Offshore drilling moratorium: good for the Gulf, bad for the economy?
The federal government enacted a six-month moratorium on offshore drilling in deep waters in the wake of the Gulf oil spill. Depending on who you ask, it is either an environmental necessity or an economic disaster.
(Page 2 of 2)
The moratorium is needed because additional deep-water drilling poses "serious, irreparable, or immediate harm to life, to property, or to the marine, coastal, or human environment," Salazar argued in his July 12 order. This "temporary pause," he writes, will give investigators and the industry time to address this threat. The new order also cited fresh concerns about drill rig safety equipment. New problems appeared in blowout-preventer safety devices on the two rigs drilling relief wells to stop the leak, the order said.Skip to next paragraph
In Pictures Destructive Oil Spills
Subscribe Today to the Monitor
How has the moratorium affected the economies of Gulf Coast states?
Over the six months of the deep-water drilling moratorium, Gulf states will lose an estimated $2.1 billion in economic productivity, 8,169 jobs, $487 million in wages, and $98 million in state tax revenues, according to Joseph Mason, a Louisiana State University professor of finance and a private business consultant. "Spillover effects" will cost other states $600 million, 3,877 jobs, and $219 million in wages, his study says. The US government could lose $219 million in tax revenue. "These losses are dramatic in both the context of local economies ... and on a national scale," Professor Mason writes.
Still, he notes that his numbers are more conservative than others, including those used by the state of Louisiana. The state assumes a stoppage lasting 12 to 18 months. The Obama administration insists BP will pay and has forced the company to set aside $20 billion.
Has the moratorium cut domestic oil production?
The Louisiana Mid-Continent Oil and Gas Association reports that the equivalent of 80,000 barrels of oil a day will not go to market due to the moratorium – a shortfall that will be picked up by increasing imports. But 80,000 barrels a day represents less than 1 percent of the 11.7 million barrels of oil the United States already imports daily, according to the Energy Information Administration's website. The EIA reported in mid-June that "to date, energy production and shipments in the Gulf have not been significantly affected by the spill."
What will happen between now and the lifting of the moratorium?
In the run-up to lifting the moratorium in November, the Interior Department is reorganizing the functions of the former Minerals Management Service into three new agencies – including one that will focus only on enforcing safety rules. During that period, a presidential commission is also looking into causes of the spill, along with another federal inquiry led by the US Coast Guard. Congress is pursuing its own investigation. Out of all this, should come a resetting of the regulatory relationship between the government and oil industry in deep-water drilling – and greater safety, experts agree.
- From 'static kill' to 'bottom kill': next steps in Gulf oil spill
- What can save Gulf's fragile coastal wetlands? Salt water, perhaps
- Scientists team up to attack Louisiana's Gulf oil spill berm plan