Such an extension is not only a bad idea, but to the contrary, the administration should lift the moratorium right away. The BP Deepwater Horizon spill had a devastating impact on Louisiana’s economy, particularly two of its largest industries: commercial fishing and oil and gas. Now that the BP leak has been plugged and greater expanses of Gulf waters are gradually being reopened, commercial fishing is beginning to recover. But with the moratorium on deepwater drilling still in place, the oil and gas industry remains largely immobilized, prolonging the economic devastation to our state. Consider the following information provided by the Louisiana Mid-Continent Oil and Gas Association:
Roughly 33% of nation’s domestically produced oil comes from the Gulf of Mexico, and 10% of the nation’s natural gas.
80% of the Gulf’s oil, and 45% of its natural gas comes from operations in more than 1000 feet of water – the “deepwater.”
Suspension of operations means roughly 33 floating drilling rigs – typically leased for hundreds of thousands of dollars per day – will be idled for six months or longer. This is costing $250,000 to $500,000 per day, per rig – resulting in roughly $8,250,000 to $16,500,000 per day in costs for idle rigs;
Secondary impacts include:
Supply boats – 2 boats per rig with day rates of $15,000/day per boat - $30,000/day for 33 rigs – nearly $1million/day.
Impacts to other supplies and related support services (i.e., welders, divers, caterers, transportation, etc.)
The impact on jobs is just as cataclysmic. Each drilling platform averages 90 to 140 employees at any one time (2 shifts per day), and 180 to 280 for two 2-week shifts.
Each platform job supports 4 other positions. Therefore, 800 to 1400 jobs per idle rig platform are at risk. Wages for those jobs average $1,804/weekly; potential for lost wages is huge, over $5 to $10 million for 1 month – per platform. Wages lost could be over $165 to $330 million/month for all 33 platforms.
The loss of all these wages will have tremendous secondary impacts. Many offshore workers live in Louisiana. The state is going to see a decrease in income taxes and sales taxes that would normally be paid by those employees. (The state does not collect a sales tax on oilfield supplies and equipment used offshore.)
The moratorium also threatens to produce longer term negative impacts.Idle drilling rigs in the Gulf could mean that they will be contracted overseas for work in other locations, and if/when the halt is lifted, rigs will not be available for completing the work in the Gulf. Fewer workers will be less traffic on LA Highway 1, and that will mean a loss of toll money collected, leaving the state of Louisiana to find other sources of funds to retire the debt for road construction, meaning loss of funding for other programs in the state’s budget. A 6-month halt in new drilling would defer 80,000 barrels/day, or 4% of 2011 deepwater Gulf of Mexico production. Higher drilling costs might jeopardize exploration in frontier areas.
The administration’s stated purpose for the moratorium is to ensure adequate safety on the rigs. Yet, the 33 Gulf wells where operations are suspended were the ones inspected immediately after the Deepwater Horizon blowout (per Interior Secretary Ken Salazar); in those inspections, “only minor problems were found on a couple of rigs”. The Vermillion Block 380, which was operating in only 340 feet of water, was not one of them. Even so, the fact that its crew apparently knew what to do and took appropriate action in response to the fire, thus preventing another spill, speaks well of the trained professionals who work offshore, the quality of the training they receive and the safety systems already in place. The costs of enforcing the drilling moratorium for nearly three more months will far exceed any benefits.