Anyone who thinks the president, governor or any court can force BP to pay for the economic fallout from a government-imposed moratorium — one a federal judge in New Orleans calls ‘arbitrary’ and ‘capricious’ — has another think coming.
Wednesday, June 30, 2010
By Leslie Turk
That’s what a federal judge in New Orleans last week called the government-imposed moratorium on deepwater drilling projects in the Gulf of Mexico, confirming what many of us believe was the Obama administration’s knee-jerk reaction to the Deepwater Horizon explosion and massive oil spill.
U.S. District Judge Martin Feldman’s June 22 decision effectively overturned the six-month moratorium on new drilling permits in depths of 500 feet or more, a government ban that also halted work on 33 exploratory wells. The White House quickly noted it would appeal and announced it is reworking the moratorium, hoping a new version will pass legal muster. Feldman, whose reversal rate is among the lowest in the Eastern District of the state, refused to stay his decision while the administration prepares its appeal.
Led by Hornbeck Offshore Services and supported by Gov. Bobby Jindal’s friend of the court brief, a group of companies that provide services to offshore drilling rigs asked the federal court for a preliminary injunction blocking the moratorium. They successfully built a case for how the government, which assumed that because one rig failed, all companies doing deepwater drilling pose an imminent danger, set up a scenario of devastation for the economies of the Gulf Coast region.
Perhaps most compelling in their argument is the fact that anyone who thinks embattled BP is going to pay for the ripple effects of a White House policy decision is in for a crude awakening.
Despite assurances from Interior Secretary Ken Salazar to U.S. Sen. Mary Landrieu in a June 9 Senate Energy and Natural Resources Committee hearing that BP would pay for oilfield workers’ losses from the ban (after she pressed him on why he went against the recommendation of eight experts in imposing the moratorium), the energy giant appears to have successfully argued it isn’t responsible for the collateral economic damage. On this issue, close observers of the moratorium believe, BP has the stronger case.
Two weeks ago, in a White House meeting between top BP officials and the president, BP agreed to earmark $20 billion to fund cleanup costs and lost wages to fishermen and others out of work and promised an additional $100 million for Gulf workers idled by the drilling moratorium. It’s a deal structured to limit the company’s exposure to claims from the moratorium, as the $100 million won’t come close to covering the losses, not even in this community.
Lafayette Economic Development Authority President and CEO Gregg Gothreaux says in oil-dependent Lafayette alone, over the next year the ban could result in more than 7,700 direct and indirect jobs lost, roughly $466.7 million in wages and income. The numbers are based on 79 wells affected by the moratorium off Louisiana’s waters and an average of 230 direct workers per deepwater well. Those workers’ average pay is $1,912 per week. Factor in the indirect jobs — from the service companies that are the lifeblood of Acadiana’s economy — and the picture comes into focus. “Oil and gas activity accounts for over 40 percent of our Lafayette GDP,” he says. “That number is much higher in Acadiana. The moratorium could eliminate an important part of our economy over the next year.”
Acknowledging the numbers present a worst-case scenario, Gothreaux stipulates that as the recovery continues, it is likely that many people who lose jobs, specifically in the energy industry, may find work elsewhere, “in other locales where the rigs will be deployed [likely out of the country, where they could go under contract for years], and in other sectors of the economy, which will mitigate some of the negative impact on the labor force.”
“We’re in a pickle,” says Brady Como, executive vice president of Broussard-based Delmar Systems, where the sign outside the corporate headquarters reads: “Mr. Obama you should not eliminate our jobs.” Como, whose privately held company supplies anchor handling crews and mooring equipment to the worldwide offshore oil industry, knows those jobs may never return.
Within days of the White House meeting between President Obama and BP’s top brass, The Wall Street Journal reported that behind the scenes, according to people on both sides of the negotiations, BP effectively pushed back on the issue of losses from the moratorium. “BP successfully argued it shouldn’t be liable for most of the broader economic distress caused by the president’s six-month moratorium on deep-water drilling in the Gulf of Mexico,” the WSJ noted.
Gov. Jindal also confirms that BP said last week it will not pay moratorium losses beyond the $100 million, which he says will only cover a few weeks of lost wages.
The moratorium hit at a time when the industry was still recovering from the destruction caused by four hurricanes in the past five years, a point Badger Oil’s Paul Hilliard drove home to CNBC’s Squawk Box last week. But this is much more distressing. When the storms dissipated, the industry took its licks from higher operating and insurance costs but immediately went back to work. Today, “the industry is driving in a fog,” Hilliard said. “This BP thing is as helpful as a heart attack. It’s a bleeping mess.”
Despite Feldman’s ruling, work has stopped.
An entire deepwater industry continues to be held hostage because one company decided to use six centralizers — rather than the 12 recommended by cement contractor Halliburton — to ensure the casing ran down the center of the well bore, skipped crucial tests and maintenance, replaced drilling mud with sea water. The processes are in place to prevent such tragedies, but BP ignored warnings to expedite completion of a well six weeks behind schedule, with calamitous results.
And even though the administration’s own subsequent inspections of deepwater rigs turned up no similar safety problems, the moratorium was put into place May 28.
