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Study: Well control rule will result in loss of jobs, tax money

By:  Jacob Batte, HoumaToday.com

 

 

Hundreds of thousands of jobs and billions of dollars in tax revenues could be lost if a federal regulation revamping offshore equipment standards and well designs goes into effect, according to an economic study released Monday.

By 2030, exploration would drop by 55 percent, production by 35 percent, and 105,000 to 190,000 jobs mostly in Louisiana and Texas would be lost, according to the study by economic think tank Wood Mackenzie. Assuming $80 per barrel of oil, the study estimates $70 billion in lost tax revenues.

“Because the prospect inventory on currently held leases will likely be condensed and fewer leases will be acquired in upcoming bid rounds, it is anticipated the production gap will continue to widen and could be irreversible post-2030, further limiting jobs, GDP and taxes,” the study’s executive summary states.

A final report will be released later this month.

Announced last year, the so-called well control rule proposed by the Bureau of Safety and Environmental Enforcement aims to avoid a catastrophic spill like the one in the Gulf of Mexico in 2010.

But industry officials and congressman say the regulations could turn into a “de facto moratorium” for offshore drilling and add another burden to a business already suffering from low prices.

“The rule would literally price America’s energy industry out of the Gulf of Mexico, reducing our local workforce, shuttering our small businesses, and cutting our tax revenue and ability to provide government services,” said Terrebonne Parish President Gordy Dove.

The proposal calls for stricter design requirements and operational procedures for oil well blowout preventers, a safety device whose failure was cited as a major cause of the BP oil spill. The proposed rule also includes reforms to well design and control, real-time well monitoring, third-party inspections and oversight for some of the processes used in deepwater drilling.

“The bottom line is that we need to make sure we don’t see another disaster like the BP disaster, which caused billions of damage to the Gulf economy,” said Raleigh Hoke, campaign director of the Gulf Coast Restoration Network. “We need safety measures in place to prevent disasters like that and smaller spills as well.”

Chett Chiasson, executive director of the Greater Lafourche Port Commission, said the changes could have a long-lasting impact on the local economy.

“With the proposed rule in place, we would be looking at massive unemployment, more local businesses closing and significant drops in tax revenue that would hurt our region for many years to come,” he said.

Industry representatives said they are invested in safety, and the regulation does not take into account the numerous safety improvements that have been implemented since 2010.

Following the disaster, the federal Office of Inspector General made a number of safety recommendations to the Bureau of Safety and Environmental Enforcement. However, a 2014 audit showed few recommendations were followed and cited a lack of proper federal oversight as a key problem.

“In the wake of the (BP) disaster, state and federal leaders made a lot of promises about how we would improve the safety of offshore drilling, but those have never come to fruition,” Hoke said. “Every time the Gulf Coast Restoration Network flies out over the coast, we see rigs leaking.”

Critics of the proposal say its effects would reach beyond the industry and into coastal restoration and the local tax base. By slowing down coastal Louisiana’s biggest industry, they said, the regulation would decrease the amount of money flowing to local governments and to coastal work through the Gulf of Mexico Energy Security Act.

“We share BSEE’s intent of developing a rule that enhances safety and environmental protection; however, several provisions in the rule are not consistent with this goal,” said Lori LeBlanc, executive director of the Gulf Economic Survival Team. “Some provisions of the Well Control Rule inadvertently increase risk to the safety of workers due to the one-size-fits-all prescriptive approach, as well as the exceedingly high costs involved in implementing it as written today.”

U.S. Reps. Garret Graves, R-Baton Rouge, and Charles Boustany, R-Lafayette, have taken aim at the Obama administration over the proposed regulation. Gov. John Bel Edwards also expressed his concern in a December letter to Secretary of the Interior Sally Jewell.