A Free-Market Energy Blog

'Hidden Victims' of Gulf Drilling Slowdown (Obama's Negative Employment Multiplier)

By Kevin Mooney -- January 31, 2012

Small business owners who depend upon the economy in the Gulf of Mexico are still victimized by the ripple effects of the moratorium Team Obama put into place after the BP oil well explosion in April 2010, documents Greater New Orleans, Inc. after surveying approximately 100 Louisiana-based companies directly involved in the offshore oil and gas industry, led by marine services and ship owners/operators.

The Impact of Decreased Drilling Permit Approvals on Gulf of Mexico Businesses found that 41% of businesses are not making a profit. Other statistics of decline:

* 76% have lost cash reserves

* 27% of businesses have lost more than half of their cash reserves

* 50% of businesses have laid off employees as a result of the moratoria

* 39% of businesses have retained workers but reduced salaries and/or hours

* 46% of businesses have moved all or some of their operations away from the Gulf of Mexico

82% of business owners have lost personal savings as a result of the permit slowdown

* 13% of business owners have lost all of their personal savings as a result of the slowdown

Even if the current administration’s anti-energy policies are reversed, this study demonstrates that there is an opportunity cost in terms of lost business that will never be recovered. As the Pelican Institute has previously reported, over 10 oil rigs have already left the Gulf and more could leave soon in the absence of a reasonable regulatory environment that allows for robust energy production on the part of those companies with a proven safety record.

Additional information was given in yesterday’s press release:

NEW ORLEANS — Today, Greater New Orleans, Inc., the economic development agency for the 10-parish Greater New Orleans region, released a study titled The Impact of Decreased Drilling permit Approvals on Gulf of Mexico Businesses. This research initiative was prepared to determine the effects of the Federal Deepwater Drilling Moratorium, as well as the ongoing impacts of the decreased approval rate for deep- and shallow-water drilling permits, on small and mid-sized businesses in Louisiana.

“Offshore service and supply companies are the core of the oil and gas industry in Louisiana,” said Lizette Terral, President, New Orleans Region, 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.”

In response to this slowdown GNO, Inc. conducted a survey of companies in the oil and gas support sectors to gauge the impacts of the permit approval rate on businesses with operations in Louisiana. The survey included 102 respondents which conduct or offer assistance to exploration and production in the Gulf of Mexico.

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.

The release concluded:

“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.

[For further information on the report, contact Matt Wolf of Greater New Orleans, Inc.]

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