Thirteen of the 33 affected deepwater exploratory rigs were moored or anchored, and Delmar was working on 12 them for companies like ENI Petroleum, Shell, Marathon and Anadarko.
“We’re moving No. 9 right now,” Como says. “All of those are coming to the beach to be idled, or stacked. Some will be brought to shallow water. This started two weeks ago. We’re busy, but in 90 days, when I’m finished picking up all the mooring systems and all the rigs are finished, we’ll be dead stop. Our business is strictly mooring and anchoring rigs, and when those rigs aren’t working, they don’t need our service. I’ll have periods where I’ll be pushing my folks internationally and doing things to try to keep them busy,” he continues. “[It will be the] first time in the 42-year history of this company that we will be just about shut down until the moratorium is lifted. We’re going to do our best to hold onto people, but if we don’t have rigs to moor, how long can we go?”
Como says 200 of Delmar’s 300 employees are involved in deepwater offshore work, and about 90 percent of that is Gulf activity. And Delmar may be one of the lucky ones. At least it has work now.
But what about the hundreds of local service companies whose revenues are already drying up?
“I tell you what,” Como says, “people here don’t have a clue. It will really impact Lafayette, and even worse, it’s going to impact state government. Think about the state budget and the condition it’s in even before this. It’ll turn this place upside down.”
February trial date indicates parties were unable to negotiate a settlement.
Gov. Bobby Jindal has been viewed as a health care policy wonk, and he's tried to build on that image ahead of a likely 2016 presidential campaign, positioning himself as the candidate with substantive ideas.
Jerry Jones watched what he called the best effort he's seen in 25 years as owner of the Dallas Cowboys in the first half, and that was before Tony Romo had the longest scramble of his career and DeMarco Murray finished off yet another 100-yard game.
Two of the most recognizable women in Republican politics, Sarah Palin and Mary Matalin, have been heavily involved in Louisiana’s current election cycle.
Even though the Louisiana Democratic Party has thrown its support behind former Gov. Edwin Edwards’ congressional bid, national Democrats are not expected to follow suit.
Volcano recovery suspended; Mossad recruiting online; high fees in Ferguson and more national and international news for Monday, September 29, 2014.
Monday's Blogs from the Bog!
“[Mike] is no longer the energetic ADA that his recent ad is trying to portray. I just think Mike needs to get the hell out.” — Kermit Harson, DA Mike Harson’s brother
The New Orleans Saints have listed Jonathan Goodwin as questionable for Sunday night's game in Dallas, raising the prospect that second-year pro Tim Lelito will start at center for the first time.
The endorsements keep coming for District 9 LPSB candidate Jeremy Hidalgo, who picked up his fifth vow of support Thursday, this time from the Chamber’s political action committee.
Republican U.S. Sen. David Vitter will be out knocking on doors this weekend with anti-abortion activists encouraging people to vote against his colleague, Democratic U.S. Sen. Mary Landrieu.
The ACLU of Louisiana has sued Abbeville's mayor and police chief over a policy barring police from any social media use showing the city in a bad light.
Prospective Republican presidential candidates are expected to promote "religious liberty" at home and abroad at a gathering of religious conservatives Friday, with anti-Obama speeches from the likes of Kentucky Sen. Rand Paul, Texas Sen. Ted Cruz, former Arkansas Gov. Mike Huckabee and Louisiana Gov. Bobby Jindal.
The American Zombie blog by New Orleans independent journalist Jason Berry has a photograph of U.S. District Court Judge Carl Barbier having dinner with Lafayette attorney Pat Juneau — yeah, that Pat Juneau, the BP claims administrator whose fate Barbier will soon decide.
But retirees and employees who face the higher deductibles and out-of-pocket costs responded angrily, telling lawmakers that they shouldn't be held responsible for what they consider the Jindal administration's mismanagement of the Office of Group Benefits.
Indictment accuses ‘chef’ who claims to work for the needy of stealing from a disabled man in his care.
Gov. Bobby Jindal's top budget adviser says the state employee health insurance program will face a dire financial scenario without the heavily criticized changes planned by the administration.
Louisiana's last execution was in 2010, and plans for the next lethal injection have been put on hold amid an ongoing legal dispute about the drugs that would be used. More than 80 people are on death row, awaiting execution, in Louisiana.
If the Saints' defense hasn't corrected early season errors it could be in for a long Sunday night.
U.S. Sen. Mary Landrieu is traveling to the Citgo refinery near Lake Charles to highlight her successful stalling of a bill to impose sanctions against human-rights abusers in Venezuela's government.
Gov. Bobby Jindal will be spending his next few days in the key presidential campaign states of New Hampshire and Iowa.
The Chamber’s Empower PAC has endorsed its second candidate for this year’s LPSB elections, announcing it will support the reelection campaign of District 5 incumbent Kermit Bouillion.
And he just lost the frat-bro vote!
Republican congressional candidate Zach Dasher is getting an advertising assist from his famous "Duck Dynasty" family.
BATON ROUGE, La. (AP) — Gov. Bobby Jindal's administration skipped required legal steps in making changes to the health insurance plans that cover state employees, teachers and retirees, the state attorney general's office said Tuesday.