BP Oil Spill Aftermath (Part 1 of 2)

I am sure you all remember the dire predictions of environmental disaster resulting from last year’s huge oil “spill” in the Gulf of Mexico. I was concerned, too, of course. But, I know that God’s Creation — or, Nature, if you prefer — has proven itself quite resilient in the past, bouncing back from disaster after disaster, both man-made and natural. So, I wasn’t really worried about the long-term health of the planet, or even the Gulf. But, such recoveries can take awhile — years, decades, maybe centuries. My real concern, then, was for the economic impact the “spill” would have on those that work in and around the Gulf.

shrimping boat

Shrimping vessel

Unfortunately, many of the affected local economies, businesses, & individuals have not fared well. Fishing — including shrimping and oystering (is that a word?) — was drastically restricted in some areas; more than 30% of federal waters in the area were closed for fishing, putting many fishermen out of work. (Such was the fear of contamination, seafood restaurants as far as New York and Chicago made it clear: “No Gulf fish served here.”) Tourism along the Gulf Coast took a dive, even where there was no oil. Everyone from hotels & lodges to fishing charters have seen cancellation after cancellation. Even real estate along the Gulf has been affected — as if it wasn’t bad enough already. Towns that rely heavily on one or more of these industries are especially bad off, because when those businesses lose their cashflow, the whole local economy dries up. Total economic costs to the Gulf Coast have been estimated at anywhere from 3 billion to 100+ billion dollars. Many small businesses were wiped out. Others are still trying to recover.

I’m keeping my eyes open for any news, good or bad, on this front. Of course, the other big player that has been hit hard by this disaster is the oil industry. I’ll get to them in a moment. In the meantime,…

I’d like to bring up a particular phenomenon that occurred surrounding the Gulf disaster — i.e., the “outbreak of social hysteria that it occasioned.” Why did it take so long for cooler heads and reason to prevail? Not surprisingly, Robert H. Nelson (Independent Institute) accuses the media, because…

“[h]ysterical overreaction, frankly, sells newspapers and magazines…. The media actually relied less on marine biologists and oil spill experts for their information and more on environmental groups. The Gulf ‘disaster’ offered multiple potential benefits to these groups, including the possibility of desired policy changes.”

What a great opportunity to highlight the dangers of carbon-based fuels, with their “greenhouse emissions and other environmental harms”!

This leads to the second reason for the lingering “social hysteria” — yes, you guessed it, “American political leadership”. President Obama, for example, likened the disaster to a hurricane or earthquake but potentially worse, because:

“[I]t’s not a single event that does its damage in a matter of minutes or days. The millions of gallons of oil that have spilled into the Gulf of Mexico are more like an epidemic, one that we will be fighting for months and even years.”

(Not so sure about that, as I’ll explain in Part 2. Blame his advisors. He’s a city-boy, a community organizer and legal academic. What does he know about oil or marine biology?)

And, the environmentalists did get some satisfaction, when the Obama administration reacted in typical liberal fashion. As you probably know, it/he instituted a temporary moratorium on deep-water drilling, causing oil companies operating in the area (not just BP) to basically shift into neutral. Fortunately, the ban was lifted on Oct. 12 — earlier than scheduled!

So, what about the oil industry? How’s that drilling going?

As Ben Casselman and Daniel Gilbert point out in their recent Wall Street Journal article, it has been 3 months since President Obama lifted that ban on deep-water drilling, but still no one has been able to drill in the Gulf. The bottleneck is the Bureau of Ocean Energy Management, Regulation and Enforcement — the administration’s new offshore drilling regulatory agency. In an effort to enforce several new, tougher safety rules, regulators take much longer to approve permits for drilling projects, even for water under 500 feet — i.e, several months, instead of weeks. Even some Democrats, like Sen. Mary Landrieu (D-LA) are complaining about the sluggish pace.

deep-water drilling rig

Deep-water drilling rig

The agency insists it is not stalling and is just trying to do what is “safe and environmentally responsible”, refusing to capitulate to pressure from the [evil] oil industry. From what we now know about the cause of the Deep Horizon disaster, I agree that better safety measures need to be in place and overseen by regulators. But, given the Green lobby’s influence on the Obama administration, I can’t help but think that at least part of the added delays are due to ideologically-driven “bureaucracy”.

Meanwhile, oil companies of all sizes are being hurt. (The environmentalists probably like this.) Some are seeing their share prices take a dive, thanks to nervous investors. Several have started moving their investments out of the Gulf, relocating rigs and personnel to places like Libya, or canceling orders for new rigs. For the most part, these companies have tried to remain loyal to the Gulf area, doing clean-up and other non-drilling activities wherever they could. But, keeping rigs mostly idle day after day has just proven too expensive.

There are long-term implications for domestic oil production, and it’s not just projects in the Gulf of Mexico that are affected by the administration’s skittishness, either. Ken Salazar, U.S. Secretary of Interior, decided in December to cancel plans for expansions in offshore oil and gas drilling in general, thereby eliminating thousands of jobs and wasting an opportunity to put a dent in our huge foreign energy bill. Last year, the Energy Information Administration (EIA), the research arm of the Department of Energy (DOE), predicted offshore production would rise 6% in 2011. Now, the agency is predicting a decrease of 13% this year due to the moratorium and the slow return to drilling. Result: a loss of roughly 220,000 barrels of oil per day.

Like Secretary Scott Angelle of the Louisiana Department of Natural Resources said,

“It’s time to get the men and women of this industry back to work, as well as the other industries that are dependent upon drilling activity for survival -— the welders, the boat captains, the pipefitters and caterers. There is a multitude of individuals on the coast who want to get back to work finding the fuel to energize America.”

Next post, some good news…..

UPDATE 2/28/2011:   Well, well, well…. After a 4 1/2 month “permitorium,” the Obama administration has finally issued a deep water drilling permit. But, they did it kicking and screaming. Here’s how Steve Everley described it:

“The permit approval comes a week after a federal court found the Obama administration’s approach to offshore drilling ‘unreasonable, unacceptable, and unjustified’ and gave the administration 30 days to act on pending permits. The judge also found the administration in contempt of court for acting with ‘determined disregard’ of previous judgments finding the Obama moratorium to be afoul of the law.”

That’s what I like to hear.

Series NavigationBP Oil Spill Aftermath (Part 2 of 2)

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