Destroying business one sector at a time

Gulf Deepwater Drilling Ban’s Hidden Victims

Energy: Small- and medium-size businesses serving Louisiana's energy industry are shedding employees, dipping into personal savings or moving elsewhere to stay afloat. The administration's war on fossil fuels is taking its toll.

The federal six-month moratorium on drilling that was issued in May 2010, after the explosion of the Deepwater Horizon oil rig, has been officially lifted, but it might as well still be in effect.

The glacial permitting process put in place in the aftermath in the name of public safety is killing an industry pledged to wean us from the "energy of the past" will not mourn.

A study released Monday by economic development agency Greater New Orleans Inc., or GNO, details the dire results to the federal deepwater drilling moratorium and its regulatory aftermath. While on the surface things appear to be going well, the supporting small and medium business infrastructure is struggling to survive.

The study says that despite the relatively limited employment losses reflected in public employment data, businesses are indeed laying off workers, reducing hours and salaries and limiting new hires as a result of the permit slowdown and insecurity about the future of the Gulf of Mexico."

"You don't see how badly they are hurting because they are still operating," said Lizette Terral, New Orleans region of JPMorgan Chase Inc., a GNO board member. To do that, many have laid off workers, reduced hiring to replacements only and dipped into personal savings to the point of exhausting them.

About 100 business owners or company executives from fields associated with the oil and gas industry responded to the GNO Inc. survey.

Forty-nine companies in the survey have laid off employees as a result of the moratoria. Fifty-two businesses (52.5%) surveyed have not hired new employees since the moratoria. Of the 47 companies that have hired, the majority have done so in small numbers and often just to replace departing staff. The 39% that have retained workers have reduced salaries and/or hours.

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Some 41% of the companies surveyed are not making a profit, a statistic that does not bode well. About 76% of the businesses have lost cash reserves with 27% losing more than half. Eighty-two percent of business owners reported losing personal savings as a result of the permit slowdown with 13% exhausting them entirely.

Although the moratorium has been lifted, permit issuance has been slower than in the years before the spill. In the past three months, two deepwater permits were issued per month on average, according to the Gulf Permit Index, released each month by GNO Inc.

That is a 66% decrease from the monthly average in the year before the spill, and a 71% drop from the historical monthly average of seven new permits per month, according to GNO Inc. data.

Shallow water permits are similarly restricted. Over the past three months, an average of 2.3 permits have been issued representing a 68% decrease in the monthly average in the year prior to the oil spill and an 84% drop from the historical average.

In this year's State of the Union address, President Obama proudly stated that "American oil production is the highest it's been in eight years" and declared that his administration would "open more than 75% of our potential offshore oil and gas resources."

Any increase in domestic oil production comes in spite of and not because of the administration's policies. Much can be traced to the oil boom in North Dakota encouraged by state government and due to the use of hydraulic fracturing technology, or "fracking" — a method frowned on by environmental activists and under investigation by an Environmental Protection Agency that has already declared war on coal.

Contrary to the president's hollow words, the administration's energy policies are killing America's domestic energy industry and the small businesses that support it.