[Senate Hearing 111-1153]
[From the U.S. Government Publishing Office]
S. Hrg. 111-1153
THE DEEPWATER DRILLING MORATORIUM: AN ECONOMIC DISASTER FOR LOUISIANA'S
SMALL BUSINESSES
=======================================================================
FIELD
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
AUGUST 17, 2010
__________
Printed for the Committee on Small Business and Entrepreneurship
Available via the World Wide Web: http://www.fdsys.gov
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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED ELEVENTH CONGRESS
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MARY L. LANDRIEU, Louisiana, Chair
OLYMPIA J. SNOWE, Maine, Ranking Member
JOHN F. KERRY, Massachusetts CHRISTOPHER S. BOND, Missouri
CARL LEVIN, Michigan DAVID VITTER, Louisiana
TOM HARKIN, Iowa JOHN THUNE, South Dakota
JOSEPH I. LIEBERMAN, Connecticut MICHAEL B. ENZI, Wyoming
MARIA CANTWELL, Washington JOHNNY ISAKSON, Georgia
EVAN BAYH, Indiana ROGER WICKER, Mississippi
MARK L. PRYOR, Arkansas JAMES E. RISCH, Idaho
BENJAMIN L. CARDIN, Maryland
JEANNE SHAHEEN, New Hampshire
KAY HAGAN, North Carolina
Donald R. Cravins, Jr., Democratic Staff Director
Wallace K. Hsueh, Republican Staff Director
C O N T E N T S
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Opening Statements
Page
Landrieu, Hon. Mary L., Chair, and a U.S. Senator from Louisiana. 1
Vitter, Hon. David, a U.S. Senator from Louisiana................ 9
Witnesses
Davis, Lori, Owner, Rig-Chem, Houma, LA.......................... 11
Goodson, Charles, Owner, Charley G's Restaurant, Lafayette, LA... 17
David, Dewitt, Commercial Real Estate Broker, Van Eaton and
Romero......................................................... 21
Cloutier, Troy, Regional President, Midsouth Bank................ 28
Angelle, Hon. Scott, Lieutenant Governor, State of Louisiana..... 32
Chabert, Hon. Norbert N., Louisiana State Senate, District 20.... 52
Champagne, Hon. Simone B., Louisiana House of Representatives,
District 49.................................................... 57
Williams, Hon. Arlanda, Council Chairwoman, Terrebonne Parish
Consolidated Government........................................ 58
Matte, Hon. Timothy, Mayor, Morgan City, LA...................... 65
Alphabetical Listing and Appendix Material Submitted
Angelle, Hon. Scott
Testimony.................................................... 32
Prepared statement........................................... 35
Response to post-hearing questions from Chair Landrieu....... 125
Chabert, Hon. Norbert N.
Testimony.................................................... 52
Prepared statement........................................... 54
Champagne, Hon. Simone B.
Testimony.................................................... 57
American Energy Alliance Report: ``The Economic Cost of a
Moratorium on Offshore Oil and Gas Exploration to the Gulf
Region''................................................... 80
E-mail from Heidi Martin..................................... 108
Cloutier, Troy
Testimony.................................................... 28
Prepared statement........................................... 30
Response to post-hearing questions from Chair Landrieu....... 122
David, Dewitt
Testimony.................................................... 21
Prepared statement........................................... 23
Davis, Lori
Testimony.................................................... 11
Prepared statement........................................... 14
Response to post-hearing questions from Chair Landrieu....... 116
Deep Water Activity.......................................... 132
Shelf Activity............................................... 133
Deep Water Work History...................................... 134
Revenues..................................................... 135
Moratorium Effect on Rig-Chem, Inc........................... 136
Graph of Moratorium Effect on Rig-Chem, Inc.................. 137
Freyou, Ernest
Letter....................................................... 138
Goodson, Charles
Testimony.................................................... 17
Prepared statement........................................... 19
Response to post-hearing questions from Chair Landrieu....... 120
IHS Global Insight
Special study................................................ 110
Landrieu, Hon. Mary L.
Opening statement............................................ 1
Prepared statement........................................... 5
Fax letter from experts and attachment....................... 73
Mason, Joseph R.
Report....................................................... 90
Prepared statement........................................... 40
Matte, Hon. Timothy
Testimony.................................................... 65
Prepared statement........................................... 69
Miller, Mark K.
Prepared statement........................................... 140
Randolph, Charlotte
Response to post-hearing questions from Chair Landrieu....... 130
Report
Potential Economic Impacts of Proposed Increases in
Regulation and Taxes on Deepwater Drilling in the Gulf of
Mexica..................................................... 111
Tea Party of Lafayette
Press release................................................ 144
Vitter, Hon. David
Opening statement............................................ 9
Williams, Hon. Arlanda
Testimony.................................................... 58
Prepared statement........................................... 61
THE DEEPWATER DRILLING MORATORIUM: AN ECONOMIC DISASTER FOR LOUISIANA'S
SMALL BUSINESSES
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TUESDAY, AUGUST 17, 2010
United States Senate,
Committee on Small Business
and Entrepreneurship,
Lafayette, LA.
The committee met, pursuant to notice, at 10:02 a.m., in
Suite 209, Louisiana Immersive Technologies Enterprise (LITE),
537 Cajundome Boulevard, Lafayette, Louisiana, Hon. Mary L.
Landrieu (Chair of the committee) presiding.
Present: Senators Landrieu and Vitter.
OPENING STATEMENT OF THE HON. MARY L. LANDRIEU, CHAIR, AND A
U.S. SENATOR FROM LOUISIANA
Chair Landrieu. If everyone would take their seats, I would
like to thank you for coming. I am pleased to be here, and I
have been particularly pleased to chair the committee the last
year and a half.
I will start with opening statements, as is our custom, and
then we will go to our panelists and have five minutes of
questions with a second round, if necessary.
I want to begin by saying, first of all, thanks to the LITE
Center for having us and also for Mark Miller and Brian Hanks,
who helped, with the help of the Chamber and many other
organizations, to put out the notice for this hearing. We are
very, very grateful.
A hundred-and-twenty-one days ago, the Deepwater Horizon
explosion 50 miles off the coast of Louisiana took place. It
took the lives of 11 men and sent an estimated five million
barrels of oil spewing into the Gulf of Mexico, onto our shores
and into our marshes. This accident has threatened our
environment, our economy, and our way of life. The Macondo well
may be capped, but the crippling economic impacts caused by
this disaster and the ensuing moratorium continue to impact our
communities in substantial negative ways.
Louisiana's families and businesses are getting hit on two
fronts. First, our seafood industry, which accounts for roughly
40 percent of the lower 48's production, is suffering from both
actual impacts from the spill and no less damaging the
perception that our seafood is no longer safe. Shrimping season
opened today. We are going to do everything we can to talk
about how fresh and flavorful our Gulf shrimp are.
Secondly, our offshore energy exploration industry and
hundreds of businesses that support it have been put in
jeopardy by the heavy hand of the Federal Government.
Regrettably, the Administration reacted to the Deepwater
Horizon tragedy by halting all deepwater exploration activities
in the Gulf and canceling the scheduled Western Gulf lease sale
which would have occurred this month. While some very limited
shallow water drilling is underway in the Gulf, only two
permits have been granted since April 20, and all deepwater
drilling has been brought to a complete standstill as a result
of this ill-conceived action.
The decision to stop virtually all new energy exploration
in the Gulf was uninformed, in my view, and it borders on
reckless. Today, thousands of Gulf Coast businesses are
fighting their way out of this government-imposed economic
disaster that not only threatens our jobs and businesses,
including the oil and gas field, transportation, fabrication
companies, hospitality, and restaurants, but it also threatens
our way of life just as surely as the massive oil spill did and
perhaps even more.
This Administration's decision to halt drilling activity
did more than threaten the livelihoods of rig workers and oil
service crews. It substantially reduced general economic
activity throughout the Gulf region. We will hear testimony
today that will highlight the hardships and challenges that
this moratorium has imposed on Gulf Coast small businesses.
While we are here today to discuss the moratorium's
economic impact on local and regional economy, we cannot ignore
the consequences to our environment and our national security,
and I would like to address both just briefly.
The Administration's stated goal of this moratorium is to
protect the environment. I believe the action to impose this
moratorium has actually increased environmental risk to our
oceans and coastal wetlands, and this is why. The United States
continues to consume 20 million barrels of oil every day. It
did so the day before the Deep Horizon explosion and it is
doing so today as we meet here at the LITE Center. Therefore,
by stopping all new drilling here at home, offshore drilling in
the Gulf, which is virtually shut down, the U.S. will
necessarily increase oil imports from other countries with far
weaker environmental standards than our own and regulatory
regimes that do not function as well as ours. In countries like
Niger, Angola, and Venezuela, the record shows that these
countries suffer significantly more spills at a much more
frequent rate, causing more harm to the world's oceans, not
less.
