DALLAS — The federal ban on new deepwater drilling in the Gulf of Mexico could be more devastating to the region’s economic recovery than the crude oil that gushed from the BP well blowout for almost three months.
A study by Joseph R. Mason, an economist and banking professor at Louisiana State University, said the six-month moratorium could result in the loss of more than 8,000 jobs, nearly $500 million in wages, and more than $2.1 billion of economic activity along the coast from Alabama to Texas.
“The data are clear,” Mason said. “The moratorium will cost the Gulf Coast region jobs, money, and economic development. In fact, the moratorium could be more costly than the oil spill itself.”
Local and state governments will see a $97.9 million reduction in tax collections due to the moratorium, the study said, with federal tax revenue dropping by $219 million.
Louisiana will suffer the most, with state tax revenue estimated to drop by $59.4 million due to the shutdown. Tax revenues are projected to decline by $22.8 million in Texas, $8.4 million in Mississippi, and $7.2 million in Alabama.
In a report issued in early July, Standard & Poor’s analyst Robert McNatt said it was unlikely that the bond ratings of Gulf Coast states and local governments would be lowered as a result of damages from the oil well blowout.
“While we believe it will take some time after the gusher stops to ascertain the full extent of the economic damage, we currently see nothing that will pressure state budgets to a degree that warrants rating actions,” McNatt said.
However, the report said that if drilling in the Gulf is curtailed for a significant period, “we expect that the foregone revenues could have serious implications for state and local budgets.”
Louisiana Treasurer John N. Kennedy said the losses cited by the study are conservative estimates.
“The numbers are pretty staggering, but I think they are low,” Kennedy said. “We have 33 rigs that have been idled. These are large offshore complexes, not just simple drilling rigs, and each one of those counts for about 1,000 well-paying jobs.”
Louisiana could see the loss of more than 4,700 jobs, the study said, with Texas losing almost 2,500 jobs related to the shutdown.
Mason said the region was already suffering from the depressed national economy and still recovering from hurricanes in 2005 and 2008 when the well blew out April 20. The drilling moratorium will make matters worse, he said.
“By stifling one of the area’s primary economic engines, the administration is crippling the local economy and risking long-term consequences,” he said.
Mason said the lower revenue would lead to reduced public spending on schools, hospitals, and public services.
Interior Secretary Ken Salazar issued the original moratorium on new deepwater drilling May 30. U.S. District Judge Martin Feldman blocked the drilling ban in June in a ruling that was upheld by the U.S. Fifth Circuit Court of Appeals.
The Interior Department on July 12 issued a revised moratorium that it said was “the product of a new decision by the secretary and new evidence regarding safety concerns, blowout containment shortcomings within the industry, and spill response capabilities that are strained by the BP oil spill.”
In announcing the new moratorium, Salazar said the halt was “essential and appropriate to protect communities, coasts, and wildlife from the risks that deep-water drilling currently pose.”
The federal order said the ban would last at least through Nov. 30.
The U.S. Coast Guard said Wednesday that a total of around 5.4 million barrels of oil spilled into the Gulf from the time the rig exploded April 20 until the well was capped last week. The total is based on an estimate of an average of 60,000 barrels being released from the well each day.