More than 15 months after the Obama administration lifted its ban on offshore drilling in the Gulf of Mexico, oil and gas supply and service companies report they are suffering significant financial hardships from the government’s actions.
The moratorium — as well as the slow pace of permitting that followed — have suffocated businesses, costing jeopardizing millions in business revenue and even forcing some to close their doors, according to a survey conducted by Greater New Orleans Inc.
Louisiana, home to 88 percent of the country’s offshore rigs, has absorbed much of the impact.
“In Louisiana, there are more than 1,777 small businesses in the Oil and Gas Extraction industry that represent over $4.2B in annual revenue. Their operations also support over 9,700 employees, and aid in increasing our country’s energy security,” GNO Inc. reported. “[B]usinesses are indeed laying off workers, reducing hours and salaries, and limiting new hires as a result of the permit slow-down and insecurity about future markets in the Gulf of Mexico.”
The survey included 102 respondents — representing small, medium and large companies — that are involved in Gulf of Mexico exploration and production. They were asked to share information about revenue, cash reserves, employment, business plans and personal finances.
Key findings show:
- 41 percent of businesses are not making a profit;
- 76 percent have lost cash revenues;
- 27 percent of businesses have lost more than half of their cash reserves;
- 50 percent of businesses have laid off employees as a result of the moratorium;
- 39 percent of businesses have retained workers but reduced salaries and/or hours;
- 46 percent of businesses have moved all or some of their operations away from the Gulf of Mexico;
- 82 percent of business owners have lost personal savings as a result of the permit slowdown;
- And 13 percent of business owners have lost all of their personal savings as a result of the slowdown.
The economic impact has been diverse and far-reaching because the oil and gas industry in Louisiana is a major part of the local economy, according to the study. Among the most alarming consequences: Revenues have dramatically decreased.
“One company reported an annual revenue range from $750M to $1B before the moratoria, decreasing to $50M to $250M — representing a decline of at least $500 million,” GNO Inc. reported. “Additionally, two companies transitioned from the $250M-$500M range to the $15M-$25M range.
“The losses of these three companies alone (total of at least $950M annually) represent a tangible economic loss to communities in Southeast Louisiana that rely on larger companies for subcontracts and constant demand for services,” according to the survey.
The Heritage Foundation has consistently highlighted the impact of the drilling slowdown — both on the local economy in Louisiana and in terms of lost revenue for the federal government.
“Allowing access for exploration and creating an efficient regulatory process that allows energy projects to move forward in a timely manner will not only increase revenue through more royalties, leases, and rent,” Heritage’s Nick Loris wrote, “it will also create jobs and help lower energy prices in the process.”