In addition, all of that oil must be tankered into U.S.
ports. While tankers are much safer today than they were before
the Exxon Valdez spill, the fact is that prior to the Deepwater
Horizon, the record will show that spills from tankers were
four times more volume and frequency than spills from the
drilling rigs themselves.
The negative impacts of the moratorium on national security
should also not be overlooked. The U.S. demand for oil will not
decline simply because Gulf Coast exploration has been shut
down. This means that less oil used by Americans going forward
will have been produced by Americans and more will have been
produced offshore and imported to our shores. As we all know,
some of these imports will invariably come from hostile
nations, or nations hostile to U.S. interests. In 2008 alone,
Americans transferred nearly $700 billion overseas to pay for
oil imports. That number, in addition, will increase as future
Gulf Coast production lags due to the long-term effects of this
ill-conceived moratorium. This is a blow also to our national
security, and one that we could do without.
At a hearing I chaired in Washington, DC, last month
through the Small Business Committee, we heard testimony from
Louisiana State University Professor Joe Mason who said that
under the current moratorium, the Gulf Coast region will lose
more than 8,000 jobs, nearly $500 million in wages, over $2.1
billion in economic activity, as well as nearly $100 million in
State and local revenue. The moratoria's spillover effect could
mean 12,000 jobs and nearly three billion nationwide, including
almost $200 million in Federal tax revenues just in the first
six months. This is a very serious issue, not only related here
in Lafayette Parish and in this region, not only to the State
of Louisiana, but to the nation as a whole. According to Dr.
Mason, if the moratorium lasts longer, some 25,000 jobs could
be in jeopardy, and we will hear from our panelists along those
lines today.
Another expert from a research firm, from Dun and
Bradstreet, estimated that in Lafayette Parish alone, 780
businesses employing close to 10,500 people could be negatively
affected. Businesses here in Lafayette are some of the hardest
hit, which is why I chose this site and this venue for this
important field hearing today.
Consider what we know. Idling deepwater rigs that were
permitted to drill in the Gulf will immediately impact crew
members, as many as 46,000 directly. According to the Gulf
Economic Survival Team, which is represented here today by
Lieutenant Governor Scott Angelle, and, I might add, has been
ably represented by him, it says that the long-term job loss
could reach 120,000 by 2014.
While Gulf waters may be clouded by oil in some spots, the
data that we are accumulating against this moratorium is
crystal clear. We cannot close down the Gulf offshore oil and
gas sector without devastating economic impacts to our region,
increased environmental risk to our ocean, and weakening our
national security.
I think it is noteworthy that the Administration was forced
to revise its stand in July after a Federal court decision
ruled that its action was without solid legal basis. As one of
the first Senators to call for a full investigation into the
accident and request more effective safeguards against future
spills, I share the Administration's goal of a safer oil and
gas industry. We all do, but this blanket moratorium will not
help us achieve or advance that goal.
The fact is that Louisiana's coastline is a working coast
that brings the country an abundance of energy, seafood, and
provides navigation assets for commerce for the world. The
Mississippi Delta is our home, and there is no one who wants
drilling to be safer than we do, no one who wants the water to
be cleaner than we do, and no one that wants the seafood to be
fresher than those of us that serve it and consume it in our
restaurants daily.
I am confident that we can strengthen the safety record of
Gulf drilling as we move forward while promoting a balanced and
diversified economic future. But we also know that any hope for
a prosperous future will be challenged by a prolonged
suspension of deepwater drilling.
We will hear today from grocery store owners, restaurants,
real estate companies, and local banks and other small
businesses that have been directly and negatively impacted by
this moratorium. Our Federal Government has a responsibility,
particularly in these difficult times, to make sure that these
paychecks do not turn into pink slips. In this hearing today,
we will build a strong case for lifting this moratorium now,
and that is the purpose of this hearing, to hear directly from
small businesses that are being adversely affected about this
ill-conceived and heavy-handed action by the Federal Government
that does not, as I have said already, and it is worth
repeating, does not meet our environmental needs, our national
security needs, and it most certainly does not meet our
economic needs. It fails on every test.
I believe this Congress needs to hear these stories of
these small businesses, and I am very proud that my committee
will be able to supply this for the record, and this record
will stay open for two weeks. We invite all those in attendance
to submit any written comments they feel perhaps were not given
on the record today.
I also want to take a moment to introduce a person that is
here at my request, and I want you all to be polite. Mark Doms
is the Chief Economist at the Department of Commerce. Mark,
would you stand up just so people can recognize you? He is here
to listen to this testimony. He is one of the lead officials
that will be making the report to the President in September,
and we hope that the report will lead to a lifting of the
moratorium.
I am committed, along with members of the Gulf Coast and
our delegations, both Republican and Democrat are united across
the board, from Texas to Louisiana to Mississippi to Alabama,
to get this message out so this moratorium can be lifted.
I was proud to introduce legislation in the Senate this
month that will lift the moratorium and build on the work of
others, most notably Representative Melancon in the House that
has gotten the House on the record, both Democrats and
Republicans, against this moratorium.
If the Gulf Coast is going to recover from this nightmare,
it will be because of the health and production of coastal Main
Street small businesses that support the production of energy
that fuels our nation. We cannot continue to support a policy
that will close the doors on small businesses in Acadiana, in
Louisiana, in Texas, or for that matter, throughout the United
States.
So I thank you all very much for being here. I now turn the
opening statement over to Senator Vitter, a very strong member
of our committee. Thank you, Senator.
[The prepared statement of Senator Landrieu follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
OPENING STATEMENT OF THE HON. DAVID VITTER, A U.S. SENATOR FROM
LOUISIANA
Senator Vitter. Thank you. Thank you very much, Mary, and
thanks for all your work chairing this committee, particularly
on this topic. And as you mentioned, this is really a
continuation of a hearing we had in Washington and it is a
very, very important discussion.
I also want to thank our hosts here at LITE and ULL and
certainly our panelists and everyone for being here.
As Mary said, the bottom line is real simple, and
unfortunately, very stark. It is great news that the oil flow
has stopped and the ongoing environmental damage is beginning
to lessen. But the economic threat continues worse than ever
because of this moratorium. And the bottom line is simple. If
this moratorium continues even a few more months, we will lose
more jobs because of it than we will lose from the oil itself
and it will be devastating economically in the midst of the
most serious recession since World War II.
Also, as Mary suggested, it is not just the formal
moratorium in deepwater. It is really somewhat of a broader
discussion. Obviously, the formal moratorium in deepwater is
perhaps the most serious and offensive thing we are here
talking about. It is very serious. It is costing us a lot of
jobs. Those major platforms, major investments are moving to
other parts of the world as we speak.
At the same time, there is a de facto moratorium in shallow
water, as Mary noted. The Administration says there is no
moratorium in shallow or ``open for business'' or ``open to
issue'' permits. Great. Then you ask the obvious follow-up
question, how many new drilling permits have been issued in
shallow water since the Deepwater Horizon explosion, and the
answer as of three weeks ago was zero, and the answer as of
today is two. That means there is a de facto moratorium in
shallow. That means because of the complicated, cumbersome,
uncertain nature of the new rulebook even in shallow, even
shallow is pretty much shut down.
And then there is a third component to the threat, which is
the new regulatory environment we are going to be going into
which could continue this virtual shutdown even after formal
moratoria are lifted. Just yesterday, the Interior Department
issued a new policy moving away from the so-called categorical
exclusion for Gulf drilling under NEPA that has been in place
for decades. What this means is that every new project, every
new well, will have to go through many more hoops of
environmental review, even though the basic issues are the same
throughout the Gulf, which is what led to the so-called
categorical exclusion before.
There is already an environmental review for every new
project. For the Deepwater Horizon incident, there were five
levels of NEPA work. There were nine comprehensive supporting
environmental studies. Many of those were inadequate. I am not
arguing that. But to add layers upon layers upon layers to that
five-plus-nine is not protecting the environment any more. It
is making many drilling projects completely unsustainable
economically, and I think that is what the environmental left
has in mind, quite frankly, pushing this ending of the
categorical exclusion. So that is a big threat.
What is at issue, as I said, as Mary said, is an enormous
number of jobs and enormous amounts of economic activity. A
recent study by IHS Global Insight, for instance, put some
concrete, verified numbers on that. Independent oil and gas
companies in the Gulf account for about half of the nearly
400,000 jobs, $70 billion of economic value, $20 billion in
Federal, State, and local revenue generated by the industry
just in 2009.
