It is “imperative” that the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) quickly resume issuing permits for shallow-water drilling, according to researchers at the Maguire Energy Institute at Southern Methodist University’s (SMU) Cox School of Business, who found that the slowdown in approving shallow-water operations “has very serious economic implications for the [Gulf Coast] region that rival or exceed those of the spill and moratorium” that preceded it.
“At a time when every respected study agrees on the need to increase all sources of domestic energy, offshore drilling bans, excessive regulation and higher taxes and fees on oil and gas production will do just the opposite,” the researchers concluded.
Nearly 40,000 jobs related to the Gulf of Mexico’s (GOM) shallow-water (500 feet or less) drilling industry have been placed in jeopardy by the Department of Interior’s “apparent decision to slow-walk the shallow-water permit approval process,” according to the study.
If 75% of rigs become stacked as a result of inaction on issuing permits, “the direct economic losses to the nation’s businesses and workers could exceed $4.3 billion,” a figure that balloons to more than $12.5 billion when the ripple effects of lower indirect and induced spending are added to the equation, the researchers said.
Because shallow-water operators tend to be small, independent companies, they are particularly vulnerable to the effects of the de facto moratorium, which is “especially harmful to both them and the small businesses along the Gulf Coast that support them,” according to the report.
While the Obama administration imposed a six-month moratorium on drilling in the deepwater GOM, drillers in shallow waters say they have been subject to an indefinite de facto moratorium by the department’s requirement that they meet stringent safety and environmental requirements before they can drill new wells (see Daily GPI, June 4).
BOEMRE Director Michael Bromwich said recently that he understands the frustration of shallow-water drillers in the Gulf of Mexico as they face a slower permit approval process, but he said safety will not be compromised (see Daily GPI, Sept. 14). Since June 8, 13 applications for permits to drills have been submitted to BOEMRE, of which five have been approved, Bromwich said. A sixth shallow-water permit was recently issued, according to the SMU researchers, who said 10-15 permits were issued monthly prior to the April 20 Deepwater Horizon disaster.
The SMU study were generally in line with a Moody’s Analytics report issued in late July, which projected that an estimated $1.2 billion in economic output and 17,000 jobs would be lost in the Gulf Coast states by the end of the year, even if BP plc’s busted Macondo well was plugged by its deadline (see Daily GPI, July 21). And in the first six months of the drilling ban, Louisiana State University economist Joseph F. Mason sees the moratorium causing a permanent loss of more than 8,000 jobs, nearly $500 million in wages and more than $2.1 billion in economic activity in the Gulf region alone.
A recent Obama administration study concluded that the economic impact of the six-month moratorium on deepwater drilling in the Gulf of Mexico has not been as devastating as some economists projected (see Daily GPI, Sept. 20). That study did not examine the economic impact of the slowdown of drilling in shallow waters.
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