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Texas Business Report: What Is the Future of the Houston Ship Channel?

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Formula Feud

The rivalry between Texas’ NASCAR and Formula One communities became mildly faster and slightly more furious this week when race officials took shots at each other through the media over a scheduling dispute. Eddie Gossage, the GM of Texas Motor Speedway in Fort Worth, accused F1 CEO Bernie Ecclestone of being “arrogant” and “foolish” for hosting the U.S. Grand Prix in Austin on the same day as NASCAR’s Texas 500 race this fall, the Associated Press reports.

Ecclestone waved off the criticism, explaining that the two circuits have very different fan bases. He also described F1 as a more complex undertaking that requires international planning and coordination, adding: “At the end of the day, they run a domestic series in America—we run a world championship.” The November 2 Grand Prix is F1’s only American race in 2014. Its organizer, Circuit of the Americas, estimates the three-day event attracts about 300,000 people to Central Texas for the weekend. 

The Bottom Line: NASCAR champ Dale Earnhardt Jr. had Gossage’s back at an appearance in Austin on Tuesday, arguing that “NASCAR is the best motorsports in the country for sure and possibly in the world,” and “we put on a better show,’’ according to the Dallas Morning News. 

Gulf Friction

A Thursday feature in Businessweek spotlights the future of the Houston Ship Channel, where companies including ExxonMobil, Kinder Morgan Energy Partners, and Enterprise Products Partners are investing $35 billion in projects planned through 2015. Those new plants, refineries, and other operations that will ship out of the Gulf are expected to create about 265,800 jobs.

The article describes the strain the oil and gas boom is putting on the 52-mile channel’s aging infrastructure, which first began to take shape about 100 years ago. Hundreds of ships navigate the waterway each day, requiring pilots to engage in a maneuver they have dubbed “the Texas Chicken,” in which “two ships to chart a course for a head-on collision, then swerve right, and use each other’s wave pressure to move safely past.”

The Bottom Line: In addition to heavy ship traffic, the channel also contends with problems such as fog (which closed the port for a total of about two weeks last year) and silt buildup. Channel operators dredge out about one million dump trucks worth of silt every year, and “despite that, only about 5 percent of the channel is at its authorized maximum width and depth,” according to Businessweek. When the port has to be closed, it costs companies about $330 million per day in lost business.

The Eyes of Tesla are Upon Us

Elon Musk’s corporate flirtations with Texas began a new chapter this week when Tesla Motors announced that the state is on the list of potential locations where it could build the world’s largest battery factory, the Dallas Morning News reports. Other contenders include Nevada, Arizona, and New Mexico. If that sounds familiar, it’s because the billionaire executive is engaging in a similar “will they or won’t they” courtship via his commercial space-flight company SpaceX, which is mulling plans for a potential launch site in South Texas.

Tesla, which manufactures high-end electric cars, says its so-called “gigafactory” could generate as much as $5 billion investment and create about 6,500 jobs in whichever location it ultimately selects, the Morning News reports. The ten-million-square-foot plant could also have a significant impact on the lithium-ion battery market, driving down prices by as much as thirty percent, according to company estimates. 

The Bottom Line: Tesla plans to sell $1.6 billion of convertible bonds to get the project off the ground. If the company is able to secure the necessary financing and incentives to move forward, it could start construction on the facility by the end of this year. 

Winner of the Week: J.C. Penney

Finally some good news for beleaguered J.C. Penney: After more than a year of financial turmoil, the Plano retailer’s stock shot up more than 25 percent Thursday on the heels of a positive fourth-quarter earnings report. The Motley Fool reports the company’s same-store sales increased by two percent compared to last year’s Q4—a vast improvement over the 31 percent decline in that period from 2012 to 2013. Penney’s new CEO Myron Ullman expects that figure to increase slowly but surely to about five percent in the first quarter and a similar rate for the fiscal year, according to the finance website’s analysis, which argues that despite the sudden turnaround, JCP is “still a risky investment.” 

Loser of the Week: Castro Property Restoration

A lawsuit filed this week by Attorney General Greg Abbott accuses two Austin construction contractors of duping homeowners into signing contracts that gave them access to their home insurance funds, NBC TV affiliate KETK reports. As part of the alleged scam, the owners of Castro Property Restoration went door to door offering to provide home repairs, telling residents that “free money from the government” would cover the cost of their services if they agreed to sign a contract and pay a $99 up-front fee. 

One detail the contractors failed to mention in their pitches was that the contracts “contained a ‘power of attorney’ clause that gave [them] control over financial decisions” including the authority to file homeowners’ insurance claims, according to KETK. Once the scam was discovered, the contractors were charged with violating the Texas Deceptive Trade Practices Act and Texas Business Code.

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