“Political uncertainty” bedevils Gulf region and discourages business investment

Ten oil rigs have left the Gulf of Mexico since the Obama Administration imposed a moratorium on deepwater oil and gas drilling in May 2010, according to documentation obtained from Sen. David Vitter’s (R-La.) office.

The ten rigs named in the document are: Marinas, Discover Americas, Ocean Endeavor, Ocean Confidence, Stena Forth, Clyde Bourdeaux, Ensco 8503, Deep Ocean Clarion, Discover Spirit, and Amirante. The rigs have left the Gulf for locations in Egypt, Congo, French Guiana, Liberia, Nigeria and Brazil.

“This highlights the problem we have with losing domestic energy production as a result of the drilling moratorium and the slow permitting,” David Kreutzer, a research fellow in Energy Economics and Climate Change at the Heritage Foundation, said. “We must also keep in mind that the impacts are not instantaneous, the rigs may be idle for a while, but once they move it’s going to be difficult to move them back once they are drilling in say Nigeria or Brazil.  The oil companies must have confidence they can move forward with their drilling plans and to know these plans won’t be revoked. Only certainty will bring them back.”

Although federal officials announced they were lifting the restrictions last October, a “de-facto moratorium” remains in effect that stifles energy production and undermines large and small businesses in the Gulf region, industry officials have argued.

“I don’t think the people in Washington D.C. who implement these policies have an understanding of how much this has impacted our economy, especially in Louisiana,” Renee Baker, the state director for the National Federation of Independent Business (NFIB), said. “We can’t just look at the large businesses to understand what’s happening, there are small businesses that do a lot of services for the rigs and they have been set back. We just want to see people get back to work.”

Unfortunately, the “political uncertainty” surrounding the Gulf region has discouraged companies from making investments that could help spur economic growth, Don Briggs, president of the Louisiana Oil and Gas Association (LOGA), laments. Even before the 10 rigs cited in the document from Vitter’s office pulled out, eight other rigs that were planned for the Gulf were detoured away, Briggs said.

“When you have companies that would be spending hundreds of millions of dollars, or some cases, billions of dollars, they need certainty,” Briggs explained. “We don’t have that now and I don’t expect that we will anytime soon. We will be in a deteriorating position until this changes.”

Briggs also questions the necessity of the moratorium that was imposed in response to the explosion of British Petroleum’s (BP) Macondo oil well on April 20 of last year. The accident resulted in the death of 11 workers and caused an estimated five million barrels of crude oil to spill into the Gulf.

Despite whatever missteps were involved with BP’s oil drilling operations, the industry as a whole has a “great safety record” in the Gulf, but this has not been taken into account, Briggs noted.

“We would have implemented new rules and guidelines without any federal action. This could have been done without a moratorium. There is no getting around how severe the regulatory fallout has been for us,” Briggs said.

Meanwhile, Sen. David Vitter has called out top Obama administration officials for issuing what he views as conflicting and misleading statements on the correct number offshore drilling permits. A U.S. Justice Department motion filed in March stated there are 270 shallow water permit applications pending and 52 deepwater permit applications pending.

But in testimony before the Senate Energy and Natural Resources Committee this past March, Interior Secretary Ken Salazar said the Interior Department had received only 47 shallow water permit applications over the previous nine months and that only seven deepwater permit applications were pending. Michael Bromwich, director of the Bureau of Ocean Energy Management, Regulation, and Enforcement, told Vitter personally that only six deepwater permits were pending, and he publicly stated that deepwater permits would be limited because “only a handful of completed applications have been received.”

Over the past three months, deepwater permits are down 71 percent from their historical monthly average of 5.8 permits per month, Robert Bluey, a blogger and journalist with the Heritage Foundation, has reported on The Scribe. Shallow-water permitting have also fallen in past few weeks by 34 percent from the historical monthly average of 7.1 permits, Bluey reported.

Kevin Mooney is an investigative reporter with the Pelican Institute for Public Policy. He can be reached at kmooney@pelicanpolicy.org. Follow him on Twitter.