That same study says that if this policy or something like
it continues into the future, by 2012, we could lose hundreds
of thousands of jobs in the Gulf. It would also cost government
major revenue, over ten years, $147 billion in Federal, State,
and local revenue from the Gulf region. So there is a lot at
stake for the country and for Louisiana.
Again, I am eager to hear from our witnesses.
In closing, let me say that, again, just like in our
Washington, DC, hearing, I am very disappointed that our
witnesses don't include any representative of the Obama
Administration. In that Washington, DC, hearing, Mary and I
both invited the Administration to send a representative to lay
out the case and the economic analysis for the moratorium. They
sent no one, complete, utter silence.
For today, I again specifically invited the Administration
to send a representative as a witness to testify, to lay out
the case for the moratorium and their economic analysis. Again,
they sent no one as a witness. I am happy Mark is here from the
Commerce Department. What I, at least, requested--Mary probably
did the same thing--is a witness to testify, to lay out the
case, to lay out the reasoning that led to this draconian
action, and they sent no witness. We are still waiting to hear
the justification. The people of Louisiana are still waiting to
hear the justification.
But with that, I very much look forward to hearing from our
witnesses. Thank you, Mary.
Chair Landrieu. Thank you, Senator Vitter.
We are going to begin with a terrific panel of witnesses
that both of us have asked to testify. They represent, I think,
a broad swath of business owners in this region. Of course, we
could have filled up this room ten times over with businesses
that are affected, but we are really very grateful to those of
you that have prepared testimony in such a comprehensive way to
help us build a Congressional record to get this moratorium
lifted.
We would like to begin with Ms. Lori Davis, who is
President and co-owner of Rig-Chemical, Inc., a small family-
owned company located in Houma. Rig-Chem was founded in 1980 as
a specialty chemical manufacturer distributor servicing the oil
and gas industry. Lori is an active member of Petroleum
Engineers and a member of American Association of Drilling
Engineers. Thank you, Ms. Davis, for being here.
Next, we will hear from Charlie Goodson, a very famous
Lafayette leader. He has owned Charley G's for now, I think,
celebrated, what, 25 years, Charlie? All of us have eaten at
this wonderful restaurant. He also has a great deal of
experience with other restaurants in the area, from Cafe
Vermilion to Hub City Diner, and he is really an outstanding
member of this community and we thank you, Charlie, for being
here.
Our next witness is Dewitt David, Commercial Sales Manager
for Van Eaton and Romero Realtors here in Lafayette. He is
very, very active in the community. He is Chairman of the
Commercial Real Estate Committee and Realtors Association of
Acadiana. We want people to understand this goes well beyond
oil field service companies and the negative impacts that are
being felt.
Mr. Troy Cloutier serves as Senior Vice President, Regional
President for MidSouth Bank. As a Regional President, his area
includes Houma, Thibodaux, Morgan City, and Lafayette. Bankers
like Mr. Cloutier are in a particularly front-row seat to see
what is happening in this region and we are very grateful for
you to be here, Mr. Cloutier.
Because Scott Angelle's presence is required in North
Louisiana--work never ends for our Lieutenant Governor--we have
pushed him up to our first panel, and he will be the last
panelist. Lieutenant Governor Scott Angelle from Breaux Bridge
has been serving as Lieutenant Governor since May. Prior to
that, he served as the Secretary for the Department of Natural
Resources that has the jurisdiction over, of course, drilling
here in our state. He is extremely knowledgeable and he leads
our state's efforts right now to overturn the moratorium with
the Gulf Economic Survival Team. Many organizations are a part
of that effort, and he has been the leader of that. He is a
graduate right here of Lafayette and a former President of St.
Martin Parish.
Lori, why don't we start with you? We are going to limit
opening statements to five minutes. If you can shorten them to
four or five, we will go through each and then have a series of
questions for you.
Ms. Davis.
STATEMENT OF LORI DAVIS, OWNER, RIG-CHEM, HOUMA, LA
Ms. Davis. First of all, I would like to say thank you to
Senator Landrieu and Senator Vitter and for everyone here
today.
Today, I would like to paint for you a picture, a picture
of a real American dream. During the oil crisis in 1984, when
over 50,000 people left the industry----
Chair Landrieu. Lori, pull the microphone closer to you,
down, if you could. There you go.
Ms. Davis. When my father, who had worked for an oil field
service company for 21 years, was forced into early retirement
at the young age of 50, with no formal education and a $25,000
severance package that was given to him for his 20-plus years
of experience, he took a chance, with my mother's support, to
live a dream and buy into a small business. What he didn't
realize at the time was that it would become a family business
and would support his daughters, grandson, niece, and later a
daughter-in-law, all as employees of the company now known as
Rig-Chem.
Picture today, 26 years later, we are in a very similar
place. I, Lori Davis, co-owner of Rig-Chem, and my sister,
Penny Molina, have no formal education. We are both close to
the age my father was in the early 1980s and now being forced
not into early retirement, but possibly out of business, and
not by market demand, but by a Federal Government who is taking
control of our industry and offering no help but to possibly
force us all into unemployment, which is not the severance
package I had hoped for and worked so hard to build. All of
this because the government feels that one company's mistake
should be borne by an entire industry that has operated safely
and never had anything like this happen before in the Gulf of
Mexico.
We have been a company that was debt free, never had to
borrow money to operate, never had to lay anyone off, always
had paid a good income to our 17 employees, 14 that live in
Louisiana, two in Texas, and one that lives in Maine. We offer
our employees 401(k) matching of four percent. We have given
profit sharing of 11 percent yearly per employee. And we pay
100 percent employee health benefit, dental, disability, and
life insurance, along with two weeks of paid vacation.
We are now facing the worst year in the company's history,
with six-figure losses and the reality that we can only hold on
until December without having to take drastic measures, such as
layoffs and pay cuts. This is hard to believe, but this is what
the moratorium has done to Rig-Chem, an American dream.
The only people that will profit from this tragedy will be
big business. They are the only ones that can survive during
this type of crisis. They have huge resources, established
international divisions, bank support, government connections,
and deep pockets with no real loyalty to employees, only to
stockholders. Once this is all done and the moratorium lifted,
they will emerge that much better, and they now have reduced
competition due to this arrest in our industry forcing small
business closures and access to our best employees.
Small business is usually quick to react to change. That is
why we have a niche in most markets. Small business can make
things happen because we are the decision makers. We keep
markets competitive. We employ and train talent that allow them
to focus on their job, not corporate culture.
Unfortunately, small businesses, the moms and pops of the
industry, will not survive this moratorium if it is not lifted
soon. To add insult to injury, we are receiving daily news of
price increases on our core materials with concerns of
shortages due to production changes, all of which are being
driven by the fear of what will happen as the price of oil
continues to rise, our demand for foreign oil increase, and the
uncertainty of U.S. oil production and its future.
Another blow to our industry is that our insurance company
is not sure what will happen. As a business, we have to be
profitable, which means we have to operate on budgets. But with
all the uncertainty caused by the moratorium, it makes it very
hard to project the budget. We are being asked to review MSA
agreements with many clients and now being offered new
agreements that have language included which there is no
insurance coverage available, at least not to small business.
The next hurdle we will have to endure is directly related
to safety. We already work in an environment that adheres to
high standards when it comes to safety and performance. We will
be asked to comply and should to the new requirements that will
be placed as a result of this incident, which will add yet
another financial burden.
Our picture is not unique. Most small business owners are
in the same situation and may be some without the fortunate
reserves to continue to battle through this lockdown and have
nowhere to turn but to bankruptcy or foreclosure. We need help.
We need to go back to work and be assured that we will have the
support and commitment from our industry and legislators to
help keep the American dream alive.
This is not what my parents planned for our future, nor is
it the one I planned for my son. Thank you very much.
[The prepared statement of Ms. Davis follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chair Landrieu. Thank you.
[Applause.]
Mr. Goodson.
STATEMENT OF CHARLES GOODSON, OWNER, CHARLEY G'S RESTAURANT,
LAFAYETTE, LA
Mr. Goodson. Senator Landrieu, Senator Vitter, and members
of the Senate committee, thank you for allowing me to testify
before you today and thank you for holding this hearing. I
appreciate the opportunity to tell my story of the possible and
very probable effects of the continued deepwater drilling
moratorium.
My name is Charlie Goodson, owner with my wife, Del, of
Charley G's Restaurant. We have been in the restaurant business
for over 30 years and I have operated Charley G's concept for
the last 25 years.
The Louisiana restaurant industry is the largest private
sector employer in the State, 145,000 people directly and
another 70,000 people indirectly. The restaurant industry in
Louisiana has had to overcome some significant challenges in
the last five years, Hurricanes Katrina and Rita in 2005, Ike
and Gustav in 2008, and five years and a national recession
later, things are finally looking up for Louisiana restaurants.
