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Oils Big Slump

Extended slump in oil taking toll on industry, economy

NEW YORK — As drivers, shippers and airlines continue to enjoy lower fuel prices, the oil industry is responding to much lower profits with sharp cuts in spending and employment that are hurting economic growth. Low oil and gas prices are good for the overall economy because they reduce costs for consumers and business. U.S. economic growth was higher in the second quarter, and economists say that was partly fueled by consumers spending some of their savings on gasoline at stores and restaurants. But with oil prices down around 50 percent from last year, major oil companies are cutting back, offsetting some of this good news. For instance, Exxon Mobil said Friday it cut spending by $1.54 billion in the second quarter, while Chevron announced it is laying off 1,500 workers. Until about six months ago, booming U.S. oil and gas production was helping the country’s economy grow during a time of economic sluggishness. David Kelly, chief global strategist at J.P. Morgan Asset Management, said this week that a $29 billion decline in oil exploration and mining activity in the U.S. cut economic growth by 0.7 percent in the second quarter, a sizable chunk for an economy that grew 2.3 percent. Investors also feel the pain. Lower oil profits have an outsized effect on stock markets because the companies are so enormous. Analysts at RBC Capital Markets wrote that when oil prices drop by 10 percent, earnings for the overall S&P 500 fall by 1 percent. Industry layoffs seem to be accelerating. Royal Dutch Shell, while announcing Thursday that profits fell 25 percent in the second quarter, said it would cut its global workforce by 6,500. Chevron’s quarterly profit fell 90 percent and CEO John Watson said the company is reducing its workforce “to reflect lower activity levels going forward.” Layoffs at three of the big oil and gas service companies are near 60,000 after two of them, Halliburton and Baker Hughes, revealed further layoffs in quarterly filings last week. BP CFO Brian Gilvary told investors Thursday that the company has been cutting workers “and I think you’ll see more of that before we get to the end of the year.” BP’s oil and gas profit dropped 64 percent from April through June. Exxon Mobil’s profit fell by half, to its lowest level since the recession of 2009, the company said Friday. Its operations in the U.S. — the center of the global oil and gas boom — posted its second straight quarterly loss. “The surprise really was here in the U.S.,” said Brian Youngberg, an analyst at Edward Jones. Shares of Exxon and Chevron, both components of the 20-member Dow Jones Industrial Average, fell 4 percent on Friday after they announced results. The companies are in some ways victims of their own success. A surge in oil and gas production brought on by technological advances and high prices in recent years has flooded the market, sending global prices sharply lower. But geopolitical forces have also increased the pressure on prices. Iranian oil is poised to return the world market after years of sanctions, the Greek debt crisis is reducing economic growth in Europe and a shake-up in Chinese financial markets is reducing demand growth in the world’s second largest oil consumer. After nearly four years near $100 a barrel, the price of oil began slumping a year ago, falling to $43 by March. It surged briefly all the way to $61 in June, but then fell again. Oil traded just above $47 a barrel on Friday. That has translated to sharply lower fuel prices. The U.S. average retail price of gasoline through the first half of the year was 30 percent lower than during the same period last year. On Friday the national average was $2.67 a gallon, 85 cents lower than last year at this time, according to AAA. Retail prices for diesel and heating oil have averaged 27 percent lower than last year, and airlines have posted some of their highest profits in years thanks to lower jet fuel prices. These low prices, along with the pain for the oil industry and pleasure for consumers, are likely to continue for a while, analysts say. There is plenty of oil in storage tanks and the global oil industry has the capacity to produce more if demand picks up. In a report Friday, IHS Energy analysts predict further declines in oil prices. IHS says oil will have to fall into the low $40 range and stay there for “several months” before U.S. production growth slows and the supply glut eases. “It’s not good news for producers,” said IHS Chief Economist Nariman Behravesh. “It’s very good news for U.S. households and consumers.” Jonathan Fahey can be reached at http://twitter.com/JonathanFahey .

