Drilling-Ban Job Losses Smaller Than Estimated, Obama Administration Says

President Barack Obama’s moratorium on deep-water drilling is costing no more than 8,000 to 12,000 jobs because offshore rig operators have retained skilled workers, according to an administration report.

During the moratorium, which began May 28, the average number of rig workers fell by about 2,000 and spending by drillers is declining by $1.8 billion, according to the report released today. The additional job losses were from companies that service drilling rigs and businesses along the Gulf Coast.

The administration’s number is far smaller than some earlier estimates, such as a prediction by the Baton Rouge-based Louisiana Mid-Continent Oil and Gas Association that the moratorium may put as many as 46,000 rig workers out of work. An initial administration estimate that the moratorium would lead to the loss of 23,247 jobs assumed that all workers on deep- water rigs would be laid off during the suspension.

“Thankfully, offshore oil and gas companies are good corporate citizens who have retained their skilled employees during this unprecedented time,” Randall Luthi, president of the National Ocean Industries Association in Washington, said in a statement. “However, this ability to keep these workers without work cannot last much longer.”

Obama halted drilling in waters deeper than 500 feet after a BP Plc well about 40 miles (64 kilometers) off the Louisiana coast blew out on April 20, killing 11 workers and causing the worst U.S. oil spill.

‘Relatively Limited’

“The evidence suggests that job impacts among workers in larger companies, particularly the drilling rigs in the Gulf of Mexico, may be relatively limited because these companies have chosen to retain their skilled labor,” according to today’s inter-agency report. “Most of the potential employment impacts may be in businesses that provide supplies and support to the drilling industry in the Gulf Coast.”

Administration officials presented the findings today at a hearing of the Senate Small Business and Entrepreneurship Committee. Senator Mary Landrieu, a Louisiana Democrat who heads the committee, said in July that lost jobs, wages and spending may cause “almost unfathomable” damage to state and local government finances.

“The decision to stop virtually all new energy exploration in the Gulf of Mexico was uninformed and in my view bordered on recklessness,” Landrieu said today. “Our offshore energy exploration industry, and the hundreds of businesses that support it, has also been put in jeopardy by the heavy hand of the federal government.”

33 Rigs Idled

The findings in the administration’s report are based on conversations with rig operators and publicly available data on jobs and unemployment claims.

The moratorium, which idled 33 rigs, is due to end Nov. 30. Interior Secretary Ken Salazar and Michael Bromwich, head of the Bureau of Ocean Energy Management, the Interior Department office that oversees offshore drilling, have said the ban may be lifted early if the industry shows it has improved safety and developed means to contain another spill.

The ban affected rigs exploring for oil, not those already producing crude. Work also has continued on rigs drilling relief wells meant to shut in BP’s damaged Macondo well, as has repair work on rigs that have moved into port.

The report examined unemployment data from five Louisiana parishes that rely on the deep-water drilling industry. New unemployment claims varied little in those parishes in the three months through August, according to the report.

Five Parishes

Monthly job data in the region were boosted by temporary jobs cleaning up the spill. Employment in the five parishes -- Lafourche, Lafayette, St. Mary’s, Terrebonne and Iberia -- increased from April to July by 0.7 percent, close to the rate for Louisiana and the nation.

“There is no evidence of declining employment after the moratorium was announced,” according to the report.

While that may be true when temporary cleanup jobs are counted, Key Energy Services, Inc., a Houston-based oilfield contractor, reduced its Gulf field workforce by 40 percent during the moratorium, Chief Executive Officer Dick Alario said.

“These are good-paying jobs that require many years of training and experience to fulfill,” Alario said in a statement. “We need our federal regulators to be rational and recognize the hardship that the moratorium has placed on families.”

A report last month for a panel investigating the BP disaster aboard the Deepwater Horizon rig said the moratorium is no longer needed because new rules reduce the risk of an uncontrolled spill. Offshore drillers must now estimate the amount of oil that might gush from an undersea well if systems designed to cap the flow fail in an emergency, among other new requirements.

Presidential Commission

That report from the Bipartisan Policy Center, a Washington-based research group, was prepared for a presidential commission investigating the BP spill.

“While any job loss due to the moratorium, even temporary, is deeply regrettable, it is important to place these effects in the context of the economic, environmental and safety threat that the Deepwater Horizon explosion created,” according to today’s report by the administration.

To contact the reporter on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net.

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