Along comes the BP oil crisis. The deepwater drilling
moratorium will cripple Louisiana's economy and force many
restaurants to lay off workers or even close their doors.
Traditionally, summer is a slow season, and combined with
another hurricane season, times could not be more desperate.
Owning a restaurant in Louisiana has been a roller coaster
ride, with some terrific highs and some soul-searching lows.
With only what I can describe as a stubborn will to stay in
business, we have survived. In the mid-1980s during the oil
bust, it was particularly hard for Louisiana restaurants and
our city. We pulled out all the stops, any marketing strategy
we could think of. For a time, we ran a promotion, lunch for
two for the price of a barrel of oil. I served lunch for two
for $5.40, definitely not a profitable situation.
With the deepwater drilling moratorium of six months, I
believe we are headed back to those struggles, those economic
times. As small business owners, we hang on economic decisions
made by others that can take us down in a matter of months. We
work hard at our business and we budget our sales every year on
a day-to-day basis. This year, I budgeted a seven percent net
income before taxes. We probably will do somewhere between four
and five if we don't have any major problems. This moratorium
could be that major problem and put us into negative for the
year.
Our management team, my daughters and my wife have started
to prepare our company for a major slowdown if there are jobs
lost in the oil industry in our area. Our first line of defense
would be a hiring freeze, then a salary freeze, then a halt on
all leasehold improvement. Our second tier of defense would be
to discontinue our lunch service. By discontinuing lunch, we
will be able to eliminate six kitchen positions, four service
staff positions, and one manager. That represents 25 percent of
my entire staff, 11 jobs in one small local restaurant.
Our daughters are now at the age where they will be getting
involved in the management of our family business. We hope to
pass this healthy and growing business on to them. The
moratorium casts big doubts over the future of this small
business.
Each and every one of us understands the importance of safe
offshore drilling to prevent another spill such as the April 20
explosion of BP's well, not to mention the devastating loss of
life. However, reckless shutting down of the industry will
result in a tsunami sized wave of economic impact on the other
industries in Louisiana.
Thank you, Senator Landrieu, Senator Vitter, for allowing
me to speak today.
[The prepared statement of Mr. Goodson follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chair Landrieu. Thank you, Mr. Goodson.
[Applause.]
Mr. David.
STATEMENT OF DEWITT DAVID, COMMERCIAL REAL ESTATE BROKER, VAN
EATON AND ROMERO
Mr. David. Well, good morning, and also, thank you for
allowing me to be here to share my thoughts on the impact of
the moratorium on the local real estate market.
After receiving the invitation to speak with you this
morning, I spoke with dozens of real estate agents, investors,
developers, and others involved in our real estate community
and all agree that this moratorium is having a devastating
effect on their business. I would like to share a few quotes
with you from some of the individuals that I spoke with.
First, a couple of residential agents. ``I had a ready,
willing, and able buyer under contract to purchase. Given the
moratorium and rumblings at his job about cutbacks, he walked
from the contract.'' Another said, ``My phone quite literally
quit ringing when the moratorium was announced. Three clients
who were on the verge of buying decided to sit tight. They were
concerned about whether or not they would have jobs in a year,
and if they did, whether the job would be based in Acadiana.''
The vast majority of residential sales are reported to our
local MLS and there are some disturbing numbers which may
illustrate the impact that the moratorium has had on our
residential market. If you compare the residential pending
sales, which some people call ``under contracts,'' for the
period June 1 to August 13 of this year, which I call the basic
moratorium period, with last year, we find, I think, some
startling numbers.
Last year during that period, 565 families made a decision
to buy a residential property. Through that same period this
year, what I call the moratorium period, that 565 dropped to
437. That is a 22 percent drop in the number of people who made
a decision to buy a residential property, and there is no doubt
since the moratorium went into effect, buyers are taking a
waiting and see attitude before they purchase a home. What is
interesting, this is in spite of the fact that interest rates
are near all-time lows and home prices in the past several
months have gotten to be pretty competitive. And, of course,
our local commercial market is also showing some signs of
slowdown.
Since much of our commercial market is not reported to a
central database, it is difficult sometimes to quantify exactly
what effect the moratorium is having on the market. But I spoke
to dozens of commercial agents in our area and all agree that
since the moratorium has been in effect, we have seen a drastic
drop in our business and it also seems that it is close to
being at a standstill.
Now, our industry, the commercial real estate market, is
heavily dependent on the oil industry. These folks lease and
buy hundreds and hundreds of industrial facilities from here to
New Iberia to Houma and they occupy thousands and thousands of
square feet of our office space. I would like to share with you
a few comments from a couple of our commercial brokers.
``I was working with an investor from a major city to buy a
very large apartment complex here in Lafayette. He states, `No
go until the moratorium is over and the economy back in
check.''' Another said, ``I lost a sale to an oil field service
company for a tract of land. The contract was signed. They were
in their due diligence period. Then the moratorium was
announced. They canceled the agreement and said because of the
moratorium, they no longer had a need to expand.''
A study that was just completed by the Louisiana Realtors
Association projects that the Deepwater Horizon catastrophe
will result in an initial loss of commission income to South
Louisiana Realtors of over $6 million from May to April of next
year. It also cautions that the effects could possibly spread
over many years and impact our real estate market for years to
come. And note this includes only the projected lost commission
income for the spill. This does not include what we assume is
surely coming, a loss of revenue from the moratorium.
So both in the areas in our local market of residential and
commercial, the phones just aren't ringing and we hear clients
saying they are cautious, they are afraid, they are uncertain.
The perception is that the worst is yet to come, and there are
very few people out there in a position to make a commitment on
a long-term real estate deal not knowing what our economy will
bring.
Many of us here remember the oil bust in the mid-1980s. The
reality was, we were all in the oil business, but we didn't
realize it until that bust hit us right in the face. Home
builders, electricians, plumbers, grocers, beauticians,
restaurant owners, dance instructors, you name it, we all
depended then and we still do on the jobs that are generated by
this great industry.
We have all heard the numbers, that for every one job on a
deepwater drilling rig there are eight conciliary jobs. But I
contend there is a much greater impact than those numbers
indicate. The rig workers, their eight supporting workers and
the companies they work for are now carefully analyzing their
spending habits.
The bottom line is this. The moratorium is not just on the
drilling and the jobs supporting that drilling. The moratorium
is a strain on everyone in our area. It is critical to our
economy that the ban on deepwater drilling be lifted
immediately so the air of uncertainty and fear that is hanging
over our heads be removed.
Senators, I urge you to bring back to Washington our
message loud and clear. Lift the moratorium. Thank you.
[The prepared statement of Mr. David follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chair Landrieu. Thank you.
[Applause.]
Thank you, Mr. David.
Mr. Cloutier.
STATEMENT OF TROY CLOUTIER, REGIONAL PRESIDENT, MIDSOUTH BANK
Mr. Cloutier. Good morning, Senators Vitter and Landrieu.
Thank you for this opportunity, and also, Mark from the
Commerce Department, thank you for taking time out of your
schedule to come here.
My name is Troy Cloutier. I have worked at MidSouth Bank
for over 18 years. MidSouth Bank is a $950 million bank
headquartered in Lafayette, Louisiana. MidSouth is one of the
biggest users of SBA programs in the State, so we thank you for
your work with SBA that you have done over the past few months.
MidSouth is an oil and gas bank with numerous lines of
credit extended to companies to pay their daily expenses during
payroll, insurance, payables, and other expenses that arise
during a business cycle. We also do boat loans, equipment
loans. Currently, 32 percent of our portfolio is in the oil and
gas industry or commercial and industrial, so we are the people
who lend to the oil and gas people.
Right now, we have $80 million in loans in the South
Region, which consists of Terrebonne, Lafourche, and St. Mary
Parishes. Over the past few months, we have seen an increase in
companies using their lines of credit for oil field cleanup. We
have seen boats that we couldn't get to work go to work because
of the cleanup. Because of these issues, we have increased in
loans $11 million since March of this year. So you can see that
oil companies are currently--the service companies are
currently working, or have been working because of the clean-
up.
Going forward, though, we see businesses being very nervous
about what is going to happen in the oil industry. Because of
the moratorium on deepwater drilling, some of the big companies
are going overseas because they have the financial resources to
do so. The smaller companies, however, like the seven that I
put in business over the past five years with SBA loans, are
very fearful that work will dry up when bigger companies move
overseas and hire other providers. They are holding on to their
money and making sure that they do not buy any new equipment or
have any additional expenses that might compound their problem
once a slowdown occurs.
