WSJ: Drilling moratorium a second disaster

Over a week ago, the panel of experts consulted by the White House publicly accused the Obama administration of misrepresenting their views on the drilling moratorium imposed by Barack Obama for deepwater drilling in the wake of the Gulf disaster.  The White House acknowledged that their release of the language had changed since the experts had reviewed it, but that they took the experts’ advice in reaching those conclusions that led to the moratorium.  The Wall Street Journal decided to consult with the same experts — and report that their opinions diametrically oppose the White House position:

The experts were certainly under the impression they were reviewing a comprehensive document, as some of the recommendations would take six months or even a year to implement. And the report they agreed to did address moratoria: It recommended a six-month ban on new deepwater permits. Yet Benton Baugh, president of Radoil, said that in at least two separate hour-and-a-half phone calls among Interior and the experts, there was no discussion of a moratorium on existing drilling. “Because if anybody had [made that suggestion], we’d have said ‘that’s craziness.’” …

A big reason why those experts would have balked is because they recognize that the moratorium is indeed a threat to safety. Mr. Arnold offers at least four reasons why.

The ban requires oil companies to abandon uncompleted wells. The process of discontinuing a well, and then later re-entering it, introduces unnecessary risk. He notes BP was in the process of abandoning its well when the blowout happened.

The ban is going to push drilling rigs to take jobs in other countries. “The ones that go first will be the newest, biggest, safest rigs, because they are most in demand. The ones that go last and come back first are the ones that aren’t as modern,” says Mr. Arnold.

The indeterminate nature of this ban will encourage experienced crew members to seek other lines of work—perhaps permanently. Restarting after a ban will bring with it a “greater mix of new people who will need to be trained.” The BP event is already pointing, in part, to human error, and the risk of that will increase with a less experienced crew base. Finally, a ban will result in more oil being imported on tankers, which are “more likely” to spill oil than local production.

All this is even before raising ban’s economic consequences, which already threaten tens of thousands of jobs. This is why Louisiana politicians are now pleading with the Administration to back off a ban that is sending the Gulf’s biggest industry to its grave.

There is already some talk of the evaporation of assets.  Supposedly, Petrobras is interested in the rigs that went out of business, to fill the demand created by Brazil’s government-owned oil company to explore and exploit the huge field of oil discovered recently off their coast.  As those efforts increase in Brazil and other areas where deepwater drilling will be conducted, the need for completed rigs will be at a premium, leaving fewer for the US to use when drilling eventually resumes.

The same is true of the skilled labor base.  First, skilled deepwater oil workers are probably not in large supply in the US anyway, thanks to the efforts of the US government to discourage drilling or at least slow it down.  The people put out of work won’t get many other kinds of job opportunities in this economy, and will have to look overseas for work.  They may return if jobs become available in the US or they may decide to stick with their current job, but as with the rigs, the most valuable (experienced) labor will go first and get the best deals, which will provide a big disincentive for returning.

Economically, this will be a second disaster for the Gulf region.  The spill has critically damaged other traditional industries such as fishing, shrimping, and tourism.  Now the moratorium will kill another skilled-labor industry on which tens of thousands of Americans rely for their livelihood.  Small wonder that state and local governments reacted with alarm to the blanket moratorium; tax bases will shrink even further and put a heavier strain on government services.

The Obama administration has not moved to correct this moratorium and its damaging impact.  Perhaps Congress needs to get involved — and not just in the moratorium, either.

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