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Government Makes Gulf Oil Disaster Even Worse

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You have to hand it to the federal government.

Just when you think that the horrific explosion and sinking of an offshore drilling rig and an oil spill unlike any the United States (or the world) has ever experienced couldn’t get worse, the President and Interior Secretary Salazar have made a series of moves that could turn this incident from an environmental tragedy into an economic train wreck.

Following a month’s worth of official statements earlier this spring that offshore drilling must remain a vital part of the United State’s energy future, President Obama announced on May 27 that it was suspending all deepwater exploration and production activities pending a six-month review by a Presidential Commission. That Commission, however, is made up of many staunch anti-drilling activists including the President of the Natural Resources Defense Council. In addition to halting the permitting process for new wells, this moratorium actually stopped drilling on 33 different wells in the Gulf of Mexico. That administrative ruling has been overturned by a federal judge, but the government is challenging it by taking the issue to the Court of Appeals.

In addition to halting all deepwater activities in the Gulf of Mexico, the President announced that he was suspending the permits for five exploration wells in the Chukchi and Beaufort Seas in Alaska – despite the fact that these wells would have been drilled in only 250 feet of water not at 5280 feet or more that was the case in the Gulf disaster. Earlier this year, Secretary Salazar had announced that he was cancelling four future lease sales in these key Alaska regions, meaning that the Administration has completely taken at least 53 billion barrels of undiscovered technically recoverable oil and 247 trillion cubic feet of natural gas off the table.

Finally, after suspending the development of an Environmental Impact Statement for Lease Sale 220, which was the lease sale planned for a 50-square mile area off of Virginia’s shore, the President announced that he was cancelling the Lease Sale altogether – despite the fact that it was not scheduled to take place until late 2011 or early 2012 – after it was determined if this drilling for oil and gas could be done safely and after the analysis of what triggered the Gulf oil disaster and how to prevent it in the future.

The impacts of these three decisions will have very profound – and long-term – implications in each of the three regions that are affected.

For Virginia, the decision to cancel an Environmental Impact Statement for a lease sale that wasn’t scheduled for another 2 years – rather than conducting an actual assessment of the environmental sensitivities and issues surrounding Outer Continental Shelf (OCS) exploration in Virginia’s waters means we will have to wait until the Administration puts together its next Five Year Outer Continental Oil and Gas Leasing Program (for 2012-17) to see if Virginia will have a shot at developing offshore energy resources – which tables thousands of jobs, substantial economic growth and tens of millions in state revenues. Both Governor McDonnell and Lt. Governor Bill Bolling have repeatedly stated that the OCS exploration and development in Virginia has the potential to be the largest single job creation project in the state over the next 10 years – unfortunately, it will have to wait at least a couple more years to get off the ground.

For Alaska, the decision to rescind exploratory drilling permits that would have allowed Shell to drill five exploratory wells this summer will table plans to develop the massive energy resources located in the Alaska OCS – plans for which the company has already invested over $2 billion. The state of Alaska has projected that developing these resources would add over $3.3 billion annually to the state’s economy.

As bad as these impacts are for Virginia and Alaska, however, they pale in comparison to the economic catastrophe that the decision to suspend all drilling activities in the Gulf of Mexico will unleash on the Gulf Coast region. Halting activities on the 33 wells that were actively drilling when the President announced his moratorium on May 27th will wipe out thousands of high paying jobs and cripple the economies of Texas, Louisiana, Mississippi and Alabama according to an assessment released by the National Association of Offshore Industries and the Louisiana Oil and Gas Association. According to the NOIA analysis, up to 1,400 jobs are at risk on each one of the 33 platforms and lost wages could reach $10 million per month per rig – for a total of up to $330 million in lost direct wages per month. Additionally, the report notes that the offshore industry is responsible for nearly 200,000 jobs in the Gulf of Mexico alone and that more 80,000 barrels of oil production per day will be deferred for the duration of the moratorium – raising gasoline and diesel prices and wiping out more than $7.6 billion in federal royalty revenues. We will all pay for this decision here in Virginia at the gas pump.

To make all of these matters even worse, the Co-Chair of President Obama’s commission, former EPA Administrator William O’Reilly stated recently that he believes it will take significantly longer than the six months announced by the President for the commission to complete its work and get the nation’s offshore drilling program back into gear.

As Louisiana Governor Bobby Jindal said, the federal government is well on its way to “turning an environmental disaster into an economic catastrophe.”

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