BOEMRE Slowdown Costs 230,000 Jobs, $44 Billion in GDP

A new study from IHS-CERA, one of the leading energy think tanks, projects the cost of the Department of the Interior’s ongoing regulatory slowdown and its impact on the energy industry, employment in the coastal states, and the U.S. economy in general. The study, released on Thursday, was commissioned by the Gulf Economic Survival Team (GEST).


We’re beginning to see the true cost of an energy-hostile Administration in Washington. Their policies are not just an inconvenience to a few companies. They are permanently damaging infrastructure which will be difficult to impossible to rebuild. That seems to be their intent.

From the study’s Executive Summary (.pdf link to full study):

Swift action to reduce the growing backlog of plans and increase the pace of plan and permit approvals to explore for oil and natural gas resources in the deepwater Gulf of Mexico would increase employment opportunities in almost every state, boost tax and royalty revenues for governments, and help stabilize US energy security. And these benefits could materialize rapidly. Early alignment between the capacity to properly regulate oil and natural gas activities and the pace and scale of investment opportunities would capture the largest possible share of the activity gap, which in 2012 results in

  • 230,000 American jobs
  • more than $44 billion of US gross domestic product (GDP)
  • nearly $12 billion in tax and royalty revenues to state and federal treasuries
  • US oil production of more than 400,000 barrels of oil per day (bd) (equivalent to approximately 150 million barrels in the full year)
  • reducing the amount the United States sends to foreign governments for imported oil by around $15 billion

The employment effects would not be limited to the Gulf states. One-third of those jobs would be generated outside the Gulf region in such states as California, Florida, Illinois, Georgia, and Pennsylvania.

[Emphasis added.]


The damage done by BOEMRE* now extends beyond a mere slowdown in acquiring permits. With the moratorium/permitorium well into its second year, structural damage to the industry has begun. This is affecting larger companies — the “majors” and the large independents — but it is especially damaging to the small independents and service companies. Private companies and small cap public companies have a particularly difficult time complying with new requirements and funding new bonding requirements. Many are understandably reluctant to embark on large new capital projects during a period of unprecedented hostility toward industry.

Whatever happens in the wake of the Deepwater Horizon, BOEMRE’s new regulations and aggressive regulatory posture will not threaten the futures of BP, Transocean, Halliburton or the other key players in the disaster. They have deep pockets and can afford to comply. Instead, dozens of smaller producers, service companies, boat companies, etc., none of them household names, will either be forced out of the Gulf of Mexico (some out of business entirely) because they cannot afford the cost of compliance with a myriad of regulations, few of which actually pertain to Macondo’s root causes.

Readers of Jonah Goldberg’s Liberal Fascism should be familiar with this effect: the weight of regulation always falls disproportionately on smaller companies. Ironically, the smaller companies did not create the problem, and the inherent risks of their operations are miniscule compared to Macondo’s deepwater monster.


* I am stinging from criticism for not explaining my acronyms. Originally, offshore oil and gas was regulated by the USGS, the United States Geological Survey. The regulatory function was vested in the newly-created MMS, the Minerals Management Service around 1980 or so. MMS lasted until 1 month after Macondo, when it was reborn BOEMRE, the Bureau of Ocean Energy Management, Regulation and Enforcement, an agency within the Department of Interior. BOEMRE is currently in the process of being broken up into BOEM and two other agencies (I don’t recall either of the new acronyms). One will contain the RE function (offshore inspections) and the other will handle revenue collection. – SM

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