Louisiana Business Challenges|Moratorium on Offshore Drilling

     NEW ORLEANS (CN) – An offshore oil-drilling support business has challenged the 6-month moratorium on deepwater drilling on the Outer Continental Shelf in Federal Court. Hornbeck Offshore Services claims that all 33 oil rigs affected by Interior Secretary Ken Salazar’s moratorium had “previously satisfied the rigors” of the Minerals Management Service’s permitting process. The drilling moratorium was a response to BP’s catastrophic oil spill in the Gulf of Mexico.




     Some critics of the moratorium say drilling is not the issue – poor oversight and lack of regulation is. They claim that problems with regulation won’t be solved by throwing oil workers out of work, exacerbating the blows to Louisiana’s economy.
     In its federal complaint, Hornbeck claims that Secretary Salazar’s report “does not contain any facts, data, analysis or risk assessment concerning why the Salazar imposed the moratorium.”
     In an interview on Thursday, a worker at a food bank said the moratorium will have wide effects in Louisiana, and that all Louisianans “will eventually be impacted” by the moratorium.
     “This is not like with a hurricane, where you know what the steps are to put it all back together,” said Leslie Doles, of the Second Harvest Food Bank.
     “Just the uncertainty of what’s going to happen economically” is burden enough, Doles said. “The longevity, how long this will be a problem, no one knows.”
     She added that the impact of the oil spill itself will surely be felt for years to come.
     Second Harvest Food Bank operates in the coastal half of Louisiana. Doles said its food distribution warehouse has managed to scrape together the resources to meet the nutritional needs of 47,000 households this month, an increase of 20 percent since BP catastrophe has caused the collapse of the local seafood industry and plunged thousands of families into unemployment.
     The Winn Dixie grocery chain unloaded 12 tons of food at Second Harvest’s warehouse Thursday. It was the store’s fourth such distribution in the past month, as Second Harvest scrambled to meet the ever-increasing need.
     Winn Dixie district manager Dave Ducote said the store also makes twice weekly regular donations of perishable items, such as meat and produce, to keep the food bank stocked.
     “Our food is meant to be a safety net for people,” Doles said. He said that the demand always increases in the summer, when children who would otherwise eat free or reduced-price breakfast and lunch at school are at home.
     Louisiana is second to Mississippi in childhood poverty, according to the National Center for Children in Poverty. The center reports that 13 percent of Louisiana children live in “extreme poverty – that is, in families with an income less than half of the federal poverty level, or $9,675 for a family of four.”
     Federal scientists said this week that much more oil than previously estimated has spilled daily from the well all along. Estimates now place the flow as 840,000 to 1.68 million gallons daily – or more – twice the size of the estimate of two weeks ago.
     Salazar issued a drilling moratorium on May 27, after compiling a report at the request of President Obama.
     Salazar’s report included recommendations for blowout preventers and related safety equipment and recommended a “six-month moratorium on permits for new wells being drilled” and “an immediate halt to drilling operations on the 33 permitted wells, not including the relief wells currently being drilled by BP.”
     President Obama accepted the recommendations, announced there would be no new deepwater drilling for 6 months and shut down operations for 33 rigs.
     Hornbeck, which operates a fleet of offshore drilling support vessels out of St. Tammany Parish, said all of its vessels have a limited useful life and there is no way to recover time lost to the moratorium. Hornbeck says it employs 1300 people, many in Louisiana.
     Hornbeck claims that Salazar’s report “does not contain any facts, data, analysis or risk assessment concerning why the secretary imposed a moratorium of further drilling by the ’33 permitted wells.'” It claims that 29 of the 33 wells “had been subjected to additional inspections after BP’s Deepwater Horizon rig exploded, burned and sank.
     “Further,” Hornbeck claims, “each of the 33 rigs had previously satisfied the rigors of the MMS permitting process” and Salazar’s report contains “no finding or evidence of systematic failure by the rig operators, driller or other participants in offshore drilling operations to comply with current regulations or existing permits.”
     The complaint adds: “Likewise, the report contains no facts, data or analysis that supports its recommendations that a blanket moratorium be imposed on any and all new deepwater drilling activity for a 6-month period or that supports an arbitrary drilling depth of 500 feet.”
     Hornbeck’s complaint cites a May 11 inspection report by the Minerals Management Service, in which the agency said it found “no violations of governing regulations or existing permit terms on 27 of the 29 drilling rigs inspected and only minor violations of the two others.” Hornbeck claims that the “imposition of compliance with the report’s requirements at all water depths is effectively a moratorium on all drilling because it may take months if not years for the industry to come into compliance with the standards, some of which have not yet been determined, set forth in the report.”
     Hornbeck claims that one operator of a closed well has already indicated it intends to end its contract with Hornbeck as a result of the moratorium. Hornbeck says it fears that other well operators with follow suit.
     It claims that termination of its contracts “with the operators of the 33 deepwater wells, coupled with Hornbeck’s lack of any prospective contracting opportunities to provide new deepwater drilling” will harm its business “in ways that are irreparable.”
     Congress amended the Outer Continental Shelf Lands Act in 1978 and 1990. The changes were meant to strengthen the role of the states near the Outer Continental Shelf and ensure that activities permitted under the Act do not hurt states’ coastal resources.
     As amended, the Act requires the federal government to balance resource development with protection of the human, marine and coastal environments.
     Before the fishing and shrimp were banned in large areas of the Gulf after the oil spill began, the Gulf Region accounted for about 20 percent of U.S. commercial seafood production and nearly three-quarters of the nation’s shrimp output. And the National Oceanographic and Atmospheric Administration’s Fisheries Service reports that nearly one-third of marine recreational fishing trips are, or were, on Gulf waters.
     The oil industry employs roughly 58,000 workers in Louisiana, and its total of 260,000 oil-related jobs accounts for roughly 17 percent – one of every six jobs – in Louisiana, the state estimates.

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