Post-moratorium economy uncertain at best

Six months ago today the BP-managed Deepwater Horizon oilrig exploded 41 miles off the coast of Louisiana. Eleven workers were killed, 17 crew members were seriously injured, dozens of families were directly impacted, and the Gulf coast economy was set adrift on a sea of uncertainty surrounded by the worst oil spill in U.S. history.

Last week, the Obama administration lifted a 139-day deepwater oil-drilling moratorium, which had been in place since May 27, and was resistant to public opposition and a ruling by U.S District Judge Martin Feldman.

Petroleum industry officials insist the drilling ban also led to a reduction in the number of shallow water permits being issued, and added to hardship experienced in the maritime oil and gas industry as well as other offshore and onshore businesses.

In Louisiana alone, experts along with working class residents, now claim it will take at least another six months before any sign of economic recovery from the loss of thousands of jobs and millions of dollars in local and state tax revenue – since the oil spill incident and moratorium enactment – might be seen.

It could be even longer before what some consider normal activity, ranging from the fishing industry to retail sales, resumes.

“[The lifting of the moratorium] is a great first step, but I would not start popping the champagne yet,” said Greg Briggs, vice president of the Louisiana Oil and Gas Association. “It will be a minimum of two years before we start seeing production in the Gulf at pre-spill levels.”

Although the moratorium was lifted six weeks ahead of what had originally been scheduled, oil and gas industry experts said this week that bureaucratic red tape could hold off any drilling activity for at least two months.

“The deepwater drilling moratorium that was called ‘arbitrarily capricious’ by the federal courts resulted in significant uncertainty to the industry and forced many to impose reduced hours and wages, relocations and, in some instances, layoffs,” said Lori LeBlanc, executive director for the Gulf Economic Survival Team, a sub-organization of the South Louisiana Economic Council.

“Even with this week’s lifting of the moratorium, we fully expect the uncertainty to continue in the form of ambiguous regulations and delays in the permitting approval process,” LeBlanc said.

Oil industry leaders noted that in addition to the deepwater moratorium, companies have found it increasingly difficult to have shallow water drilling permits secured – although that was not designated as part of the ban.

Briggs and LeBlanc are among those who suggest that a 90 percent reduction in the number of shallow water permits issued since May could have been the federal government’s way of causing a shallow water moratorium without admitting it.

“Only 12 [shallow water] permits have been approved in the past four and a half months for new wells; where historically 10-to-14 permits were approved each month,” LeBlanc said.

When the deepwater moratorium was lifted, it was done with a list of new regulations, which could continue to slow oil and gas production, and further impact the overall state economy.

The Louisiana Department of Economic Development has not yet released final statistics on how the moratorium and its aftermath have impacted conditions among coastal parishes or the state as a whole.

However, the state did release, on emergency.Louisiana.gov, a rundown of data and a list of factors that would be hit by the originally planned six-month moratorium.

According to state figures, oil and gas production supported both directly and indirectly $12.7 billion in household earnings in Louisiana in 2005. Those earnings reflected the presence of 320,000 jobs and are part of $70.2 billion in business sales.

In 2006, the oil and gas industry alone paid more than 14 percent of total state taxes, licenses and fees.

U.S. Sen. David Vitter on Thursday charged that the lifted moratorium was more exhibit than essence.

“Numerous reports have appeared describing what I and many others have been fearing for months,” Vitter said in a printed statement, “that the Obama administration would make a big show of lifting the moratorium without actually making it possible for drilling to resume.”

Vitter said that a list of new rules attached to the ban-lifting order would only mean the loss of more jobs and increased uncertainty for the coastal areas.

One of the challenges faced by both deepwater and shallow water drillers is an increase in insurance coverage. By law, companies must pay from $35 million for up to 35,000 barrels of oil spilled each day and up to $150 million for anything more than 105,000 barrels a day.

With the new regulations, according to Vitter, all companies must carry at least $105 million spill insurance, which carries a price tag of $625,000 in annual premiums; an expense that smaller drillers might not be able to handle.

The senator suggested that added expenses placed on the oil and gas industry will continue to not only impact those businesses, but will have a carry-over to other areas of commerce and consumers.

“If you think that just because the moratorium is lifted all these rigs will go to work, think again,” Vitter said.

Government officials and oil industry experts claim that unless a significant amount of both shallow and deepwater drilling permits are issued quickly, as many as 30,000 more jobs in Louisiana will be at risk.

“If there is one thing we have learned from [the Obama] Administration it is that the devil is always in the details,” said Gov. Bobby Jindal in a printed news release.

According to the Associated Press, several oil companies made known their intentions of going back to drilling in the Gulf of Mexico. However, as of last week, BP did not specify if it would seek new permits to drill in deepwater areas.

In addition, BP has not indicated if it will pay anything in terms of job loss compensation related to the moratorium.

“A … hurricane comes in and beats us up and then things get better,” Terrebonne Parish President Michel Claudet told Houma-area citizens during a town hall meeting Thursday. “[The moratorium] was a different saga.”

Oil and gas businesses are not the only ones impacted by the spill and moratorium. Viet Nguin took his boat out to try and catch shrimp Sunday for the first time since the April 20 Deepwater Horizon explosion.

Nguin said his annual income of about $39,000 is lost this year because of the oil spill and the moratorium. He worked four months for BP with the oil skimming efforts and earned $36,000 but, along with a large number of fishermen, he was cut from that job last week. “I think [BP] wanted to give other boats a chance to make money,” he said.

“I don’t know what’s going on,” Nguin said regarding BP activity or when the fishing industry will return to normal activity. “I really don’t know [when the shrimping business will return to normal].”

Briggs voiced a cautionary warning as he said: “We’ll see what happens in the next six months.”

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