During the moratorium, they have already--before the
moratorium, they have already scaled back where they could just
because of the slowdown in the economy today. They have laid
off people and do not plan on hiring them back anytime soon. I
have talked to a machine shop owner the other day and he told
me that him and his wife will work the machine for the next six
months and not hire any new people. He has let five people go
since the beginning of the year and does not have any plans to
hire any of them back.
Because businesses are trying to prepare for new
regulations when the moratorium is lifted, some of the business
owners fear that the cost of doing business in the Gulf will
skyrocket, and not just the deepwater operations. So they are
holding on to their cash now. They are worried about the
profits of their business going forward, so they are taking
care of their families first. Many of them just recovered from
Hurricanes--not Hurricane Katrina, but Gustav and Ike, which
hit the area very hard, and now are faced with this. We hear so
much about Hurricane Katrina, but we do not hear anything about
the other hurricanes that devastated the areas below New
Orleans.
I have talked to oil field executives the other day who
pointed out the irony of the fact that businesses moved to the
Gulf the last few years because of the political landscape
here. Now they are moving out of the Gulf because of the
political landscape here.
Those who will be hurt the most are the employees, who are
already leveraged as much as they can be financially. Many of
the employees were working 50 to 60 hours a week a year ago and
now they are being laid off today. They have seen a decrease in
salaries just because of the overtime not there, and today,
they face the layoff ahead of them. They cannot get home loans
today because of the regulations. I personally just moved into
a house and the mortgage process was a nightmare, and I have
great credit. So that is why they are not buying as many
houses.
Consumers have a lot of credit card debt. Most consumers
today have a very high debt-to-income ratio, so it is very hard
for them to get credit today. It is easy to say that they
should have done a better job managing their finances, but the
fact of the matter is, they live paycheck to paycheck and they
do not have any money in reserve to pay for being laid off in
the next 30 to 90 days. The only way they can make it is to get
credit cards from the big banks.
Many of them do not have the skill to go get another job.
They come out of college and they see that they can make
$60,000 to $70,000 a year in the oil field and that is what
they go to do. This is what they want to do, and we ask you to
put them back to work.
On behalf of community banks, I would like to urge both of
you to get with BP, ask them to put their money, their $20
billion in local community banks because that will be the banks
that will help the communities and the businesses go forward.
So I ask you to get with them to put the money in community
banks. And I also urge you to continue your work on the jobs
bill, Bill 5297. I know you all have worked very hard on that.
That is key for community banks to start lending again to
companies like Lori Davis's and others out there. The community
banks will be the ones to come in and help these companies in
the future.
So thank you for what you all have done today and I will
answer any questions.
[The prepared statement of Mr. Cloutier follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chair Landrieu. Thank you very much.
I have already sent a letter to the Administration and BP
asking them to put those deposits into local banks along the
Gulf Coast, which would make a lot of sense, and I hope that
that is exactly what will happen.
Now we will hear from Scott Angelle.
STATEMENT OF HON. SCOTT ANGELLE, LIEUTENANT GOVERNOR, STATE OF
LOUISIANA
Mr. Angelle. Good morning, Madam Chairlady and Ranking
Member Vitter. I bring greetings to you from Governor Bobby
Jindal and the men and women of Louisiana who have been working
for the past 120 days to restore our way of life. I thank you
for bringing this hearing of the Senate Committee on Small
Business to Louisiana, which proudly holds America's most
prominent oil and gas economy.
Since oral testimony is limited to five minutes, I will
offer brief comments and introduce a few faces of the
moratorium to make certain the public record reflects that this
policy is a burden imposed mostly on the middle class of
America.
I thank each of you for your public service and your
continued interest in a strong, safe domestic oil and gas
industry. I say strong and safe because that is what we have
been about and are about in the Gulf of Mexico, with a proven
track record of nearly 50,000 wells drilled over the last 60
years. The issuance of a six-month moratorium on deepwater
drilling is an overreach, not necessary, and has been deemed
arbitrary and capricious by the Federal courts.
Not only did five of seven of Secretary Salazar's experts
chosen to review his safety study publicly oppose the
moratorium, saying, quote, ``it will not measurably reduce risk
further and it will have a lasting impact on the nation's
economy,'' but in addition, at least five independently
conducted studies, referenced in my written comments previously
submitted, forecast a huge negative impact on the small
businesses of America. I am not speaking of the stockholders of
BP, Conoco, Shell, Exxon, or Chevron. I am speaking of the
middle-class American men and women who work on the drilling
rigs, the ones who put on their hardhats and steeltoed boots,
kiss their families goodbye for weeks at a time, and do the
tough work of exploring the energy to fuel America.
But that is not all. The companies that employ welders,
fabricators, diesel mechanics, pipefitters, boat captains, and
forklift operators are seeing a decrease in business. And that
is not all. The companies that employ hotel workers, retail
clerks, auto mechanics, restaurant workers, and caterers are
impacted. And that is not all. The banks, auto dealers, and
real estate folks are feeling the pressure, I might add,
probably the three industries that have most been discussed on
Capitol Hill, the banks, auto dealers, and real estate folks,
and we are at a time having a disconnected policy in South
Louisiana relative to those industries.
I have said before, this moratorium is not about big oil.
It is rather about the Calais, the Sheramies, Depueys, the
Roberts, the Boudreauxes, and the Thibodauxes [ph.], just a few
of the South Louisiana middle-class families that have taken
the risk, borrowed the money, created the jobs, paid the taxes,
found the energy, built our economy, and have done nothing
wrong, and yet find themselves in the bullseye of this poor
public policy to shutdown deepwater drilling.
[Applause.]
But don't just take my word for it. Todd Citron of Hub City
Ford reports a 20 percent drop in sales of both new and used
cars since the moratorium. Flo Meadows, a Lafayette realtor,
reports that she has had more commercial contracts dropped
before closing in the last five months than in the the last
five years combined. Ken Veron, who employs 38 workers in his
family-owned Cafe Vermilionville restaurant, reports his
holiday event schedule is normally booked at this time by oil
field service companies with deposits in hand. Today, he does
not have a single oil field service company booked for a
holiday event, and two other energy companies have recently
canceled events.
Layoffs are happening all around us for all the wrong
reasons. This comes at a time when our nation has invested
nearly $800 billion in stimulus funding to boost the economy
and create jobs, yet we still have an unacceptable unemployment
rate. There is not one shred of evidence of systemic failure
for operations in the Gulf of Mexico, yet we are being treated
with a one-size-fits-all approach. We certainly have the
wherewithal in America to immediately institute enhanced safety
practices if we are serious and have a sense of urgency about a
strong and safe domestic oil and gas industry.
So the rest of the country can be clear that there are real
people impacted by this moratorium, allow me quickly to
introduce you to a few great Americans, to Dustin and Gwen Guy
[ph.], a family from Broussard. Neither are employed in the oil
and gas business, but because Dustin's employer, a flooring
contractor, has experienced a slowdown in work from oil and gas
companies, they have been forced to cancel their home building
plans, an example of a cascading impact on the economy.
Bayou Country Harley-Davidson--since the moratorium, owner
Mike Bruno's stores in Slidell and Houma have seen a 38 percent
decrease in sales revenue and a reduction in net operating
profit in excess of $400,000. He has eliminated all
advertising, reduced inventory, and laid off 14 of the
employees pictured here.
From Cut Off, Kirk and Sheila Rouse and their six children,
ages six to 17, Kirk is the owner/operator/truck driver and
terminal manager hauling offshore equipment and earning
commission for the loads he transports. The dramatic increase
in work since the moratorium has the Rouse family unsure of how
they will send their oldest son, a heart patient, to college
this fall because now they can't afford to pay health insurance
premiums.
Dwayne Webstock invested $3 million in a Port Fourchon
multi-service dock facility that opened less than three months
before the moratorium. Since then, he has laid off 30 of his
employees and made other cutbacks, and he has attempted to find
work not related to the oil and gas industry just to keep his
doors open.
Again, thank you Senators Landrieu and Vitter for having me
here today, for your extreme leadership and your courage in
continuing to fight, and with your help, Louisiana will not
give up on this fight, not today, not tomorrow, not ever. Thank
you very much.
[Applause.]
[The prepared statement of Mr. Angelle follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chair Landrieu. Thank you, Lieutenant Governor. We
appreciate your leadership on the coalition.
I understand you may have to leave, and just excuse
yourself when you do--we were happy to accommodate your
schedule--we are going to ask the panel a few questions and
then move to our second panel. Lieutenant Governor, let me
start with you.
We have gotten a terrific response throughout Louisiana for
overturning this moratorium, and I think because of the work
that we have all done, that message clearly is getting out to
our state. The issue is how to get it out around the nation.
