08/30/2011 07:00 pm ET Updated Oct 30, 2011

Oil From the Gulf of Mexico

Crossposted with, the blog by the dean of Duke's Nicholas School

It's a sad story. It's a shocking story.

You can find out all about it at, a website sponsored by the industry-backed Consumer Energy Alliance. The problem, according to the site: the Obama administration's "Gulf Moratorium and Permit Freeze" are killing jobs. The solution as per the site: send a message to U.S. government officials to "Open the Gulf."

Gulf Stories as Centerpiece

The Web campaign's centerpiece are clips of real people -- Lori, David, Mark, and others --  telling their stories of economic ruin to a backdrop of empty rigs and warehouses underscored by somber, plaintive music. (These stories are also being featured in TV ads.) Each has a compelling and sad story to tell. Their lives are in economic free fall -- they're out of work, can't make ends meet, gasoline is too expensive, all the jobs have gone overseas. And why is all this happening? The administration's policy on oil from the Gulf of Mexico.

Mark claims that if "the [Gulf of Mexico] moratorium was opened up ... it would be better for everyone." Lori, the owner of a company that runs rigs in the gulf, laments the loss of business and has a solution: "Let's fix it ... Let's come up with a solution that everyone can live with and let's get back to work." David's a suffering truck driver but he's still patriotic: "Made in America says it all. ... Just let us do it. Free it up."

Citing estimates from a July report [pdf] by IHS Global Institute and IHS CERA, claims that more than "230,000 American jobs and nearly $12 billion in tax revenues could be generated in 2012 if activity in the Gulf resumed to normal levels." That IHS report, by the way, was funded by the Gulf Economic Survival Team, "founded in June 2010 to push for a swift end to the federal moratorium on offshore drilling." It was also roundly criticized by Michael R. Bromwich, the director of
the Bureau of Ocean Energy Management, Regulation and Enforcement, as
being "fundamentally flawed."

And then there's the call to action. Clicking on "Send a Message to Washington" takes you to a prepared letter ready to send to the president and Congress. It says, among other things, that "stalled development of our critical energy resources threatens another 380,000 jobs nationally and has driven up gasoline and diesel prices as the Gulf of Mexico moratorium and permit freeze force consumers to rely increasingly on overseas oil." And it ends with a simple demand: "Open the Gulf."

Wow, a powerful message. But there are some problems: Facts.

The Gulf Offline?

The Consumer Energy Alliance -- a group with a private Internet registration through Domains by Proxy, Inc., which says something in and of itself -- describes the Gulf of Mexico as being "essentially offline." Hardly. Oil has been flowing from the gulf without interruption during the Deepwater Horizon disaster in the spring and summer of 2010 all the way through to now. And the rates of production have been pretty close to historical highs.

And what exactly do the IHS folks mean by "activity in the gulf" resuming "to normal levels"? If you choose the peak, in mid-2010, then, yes, current activity is a bit lower. But why should that be designated as normal? Why not 2006, 2007 or 2009? In those cases, current activity would be above normal. (2008 was a hurricane year with major shut-ins.)

Oil Field Production in Gulf of Mexico, Chart by EIA

Source: EIA

A Moratorium?

In late May 2010 following the Deepwater Horizon accident, the president placed a six-month moratorium on new drilling -- not on all oil operations, just on new drilling. So the suspension affected a total of about 33 rigs, 12 of which continued to operate. (For more, see here and here.) The rationale for this short-term halt to new drilling was so that officials could figure out what went wrong and how to avoid such an event in the future. (Incidentally, the initial moratorium was overturned by a judge; a revised moratorium kicked in in July 2010.)

In October 2010 -- a month and a half earlier than projected -- the moratorium was lifted and new safety requirements for drilling and spill containment were established, including the requirement that new operations would need to demonstrate in advance that they have the ability and equipment to contain "a subsea blowout," like what occurred when the Macondo well transformed into a uncontainable deepwater oil gusher. In short, there is no moratorium.

OK, you might say, the moratorium has been lifted, but the administration has still put a lid on gulf oil by refusing to grant new permits -- the so-called "permit freeze." Really?

Permit Freeze?

The new requirements for drilling and spill containment certainly did slow things down for a while because they meant that operators would need to procure additional equipment before submitting new permit applications. But in February the first permit for deepwater drilling in the gulf was approved. Since then, of the new permit applications for deepwater drilling that require subsea containment:

  • 113 have been approved,
  • 17 are pending, and
  • 22 have been returned to the operator for more information.

As for deepwater drilling that does not require subsea containment:

  • 45 have been approved,
  • 1 is still pending, and
  • 1 has been returned to the operator.

And shallow water permits between April 2010 and March 2011 have proceeded at a rate of seven per month compared to eight per month in the 12 months leading up to the Deepwater Horizon disaster. 

Bottom Line: The Gulf of Mexico Is Open for Drilling Business

Did the Deepwater Horizon disaster cause folks to be laid off? Did it lead to economic hardship? Of course. It was a disaster. Almost five million barrels of crude gushed into the Gulf of Mexico -- the largest marine oil-spill disaster on record. Were new permits put on hold until steps could be taken to avoid similar disasters in the future? Yep.

But, with a permitting process now in place, drilling
activity in the gulf's deepwaters has been steadily increasing. 

The Anti-Oil President? Take a Look at the Numbers.

It is often claimed that President Obama is against big oil, wants to
shut down all oil extraction and exploration in the United States.
Really? You think so?


chart of Gulf of Mexico Oil Production, EIA

With oil production up, President Obama can hardly be called the anti-oil president. (Source: "Short-Term Energy Outlook," May 2011, U.S. Energy Information Administration)


Well, here are the facts: During the Bush presidency from 2001 to 2008, U.S. crude oil production declined from about 2.12 billion barrels to about 1.81 billion barrels. In the post-Bush years between 2009 and 2010, on the other hand, U.S. crude petroleum production increased: 1.96 billion and 2.00 billion, respectively. And the EIA projects the production rates to continue to grow in 2011 and 2012.

Is increasing crude oil production a good thing? Like so much else, it probably depends on your politics. But one thing I am pretty sure is not good: misinformation. Like I said: It's a sad story; it's a shocking story.