Law books

Why American lawyers revere legal precedence

A lot of things have changed about the practice of law since I began law school in 1986. I finally started to use a word processor for my school papers and I was first introduced to the world of electronic research. Prior to law school (and for a large portion of law school) research meant walking around a library and pulling books off of the shelf. Information was expensive because it had to be printed and bound and shelved and kept track of by the herculean efforts of librarians. I think back to the times when I had stacks of books piled around me as I sifted through book after book. I remember the excitement of the new CD-Roms with Utah case law that came out in the late 1980s — a whole bunch of books on one disk! Now, the information is all free and a few mouse clicks and keystrokes away on Google Scholar. But why has the law been associated with dusty tomes for so many decades? And why are lawyers obsessed with judges’ decisions? In our modern society, we tend to think of laws as rules written down on everything from stone tablets to code books, but this isn’t the reason law students ended up in law libraries. What judges say has a historic connection to the creation of our laws. But isn’t that what legislatures do — create our laws and write down the laws that we are to follow? Yes and no. The written-down statutory law isn’t the true historic foundation of our legal system. Anyone who has ever raised a teenager knows how slippery rulemaking can be. The time and effort necessary to cover every scenario a child might encounter is far beyond the capability of any parent to write down every potential violation in detail. Instead, broad generalizations and basic rules are created and specific instances dealt with accordingly. A general curfew might be in place, but can be adapted for special circumstances. Good parenting shows a consistency in the rulemaking and rule enforcement. In the communities of England in the Middle Ages, the English legal system developed on the same model as parents and teenagers: things happened, judges ruled based on what happened and a general idea of what was accepted and what was wrong become the “law.” This is the legal system that became the common law. In that regard, the lawyers act like perpetual adolescents running around looking for inconsistencies in the judges’/parents’ prior rulings. This explains the long-held legal obsession with the law library. Rather than teenagers, Alex De Tocqueville, in his Democracy in America in 1835, opted to describe lawyers as aristocrats, rather than teenagers, in their striving to understand and enforce judicial decisions: This aristocratic character, which I hold to be common to the legal profession, is much more distinctly marked in the United States and in England than in any other country. This proceeds not only from the legal studies of the English and American lawyers, but from the nature of the law and the position that these interpreters of it occupy in the two countries. The English and the Americans have retained the law of precedents; that is to say, they continue to found their legal opinions and the decisions of their courts upon the opinions and decisions of their predecessors. In the mind of an English or American lawyer, a taste and a reverence for what is old is almost always united with a love of regular and lawful proceedings. The attorney’s reverence for what is old is born out of the ability to predict what the legal system is going to do. Clients are happiest when the attorney can properly predict the ultimate outcome. No matter how much legislatures legislate, there will always be gaps. Our common law heritage requires that judges fill those gaps, and attorneys will rush to the law books (or Google Scholar) to try to convince the judges what precedent says should be done, just like aristocratic teenagers. E. Kent Winward is an Ogden attorney. He can be reached at 801-392-8200 or creditcorrection@gmail.com.

