A cure for the debt-ceiling blues

With the furor in Washington about raising the debt ceiling, we sometimes lose our perspective. As this is written, Democrats and Republicans have been going at it for what seems like an eternity, and we still don't have resolution on the issue. I'm waiting to see if we get a last-minute agreement or if we have to prepare for Armadebtgeddon.

Frankly, I'm not sure anyone knows what will happen if the United States fails to pay its bills, or at least is unable to pay some of them. At least one of the main credit rating agencies, Moody's, said it's possible the US could lose the AAA rating it's had since 1917 even if we do increase the debt ceiling. Something about $14.3 trillion in debt, I think.

What seems to be lost in the discussion is that the best way to reduce our national debt is to create a robust economy. If we start creating jobs and put people to work, they will begin spending money again. These purchases will help businesses and in turn will put more revenue in the government coffers so they won't have to borrow as much.

Without getting into a complicated discussion about the merits of cutting spending with or without increasing revenues (i.e., taxes) to pay down the national debt, here is one point that most of us in the oil and gas industry can agree on: more drilling = more jobs.

To my way of thinking, jobs are fundamental. The petroleum industry already employs a lot of people in good-paying jobs. However, since technology has started to unleash the vast potential in North American shale plays, there is still considerable room for growth in these mainly onshore resources. Throw in the enormous potential in the deepwater Gulf of Mexico alone, and the US could go a long way towards meeting its own energy needs and reducing its dependency on foreign exports.

In late July, IHS released a study that said fully restoring oil and gas activity in the Gulf of Mexico to a level that supports the industry's capacity to explore and operate would create 230,000 jobs – one third of which would be outside the Gulf region. This would generate an additional $44 billion to the US gross domestic product (GDP). In addition, $22 billion in new wages and compensation would be realized.

The leading states outside of the GOM to benefit from these additional jobs would be, in descending order, California, followed by New York, Florida, Illinois, and Georgia, according to the study. Other manufacturing-dependent economies such as Pennsylvania and Ohio also would receive significant benefits.

The IHS report, "Restarting the Engine – Securing American Jobs, Investment, and Energy Security," examined the so-called "activity gap," the difference between the investment capacity of oil and gas companies and the regulatory capacity to process and oversee this activity. The analysis, based on data from the Bureau of Ocean Energy Management, Regulation, and Enforcement (BOEMRE), identified a growing backlog of exploration and development plan applications awaiting approval and a significant reduction in plan and drill permit approvals.

This is a shame, especially when our country clearly needs more revenue and our official unemployment rate is near 10%. There is no doubt that safety is important and no one wants a government agency that rubberstamps all applications (wink-wink), but we've got to find a way to cut through the excessive red tape and get our country running again. Failure to do so will cost us too much.

"There is a need to better align the new regulatory environment with industry capacity, as the current pace of plan and permit approval is congested," says Jim Burkhard, IHS CERA managing director of global oil. "With that alignment, then the country can realize the economic and energy security benefits of a restarted Gulf of Mexico."

The study examined plan and permit activity levels in the six months since the lifting of the moratorium in the GOM in October of 2010. It found:

• An 86% decline in the pace of regulatory approvals for plans
• A 38% increase in the time to reach each regulatory approval for plans
• A 250% increase in the backlog of deepwater plans pending approval, and
• A 60% decline in drilling permits (combined shallow water and deepwater)

"An increase in oil and gas activity reverberates throughout the broader economy," says James Diffley, senior director of IHS Global Insight's US Regional Economic Group. "Each new hire of a platform working, machinist, or other specialist to work in the Gulf's oil and gas industry results, on average, in more than three additional jobs in an array of industries around the country, whether it be in the Gulf region or a subsea power cable provider in Ohio, a steel manufacturer in Pittsburgh, or a software firm in California's Silicon Valley."

Let's put people to work and end the tired discussion about debt ceilings. As the saying goes, "A rising tide floats all boats."

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