Deepwater Drilling Ban Continues to Devastate Gulf Coast Economy

Published on July 26, 2010

The six month moratorium on exploratory deepwater drilling in the Gulf of Mexico is continuing to heavily impact the economy of the Gulf Coast.  Despite two court rulings calling into question the legal basis for the moratorium, the federal government is continuing to insist on a complete halt to deepwater exploration until the commission appointed by President Obama reports on its findings.  The commission report could still be months away.

Although the commission has made few public statements, much has been revealed over the past several weeks regarding the factors that almost certainly led to the Deepwater Horizon disaster.  A Congressional investigation of the disaster identified at least five key factors related to engineering flaws that could have contributed to the well blow out.  In particular, BP’s choice of a “long string” casing rather than a more expensive, but safer, liner-tieback system could have allowed gas to escape the casing and cause the explosion.  In a recent presentation, one of Shell’s experts on well design clearly explained the safety advantages of more robust systems and recommended a ban on long string casing.

While the commission continues to deliberate on the moratorium, the Gulf Coast economy is reeling from the impacts of the oil spill both in terms of the tourism and fishing losses and the government’s moratorium on deepwater exploration.  The moratorium has not only impacted the jobs on the drilling rigs but also numerous support businesses that serve the industry.

The video shown below from The Economist does a good job of explaining the issues facing the Gulf Coast economy and the heavy dependence of the region on deepwater oil exploration.

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Disclosure:  The author of this article owns shares of companies involved in oil and gas exploration in the Gulf of Mexico.

Deepwater Drilling Ban Continues to Devastate Gulf Coast Economy