Drilling ban job losses not as bad as feared? Not so fast, analyst says

When the Obama administration said the deep-water drilling ban was temporarily killing about 8,000 to 12,000 Gulf Coast jobs, it seemed like the worst fears about the possible economic damage from the moratorium weren’t coming true.

Not so fast, says a Louisiana State University professor who has been studying the economic effects of the ban since it went into effect in late May. After scrutinizing the Commerce Department’s report, finance professor Joseph Mason says the Obama administration lowballed the total job losses tied to the deep-water drilling ban.

Where the number crunchers at the Commerce Department estimated an immediate $1.8 billion cut in spending by drilling operators, Mason says economic output will be slashed by at least twice as much, or $5 billion. And at least a third more jobs hang in the balance, Mason says, adding that the government’s own numbers show the ban could claim 19,536 jobs in the region.

Mason’s assessment, released today during a news conference with the American Energy Alliance, focuses on what the professor says was a major failing of the Commerce Department’s analysis: an apparent decision to trim the initial estimated job losses by 40 to 60 percent.

Mason says the administration softened its initial estimates of a $1.95 billion cut in total operating expenditures by the industry, partly by subtracting the $141 million that could be paid out by the Rig Worker Assistance Fund to displaced employees.

At an estimated rate of $92,136 in spending per job — the government’s adopted number — that should translate to an estimated 19,536 jobs. But inexplicably, Mason says, the Commerce Department analysts then cut that forecast by a factor of 40 to 60 percent to arrive at its finding that just 8,000 to 12,000 were at risk.

“The heart of this critique is that the administration cut its estimates by a seemingly ad hoc 40 to 60 percent,” Mason said in a statement. “The justifications given in its report are not supported by U.S. Bureau of Economics documentation. Without that methodologically unjustified cut, the Gulf starts with almost 20,000 jobs lost.”

Mason’s findings respond to concerns raised by Gulf Coast lawmakers and industry advocates who were skeptical of the Commerce Department study.