Minimum Wage-1

Higher wages a surprising success for Seattle restaurant

SEATTLE — Menu prices are up 21 percent and you don’t have to tip at Ivar’s Salmon House on Seattle’s Lake Union after the restaurant decided to institute the city’s $15-an-hour minimum wage two years ahead of schedule. It is staff, not diners, who feel the real difference, with wages as much as 60 percent higher than before. One waitress is saving for accounting classes and finding it easier to take weekend vacations, while another server is using the added pay to cover increased rent. Seattle’s law, adopted last year after a strong push from labor and grassroots activists, bumped the city’s minimum wage to $11 beginning April 1, above Washington state’s highest-in-the-nation $9.47. Scheduled increases that depend on business size and benefits will bring the minimum to $15 within four years for large businesses and seven years for smaller ones. There’s little data yet on how the law’s working. “To the extent that we can look at macro patterns, we’re not seeing a problem,” said Seattle Mayor Ed Murray. As Washington, D.C., and other cities consider following Seattle, San Francisco and Los Angeles in phasing in a $15-an-hour minimum wage, Ivar’s approach, adopted in April, offers lessons in how some businesses might adapt. Ivar’s Seafood Restaurants President Bob Donegan decided to raise prices, tell customers that they don’t need to tip, and parcel the added revenue among the hourly staff. For some of the restaurant’s lesser paid workers — including bussers and dishwashers — that’s meant as much as 60 percent more. Revenue has soared, supportive customers are leaving additional tips even though they don’t need to, and servers and bartenders are on pace to increase their annual pay by thousands, with wages for a few of the best compensated approaching $80,000 a year. “It’s been a surprise,” Donegan said. “The customers seem to like it, the employees seem to like it, and it seems to be working, at least in this location.” Rochelle Hann, 25, is a second-generation worker at Ivar’s. Like her mom, she has performed a variety of roles, including serving, bookkeeping and even dressing up as a giant clam. If she keeps working 30 hours a week, her annual pay will jump about $12,000 — money she’s socking away for accounting classes at a community college. “Before, I felt like it was maybe not quite paycheck-to-paycheck, but now I don’t even have to worry about it,” she said. “I just went away for the weekend, and it was an easy expense.” Brett Richards, a 50-year-old singer and guitarist, has worked 25 years in food service, including the past eight at Ivar’s. Before, he made minimum wage, plus tips. Now, he gets $15 an hour, plus a share of the 21 percent menu price increase, plus any additional tips customers leave. He expects to make almost $7,000 more this year, money that’s helping him with his increased rent and with taking his kids out to eat a little more often. Other industries with minimum wage employees could have a tougher time as worker pay climbs. “What we expect to observe is this is not going to be a policy that’s universally good for everybody or bad for everybody,” said Jacob Vigdor, a University of Washington professor who is leading a study of Seattle’s minimum wage law. The study includes recurring surveys of 700 Seattle businesses and ongoing interviews with about 50 low-wage workers and their families. Downtown Emergency Services Center, which relies heavily on government contracts to provide housing and other services for chronically homeless residents, might need to cut those services unless the city boosts its funding. “The economic justice that would be happening for our employees would be borne by our clients, who are extremely vulnerable people,” said executive director Daniel Malone. In the restaurant industry, where many low-wage workers are employed, adapting could mean pooling tips among all workers, cutting shifts or relying on technology — such as mobile phone applications that let customers pay electronically, rather than having someone dedicated to running the cash register. “This last jump wasn’t that far out of market so it didn’t require a lot of reworking of the financials,” says Anthony Anton, president of the Washington Restaurant Association. “Those second and third jumps will be much bigger jumps. Everyone is talking about what to do.” At Ivar’s Salmon House, decorated with century-old, hand-carved canoes and tribal art, Donegan attributes at least some of his pay policy’s success to Seattle’s white-hot economy. Looking out the broad windows of the dining room across Lake Union, diners can take in pleasure boats and kayaks cruising by, seaplanes landing, the Space Needle — and across the water, the ever-growing Amazon campus that has brought tens of thousands of workers to the city in the past few years. The restaurant’s revenue is up 20 percent, said Donegan, who served on the mayoral committee that drafted the minimum wage law. A few other table-service restaurants have started following suit, and Donegan said he gets inquiries every day from owners wondering how Ivar’s policy is working. But the approach is unlikely to be replicated among fast food restaurants or others where servers make less in tips — even though New York City is making $15 an hour the minimum wage for fast food chains. Even Ivar’s isn’t expanding its new policy to its quick-service seafood stands. Follow Johnson at https://twitter.com/GeneAPseattle