You have traveled to Washington. You have been meeting with
other delegations. Could you give us some insight into how the
committees have been receiving the testimony that you have
given here and if you feel like we are making some progress or
not in getting this message out around the country, and not
just to other delegations, but to other cities and elected
officials around the country?
Mr. Angelle. Certainly, my concern is that we are talking
to only our friends. Certainly, our folks in Texas and
Mississippi certainly understand what it is that we are doing
here and we have attempted to reach out to as many folks across
the nation. I would tell you that my observation is that many
folks across the nation do not have a full understanding of the
value of what happens in the Gulf of Mexico, and we will only
know that value when they begin to see energy prices rise
because of the lack of production that will come from this
moratorium and the cascading impact of the regulations that we
believe are coming as the other shoe drops.
Certainly, we have worked with the National Association of
Counties. You have perhaps received a resolution. The National
Association of Counties, representing counties across America,
has adopted a resolution opposing the moratorium. We have seen
manufacturers across the nation opposing this.
However, I am concerned that America does not yet
understand that what happens in the Gulf of Mexico is so
important to the daily lives of the families of America. Fully
a third of the oil and gas production comes from the Gulf of
Mexico and 90 percent of it comes from deepwater wells. We will
do everything we can to continue to get that message across.
Again, I think there are some biases. Somewhere along the way,
the oil and gas industry helped to create a strong America and
somebody hijacked that message and began to convince people
that what we were doing was somehow dirty and not American and
nothing could be further from the truth.
Chair Landrieu. Thank you very much.
Could you also comment--I am going to move to others for
questions--the meeting that I was able to help establish with
you and Michael Bromwich about three weeks ago in Washington.
The meeting went on for eight hours, I understand. Was any
progress made in terms of the shallow water regulations,
because you all were getting down into some real detail about
how to move that forward? Is there anything you would like to
report here on that?
Mr. Angelle. I would like to say, to borrow a phrase, I
think the spirit is willing, but the flesh is weak, and what I
mean by that is I get into meetings and we hear about the
things that we are trying to get done from a shallow water
perspective, but the proof is really in the numbers and there
have only been two wells, in fact, two new permit for gas
wells, relatively low-risk wells, that have been issued. We
continue to grind, and in ways that I have never seen before.
We hosted a meeting here last week at the LITE Center with
operators doing everything we can, sharing best management
practices, trying to put the kind of things that we can in
front of the regulators. There is a strong disconnect between
the home office and the regional office. There is a culture of
fear within the Bureau of Ocean Energy. There is a feeling that
to do the work that both the President and the Secretary have
said is legal in America, to drill for shallow water--to issue
shallow water permits, we believe that there is a fear in that
agency. There is a culture of better to not issue a permit than
to issue a legal permit and have someone question your job
performance.
And, look, it is tough. I served in a position in a
regulatory environment. It is tough to do this work, but that
is what the folks signed up for. The work that you--the meeting
that I think that you hosted did help us identify the issues. I
thank you for that. And I think we are moving in a direction to
get shallow water permits. I think we are in the red zone, if
you will allow me to borrow a sports analogy, but we need to
push it over the end zone, over the goal line, in a relatively
soon manner.
Chair Landrieu. And finally, I just want to be clear that
while the official moratorium is for deepwater drilling and
there were about 33 rigs with, I think I understand, four
additional that were on the way when this happened, into the
Gulf, that what we are hearing, the testimony is that for all
practical purposes, drilling in the entire Gulf, including the
shallow, is shut down. So I hope the members that are
representing the Administration here put that into their
calculations. It is not just the deepwater drilling.
Let me ask one final question to the panel and I will turn
it over to Senator Vitter. For all of you, it is important, and
I think, Charlie, you hit the nail on the head when you said we
didn't know we were all in the oil business, but when the crash
happened in 1980, we figured that out. I mean, I can remember
what a ghost town not only Lafayette, the West Bank of Orleans
and Jefferson felt like, Iberia, Vermilion, Lafourche,
Terrebonne. I mean, it was like the movies with the sagebrush.
You got that feeling going through a lot of our neighborhoods.
It doesn't quite feel like that yet, but we are getting sort of
the first ripples of it.
Can you describe--you described for your restaurant, but if
each of you would just take 30 seconds and talk about one of
your suppliers or one of your neighbors or someone that is
related that is being negatively affected so we can get as many
stories on the record as possible, if something comes to mind.
I don't know, Charlie, do you want to start?
Mr. Goodson. Right off the top of my head, speaking with
Gerald Breaux over the last few days with the Lafayette
Visitors and Convention Bureau----
Chair Landrieu. Speak a little louder, if you could.
Mr. Goodson. The motel industry in town locally is really
suffering. The vacationer dollars seem to be there. The tourist
dollars are still there. But the traveler, the business
traveler is way, way down, and Gerald told me somewhere around
25 percent, that the hotel-motel--and that is so directly
related to us. A business person comes into town to do
business, entertains their guests, so if they are not coming,
it also affects my business, as well.
Chair Landrieu. Mr. David.
Mr. David. Yes, Senator. We think that it appears that
somewhere between 16 and 17 agents that we are aware of have
left our industry since the first of June to find employment
elsewhere. I mean, you saw the Louisiana Realtors' projections
that we are going to lose considerable commission dollars in
the next 12 months. My fear is that we are going to lose good
people, experienced people that just can't make it unless homes
and buildings are selling and leasing. So we are beginning to
see some of the agents seek employment elsewhere.
Chair Landrieu. Mr. Cloutier.
Mr. Cloutier. I have customers all the time who say that
they are laying off and going to continue to lay off, but I
also deal with mergers and acquisitions and there is a ton of
banks in the Florida-Alabama area that are failing, and this
summer was supposed to be their resurrection year. They are
going down much further than they ever thought they would.
But I would like to offer a solution, because I don't like
people coming to my office and throwing a lot of problems on
the desk----
Chair Landrieu. Please.
Mr. Cloutier [continuing]. Without solutions.
Chair Landrieu. We are looking for them.
Mr. Cloutier. I was with a retired engineer this weekend
and he said that he is working harder now than he ever did
because of all the new regulations. He is having to find ways
to get the rigs out there. He says he is working six days a
week and he only wants to work two to three days a week, at
most, and spend time with his grandchildren after that.
So I would offer that there are 33 rigs that you said,
which he said the same number, 33 rigs on the deepwater. If MMS
would look at hiring two retired engineers to go through the
processes of these rigs and make sure they are meeting the
regulations as for the deepwater, and I am sure there are at
least 66 retired engineers out there that would be interested
in doing it on a part-time or full-time basis----
Chair Landrieu. That is excellent, and we have generally
suggested along those lines a SWAT team concept that Lieutenant
Governor Angelle and the coalition have pressed the
Administration to try to put into place and use the experience
here.
Ms. Davis, and then I will turn it over to you, Senator
Vitter. Just another story or two about a supplier or a
neighbor or----
Ms. Davis. Well, I mean, we represent--we do business quite
a bit with companies in Louisiana, but because of the nature of
our industry, we do have to reach out into other States. I
mean, 30 percent of revenues for one of the suppliers that we
do business with that is in Atlanta, Georgia, is being affected
by the downturn in our purchases. We have another supplier in
Howell, Michigan, that is feeling the same effects. And it is
not just Louisiana.
So when we think about this, it is going to reach further
and further because that person that is 30 percent down in
Atlanta, Georgia, is going to have to cut back somewhere in his
business and some of the things that he is doing. So it is more
than just a Louisiana problem.
Chair Landrieu. Thank you for bringing that up, and I think
that is one of our strategies moving forward, to get these
small business owners that are outside the Gulf to start
calling their Congressmen and their Senators and saying how
they are being directly affected, and I think that is a good
strategy.
Senator Vitter.
Senator Vitter. Thank you, Mary.
Mr. Lieutenant Governor, I want to go back to the broader
issue of not just the formal moratorium in deepwater, but the
de facto moratorium in shallow water and the threat of
unreasonable regulation. You have been working with us and
others on this shallow water problem, as you alluded to.
Secretary Salazar told me that is going to get solved six weeks
ago. Is that solved today?
Mr. Angelle. No, sir. The problem is not solved. There is a
strong disconnect between what home office in Washington, DC,
is trying to implement and their ability to communicate that to
regional offices throughout America. There is no question that
the shallow water fleet is getting stacked by the day. We will
have fewer shallow water rigs working this week than we had two
weeks ago, and that continues to be the forecast with the
uncertainty of these regulations.
Senator Vitter. Is it fair to say, because shallow water
rigs and projects are smaller and the lead-in time is much
shorter--it is something like 30 days in terms of getting a rig
operating--that the negative economic impact is going to be
felt even more quickly in shallow?
