The Human Cost of Drilling Moratoria

Jane Van Ryan
Posted June 1, 2010

While BP prepares to cut the damaged riser from the blowout preventer (BOP) as the first step in using the low marine riser package (LMRP) at the Macondo well, analysts and bloggers are assessing the costs associated with the administration's deepwater drilling hiatus in the Gulf.

Last week, President Obama announced a six-month Gulf drilling permit delay, a delay of drilling in shallow water off the coast of Alaska until 2011, the cancellation of the Virginia offshore lease sale, and a halt to 33 exploratory wells already underway in the Gulf.

Those familiar with drilling operations noted that the administration's action would be another blow to Gulf Coast states already reeling from the impact of the oil spill on fishing and tourism.

The Louisiana Mid-Continent Oil & Gas Association said the exploratory drilling suspension would deprive rig owners of $8-16.5 million a day, cost supply-boat operators $1 million a day, reduce demand for supplies and oil and natural gas industry support services (welders, divers etc.), and result in lay-offs of 800-1,400 workers per rig.

The exploratory rigs, by the way, are the same ones that were inspected just days after the Deepwater Horizon accident. And as we reported here, only two of the rigs had compliance issues.

Geoff Styles at Energy Outlook (May 28) said:

"Stopping work on the 33 projects already might look like prudence to some, it could ultimately have economic consequences rivaling those of the spill...the President's decision will compound the economic damage..."

Byron King of Agora Financial and Whiskey and Gunpowder wrote the administration's announcement would lead to:

"...an instant drought of funds in the energy economy. Indeed, it's an overnight Drilling Depression...Now we can watch, over the coming weeks and months, as energy workers lose their jobs."

The Bear at The Absurd Report asked his readers to look at the facts:

"There are 9.2 million people employed in the energy industry including 170,000 people who work in the Gulf of Mexico. Moratoriums will cost jobs."