Administration report tries to downplay impact of moratorium"

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September 16, 2010

Administration report tries to downplay impact of moratorium

The Administration has released a report entitled "Estimating the Economic Effects of the Deepwater Drilling Moratorium on the Gulf Coast Economy."

You can download it here.

The report was discussed today at a hearing of the Senate Small Business Committee, chaired by Democratic Senator Mary Landrieu.

The video clip captures an exchange at the hearing between Rebecca M. Blank, Under Secretary for Economic Affairs, U.S. Department of Commerce.

In it, Under Secretary Blank concedes that the Administration undertook no kind of economic analysis before imposing the drilling moratorium.

Few in the offshore industry share the somewhat rosy view of the moratorium that emerges from the report issued today.

Jim Noe, Executive Director of the Shallow Water Energy Security Coalition, called the report "little more than an unjustifiably optimistic attempt to glaze over the real, devastating impact of the ban on deepwater drilling."

"The report," he said,"twists facts, makes unrealistic assumptions, and wholly ignores the de facto moratorium on shallow water drilling."

Mr. Noe said the report's claim that spill clean-up work is a net positive for the Gulf Coast is "like saying that a hurricane is good for the economy because of all of the rebuilding work it will provide afterwards, ignoring the more lasting destruction wrought by the storm. Contrary to the claims in the report, it's the clean-up that's 'temporary,' not the impact of the moratorium.

"Drilling companies are doing their best to save their employees' jobs by moving them towards work that is not an efficient use of resources, and the report uses this to claim that predictions of more extensive layoffs 'have not proven true.' In reality, companies, particularly independent and small businesses, are unable to make new, important investments, have stopped hiring workers, and are forced to drain their reserves while they sit and wait, hoping that the recklessly imposed moratorium will be lifted."

"The administration's report makes assumptions that drilling will resume when the moratorium ends," noted Mr. Noe,"but based upon our experience as shallow water drillers, it is far from a guarantee that any new permits will be issued upon the lifting of the ban. We haven't had a moratorium in shallow waters since May 28t, yet rigs continue to go idle. Today, 15 of the 46 shallow water rigs are idle due to a lack of the issuance of new drilling permits. By Halloween, we will have over 70 percent of the shallow water fleet idle unless the administration speeds up the issuance of permits.

"In order to have a truly accurate look at the economic devastation in the Gulf region, it is imperative to include data from shallow water drillers. The shallow water de facto moratorium is having a direct impact on the economies of the Gulf States, and no report claiming to measure the effects of the ban on drilling can be considered credible without analyzing shallow water as well. The shallow water industry has already seen hundreds of layoffs and we have hundreds more on our payrolls but left without a job to do. The real deepwater moratorium and the de facto shallow water moratorium have frozen job growth and economic investment. It's a chilling disappointment that the administration would brush that off in today's economy."

U.S. Congressman Kevin Brady, (R.-Texas) the top House Republican on the Joint Economic Committee, said the report "ignores mounting small business job losses occurring throughout the Gulf as a result of the moratoria in deep and shallow water".

He called the economic damage "real and severe" and said it casts "real doubt on the credibility of this report."

While API did not directly address the accuracy of the report,President and CEO Jack Gerard said the moratorium jeopardizes the jobs of tens of thousands of workers and could substantially reduce domestic energy production.

"Oil and gas companies are doing everything possible to hold onto these jobs and retain the highly skilled workers necessary to operate. However, they must now make long-term capital expenditure decisions, and the current level of uncertainty about the openness of the Gulf of Mexico for development could threaten that investment and send capital and American jobs overseas. Unfortunately, the moratorium has already forced companies to move drilling rigs out of the Gulf," he said


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