On Monday in New Orleans, Dr. Joseph Mason of Louisiana State University presented a sobering assessment of the economic impact of a six-month drilling moratorium in the Gulf of Mexico. His report, commissioned by the American Energy Alliance (AEA), forecasts that over the coming year the moratorium would result in Gulf states losing 8,000 jobs, $500 million worth of wages, and economic activity would contract by $2.1 billion.

Dr. Mason, an associate professor of finance, did not mince his words and wants those responsible for the moratorium to realize that “you cannot escape the economic costs of the policy… The moratorium could be more costly than the oil spill itself… By stifling one of the area’s primary economic engines, the administration is crippling the local economy and risking long term consequences.”

He deliberately set up his research approach to be conservative rather than alarmist, in what he described as “very established methodology.” His estimates fell well under those released last week by Louisiana’s Office of the Governor. Bobby Jindal’s statement estimated 20,000 job losses and up to $1.6 billion in lost annual economic activity in Louisiana alone.

The research approach matched that often used by the U.S. Bureau of Economic Analysis and the Government Accountability Office, and it drew upon data from a wide variety of sources, including the Department of the Interior, the Department of Energy, the Census Bureau, and the Treasury Department. Dr. Mason also utilized data from industry representatives, regarding the jobs lost specifically on account of the moratorium.

When questioned regarding how much the compensation payments from BP would offset any downturn, Dr. Mason remained skeptical. “It could take years to be settled. These individuals, these communities, need help now. They need jobs now… Even the communities themselves need tax revenues. We can’t wait.”

Tax revenues may well become a growing consideration, as federal and state governments face sustained deficit challenges. This year the Louisiana state government, for example, dealt with a more than half-billion dollar deficit, and the outlook does not suggest improvement. According to Dr. Mason’s report, the federal government is set to lose more than $200 million in taxes and Gulf states are set to lose around $100 million.

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