Little comfort emanates from reports that the moratorium on deepwater drilling in the Gulf of Mexico will cut fewer jobs than originally was feared. The moratorium isn't the only blow to employment.
At a Sept. 16 hearing of the Senate Small Business and Entrepreneurship Committee, a Department of Commerce official reported new government estimates that temporary job losses related to the moratorium would total 8,000-12,000. Earlier, the Department of the Interior had estimated the bite at 23,000 jobs. The new estimate comes from an interagency report offering several explanations for the difference. "One of the primary ones," it says, "is that contrary to the worst-case assumptions in prior studies, many deepwater drilling operators and contractors have kept most of their employees on payroll. Earlier studies assumed that these employees would have been let go." Operators and contractors have kept rig workers busy performing maintenance or have moved them to other jobs.
Delayed effects?
So far, then, so good. But maybe the worst-case response just hasn't happened yet. Employers usually delay layoffs as long as they can. And the government bases part of its assurance on failure of an predicted exodus of deepwater rigs to come about. As of Sept. 10, 41 of the 46 rigs in the gulf at the time of the Macondo blowout remained in the region, the interagency report noted. Since Sept. 10, however, at least two more deepwater rigs have departed. In time, events still might make the new job-loss estimate look rosy.
The hope, of course, must be that job losses do fall short of projections and that rigs now in the gulf stay in the gulf. But there are strong reasons to worry.
When deepwater drilling restarts, it will do so in an all-new regulatory environment. The regulatory agency itself is new. The Macondo tragedy hastened and deepened a preordained overhaul of the old Minerals Management Service. At the new Bureau of Ocean Energy Management, Regulation, and Enforcement (BOE), regulators—now separate from resource and revenue managers—are busy.
BOE Director Michael R. Bromwich this month sent Salazar plans for implementing recommendations from a safety board to improve Outer Continental Shelf regulation. The list is long. It seeks more regulators, more and better-trained inspectors, more inspections, tougher penalties for infractions, more reports from leaseholders—in general, more regulation. BOE soon will publish an interim final rule requiring new drilling safety measures and the final version of a safety and environmental management systems rule that has been under development for several years.
Already, BOE has issued notices to lessees that require additional technical and environmental information on applications for permits, and not just for deep water. Operators complain of a de facto moratorium in shallow water caused by new permit requirements and regulatory confusion. Meanwhile, stricter National Environmental Protection Act compliance for OCS leases is under consideration. And newly updated "idle iron" guidance presses operators to plug nonproducing wells and remove inactive platforms within strict time limits, prompting the National Ocean Industries Association to wonder if state and federal regulators will approve the work.
Jobs in jeopardy
Looming over this uncertainty are federal budget proposals calling for higher taxes on producers, higher fees, and penalties for leases on which production doesn't begin promptly enough to suit regulators. Congress wants to remove liability limits for deepwater operators. And producers have no assurance deepwater drilling will resume Nov. 30. Bromwich told reporters on Sept. 14 that BOE won't issue permits until applicants satisfy the new regulations—the regulations still under development, which might or might not be finished by Sept. 30.
More than 8,000-12,000 jobs are in jeopardy. With a regulatory tempest raging, a temporary moratorium, however painful now, is not the biggest or most enduring threat to offshore drilling and related employment. BOE will be hiring, of course. To clear new ethics hurdles there, however, job seekers probably should understate past affiliation with the oil and gas business.
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