If drilling permit and plan approvals in the Gulf of Mexico (GOM) returned to levels that would support the industry’s capacity to explore and operate safely, an estimated $44 billion would be added to U.S. gross domestic product (GDP) and another 230,000 jobs could be supported, one-third of them outside of the Gulf region, according to a new study by IHS CERA/IHS Global Insight.

The study was commissioned by the Gulf Economic Survival Team, an independent nonprofit group that serves as a liaison between industry, state and local government and the federal government. Researchers analyzed the pace of regulatory approvals after the deepwater drilling moratorium was lifted last October and its resulting impact on activity levels by comparing the current trend against what could be achieved with “appropriate resources consistent with the capacity of the industry to operate safely and environmentally responsibly.”

The study, “Restarting ‘the Engine’ — Securing American Jobs, Investment and Energy Security,” examined the GOM’s “activity gap,” which is the difference between the investment capacity of oil and gas companies and the regulatory capacity to process and oversee this activity. The analysis, based on data from the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM), identified “a growing backlog” of exploration and development plans that are awaiting approval, as well as a “significant” drop in plan and drill permit approvals.

The decline in offshore permit approval was noted by Halliburton CEO Dave Lesar on Monday (see Daily GPI, July 19).

“There is a need to better align the new regulatory environment with industry capacity as the current pace of plan and permit approval is congested,” said IHS CERA’s Jim Burkhard, the managing director of global oil. “With that alignment, then the country can realize the economic and energy security benefits of a restarted Gulf of Mexico.”

Burkhard said the “congestion in regulatory capacity is holding back development” in the GOM. The study looked at the first six months since the moratorium was lifted. A second study will look at the pace of activity 12 months after the moratorium was lifted in October 2012. “We focused on capacity on the regulatory side and the investment capacity by the industry…There’s a mismatch between the two, and the regulatory capacity is right now the congestion point, a constraint that’s pressuring the benefits” that the industry could provide.

In his remarks IHS CERA Chairman Dan Yergin acknowledged that the offshore industry today is operating “in a new era, a new regulatory regime. The question we explored is how it is working in terms of the overall economy, not just for states in the Gulf region but across the country.” The study didn’t attempt to offer solutions to the regulatory backlog but rather to help “inform” the debate, he said.

“There’s no going back…The old system is finished and we operate in a new regulatory regime,” he said of the former Minerals Management Services arm of the Department of Interior, which was replaced by the BOEM. “The system has obviously been restructured.”

Federal agencies that oversee energy exploration were restructured last year, but BOEM’s regulatory approval process has not returned to previous levels, and “each month that passes without closing the gap reduces the potential economic benefits,” said the researchers. An analysis of GOM plan and permit activity levels in the six months since the moratorium was lifted last October found there was an:

The “lost opportunity” from not closing the activity gap in the GOM was estimated to be the loss of 150 million bbl of oil, or 411,000 b/d, in 2012 from the deepwater GOM, which is “five times the amount recently released from the U.S. Strategic Petroleum Reserve.”

Among other things the study found that there could be the addition of $22 billion in new wages and compensation that could come from the GOM recovery. An additional 1 billion bbl of oil reserves that the GOM “contributes each year in the form of new discoveries were not realized in the past 12 months, which could affect the future production outlook,” the report said.

“An increase in oil and gas activity reverberates throughout the broader economy,” said IHS Global Insight’s James Diffley, senior director of the U.S. Regional Economic Group. “Each new hire of a platform worker, machinist or other specialist to work in the Gulf’s oil and gas industry results, on average, in more than three additional jobs in an array of industries around the country, whether it be in the Gulf region or a subsea power cable provider in Ohio, a steel manufacturer in Pittsburgh or a software firm in California’s Silicon Valley.”

Increased activity in the GOM’s upstream sector “will have substantial impact on income and would lead to increased consumer spending since oil and gas jobs are higher paying, on average, than wages paid to workers in many other sectors,” said the researchers. States outside of the GOM region that would benefit the most from the additional jobs in order are California, New York, Florida, Illinois and Georgia, the study found. Other “manufacturing-dependent” economies such as Pennsylvania and Ohio also would receive “significant benefits.”

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