Of all the Gulf Coast states, Louisiana is the most at risk to credit pressures resulting from the BP oil spill, Moody’s Investors Service said in a report on Monday.
The doubling of the estimate of oil leaking from the damaged well to as much as 40,000 barrels a day means the Deepwater Horizon blowout will have far greater environmental and economic consequences than the grounding of the Exxon Valdez in 1989, analyst Ted Hampton said.
Louisiana is especially vulnerable, due to its proximity to the leaking well and its economic reliance on offshore oil and gas activity, the analyst said.
Credit implications for the affected states, which also include Alabama, Mississippi, and Florida, are negative but offset in the near term by support from BP, Hampton said. He noted that Florida’s tourism industry, which accounts for 13% of employment in the state, and its coastal real estate industry “face long-term risks that will grow more apparent in coming months.”
Louisiana Treasurer John Kennedy Tuesday said he did not expect the negative report to affect the state’s upcoming sale of $500 million of fuel tax bonds for an ongoing road and bridge program.
“We’ll deal with it as it comes,” he said. “We still have good ratings from all the agencies.”
“If we anticipate a problem, we’ll ameliorate it with how the deal is structured,” Kennedy said. “We might issue the debt as Build America Bonds or as short-term bonds.”
Louisiana stands to lose up to 6,000 of its 17,000 oil industry jobs if the federal ban on new deepwater drilling continues for six months, according to Hampton.
“We expect oil industry job losses may be offset in the near term by employment gains in the clean-up effort,” the analyst said. “The Obama administration contends that BP should compensate idled oil workers, but the company’s legal obligation to do so remains unclear.”
Moody’s rates Louisiana’s state debt at Aa2. The state is rated AA by Standard & Poor’s and Fitch Ratings.