Drilling ban may temporarily cost 8,000-12,000 jobs, panel told

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Sept. 17 -- The Obama administration’s deepwater drilling moratorium could cut net oil and gas spending on the Gulf Coast by $1.8 billion and temporarily cost 8,000-12,000 jobs, an administration official told the US Senate Small Business and Entrepreneurship Committee.

But Rebecca M. Blank, undersecretary for economic affairs at the US Department of Commerce, emphasized that job losses may be limited since most Gulf of Mexico producers and drilling contractors have retained their skilled employees.

“In addition, these highly skilled workers are able to conduct some backlogged rig maintenance and improvement,” she said in her written testimony. “Some rig workers have been deployed to work outside the Gulf of Mexico. Based on our information, we estimate that fewer than 2,000 (about 20%) out of 9,700 rig workers have been laid off or have left the gulf to work elsewhere.”

Most of the businesses which are feeling impacts from offshore drilling suspensions following the Apr. 20 Macondo well blowout, rig explosion, and oil spill in the gulf provide supplies and support, Blank indicated. “The magnitude of the spill response and cleanup spending in the Gulf Coast is large enough, however, that some of these businesses may have been able to replace some of their lost earnings by serving other customers,” she said.

Obama’s administration also has tried to mitigate the moratorium’s impacts on workers, she continued. It proposed legislation in May calling for new unemployment assistance modeled after the Disaster Unemployment Assistance Program to provide benefits to workers who lose their jobs as a result of a spill of national significance, she said.

Also, as part of discussions which created an independent claims facility and a $20 billion trust fund, the White House negotiated with BP PLC, the Macondo well’s operator, to establish the Rig Worker Assistance Fund to which the British major donated $100 million, Blank said.

Spending declines
She noted that while employment on deepwater rigs in the gulf has not fallen substantially, spending has dropped because operations have been suspended, particularly for drilling supplies, materials, and services.

“For those rigs that remain in the gulf but are no longer working, we assume that rig leasing costs continue to be paid (about 50% of total costs) plus a small amount for supplies and materials for workers remaining on the rigs, but any remaining spending has dropped to zero,” Blank said. Some of this reduced spending has been offset by other sources, she added, such as the up to $30,000 in wage replacement unemployed rig workers are eligible to receive through the BP Rig Worker Assistance Fund.

Early predictions that many deepwater rigs would leave the gulf and virtually all of their 9,700 workers would lose their jobs because of the moratorium have not come true, she told the committee. “Of the 46 rigs in the gulf in April, 41 of them were still there as of Sept. 13,” she said.

Blank said the estimated job losses from the moratorium may be overstated since the analysis assumed that deepwater drilling activities would have continued at nearly the same level before the Apr. 20 accident. “In the aftermath of this event, [they] likely would have been curtailed even without a moratorium as rig operators and contractors reviewed their safety procedures and as regulators examined the effectiveness of existing safety regulations,” she said. “Even in the absence of a moratorium, some of this spending would have been temporarily lost in the wake of such a serious disaster.”

The committee also heard from John Fernandez, assistant US Commerce secretary for economic development, who outlined the response by the department’s Economic Development Administration to impacts from the spill and deepwater drilling moratorium on Gulf Coast states and communities.

Bipartisan concerns
Following the hearing, American Petroleum Institute Pres. Jack N. Gerard said it included strong bipartisan concerns that the deepwater drilling moratorium is harming the Gulf Coast and weakening US energy security. Deepwater rigs in the gulf were appropriately inspected following the Apr. 20 accident and the industry has been working hard to improve safety and is ready to go back to work, he said in a statement.

“Oil and gas companies are doing everything possible to hold onto these jobs and retain the highly skilled workers necessary to operate,” said Gerard. “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.”

The moratorium already has forced some offshore drilling contractors to move rigs from the gulf, he observed. “We strongly encourage the Department of the Interior to establish a solid timeline for putting our companies and highly skilled employees in the gulf region back to work,” Gerard said.

National Ocean Industries Association Pres. Randall B. Luthi noted that the report reduced original job loss projections from 23,000 to 8,000-12,000, but added that it downplayed the deepwater drilling moratorium’s true impact on the region. “Thankfully, offshore oil and gas companies are good corporate citizens who have retained their skilled employees during this unprecedented time in hopes that the moratorium is lifted soon, permits are issued and drilling activity resumes,” he said. “However, this ability to keep these workers without work cannot last much longer.”

Luthi also said the report fails to recognize that temporary work many laid-off employees may have found assisting with oil spill response and cleanup will end soon now that the Macondo well has been capped and leaks from it have been stopped. “These workers will only be able to resume full-time work when gulf drilling activity resumes,” he said.

Contact Nick Snow at nicks@pennwell.com.

Related Articles

Senate passes Defense bill with BLM drilling permit program provision

12/15/2014 The US Senate approved a Department of Defense appropriations bill on Dec. 13 containing a provision extending and making permanent a drilling perm...

Cook to head DONG Energy E&P group

12/15/2014 David B. Cook has been named group executive vice-president and chief executive officer for exploration and production at DONG Energy, Fredericia, ...

Husky, CNOOC start gas production at Liuhua 34-2 field

12/15/2014 Husky Energy Inc. and China National Offshore Oil Corp. Ltd. reported the start of natural gas production at the Liuhua 34-2 gas field in the South...

US Forest Service takes no stance on fracturing in national forest

12/12/2014

The US Forest Service has dropped a proposal that would have banned hydraulic fracturing in the George Washington National Forest.

Weak crude prices could threaten Bakken production growth

12/12/2014 Bakken shale production set another record in August, but weakening crude prices and flaring reduction efforts threatened to temper production grow...

BHI: US rig count forced down by large losses in Texas

12/12/2014 Forced down by large losses in Texas and specifically the Permian basin, the US drilling rig count plummeted 27 units to settle at 1,893 rigs worki...

Husky reports start of steam operations at Sunrise oil sands project

12/12/2014

Husky Energy, Calgary, reported the start of steam operations at the in situ Sunrise Oil Sands Project in northeastern Alberta.

TAEP: TPI still peaking, but ‘contraction unavoidable’ as oil prices fall

12/12/2014 The Texas Petro Index (TPI), a composite index based on a comprehensive group of upstream economic indicators released by the Texas Alliance of Ene...

Independent assessment hikes Husky heavy oil resources

12/12/2014 Husky Energy Inc., Calgary, says an independent assessment increases its heavy oil resources in the Lloydminster region of Alberta and Saskatchewan.

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected