Fully Restoring Oil and Gas Activity in the U.S. Gulf of Mexico Would Support 230,000 Additional Jobs in 2012, IHS Study Finds
Significant economic benefits would stretch beyond the Gulf of Mexico region to other parts of the country
Fully returning the pace of oil and gas plan and permit approval activity under the new regulatory regime to levels that support the oil industry's capacity to responsibly explore and operate in the Gulf of Mexico (GOM) would add $44 billion to U.S. gross domestic product while supporting nearly 230,000 jobs—one third of which would be outside of the Gulf region, according to a new IHS CERA/IHS Global Insight study. An additional $22 billion in new wages and compensation would also be realized.
The leading states outside of the GOM to benefit from those additional jobs would be California, followed by New York, Florida, Illinois and Georgia, the study found. Other manufacturing-dependent economies such as Pennsylvania and Ohio also would receive significant benefits.
The study, Restarting “the Engine” — Securing American Jobs, Investment and Energy Security, examined the “activity gap,” the difference between the investment capacity of oil and gas companies and the regulatory capacity to process and oversee this activity. The analysis, based on data from the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), identified a growing backlog of exploration and development plan applications awaiting approval and a significant reduction in plan and drill permit approvals.
“There is a need to better align the new regulatory environment with industry capacity, as the current pace of plan and permit approval is congested” said Jim Burkhard, IHS CERA managing director-global oil. “With that alignment, then the country can realize the economic and energy security benefits of a restarted Gulf of Mexico.”
Among the key findings, the lost opportunity from an inability to close the activity gap would be:
- 150 million barrels of oil next year (411,000 barrels of oil per day) from the deepwater Gulf of Mexico alone– five times the amount recently released from the U.S. Strategic Petroleum Reserve.
- $44 billion of U.S. gross domestic product growth in 201
- 230,000 additional jobs in 2012
- $22 billion improvement in 2012 wages and compensation
- Realizing $19 billion in pent-up capital investment over a three-year period
- $18.6 billion more of federal, state and local, royalties, bonuses and rents tax payments over the next three years
The study also noted that the additional one billion barrels of oil reserves that the Gulf of Mexico contributes each year in the form of new discoveries were not realized in the past 12 months, which could affect the future production outlook.
Although the federal agencies charged with overseeing energy exploration were restructured last year, the regulatory approval process has not returned to previous levels. Each month that passes without closing the gap reduces the potential economic benefits.
The study examined plan and permit activity levels in the six months since the lifting of the moratorium in the GOM in October, 2010. The analysis found:
- 86 percent decline in the pace of regulatory approvals for plans
- 38 percent increase in the time to reach each regulatory approval for plans
- 250 percent increase in the backlog of deepwater plans pending approval (from an average of 18 per year to a current pace of 67 per year)
- 60 percent decline in drill permits (combined shallow water and deepwater)
“An increase in oil and gas activity reverberates throughout the broader economy,” said James Diffley, senior director of IHS Global Insight's U.S. Regional Economic Group. “Each new hire of a platform worker, machinist or other specialist to work in the Gulf’s oil and gas industry results, on average, in more than three additional jobs in an array of industries around the country, whether it be in the Gulf region or a subsea power cable provider in Ohio, a steel manufacturer in Pittsburgh or a software firm in California’s Silicon Valley.”
The report also noted that the increased activity in the upstream oil and gas sector of the Gulf of Mexico will have substantial impact on income and would lead to increased consumer spending since oil and gas jobs are higher paying, on average, than wages paid to workers in many other sectors.
Restarting “the Engine” — Securing American Jobs, Investment and Energy Security, part of an on-going research program, was commissioned by the Gulf Economic Survival Team (GEST). GEST is an independent nonprofit group that serves as a liaison between industry, state and local government and the federal government in an effort to resolve federal permitting issues that are delaying a return to drilling in the Gulf. The study analyzed the pace of regulatory approvals after the lifting of the moratorium and its resulting impact on activity levels. IHS compared the current trend against what could be achieved with appropriate resources consistent with the capacity of the industry to operate safely and environmentally responsibly. This has allowed IHS to benchmark the impacts on investments, production, employment and government revenues under a “proactive recovery” scenario versus the “slow recovery” scenario implied by post-moratorium trends.
For a copy of the report, Restarting “the Engine” — Securing American Jobs, Investment and Energy Security, click here.
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