Analysis: Where are lost jobs from drilling ban?

The ban on deepwater petroleum drilling in the Gulf of Mexico is in its third month and the forecasts of thousands of lost jobs in Louisiana just haven’t materialized.

Why not? And could it still happen?

It’s a worry for the state’s economy, for sure, and shouldn’t be discounted, says David Dismukes, associate executive director for the Louisiana State University Center for Energy Studies.

But for now, the unemployment lines aren’t streaming around the corner for reasons tied to the fact that petroleum drilling is an enormously complicated business. According to figures from the Louisiana Workforce Commission, there were 595 first-time claims in June and July for jobless benefits from people who had just lost jobs in the mining sector, which includes mostly petroleum.

There’s more to that sector than deepwater drilling. It includes onshore drilling, exploration and production – including the huge Haynesville natural gas find in northwestern Louisiana – plus natural gas exploration in state-owned waterbottoms and close to the coast.

For June and July, Louisiana averaged 4,738 first-time unemployment claims per week in the overall economy. That’s far below the weekly high this year of 6,033 for the week ending Jan. 9. A similar pattern is noted in Texas and Mississippi.

For now, Dismuskes said big job losses are being held off by “mitigating circumstances.”

First, no one knows how long the moratorium, ordered by Interior Secretary Ken Salazar after the Deepwater Horizon disaster and the BP oil spill in the Gulf, will last. Salazar ordered it through Nov. 30 while new safety standards are developed. He wants rigs to re-examine equipment and safety standards and plans to order new blowout preventer safeguards.

But pressure is coming to lift the ban before widespread layoffs hit the Gulf. The Bureau of Ocean Energy Management, Enforcement and Regulation is now holding hearings on the issue, but agency head Michael Bromwich has refused to pin down on a date for a decision.

Dismukes says the industry is one of specialized skills and not one where entire work forces are easily trained – or easily expendable.

“The people who work in the deepwater environment are the A-team. They are the best of the best,” Dismukes said. “They’re dealing with millions of dollars in assets and equipment. They are highly trained and an oil company has invested in them.”

The Oil Patch learned more than 20 years ago how not to react to crisis. In 1986, due to Iran flooding petroleum markets to pay for a war against Iraq, oil prices crashed and thousands of industry employees were laid off quickly. After prices rebounded, the industry suffered a yearslong shortage of skilled workers after many of those laid off never returned.

And the overall work force in drilling is growing older and older, another disincentive for hasty layoffs.

“A six-month moratorium is not a real long period of time to justify laying off a skilled work force,” Dismukes said.

Although two deepwater rigs have been moved out of the Gulf by Diamond Offshore for deepwater contracts in foreign markets and another 30 in the Gulf are idle, Dismukes said it’s not easy for drilling companies to readily find other projects.

“In six months, it is difficult to replace a deepwater project somewhere else in the world. These are projects that have gestation periods of years, not months,” he said.

And it’s not as if the rigs would be readily accepted in all quarters: BP’s deepwater drilling plans of Britain’s Shetland isles and the Libyan coast are under scrutiny. Opponents want a moratorium in those areas until the cause of the Gulf spill is determined.

Drilling companies also are taking advantage of the pause in the Gulf to work on the giant deepwater rigs that can command prices of $750,000 per day.

“The industry has been working at breakneck speeds to meet domestic energy requirements since Hurricane Katrina,” Dismukes said. “This is a great opportunity to go back and do maintenance work, retrain, get people recertified and trained in new areas.”

Still, Dismukes said it’s economically hazardous to ignore the huge job loss forecasts, which he said are based on solid numbers.

“These are scenarios that could happen in the worst of circumstances,” he said. “We’re just fortunate there are some mitigating circumstances now.”

Alan Sayre is the New Orleans-based business writer for The Associated Press.