Mr. Angelle. That is absolutely right. I think some of the
issues that you are hearing about, real estate folks and
banking folks and car dealers and those kind of things, are all
just tied to some of the poor public policy of not being able
to communicate what it is that we want in this country from a
shallow water standpoint. Again, the President and the
Secretary have both indicated publicly that shallow water
permitting is a legal business enterprise in this country, yet
the numbers don't indicate that the government is issuing the
license to do that.
Senator Vitter. Right. And just to be clear for the record,
as of three weeks ago, the number of those new drilling permits
in shallow since the Deepwater Horizon explosion was zero. As
of today, it is two. The month before the explosion, for a one-
month period, that number would have been what, I think in the
40s or 30s?
Mr. Angelle. That is correct. I think it was upwards in the
high 30s. So clearly, a significant drop-off, even in spite of
the fact that it is legal to permit and to prosecute those
drilling plans.
Senator Vitter. Now, in this context, it just happened
yesterday, but do you have any comments or reaction to this
move by the administration, at least in deepwater, possibly
broader, to get rid of this NEPA categorical exclusion, to have
the NEPA process a whole lot more complicated for projects?
Mr. Angelle. I think it is terrible public policy. It has
been longstanding public policy in this country between
Presidents of different parties for a long time to recognize
the categorical exclusions, that when the Federal Government
produces its five-year plan for leasing, it takes into
consideration the activity that goes on in these areas, and as
a result, companies are then able to use the environmental
reports the government, in fact, provides to indicate that the
prosecution of drilling plans is, in fact, synonymous with what
the Federal Government looks to avoid from an environmental
standpoint.
To now have a situation that we are going to roll back
longstanding policy, at least in the deepwater situation--I am
not certain yet what kind of impact it has on shallow water, I
am continuing to follow that--but in the deepwater, this is
going to be a significant, significant slowdown, even if we
lift the moratorium early. If we lift it today, we still, as a
result of this announcement yesterday, are going to have
significant issues getting permits issued in a shorter period
of time.
Again, the fact that five out of seven disagree, the fact
that there is not one shred of systemic evidence here, the fact
that we have gone to court and the courts have said it is
arbitrary and capricious, the fact that the day after we
issued--the day after the courts issued their order, the
Secretary testified to a question by Senator Alexander, if the
fact--was he aware of the fact that the day before the Federal
courts had issued and vacated and called it arbitrary and
capricious, would he simply issue another moratorium, he said
yes.
So it is clear to me that there is a ``damn you'' attitude
towards the science and to the analysis. It is clear to me that
there is an effort at play to move this country artificially or
to accelerate a move away from the use of hydrocarbons to fuel
this country. And there are some folks who are going to look at
this opportunity, and shame on them for using the loss of life
of 11 Americans to try to bring about a change in the use of
where we get our energy. If we are going to have an energy
debate in this country, we ought to have it----
[Applause.]
If we are going to have an energy debate in this country,
we ought to have it, but we ought to not use this event as the
reason. Seven percent of America today gets its energy from
alternatives and renewables and I think that this was about--we
all believe that this can't be business as usual. You have
testified, both of you have testified, it can't be business as
usual.
Death by a thousand cuts is what is happening. It is a
moratorium today. We beat it. We get another one issued the
following day. We go to court on that on August 25. There will
be another one. Then we get regulations that are rolled out.
Then we can't understand the regulations because the people who
wrote them have the duty to explain them can't explain them
fully to us. You just begin to get the sense there is something
at play a lot more than just moratorium and deepwater drilling.
I think you get the play that this is about an effort to move
this country off of hydrocarbons premature.
Senator Vitter. Thanks. Just one----
[Applause.]
Thank you. One closing comment to the other panelists who
are talking about the investment business environment. You
know, for a lot of businesses, particularly worldwide
businesses, one factor they look to in terms of investing in
different places is political risk. What I am scared to death
about is that for energy companies and related industries, all
of a sudden, the political risk in the United States of America
is higher, is worse, is more threatening than it is in West
Africa or a lot of other places in the world, and that is quite
a comment.
Would any of you all like to expand on what you think this
is doing to that business investment environment, including for
small business here in Louisiana?
Mr. Cloutier. I would say that what we are seeing is that
there are people who can go overseas that are moving overseas
because they are just as worried as we are about what it is
going to be going forward. I mean, we don't know what it is
going to be going forward. We don't know when they are going to
open up the permits to the shallow water or the deepwater and
what is that price going to be going forward. How much is the
insurance going to be? What are you going to have to do to get
that permit?
So those people who have the financial wherewithal to go
overseas, and a lot of them already have had offices overseas,
so it is very easy for them to bring their rigs, their boats,
their equipment overseas, they are gone overseas. And I know
Anandarko just moved three rigs, I think three months ago.
So we are seeing the movement to overseas and that is going
to hurt the small businesses here because they are not going to
be able to move overseas with them. So, yes, that is a big
concern of ours, is the political landscape and the price of
doing business in the Gulf is going to go through the roof to
us.
Chair Landrieu. Would you all go quickly so--I wanted to
get this in----
Mr. David. Senator Vitter, I am so glad you asked that
question, because I had a little blip here, but I didn't have
enough time. This is from an investor developer. ``Over the
past decade, my partners and I have invested more than $3
million per year in the real estate in this area. In 2009
through early 2010, we invested close to $20 million. Since the
moratorium, we had four build-to-suit projects canceled. The
prospective tenants were all multi-million-dollar companies. We
lost our option monies and all our pre-development costs. At
this time, we are no longer looking at this area for investment
and strongly considering investing in Brazil.''
Chair Landrieu. Charlie?
Mr. Goodson. Quickly, I think as a community, we are where
we eat and we are where we shop. Local restaurants, local
stores are who we are--Charley G's, Cafe Vermilionville,
Judy's--and there is only one of those in the whole world,
right here in Lafayette. So as a small businessman, I would
like to do another project in Lafayette with my daughters, but
that is not going to be the case. I cannot take that risk. I
cannot venture out until there is some kind of final solution
to this problem. So I think more small business, like myself,
to open up individual local restaurants is going to be very,
very hard.
Chair Landrieu. Ms. Davis.
Ms. Davis. I would like to say, the oil and gas industry is
a very global industry, and even as a small business owner, we
have had to position ourselves, even before the moratorium, to
be able to compete in a global market because many of our
clients are overseas.
What I am seeing as a result of the moratorium, companies
and agents that I had been working with and working through in
Saudi Arabia, Nigeria, other parts of the world, are very
pleased with what is happening here because they are now going
to capitalize on the fact that we need to do business there. We
will be able to send our technology there. We will be able to
send our people there. We will be able to focus more time and
energy to developing those business relationships and making
them stronger. And it is going to be a real pain for us.
Chair Landrieu. Well, that is a perfect place to end, a
perfect place as a challenge to end this first panel. We have a
second panel. You all were excellent. I want the Administration
to take note that even Secretary Chu, the President's hand-
chosen person for Secretary of Energy, said that this country
is going to be needing a tremendous amount of oil and gas for
the next 50 years. I would strongly suggest we get as much of
that oil and gas here, right here at home on American soil,
right here along the Gulf Coast. The Administration's policies
are in a direct conflict even with the statements of the
Secretary of Energy.
Thank you. While this panel is moving and the other panel
comes forward, I am sorry I cannot recognize people in the
audience at an official field hearing. If you want to submit
anything for the record, you may, and I am going to remain
afterwards for a few minutes for anyone who wants to talk to me
personally. I thank you all very, very much for coming.
Would the second panel come forward, please? To save time,
I am going to introduce them as they come forward.
First, we have State Senator Norby Chabert. Senator Chabert
was born and raised in Petit Caillou. He represents District
20, which covers the southernmost sections of Terrebonne and
Lafourche Parish. He is one of the rising stars in our
legislature, a dynamic leader in the state, and will speak from
a perspective--his family, of course, has been in and around
the business for many years.
Representative Simone Champagne is a lifelong resident of
Jeanerette, who worked for First National Bank of Jeanerette
for 23 years. She served as Chief Administrative Officer of
Iberia Parish Government. She is currently a member of the
legislature and an excellent leader. We are very pleased to
have Representative Champagne with us today.
Honorable Arlanda Williams is the Parish Chairwoman of
Terrebonne Parish, the first female to hold this position. She
currently serves her first full-time term of District 2 on the
Council. She was Immediate Past President of Louisiana Police
Jury Association, of the Black Caucus, and current President of
the National Association of Black County Officials, and she has
testified in Washington and we thank you very much for your
leadership.
