As oil spill ends, are Gulf Coast economic woes just beginning?

BP says it will stay for years, but some oil spill relief operations are winding down. The loss of BP jobs, along with the drilling moratorium, could mean tough times for the Gulf Coast.

By MARK GUARINO | Staff Writer Christian Science Monitor
posted August 9, 2010 at 5:38 pm EDT

BP and federal officials say that the bid to permanently close the runaway well that sent 4.9 million barrels of oil into the Gulf of Mexico is nearing an end. But an economist called to testify before Congress last week suggests that the Gulf’s economic woes might now be accelerating.

Local workers not only face a wave of unemployment as BP winds down some parts of its operations in coming weeks, but intermittent fishing closures and the six-month moratorium on deep water drilling could create challenges in the months ahead.

Since oil started spewing in late April, BP has become one of the region’s largest employers. At the peak of the crisis, the company employed 48,000 workers and contracted 6,000 vessels. But the Vessels of Opportunity program, which used shrimp and oyster boats and crews in the relief effort, is being pared back.

More important is the moratorium, says Joseph Mason, a finance professor at Louisiana State University.

The combined economies of four coastal states affected by the moratorium in particular — Louisiana, Texas, Florida, Alabama, and Mississippi — are “widely expected to fall off a cliff when BP exits,” says Mr. Mason.

In his testimony to the Senate Small Business Committee last week, Mason said the area is poised to lose $2.1 billion in economic activity, which translates to a loss of over 8,000 jobs and nearly $500 million in wages.

BP vows to stay

Last week, BP’s Mike Utsler stepped into the new role of chief operating officer for the BP Gulf Coast Restoration Organization, which will coordinate response efforts related to the spill across all five coastal states.

“We are in for the long term,” he told reporters Friday.

Yet there are signs that BP is pulling back resources – money that served as vital income to area residents who lost money through seafood closures and the federal moratorium on deep water drilling.

Vessels of Opportunity currently has 1,501 vessels on the water. But they became less essential in mid-July, when a new container cap stopped the flow of oil. said Doug Suttles, chief operating officer for BP exploration and production.

“Some of those activities are no longer underway,” he said. “Clearly things have changed. We don’t have recoverable oil going on right now.”

The company also reduced its work personnel by 18,000, replacing some workers with beach-cleaning machines that Mr. Suttles said “are much more efficient.”

‘Guaranteed money’

The diminished need for the Vessels program is likely to affect local shrimpers like Tommy Thibodeaux of Chauvin, La., who says BP pays him $10,000 plus groceries and fuel so he and his three-person crew can skim and burn oil in stints lasting more than two weeks.

“This is guaranteed money. It’s not gambling. We’re taken care of, I guess,” he says.

Despite those benefits, Mr. Thibodeaux says that once the situation is stabilized, he says, he intends to return to shrimping.

The National Oceanic and Atmospheric Administration (NOAA) has helped by reopening in late July 26,388 square miles of Gulf waters – one-third of the overall waters previously considered hazardous for fishing.

Yet greatest threat to local employment remains the six-month drilling suspension that is due to end Nov. 30. Michael Bromwich, the director of the Bureau of Ocean Energy Management Regulation and Enforcement (formerly the Minerals Management Service) said Tuesday that the moratorium may end sooner if Gulf operators are willing to commit to new standards, many of which are costly.

“It’s everybody’s hope that we will feel comfortable enough that the moratorium can be lifted significantly in advance of Nov. 30,” he told reporters last week in advance of an eight-city listening tour.

The longer the waters are closed, the more difficulty the region will have in rebounding, Mason says. He says federal regulators should be conducting immediate inspections that could allow some oil rigs to continue drilling “to preserve as much economic growth as possible rather than throw away the whole industry.”

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