Drilling ban to cost thousands of jobs

By Ben Rooney, staff reporter


NEW YORK (CNNMoney.com) -- The White House responded Thursday to concerns that the ban on drilling for oil in the deep waters of the Gulf of Mexico will cost the region thousands of jobs.

"The six month moratorium on deepwater drilling was instituted for a clear reason," White House spokesman Ben LaBolt told CNN. "The President believes we must ensure that the BP Deepwater Horizon spill is never repeated."

But Louisiana Governor Bobby Jindal said that prohibiting deepwater drilling could cost the state up to 6,000 jobs this month, and 10,000 jobs over the next few months, in a letter sent Wednesday to president Obama.

If the ban continues for an "extended period," Jindal said, the state could lose up to 20,000 existing and new jobs by next year.

The moratorium was extended last week from 30 days to six months pending the outcome of an investigation into what caused an oil rig operated by BP to explode and sink last month.

The ban requires all Gulf wells drilling in more than 500 feet of water to shut down, and also prevents permits from being issued for any new deepwater drilling. It does not, however, halt oil pumping in the Gulf, meaning the wells already producing crude can continue to operate.

Additionally, there are 4,515 shallow-water wells in the Gulf that will not be affected, according to the Louisiana Mid-Continent Oil and Gas Association (LMOGA).

Jindal criticized the ban, saying it will hurt Louisiana's economy "during one of the most challenging economic periods in decades."

The spill has already caused "huge economic losses" in the state's seafood industry, Jindal said, adding that tourism is also suffering "escalating losses."

"The last thing we need is to enact public policies that will certainly destroy thousands of existing jobs while preventing the creation of thousands more," he said.

The oil and gas industry accounts for more than half of all economic activity in the Gulf, which totaled $234 billion in 2007, according to a study done by regional scholars and published by Texas A&M University Press.

In response to Jindal's pleas, White House spokesman LaBolt stressed that the moratorium only applies to deepwater drilling, and that wells in shallow water are not subject to the ban.

"Economic impacts were certainly taken into account," he said. "The moratorium is surgical and shallow water drilling, in which the risks are better known, is continuing under stricter safety rules."

The dollar figures

But deepwater drilling accounts for the vast majority of oil production in the Gulf of Mexico, and the oil industry has invested billions of dollars to ramp up development of deepwater sources.

A full 80% of the Gulf's oil comes from operations in water deeper than 1,000 feet, according to the LMOGA.

Douglas-Westwood, an industry research firm, estimates that oil companies will spend a total of $167 billion over the next four years on deepwater projects around the world. That's an increase of 37% over the five preceding years.

According to the LMOGA, roughly 33 floating drilling rigs in the Gulf will be idled as a result of the ban. Jindal said 22 of those deepwater rigs are off the coast of Louisiana.

And the group estimates that as many as 1,400 jobs are at risk for each of the 33 idled rigs.

Those jobs pay an average of $1,804 per week, which means the potential for lost wages for all 33 rigs could be as much as $330 million per month, LMOGA said.

-- CNN's Dan Lothian contributed to this report.  To top of page

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