CERA study: Faster drilling permits means more jobs

Faster permitting of offshore oil and gas projects could create nearly 230,000 new jobs in 2012 and boost the economy by $44 billion, including a surge in federal and state tax revenues, according to an industry-funded study put out today by IHS-CERA.

The job growth would extend well beyond the traditional Gulf Coast energy industry states, the study says, boosting employment indirectly as far away as California, New York, Florida, Illinois and Georgia.

The study, funded by The Gulf Economic Survival Team, a collection of largely Louisiana-based energy and business interests, looks at data on the pace of permitting by the Bureau of Ocean Energy Management Regulation and Enforcement through April 30 – six months after the federal moratorium on offshore drilling was formally lifted following the Deepwater Horizon accident.

You can see the study here.

IHS CERA Chairman Daniel Yergin said in a conference call the study doesn’t try to answer why the pace of permitting has slowed or how it should be fixed. Rather is simply identifies the problem and the missed economic opportunities that come with less oil and gas drilling.

Following the April 2010 incident that killed 11 and led to the largest ever oil spill in the U.S. Gulf of Mexico, the federal government began to reorganize the agency overseeing offshore exploration and production, adding a number of new safety and environmental rules and did away with prior rules exemptions that allowed companies to skip certain analysis.

Since then, the backlog of permits waiting for approval has grown, the study says, reaching some 90 percent more than pre-spill levels.

The length of time permits are waiting for approval has also grown some 95 percent over the pre-spill pace, the study says.

These delays are leading to lost opportunities for industry investments in the U.S. Gulf, which would create jobs and tax revenues, the IHS-CERA study reported.

It is also hurting future U.S. oil production as fewer drilling permits mean fewer new oil discoveries – or at least several years of delays before new discoveries are made. Faster permitting could lead to an additional 400,000 barrels per day in production by 2012, according to the study.


“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’s managing director for global oil, who co-authored the report. “With that alignment, then the country can realize the economic and energy security benefits of a restarted Gulf of Mexico.”

The study presents arguments similar to those made by industry groups repeatedly in the months since the moratorium was lifted. Earlier this month a study from the American Petroleum Institute and the National Ocean Industries Association said a return to prior permitting levels could create about 190,000 jobs by the year 2013.

There have been some changes in the outlook since the time frame of the study, which ended April 30.

In June ExxonMobil announced a new discoveryin the Keathley Canyon area of the Gulf with an estimated 700 million barrels of recoverable oil. Shell also announced plans to invest $2.5 billion in its Cardamon field in the Gulf.

BOEMRE has also said a new Gulf lease sale is on schedule for later this year:

In a hearing last week, BOEMRE director Michael Bromwich defended the agency’s work.


The agency can only act on the permits they have pending, Bromwich said, which as of Thursday includes four new shallow water permits and 14 new deepwater well permits.

He has also said that while BOEMRE has hired more permitting staff and inspectors, further hires are jeopardized by a Republican spending bill in the House that would cut funding for the agency roughly $35 million below what had been sought by the Obama administration

Bromwich is still seeking authority to pay recruits more money and improve benefits in order to better attract and retain staff at the agency.

“We are working as efficiently as we can with the resources we have, including hiring people as swiftly as the federal system will allow with the funding provided this Spring by the FY11 budget,” said Melissa Schwartz, a spokeswoman for BOEMRE.