BOEMRE Slowdown Costs 230,000 Jobs, $44 Billion in GDP

A new study from IHS-CERA, one of the leading energy think tanks, projects the cost of the Department of the Interior’s ongoing regulatory slowdown and its impact on the energy industry, employment in the coastal states, and the U.S. economy in general. The study, released on Thursday, was commissioned by the Gulf Economic Survival Team (GEST).

We’re beginning to see the true cost of an energy-hostile Administration in Washington. Their policies are not just an inconvenience to a few companies. They are permanently damaging infrastructure which will be difficult to impossible to rebuild. That seems to be their intent.

From the study’s Executive Summary (.pdf link to full study):

Swift  action  to  reduce  the  growing  backlog  of  plans  and  increase  the  pace  of  plan  and permit  approvals  to  explore  for  oil  and  natural  gas  resources  in  the  deepwater  Gulf  of Mexico  would  increase  employment  opportunities  in  almost  every  state,  boost  tax  and royalty revenues for governments, and help stabilize US energy security. And these benefits could  materialize  rapidly.  Early  alignment  between  the  capacity  to  properly  regulate  oil and natural gas activities and the pace and scale of investment opportunities would capture the  largest  possible  share  of  the  activity  gap,  which  in  2012  results  in

  • 230,000 American  jobs
  • more  than  $44  billion  of  US  gross  domestic  product  (GDP)
  • nearly  $12  billion  in  tax  and  royalty  revenues  to  state  and  federal  treasuries
  • US  oil  production  of  more  than  400,000  barrels  of  oil  per  day  (bd)  (equivalent  to  approximately  150  million  barrels  in  the  full  year)
  • reducing  the  amount  the  United  States  sends  to  foreign  governments  for  imported  oil  by  around  $15  billion

The  employment  effects  would  not  be  limited  to  the  Gulf  states.  One-third  of  those  jobs would  be  generated  outside  the  Gulf  region  in  such  states  as  California,  Florida,  Illinois, Georgia,  and  Pennsylvania.

[Emphasis added.]

The damage done by BOEMRE now extends beyond a mere slowdown in acquiring permits. With the moratorium/permitorium well into its second year, structural damage to the industry has begun. This is affecting larger companies — the “majors” and the large independents — but it is especially damaging to the small independents and service companies. Private companies and small cap public companies have a particularly difficult time complying with new requirements and funding new bonding requirements. Many are understandably reluctant to embark on large new capital projects during a period of unprecedented hostility toward industry.

Whatever happens in the wake of the Deepwater Horizon, BOEMRE’s new regulations and aggressive regulatory posture will not threaten the futures of BP, Transocean, Halliburton or the other key players in the disaster. They have deep pockets and can afford to comply. Instead, dozens of smaller producers, service companies, boat companies, etc., none of them household names, will either be forced out of the Gulf of Mexico (some out of business entirely) because they cannot afford the cost of compliance with a myriad of regulations, few of which actually pertain to Macondo’s root causes.

Readers of Jonah Goldberg’s Liberal Fascism should be familiar with this effect: the weight of regulation always falls disproportionately on smaller companies. Ironically, the smaller companies did not create the problem, and the inherent risks of their operations are miniscule compared to Macondo’s deepwater monster.

Cross-posted at

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