Moratorium Lifted? Color Us Unimpressed.

Amid considerable fanfare today, Interior Secretary Ken Salazar announced the Obama administration is lifting the moratorium on deepwater oil exploration.


This is the same Interior Department which lifted a moratorium on shallow-water drilling in May. Since then, it has issued all of seven drilling permits for shallow-water operators in the Gulf. Some one-third of the shallow-water drilling fleet sits idle in port now, with another 30 percent scheduled to join them within the next six weeks unless permitting speeds up.

Even Salazar admitted the lifting of the moratorium is a tepid endorsement of drilling at best.

“The policy position that we are articulating today is that we are open for business,” Salazar told a news conference. The action comes as a federal judge weighed a drilling company’s bid to overturn the moratorium.

It also comes less than a month before midterm elections in which Democrats face widespread criticism for overextending government actions on the economy, including the health care overhaul, the economic stimulus plan and the drilling moratorium.

A federal report said the moratorium likely caused a temporary loss of 8,000 to 12,000 jobs in the Gulf region. While the temporary ban on exploratory oil and gas drilling is lifted immediately, drilling is unlikely to resume for at least a few weeks.

Drilling companies must meet a host of new safety regulations before they can resume operations — including a requirement that the CEO of the company responsible for the well certifies it has complied with all regulations. That could make the person at the top of the company liable for any future accidents.

“Operators who play by the rules and clear the higher bar can be allowed to resume,” Salazar said.

The secretary said he knows that some people in the oil industry and along the Gulf Coast will say the new rules are too onerous.

“Others will say that we are lifting the deep water drilling suspension too soon. They will say there are still risks involved with deep water drilling,” he said.

The truth is, there will always be such risks, Salazar said.

“As we transition to a clean energy economy,” he added, “we will still need oil and gas from the Gulf of Mexico to power our homes, our cars, our industry.”

The new rules imposed by the administration will make oil and gas drilling in the Gulf “safer than it has ever been,” Salazar said.

Making a CEO personally responsible for spills is perhaps the most ridiculous idea Salazar could offer. The CEO’s of major producers like Shell, BP or Exxon own only a small part of their companies’ stocks; personal liability for spills would needlessly induce those CEO’s to opt to drill elsewhere and cost American jobs.

Naturally, the Louisiana congressman whose district is most negatively impacted by Obama’s offshore exploration policies thinks it’s just swell that the moratorium has been “lifted,” calling it great news for the oil industry and its workers. Sen. Mary Landrieu was less moronic in her reaction…

Louisiana Sen. Mary Landrieu, a Democrat, has blocked a Senate vote to confirm President Barack Obama’s choice of Jacob Lew to head the Office of Management and Budget to protest the moratorium.

She applauded the decision to lift the ban but said she would not release her hold on Lew.

“Today’s decision is a good start, but it must be accompanied by an action plan to get the entire industry in the Gulf of Mexico back to work,” Landrieu said, calling on the administration to accelerate permit approvals for drilling in shallow and deep water and provide greater certainty about regulations industry must meet.

On the other side of the aisle, the vitriol was a lot more pronounced. Todd Hornbeck, CEO of Covington-based Hornbeck Offshore, the plaintiff in the lawsuit which judicially voided the moratorium twice, said “We’re still in the dark” until the government starts issuing actual drilling permits based on understandable rules.

“The devil is in the details, as they say, and the industry hasn’t seen the final requirements for what we would have to do to be able to actually get a permit issued,” he added. “Until that is done, lifting the moratorium may be just a moot or perfunctory act. … Right now, I’m skeptical that it will be anytime soon that permits will be issued even if the moratorium is lifted.”

Sen. David Vitter blasted the administration as well.

“I guess this is movement in the right direction, but it’s painfully slow.  It’s clear that President Obama is going to preside over a continuing de facto moratorium for months or years, with new drilling held back to a fraction of previous levels.  I’ll keep fighting until real drilling happens and jobs are actually created,”

And Steve Scalise, who represents Louisiana’s 1st District in Congress, hit today’s announcement hard.

“Today’s announcement does nothing to address the uncertainty that has caused thousands of people to lose their jobs in the energy industry,” Scalise said.  “Until they lay out a clear path toward the issuing of new drilling permits, the Obama administration continues to send the message that they’ve established a ‘permitorium’ that denies people the ability to go back to work even if they’re complying with increased safety standards.

“The administration needs to stop playing games with the people who work in America’s energy industry, and finally lay out a clear path that allows permits to be issued using safer standards that quickly get people back to work. One of the biggest factors leading to job losses in the energy industry is the uncertainty that exists in the permitting process, and today’s announcement does nothing to address those concerns.”

In sum, deepwater exploration is now in the same sorry state shallow-water exploration is. The Obama administration, with today’s announcement, gets to claim credit for stopping his moratorium and heading off another judicial disaster. But the actual effect is a de-facto ban on drilling; incomprehensible drilling rules, slow-motion permitting and thousands of jobs lost overseas.

Today, Southern Methodist University released a study claiming 40,000 jobs are at risk from the slow permitting in shallow water alone…

“[T]he Interior Department’s drastic slowdown in approving permits for shallow-water drilling operations has very serious economic implications for the region that rival, or exceed, those of the spill and moratorium. Thus far, this impact has attracted little attention from Congress, the media, or third-party analysts despite the fact that the nearly 40,000 jobs related to the Gulf of Mexico’s shallow-water drilling industry have been placed in jeopardy by the Department of the Interior’s apparent decision to slow-walk the shallow-water permit approval process,” the report states.

Those horrendous effects, applied to deepwater exploration, could do the same damage without the accompanying political fallout to the Obama administration. A rule of thumb is that each working deepwater exploration rig directly or indirectly contributes to 1,500 jobs. If one-third of the 30 remaining Gulf deepwater rigs are idled five months from now as a result of the slow permitting in deepwater (which is analogous to what has happened in shallow water), that’s 15,000 jobs at risk. If another third of those rigs are idled six months from now, it’s another 15,000. And deepwater rigs are much less likely to sit idle based on their cost, mobility and demand.

This is a disaster. It’s also a fraud. Obama’s moratorium hasn’t gone away; the administration has just found a friendlier way to say no. But the economy of Louisiana will suffer just as acutely now as yesterday, and the damage to thousands of households and businesses will continue.

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