,” Wellinghoff said.

Peterson, of Minnesota, already has pushed through his committee legislation that would give the CFTC authority over any national carbon trading system.

‘Already Regulating’

“The CFTC is already regulating markets where carbon trading is occurring and, as such, has the most experience with these markets,” Peterson said in an e-mailed statement. “I would prefer an experienced cop over a rookie any day.”

The lawmakers whose committee wins out would gain clout as well as the potential for campaign contributions from participants in the new market, said Bryan Mignone, director of research for the Brookings Institution’s energy security initiative.

“There’s money riding on this; that may in fact explain some of the political posturing,” Mignone said.

Campaign contributions tend to flow to members of committees with jurisdiction over legislation or regulations that affect particular industries.

Campaign Contributions

Employees of oil and gas companies gave $2 million to the House Energy and Commerce Committee, which oversees their industry, in the 2008 elections, according to the Washington- based Center for Responsive Politics. That compares with $1.1 million to the House Agriculture Committee, which has jurisdiction over oil and gas futures markets through the CFTC.

Electric utility employees gave $2.8 million to the Energy and Commerce panel, which oversees FERC, and $958,202 to the Agriculture Committee.

“Campaign contributions are the furthest thing from my mind,” Peterson said. “I’m more interested in getting the right outcome.”

Eben Burnham-Snyder, a Markey spokesman, didn’t respond to a voice-mail message seeking comment.

The European Union’s Emissions Trading Scheme is the world’s largest carbon market, with projected trades of $57 billion this year, according to estimates from consulting firm Point Carbon in Oslo. The Brussels-based European Commission regulates the market, and each of the EU governments has a role.

Progress Energy

Proper regulation of a U.S. carbon market is particularly important “given what’s happened in financial markets over the last year,” said William Johnson, chief executive officer of Progress Energy Inc. of Raleigh, North Carolina, which operates utilities in three Southeastern states and would be a buyer and seller in the carbon market. He didn’t express a preference in the debate over FERC or the CFTC.

The CFTC was formed in 1974 to police commodity futures and options, most related to agricultural products. The agency’s oversight now extends to futures contracts on products from pork bellies and crude oil to interest rates.

Gary Gensler, Obama’s nominee to head the CFTC, said during a Senate confirmation hearing on Feb. 25 that he would welcome having the carbon market under the agency’s purview.

Wholesale Power

FERC, set up in 1977, regulates wholesale power sales and the interstate transmission of electricity, natural gas and oil. It deals mostly with the trading of physical products on spot markets rather than futures contracts.

Senator Jeff Bingaman, a New Mexico Democrat and chairman of the Senate Energy and Natural Resources Committee, told reporters this month that his panel “hasn’t settled” on who should regulate a carbon market. Neither has the Obama White House, according to Carol Browner, Obama’s chief of environmental and energy policy.

“The question is: Is it a security or a commodity?” Browner said in an interview. “I’m a lawyer, but I wouldn’t want to make an argument about which it is.”

To contact the reporter on this story: Tina Seeley in Washington attseeley@bloomberg.net.

Last Updated: March 27, 2009 00:00 EDT

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Ex-Foamex CEO Mabus Now in the Obama Administration

AP Source: Ex-Miss. gov to get nod for Navy post

By EMILY WAGSTER PETTUS – 1 hour ago

JACKSON, Miss. (AP) — President Barack Obama will nominate former Mississippi Gov. Ray Mabus to be secretary of the Navy, a person familiar with the discussions told The Associated Press on Friday.

Mabus, 60, is a Democrat and campaigned extensively for Obama last year. He had been previously talked about as a candidate for a place in Obama's cabinet as secretary of education. The person with knowledge of the Navy nomination requested anonymity because the White House has not yet made an official announcement.

Mabus served in the Navy from 1970-72 as a surface warfare officer on the Newport, R.I.-based USS Little Rock. Before then, he was in the Naval ROTC while he was an undergraduate student at the University of Mississippi.

He was governor of Mississippi from January 1988 to January 1992. He also served as U.S. ambassador to Saudi Arabia from 1994-96 under President Bill Clinton.

Mabus' nomination would need to be approved by the U.S. Senate. The secretary is the civilian leader of the service and is responsible for a wide range of duties, from recruiting and mobilizing to overseeing the construction and repair of ships, equipment and facilities.

Mabus launched his state government career in 1980 as an assistant to Mississippi Gov. William Winter. Mabus was elected state auditor in 1983, and angered many county officials by demanding greater accountability in their handling of public money.

He used the corruption-fighting platform to emerge from a crowded Democratic primary field in the 1987 governor's race, then defeated Republican Jack Reed, a Tupelo businessman. Mabus sought a second term as governor in 1991, but lost to Republican businessman Kirk Fordice of Vicksburg.

Mabus has a master's degree in political science from Johns Hopkins University and a law degree from Harvard University.

From June 2006 to April 2007, Mabus was chairman and CEO of Foamex International Inc., and helped move the manufacturer of polyurethane foam products out of bankruptcy. He has served on the boards of several corporations and charities.

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