St. Tammany News
Published on Wednesday, February 8, 2012 12:09 AM CST
St. Tammany Parish may seem an unlikely place for the drilling permit slowdown to affect business, but the 2010 BP oil spill and now delays from the permit moratorium and lack of permitting for deep water and shallow wells in the Gulf of Mexico are doing just that..
“Absolutely, St. Tammany has many businesses directly and indirectly connected to the oil industry, and they are affected by the industry slowdown caused by the permitting delays,” said Executive Director Brenda Reine Bertus of St. Tammany Economic Development Foundation.
“Some of the parish’s businesses service rigs, some rehab products used on rigs and many are tucked away in the parish. During the study completed by GNO Inc., it was evident many are simply trying to hold on until things turn around,” she said.
Suppliers of rigs, oil supply boats, caterers and equipment already know how hard hit they are, but this has been confirmed by the release of a study of the impact of decreased drilling permit approvals on businesses conducted by Greater New Orleans Inc.
“Offshore service and supply companies are the core of the oil and gas industry in Louisiana,” said Lizette Terral, president of the New Orleans region for the J.P. Morgan Chase Bank. “These small- and mid-sized companies are dependent on activity in the Gulf for their business, and as a result they have been disproportionally hurt by the ongoing permit slowdown.”
Participants in the survey represented small, medium, and large offshore supply and service companies in numerous industries. Answers provided included details on the revenue, cash reserves, employment, business plans, and personal finances of their respective companies.
Key findings of the study show that 46 percent of businesses have moved all or some of their operations away from the Gulf of Mexico. In addition, 41 percent of businesses are not making a profit. Most, or 76 percent have lost cash reserves, and 27 percent of businesses have lost more than half of their cash reserves.
Half of the businesses have laid off employees, and 39 percent of businesses have retained workers but have reduced their hours and/or salaries.
Worst of all, 82 percent of business owners have lost personal savings as a result of the permit slowdown. Another 13 percent have lost all of their savings.
“Small– and mid-sized companies are the hidden victims of the permit moratorium and ensuing slowdown,” said Michael Hecht, president and CEO of GNO, Inc. “While global companies can simply shift their assets, these Louisiana companies — through no fault of their own — have endured significant, and now documented, financial hardships.”
“Through this study, GNO, Inc. has determined that the federal moratorium and the permit slowdown created significant negative “unintended consequences” for local businesses. While larger companies have deep cash reserves and the ability to shift assets outside of the country, Louisiana businesses dependent on the Gulf of Mexico for business have experienced significant financial hardship,” reported GNO, Inc.
“The smaller companies are digging into their personal cash reserves to keep going because many of these job require specialized training. In the 1980’s when there was an industry slowdown, the employees left and were very difficult to replace when business increased,” Bertus said. “They want to keep these specialized employees at all costs. Another problem is that the really small companies can’t just pick up and move elsewhere like larger companies.”
In 2011, the average approval time for a drilling plan was 109 days, compared to the historical average of 61 days. All deep-water plans that include any type of drilling activity must now undergo an environmental assessment (EA) process; for those plans requiring EAs in 2011, the average approval time was 213 days, significantly higher than the overall average approval time. Additionally, in 2011, only 34 percent of plans submitted were approved, compared to the historical 73.4 percent approval rate.
Deep-water permit issuance continues to lag the monthly average observed in the year prior to the oil spill. Only two deep-water permits are being issued per month since November 2011, representing a monthly reduction of 3.8 permits, or 66 percent reduction from the average of 5.8 permits per month. This number also represents a five permit or a 71 percent reduction from the historical average of seven permits per month over the past three years.
Shallow-water permit issuance is also below the historical average. Since November 2011, 2.3 shallow water permits, on average, were issued. That number represents a decrease of 4.8 permits or 68 percent from the monthly average of 7.1 permits per month observed in the year prior to the oil spill. This number also represents a reduction of 12.4 permits or a 84 percent reduction from the historical average of 14.7 permits per month over the past three years, according to the gulf permit index.
A lack of permit approval can be taken as a lack of future business in the industry and many small and mid-size businesses have been hit hard with possible lack of future business as they had known it before the oil spill, thus causing many of them to either relocate or close completely, as the study has shown.
The permitting process has become lengthy and mired in red tape, which has slowed the entire industry, affecting businesses throughout the area, even in St. Tammany.
- Drilling ban had ‘hidden victims’ (mb50.wordpress.com)
- ‘The new normal’ (mb50.wordpress.com)
- IBD: Hidden Victims of Obama’s Drilling Ban (junkscience.com)
- Hercules sees more rigs in GOM (mb50.wordpress.com)
- Obama Administration Approving Only 35 Percent of Gulf Drilling Plans (papundits.wordpress.com)
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.
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.”
- Gulf drilling, economies remain sluggish (mb50.wordpress.com)
- Obama’s obligation to free up Gulf oil (mb50.wordpress.com)
- Louisiana: oil moratorium halting much drilling (alternet.org)
- Judge refuses to withdraw from drilling ban case (seattletimes.nwsource.com)
- Ensco challenges new U.S. oil drilling moratorium (reuters.com)