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Experts: Drilling Moratorium May Do More Economic Damage Than Oil Spill

  • David Dyar

The six-month moratorium on deepwater oil and gas drilling in the Gulf of Mexico imposed by President Obama is taking a toll on the economy of Louisiana that could far exceed the damage to other industries caused by the BP oil spill. The purpose of the moratorium is to assure that no other accident occurs, but many experts believe it is too long.

Congressional representatives from Texas, Louisiana and Mississippi are appealing to the Obama administration to shorten the six-month moratorium on deepwater drilling in the Gulf, noting the damage that will be done to regional economies dependent on the oil and gas industry. The bi-partisan group of lawmakers also note the importance of the oil produced from the Gulf, which amounts to around 30 percent of total U-S domestic production. Of that, 80 percent is produced from deepwater wells.

The hardest hit state is also the one hardest hit, so far, from the oil leak, Louisiana. The state's Republican governor, Bobby Jindal, has described the moratorium as a self-inflicted wound that will make it even harder for his state to recover. Louisiana's two senators, one a Republican and one a Democrat, have also argued against the length of the moratorium.

Former Democratic congressman Chris John, who is now president of the Louisiana Mid-Continent Oil and Gas Association, says people in his state are frustrated with the White House over this issue.

"There are 120,000 people that work in the Gulf of Mexico every day and those are very good jobs. Those jobs earn an average salary of about $93,000 (annually), depending on your years of service and your expertise," he said in explaining the importance of the offshore energy industry.

John says every one of those well paid jobs supports at least four other jobs in the state's economy and those jobs altogether have a ripple effect throughout the economy. More than 7,000 good jobs could be lost if the moratorium continues much longer.

President Obama has promised to compensate oil and gas workers made idle by the moratorium and, in his address from the Oval Office Tuesday, he justified the moratorium. "I know this creates difficulty for the people who work on these rigs, but for their safety and for the sake of the entire region, we need to know the facts before we allow deepwater drilling to continue," Mr. Obama said.

The president says the moratorium could end sooner than six months if the commission he has appointed to study the BP Deepwater Horizon disaster can finish its work sooner. But Chris John says his experience in Congress, from 1995 to 2005, tells him that commissions tend to take a longer time to finish their work. In the meantime, he says the owners of the mobile platforms that carry out deepwater drilling may move away to other parts of the world.

"The day rates, on average are about $375,000 a day, a day. These pieces of equipment are nearly $1 billion a piece. Every drill ship out there is being looked at. There is a demand for them all over the world, off of Africa and, certainly, in the North Sea and all over. They are looking at their options today because they are not going to sit idle in the Gulf of Mexico for six months or more."

Houston-based Anadarko Petroleum has already dropped plans to drill at three sites in the Gulf, leaving rigs owned by Transocean, Diamond Offshore and Noble Energy available for projects elsewhere.

Much of the news media coverage of the Gulf oil leak has focused on fishers, shrimpers and oyster boat crews sidelined by the disaster. The fishing industry produces about $3 billion a year for Louisiana. Tourism, which has also been affected, is an $8 billion industry. But the Oil and Gas Industry produces $70 billion for the state of Louisiana each year and Chris John says many people who work in fishing part of the year rely on well-paid jobs in offshore energy the rest of the year.

"There are many people who hang up their shrimp boat and get on a supply boat and work in the offshore oil and gas industry. The fishing industry and the oil and gas industry are both very important to Louisiana. We have coexisted for hundred years and this is a relationship like none other."

Environmental groups have applauded the president's moratorium and some, like the Sierra Club, have argued that the ban on deepwater drilling should be permanent in order to end the nation's dependence on oil. But, as President Obama has acknowledged, there is, at the moment, no viable alternative to petroleum as a transportation fuel. So any prolonged disruption of domestic production will likely result in larger imports of foreign oil.

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