Diary

Obama throws out "baby with the bathwater" with his drill moratorium

Yes, the BP spill was and still is a tragedy for families affected and the environment, however the Boy- Dawdler-in-Chief in the Oval Office (sorry, I just can’t bring myself to call him Mr. President) has again thrown out the baby with the bath water.

While O fiddles in Chicago (probably learning more Godfather-tactics), plays golf and dawdles around, Rome is still burning in the Gulf. Now he’s talking the possibility of criminal charges brought against BP, (we’ll have to wait I guess to see if anything was mishandled); but something in my Virgo-logician mind tells me BP is not enjoying losing billions of dollars in revenue and lost oil and is therefore doing everything it can to stop the spill.

So apparently without thinking ahead of the consequences (surprise!) Obama orders a moratorium last week on deep-water drilling in the Gulf.

And because of this moratorium most companies are pulling up stakes; many may never return.

One of those companies is Walter Gas and Oil who was within reach of finding oil and has invested millions of dollars into their venture with most probably seeing no return. The MMS (Minerals Management Service) ordered Walter to start shutting down last Friday.

Secretary of the Interior Salazar has also blocked new drilling permits for 6 months and suspended 33 deepwater drilling operations.

“We’re pausing deepwater drilling and examining the system to ensure this disaster doesn’t happen again,” Salazar said during a conference call with reporters. “We need to take a cautious approach to offshore oil and gas development as we strengthen safety.”

Drilling in waters 500 feet or less will not be affected and neither will wells already in operation. The Presidential Order does not affect the 4,515 shallow-water wells, and it does not affect 591 producing deepwater Gulf wells.

Maybe I’m wrong, but I’d be willing to bet these oil companies who were in the process of deep water drilling are aware of what went wrong with BP and have taken precautions of their own.

Let’s see how this “we’re gonna punish a whole lot of other people not responsible” mentality will shake out. How does this bode for industry in the affected area? Not well, says the Louisiana Mid-Continent Oil and Gas Association.

The Louisiana Mid-Continent Oil and Gas Association is the oldest trade association in the state exclusively representing all sectors of the oil and gas industry operating in Louisiana and the Gulf of Mexico, including exploration and production, refining, transportation and marketing.

Here are a couple of basic facts about the oil and gas pulled from the Gulf via LMOGA:

  • Roughly 33% of our nation’s domestically produced oil comes from the Gulf of Mexico, and 10% of the nation’s natural gas.
  • 80% of the Gulf’s oil, and 45% of its natural gas comes from operations in more than 1000 feet of water – the deepwater (2009 data).

In an e-mail I received from LMOGA today below is how the moratorium will affect the industry and the area already devastated by the BP spill:

  • Suspension of operations means roughly 33 floating drilling rigs – typically leased for hundreds of thousands of dollars per day – will be idled for six months or longer.
  • $250,000 to $500,000 per day, per rig – results in roughly $8,250,000 to $16,500,000 per day in costs for idle rigs.

Secondary impacts include:

  • Supply boats – 2 boats per rig with day rates of $15,000/day per boat – $30,000/day for 33 rigs – nearly $1 million/day.

Jobs

  • Welders, divers, caterers, transportation, etc.
  • Each drilling platform averages 90 to 140 employees at any one time (2 shifts per day), and 180 to 280 for 2 2-week shifts Each E&P job supports 4 other positions.
  • Therefore, 800 to 1400 jobs per idle rig platform are at risk. Wages for those jobs average $1,804/weekly; potential for lost wages is huge, over $5 to $10 million for 1 month – per platform. Wages lost could be over $165 to $330 million/month for all 33 platforms.

And in addition to the jobs and all the other impacts with the drilling moratorium itself, many offshore workers live in Louisiana. The state is going to see a decrease in income taxes and sales taxes that would normally be paid by those employees. (The state does not collect a sales tax on oilfield supplies and equipment used offshore.)

And Louisiana Governor Bobby Jindal is certainly not happy about any of this. He sent a letter to Mr. Obama and Secretary Salazar in which he states:

“Already, Louisiana has suffered severe negative economic and ecological impacts from the BP oil spill. During one of the most challenging economic periods in decades, the last thing we need is to enact public policies that will certainly destroy thousands of existing jobs while preventing the creation of thousands more.”

Way to go, Obama. Bet you didn’t think of this stuff. Ironically, more jobs have probably been created by this disaster than the stimulus bill could ever have created.

Since the above facts are not as yet listed on LMOGA’s website, anyone with questions may contact the PIO Mr. Larry Wall at 225-387-3205.