Digital Life Review Microsoft Windows 10

Microsoft beats Google in closely watched patent royalty fight

SAN FRANCISCO — Microsoft Corp. won an appeals court ruling that may lower the rates many electronics makers pay to license technology considered standard in smartphones and computers. An appeals court in San Francisco Thursday upheld a $14.5 million jury verdict against Google Inc. as punishment for unfairly demanding what Microsoft said amounted to billions of dollars for use of patents covering Wi-Fi and video downloads. The decision gives new ammunition to companies like Apple, Intel Corp. and Hewlett-Packard which have waged a worldwide campaign to lower the amount of money they pay for essential technologies that let mobile phones download video, access Wi-Fi or accept calls no matter the manufacturer. “This ruling is a win for consumers, competition, and innovation,” said Charles Duan, a lawyer with consumer group Public Knowledge, which backed Microsoft. “It keeps prices reasonable for old products and allows new products to come to the marketplaces.” The court upheld a jury decision that Google’s Motorola breached its obligation to license the patents on fair and reasonable terms. The obligation came because they are part of industry standards that Motorola helped develop. The technology industry, which is split over patent policies, has been watching this case closely for guidance on how to value standardized technology. Regulators and courts on three continents have been wrangling with the issue of whether there are different rules for such patents compared with those related to inventions that are unique to a specific product. The developers of fundamental technology in the wireless industry, including Qualcomm Inc., Ericsson and Nokia, have argued they need compensation for the billions they poured into research that consumers now take for granted. Companies often get together to develop standardized technology so products can work together. Since they have the advantage of ensuring their inventions become part of the standard, they agree to license any relevant patents on fair reasonable and non-discriminatory terms, known as FRAND. Google got the case as part of its 2012 purchase of Motorola Mobility. It’s since sold the handset business but retained most of the patents. Caroline Matthews, a spokeswoman for Google, said the company had no comment on the court decision. The case dates back to 2010. Microsoft argued that Motorola, then a stand-alone company, violated its commitment by demanding a 2.25 percent cut of sales of the XBox video-game system and Windows products for using its Wi-Fi and video- compression patents. Microsoft claimed the request was exorbitant and would amount to $4 billion a year. Microsoft spokesman David Cuddy declined to comment on the appeals court ruling. Motorola, which made the demand after Microsoft sought royalties on its handsets, said the 2.25 percent was its usual opening gambit in licensing talks. It said Microsoft just didn’t want to negotiate. When Microsoft refused to pay, Motorola asked courts to shut down sales. Microsoft was forced to move its distribution center out of Germany before District Judge James Robart in Seattle said Motorola couldn’t get any sales bans while the royalty fight was pending. In 2013, after Google’s acquisition of Motorola, Robart determined the patents were worth a small fraction of what the company had sought. He looked at the value of the patents added to the standard and compared the rate to that collected by patent pools, where a number of companies combine their patents and charge a set fee. The jury, using Robart’s valuation, found that Motorola had breached its contractual obligations to license its patents on reasonable and non-discriminatory terms. After Robart’s ruling, other judges began copying his analysis for their own cases. The appeals court on Thursday upheld Robart’s analysis of how to calculate the correct royalty rate, and the jury’s use of that information. It also said Microsoft was entitled to compensation for having to move its German facility to the Netherlands and the legal costs to ensure it didn’t have to stop selling any of its products. “The jury’s verdict was supported by substantial evidence, and its damages award was proper,” the three-judge appeals court panel ruled.

National Business

sb10068539e-001

Clearfield and Farr West pace the state in home sales

Home buying was up 19 percent statewide in the second quarter, led by Clearfield and Farr West, the Salt Lake Board of Realtors said. Clearfield marked 312 homes sold and Farr West 294. Layton also was in the top 10, with 199 sales. “Home buyers appear drawn to affordable areas. In fact, seven of the top 10 cities making the list had home prices lower than their respective county’s median home price,” said Dave Robison, president of the Salt Lake Board of Realtors. In the second quarter, sales of single-family homes along the Wasatch Front increased 19 percent to 8,411 sales, up from 7,059 sales in the second quarter of 2014. At 29 percent, Tooele County posted the highest percent increase in home sales. In Salt Lake County, home sales climbed 16 percent. Utah, Davis and Weber counties also posted double-digit gains. The median-priced home sold along the Wasatch Front increased to $253,000, up 9 percent compared to $231,900 in the second quarter of 2014.

