Drilling ban had ‘hidden victims’

Written by

Claire Taylor

Half of the South Louisiana oilfield service and supply companies responding to an online survey were forced to lay off employees because of the drilling moratorium and slow permitting in the wake of the BP oil spill in April 2010.

Greater New Orleans Inc., a regional economic alliance, released the results Monday of its online survey of 102 Louisiana offshore supply and service company owners and workers.

The survey was an attempt to document the financial impact of the drilling moratorium and permitting delay on “hidden victims,” particularly small and mid-sized companies

The federal government, on May 30, 2010, enacted a six-month moratorium on deepwater drilling. No new permits were issued. The action effectively shut down the oil and gas industry in the Gulf of Mexico. Additional regulations also affected shallow water drilling, severely slowing permitting for months.

Even though the federal government lifted the moratorium in October 2010, permitting continues to lag. Before the BP spill, on average seven deepwater permits and 14.7 shallow-water permits were issued per month historically. In the past three months, on average two

deepwater and 2.3 shallow-water permits were issued.

Officials at the GNO survey release ceremony on Monday referred to the moratorium and permit restrictions as a “permatorium” and called on President Obama to ease the permitting process, allowing oilfield workers and support personnel to get back to work.

“We’ve got to see this ridiculous bureaucracy change,” Plaquemines Parish President Billy Nungesser said during a press conference Monday.

The hidden victims of the federal “permatorium” include a small mom-and-pop business in Plaquemines Parish that cleaned linens for the offshore industry. They had to shut down, Nungesser said.

“We have jobs here that we don’t have to create,” Jefferson Parish President John Young said, echoing calls to ease or speed the permitting process.

Of the businesses surveyed, 39 percent reported they retained workers but cut salaries and/or hourse to save money. Lori Davis, owner of Rig-Chem, is one of those small Louisiana businesses. As a result, a couple of her employees quit to take jobs at larger companies that still offer benefits, she said.

Larger companies are more global and were able to shift assets elsewhere, insulating them from the moratorium and permitting slow down. Small and mid-sized companies and independents in the oil and gas business don’t have the same capital assets and ability to relocate.

Forty of the businesses surveyed reported they are not making a profit. Four companies reported selling all of their assets and/or going out of business because of the “permatorium,” GNO Inc. reported.

The new federal regulations are making it very difficult for small and medium sized companies to compete, Davis said.

A New Iberia transportation company described the problem in the survey: “Costs of training associated with safety have increased 75 percent. Meanwhile, the competitive nature of the lack of work has driven daily vessel rates down.”

Davis said the regulations are “going to strangle the small business.”

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