JONATHAN COHN OCTOBER 12, 2010
So much for the deepwater-drilling ban. Earlier today, Interior Secretary Ken Salazar announced that he was lifting the moratorium on offshore drilling early, well ahead of the original November 30 deadline. The reason? "There will always be risks associated with deepwater drilling," Salazar explained, "but we have now reached the point where we have, in my view, reduced those risks."
It's too early to tell whether he's right about that. What is clear, however, is that Salazar was under plenty of political pressure to lift the ban as early as possible. In the wake of the BP oil spill, the moratorium was intended to allow the oil industry and regulators time to revamp drilling regulations, safety equipment, and contingency plans for deepwater drilling. But the oil companies and Louisiana representatives complained that the costs of the ban outweighed the necessity, and it should be lifted as soon as possible. Mary Landrieu even went so far as to block the confirmation of Jack Lew to head the White House budget office in protest.
Did the moratorium really deserve the backlash? Oil industry advocates argue that it had a massive effect on jobs. According to Richard Metcalf, the director of environmental affairs at the Louisiana Mid-Continent Oil and Gas Association, five oil rigs have already left the Gulf and moved operations to other countries, which, he estimates, means about 1,200 lost jobs. And eight other rigs may be on their way out as well. The problem, Metcalf says, is that the ban didn't just affect deepwater drilling (as intended); the delay in permits put a cramp on shallow-water drilling as well.
So how big is this effect in total? Back in September, the Obama administration released a report on the moratorium's impact and found that it would cost no more than 8,000 to 12,000 jobs. The report noted that many rigs have chosen to hold onto their workers and wait out the ban. But critics like Metcalf argue that there have been plenty of jobs indirectly affected—such as cooks on a rig who can't be retained when the rig is not operating. Some outside estimates pegged the potential losses to the local economy as high as $3 billion.
Still, that's only one side of the ledger. Other experts point out that it's inaccurate to only look at drilling jobs that are being lost—it's also important to note the potential losses that could result if the moratorium is lifted prematurely. Oliver Houck, a law professor at Tulane, notes that the Gulf's fishing industry was severely affected by the BP oil spill—and another accident could finish it off for good. “The big hit in this region has not been to the oil and gas industry, they’re making billions of dollars. The big hit is to the fishing industry that has a big chance of not coming back,” said Houck. “It is a cultural loss, not just an economic loss.”
That's the big question: was the moratorium lifted prematurely? Under the new regulations, oil and gas companies will not be allowed to start drilling again until they've come up with comprehensive plans to deal with emergencies. Some industry backers, like Landrieu, worry that the permitting process will be to sluggish—that the drilling won't resume fast enough. (Landrieu is still blocking Lew for now.) Other experts, though, are skeptical that the new regulations will go far enough: "One thing we have learned is the oil companies really do have talented engineers," says Jeffrey Rachlinski, a law professor at Cornell. "They can come up with good plans but they're not going to do it unless they have to because it’s costly." It remains to be seen whether the Interior Department is acting more prudently this time around than it did before the BP spill.
(Flickr photo credit: Skytruth)