Healthy Cokes

Food industry outguns health advocates in debate on diets

WASHINGTON — The battle to define what Americans should eat is pitting nutritionists against deep-pocketed groups that are spending almost 14 times more cash on lobbying in Washington. Coca Cola , food-industry and farm groups concerned about the recommendation of a government panel to cut sugar and meat consumption accounted for 85 percent of the comments on the issue from April to June, with health and environmental groups making up the rest, federal records show. The corporate organizations spent $15.3 million lobbying on the guidelines and other issues in the quarter, compared with $1.1 million by groups supporting the proposals, including the American Academy of Pediatrics. Specific spending isn’t tracked for work on the guidelines, which were proposed by a panel of scientists five months ago. “When you’re a nonprofit you rely on donor dollars, and we don’t have the resources others have,” said Kristy Anderson, government relations manager in Washington for the Dallas-based American Heart Association. “When we advocate it comes down to the science and our reputation.” The recommendations, if adopted by the Obama administration, would move nutrition policy closer to the goal of reducing the overconsumption that is blamed for almost tripling U.S. obesity rates from the 1960s to 2010. The guidelines are used to shape school lunch menus and the $6 billion a year Women, Infants and Children program, which helps more than 8 million Americans buy groceries. The departments of Health and Human Services and Agriculture plan to release their twice-a-decade recommendations by the end of this year. The nonpartisan Dietary Guidelines Advisory Committee, a panel of scientists that is advising the agency, proposed the first explicit target on “added sugars” from food processing. It recommended that U.S. adults consume no more than 10 percent of all calories as added sugar, down from the average 13 percent now. Consumption of “lean meat,” favored in 2010 guidelines, warranted only a footnote in 2015, with encouragement to cut meat consumption in general. The Food and Drug Administration last week endorsed the 10 percent concept as part of a labeling proposal to begin noting added-sugars content on cereal boxes, soda bottles and other packaged foods. That consumption level would be the basis of the agency’s recommended daily limits that’s printed on labels. The American Beverage Association, whose members include Coca Cola, PepsiCo and Dr Pepper Snapple Group, is pushing back on added sugars, saying those calories don’t cause obesity more than any other calories. The beverage group hired lobbyists from three firms and is using its staff in “talking with Congress and various bureaucracies in Washington that have a hand in this advice to make sure diet recommendations are based on sound science,” spokesman William Dermody said in an e-mail. The association also is using social media to encourage sending emails to lawmakers about “keeping government out of our grocery carts,” he said. “The response has been impressive,” he said, without providing specifics. One champion for keeping sugar in our diets is Warren Buffett, whose Berkshire Hathaway is the largest investor in Coca Cola and owns about one-quarter of Cheez Whiz maker Kraft Heinz. At Berkshire’s annual meeting in Omaha, Nebraska, in May, Buffett said happiness is important to longevity and that consumers enjoy Coca Cola products. “I don’t see smiles on the faces of people at Whole Foods,” said Buffett, 84, citing a grocery chain known for offerings such as organic frozen blue curled kale. Buffett didn’t respond to a request for comment sent to an assistant. Recommendations on meat, meanwhile, are opposed by livestock groups. Downplaying lean meat’s contribution to a healthy diet doesn’t help consumers make healthy choices, said Kristina Butts, executive director of legislative affairs for the Washington-based National Cattlemen’s Beef Association. “Our biggest concern is about the process” of the advisory panel, which she said isn’t transparent. The association’s goal is to give greater prominence to an endorsement of lean meat as appropriate to eat, she said. Lawmakers also have sought to limit the scope of the panel’s work, attaching language to appropriations bills. A Senate Appropriations Committee bill approved July 16 contains language added by subcommittee Chairman Jerry Moran, R-Kan., that the guidelines can use only “nutritional and scientific evidence” for its recommendations. The House version would bar the release or implementation of the guidelines unless the changes are based on scientific evidence and apply only to “diet and nutrient intake.” Such measures would make it difficult to include proposals not directly related to diet, such as weighing environmental sustainability in diet choices or imposing a soda tax to cut purchases of sugary beverages tied to increased obesity. The advisory panel mentioned both in its report. Still, Tom Brenna, a nutrition and chemistry professor at Cornell University in Ithaca, New York, and an advisory panel member, said he remains hopeful the government may not stray too far because of heightened public interest. “I think we’re having an effect, no matter how the guidelines will turn out,” Brenna said. “If we have to repeat ourselves, we’ll say them again and again and again.”

