Study: New Drilling Regulations Could Eliminate Jobs, Increase Costs

Jane Van Ryan
Posted August 30, 2010

Last week, Grant Thornton LLP released a study--"The implications of the oil spill on deepwater exploration and production"--that outlines the impacts of new, proposed offshore drilling regulations. The analysis found that these regulations would likely increase costs for Gulf energy exploration and production (E&P) businesses and adversely impact the future of Gulf offshore drilling.

The study states that "as a result of the oil spill, the future costs of drilling and operating in the Gulf will rise considerably" due to the following factors:

• Insurance increases, estimated to jump as much as 50 percent, resulting in higher daily drilling rates;
• Higher capital costs with investors and creditors demanding higher returns; and
• Significant regulation changes, such as removing the liability cap, increasing civil and criminal spill penalties, greater redundancy in drilling safety equipment, stricter requirements for permits and more federal inspectors.

Regulation changes could lead to fewer American jobs, increase the costs of energy and decrease U.S. energy security, making U.S. companies less competitive in the global race for energy. Loretta Cross, managing partner of Grant Thornton LLP's CARS practice and co-author of the white paper says:

"Policymakers need a balanced outlook; they should consider a number of factors when making long-term regulatory changes affecting the oil and gas industry."

Americans want and deserve offshore safety improvements, but they should not be so onerous that they put thousands of people out of work and increase the nation's reliance on foreign sources of energy.

The Gulf has an abundance of oil and natural gas to increase U.S. domestic production. The United States can have both--offshore safety and the energy the nation needs.