sales people

Embracing change and opportunity in sales profession

The Professional Sales Department at Weber State University has experienced a couple of changes. Aaron Hall, executive director of our Sales Center, left with his family this summer to preside over the Texas Houston South Mission for The Church of Jesus Christ of Latter-day Saints. Mikelle Barberi-Weil has taken over as the new Alan E. Hall Sales Center director and is already using her talents to build upon the great foundation that Aaron was able to build. I have been given the opportunity to serve as our department chair. All of our faculty and staff have been very helpful as I do my best to embrace this change. During this time I have contemplated the other changes I have made during different time periods in my life and how they have made such a positive impact on my future. One change I would like to share happened when I was a sophomore in college. I had an average college job, which I was very grateful to have. I was working on a degree in business administration and had the thought that I ought to try to get a job that would give me experience relating to my degree. As I checked the university’s job sites, one job stood out. It was a sales position for an insurance company. The money they were advertising had the potential to give me a big raise if I could be a producer. I decided to quit my current job and take a chance by making a change. I literally doubled my hourly wage my first week. More importantly, this change helped me realize my own strengths and led me into the professional sales field, where I found success in both sales and leadership roles. Many others have found the value of becoming professional salespeople. The great thing about quality salespeople is that they are needed in all economic trends. If you can develop the skills to sell, you will always have a job. There are many companies here in Utah as well as globally that will hire as many quality salespeople as they can find. There are many who would benefit by learning new sales skills or adapting their own skill set and starting a career in professional sales. I am not suggesting that every person quits their current job and join a sales force; however, it may be beneficial to test your own sales capabilities on a part-time basis. It may also be beneficial to come by our department and sign up for an introductory sales course where we teach more about the sales process and opportunities in the field. Although there can be a steep learning curve to excel in the selling process, people are making the change to professional sales every day and finding great opportunities. You could be next. Blake Nielson is chair of the Professional Sales Department at Weber State University. You can become a partner or member at the WSU Sales Center. Email salescenter@weber.edu and follow at www.facebook.com/wsusales or visit the website at www.weber.edu/salescenter.

Space Tourism Accident Investigation

Regulators blame poor safety culture in Virgin Galactic crash

WASHINGTON — A nine-month federal investigation into the fatal crash last year of a Virgin Galactic spaceship found that the company hired to build and test the vehicle failed to properly train its pilots and did not implement basic safeguards to prevent the human error that caused the accident. The National Transportation Safety Board on Tuesday announced that the probable cause of the October crash of a test flight was a mix of human error and systematic failures by Scaled Composites, the company that designed and was operating Virgin Galactic’s SpaceShipTwo. The spacecraft, designed to take paying passengers to the edge of Earth’s atmosphere, crashed in the Mojave Desert, killing co-pilot Michael Alsbury, 39, and injuring pilot Peter Siebold, 43, who ejected from the vehicle at an altitude of more than 40,000 feet. The NTSB had earlier concluded that Alsbury mistakenly unlocked a “feather” system on the spaceship that allows two wings to stand upright and create drag on the vehicle. With the wings unlocked prematurely, the spaceship broke apart in midair. But at Tuesday’s hearing, board members focused on the safety culture at Scaled Composites, particularly how it trained its pilots and the systems that could have prevented a premature unlocking of the system. It determined that the company “failed to consider and protect against the possibility that a single human error could result in a catastrophic hazard.” Scaled Composites also did not ensure that “pilots adequately understood the risks of unlocking the feather early,” the investigation found. NTSB member Robert Sumwalt said that Scaled “put all their eggs in the basket of the pilot doing it correctly.” But, he said, humans will inevitably make mistakes, “and the mistake is oftentimes a symptom of a flawed system.” Kevin Mickey, a spokesman for Scaled Composites, which is owned by Northrop Grumman, said that “safety has always been a critical component of Scaled’s culture and, as the NTSB noted today, our pilots were experienced and well-trained.” He said the company has “already made changes in the wake of the accident to further enhance safety. We will continue to look for additional ways to do so.” Virgin Galactic said it has “already implemented changes as a result of the accident,” including putting in place an “inhibitor” that would prevent the feather from being prematurely unlocked. NTSB officials also questioned whether the Federal Aviation Administration, under pressure to issue or deny flight permits within a 120-day period, rushed Scaled Composites’ test-flight application without fully vetting it. The NTSB recommended that the FAA more thoroughly examine permit applications to make sure they ensure safety. An FAA spokesman said the agency takes “all NTSB recommendations very seriously” and that the agency has 90 days to review them and respond.