And, of course, Mayor Tim Matte from Morgan City, which is
the gateway to the Gulf of Mexico for shrimp and oil field
industries. Because of the importance of these industries to
the local economy, Morgan City has the Annual Labor Day
Louisiana Shrimp and Petroleum Festival, and that has been
getting a lot of attention around the country as people start
to really understand how we can shrimp and drill in the same
waters on the same day and have done so successfully and safely
for many decades, and we thank you for being the spokesperson
of that community.
Let us begin, if we can, Senator Chabert, with you, and if
you will limit your testimony to four to five minutes and then
we will have a round of questions.
STATEMENT OF HON. NORBERT N. CHABERT, LOUISIANA STATE SENATE,
DISTRICT 20
Mr. Chabert. Thank you. Madam Chairwoman, distinguished
members of the United States Senate Committee on Small Business
and Entrepreneurship, my name is Norbert Nolty Chabert, but
everybody down in the bayou calls me Norby. I am a Louisiana
State Senator for District 20, and I want to first thank
Senator Landrieu and Senator Vitter for their service on the
committee and for giving this serious matter the attention that
it deserves.
Louisiana's 20th Senatorial District is a very unique and
special place. Geographically, it is comprised of the
southernmost portions of Terrebonne and Lafourche Parishes. It
is home to some of South Louisiana's most famous bayous, Bayou
Terrebonne, my home of Bayou Lil Caillou, and the most dominant
and legendary bayou of them all, Bayou Lafourche. The names of
the towns there are synonymous with Louisiana living--Houma,
Cut Off, Cocodrie, Dulac, and Golden Meadow. District 20 is a
microcosm of our State.
It is flush with shrimp boats, vast sugar cane fields, huge
mills, fertile hunting and fishing grounds, thousands of camps
and boat launches, and miles and miles of America's wetlands.
It is also the hub of offshore support and supply for oil and
gas exploration in the Gulf of Mexico. And no disrespect to our
dear friends and colleagues here in Lafayette, St. Mary, and
Iberia Parishes, but it is now the epicenter of the economic
impact of the Department of Interior's moratorium on offshore
drilling.
You see, members, District 20 is not only the home of the
Louisiana Offshore Oil Port, commonly referred to as LOOP,
where over 13 percent of our nation's oil is piped through over
50 pipelines in the Marsh Pipeline System, but it is also home
to Port Fourchon, Louisiana's offshore supply super-port.
Currently, each and every one of the 33 rigs that have had
their drilling suspended by this moratorium are based,
supplied, and serviced out of Fourchon, every single one,
members. Much has been made of the consequences of the job loss
on those 33 rigs. It is estimated that there are between 6,500
and 7,000 workers combined on the moratorium rigs. However, it
must be noted that were are over 5,000 workers on the docks of
Port Fourchon alone, Fourchon, to say nothing of the 8,500
direct jobs of men and women who drive in and out of that port
every single day to provide the goods and services needed to
make that port and our oil and gas industry operate.
But neither the port nor the large companies that lease
space there are why I come before you today. Those companies
are directly feeling the pain, the financial burden of this
moratorium, as much as anyone. But they have lawyers and
lobbyists to fight their fights for them.
I come before you as a representative of the thousands of
mom and pop operations in my district, small businesses like
Tom's Gas Station in Golden Meadow, Pat's Dress Shop and Paul's
Drive-Through, both of Chauvin, the Galliano Twist, Marcel's
Supermarket in Bayou Blue, Blackie's in Lockport. These are
places where the workers of the oil field buy their tires, they
get their groceries, they purchase their children's school
uniforms, and they pick up a hamburger or a six-pack after a
long day of work.
But there aren't a whole lot of extra burgers being bought,
not a whole lot of dresses being sold. Everyone in my district
is feeling the effects of the economic depression that has been
wrought upon us through no fault of our own. Every conversation
that I have with my constituents, whether it is at a coffee
shop on a Monday or after church on a Sunday, is filled with
the concern of the impact it is having on their businesses and
the worry about whether or not they are going to keep their
job.
Just this past weekend at my local Rouse's Market, I was
stopped seven times by people telling me of the hard times that
they were facing. Now, Senators, this is not a scene that is
unfamiliar to us. Public service is the life we have chosen.
However, the testimony of these constituents was very much the
same, yet drastically different.
A teacher was worried about the progress of her classroom,
where three of her kids' parents had lost their jobs and were
going to move. A woman working in a print shop had seen a 50
percent downturn of orders just in the last three days--excuse
me, last 30 days. A man who owns a tool rental company has had
to lay off two of his ten workers in his shop just because
their services are no longer needed. Every one of their
testimonies is because of this moratorium on drilling.
Over the last half-century, the hard-working people of
South Louisiana have built the energy infrastructure that
powers this country. The people of the Tenth Ward in South
Lafourche practically invented the international boat business.
Oil and gas is the lifeblood of our economy, from top to
bottom, and that blood has stopped pumping due to nothing more
than political posturing.
In the coming weeks and days, more and more companies will
lay off employees. Shops will shut their doors for good. Car
payments will not be made. Mortgages will not be paid. In
Terrebonne and Lafourche Parish, the welcome sign will once
again read, ``Last one out, turn out the lights.''
Once again, I would like to thank the Chairwoman for her
leadership and Senator Vitter for his leadership, as well, as
well as the attention that the committee is paying on this very
important issue. Thank you.
[The prepared statement of Mr. Chabert follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chair Landrieu. Thank you, Senator.
[Applause.]
Representative Champagne.
STATEMENT OF HON. SIMONE B. CHAMPAGNE, LOUISIANA HOUSE OF
REPRESENTATIVES, DISTRICT 49
Ms. Champagne. Thank you. First of all, I would like to
thank Senator Landrieu and Senator Vitter for being here today
and listening to us. We really appreciate all the hard work
that you all are doing in our capital to make the rest of the
nation understand how important Louisiana is in the oil and gas
industry.
I also, and in your package you will receive, I included a
survey from an independent oil and gas industry people that did
a survey on the economics and gives you a little more stats
than what I will provide.
To start off, I represent District 49, which is Coastal
Iberia and one-third of Coastal Vermilion Parish. I am very
proud of the fact that we don't compete necessarily with Port
Fourchon, but we try to complement Port Fourchon on our
industry. What we have in District 49 are two waterports that
do topside as well as fabrication, as well as an airport that
is home to the Helicopter Training Center that utilizes a lot
of the oil and gas industry air providers. I also am proud that
we are the home of the Henry Hub, which provides 25 to 30
percent of the electricity throughout the nation. This, I
believe, is what we need to make Washington understand, how
much we provide the rest of the nation, what we do for them on
a daily basis.
In my testimony, I also have written from Ms. Heidi Martin,
who owns Prologue, another woman-based industry, and she is
located on Highway 90 in Iberia Parish. She does rental and
lease for offshore oil storage facilities and drilling. She has
received 80 to 85 percent reduction in her sales and lease
since the moratorium has taken effect. On the bottom of her
statement, which I did provide for you all, she gave me a
wonderful quote. ``Courage is not denying a situation, but
denying its power over you.'' Today, my testimony is going to
be about not denying the power that the moratorium has put on
the good people of Louisiana.
I, like Norby, visit those supermarkets on a daily basis.
We have families. We have to go home and cook their meals and
take them to the ballpark and everything else that moms and
dads and grandparents do on a daily basis. So my testimony
today will be about the small businesses that I visited in the
last several months about the moratorium.
First was Prologue, a woman-owned business that is getting
80 to 85 percent decrease. The others are our mud cleaning
businesses. We all talk about how the drilling rig, how they
are pumping mud into the Deepwater Horizon. Well, all of that
has to be cleaned out at some point in time, and that is what
drilling does. So we have a lot of that industry in District 49
and across the coastal parishes. So they are hurting, because
if they are not working, if they are not drilling, they are not
cleaning.
I also visited with supply companies. We have very many.
Now, we look at supply companies sometimes as giving those
fittings and the piping, which they do, but we also have supply
companies that will daily ship to our businesses supplies such
as groceries, air conditioners, and heating, linen supplies,
our galley hands. If they are not drilling and we are not
producing oil and gas, they are not working. So these people
are out of work. They run the risk of not having a job in the
next six to nine months or as long as this will last, and for
eternity.
I also visited our uniform companies that have had a
decrease of about 50 percent in their sales for uniform
companies and printing. So all of this, along with I had an
interesting conversation on Friday with a caterer, and what she
said was--another woman-owned business that employs about 35
people--she said, people think of caterers as being the wedding
people or the special planners, which they are. But I know in
the district I represent, they also go out to our ports. They
furnish daily meals for the industry that they sell to workers.
And all of these specialty items, they can no longer furnish
because these are some of the things that are being cut back in
our economy because of this moratorium. They also buy from our
local restaurants and our local grocery stores.
So it is not about the trickle-down effect. It is about the
trickle-up effect, how it is climbing the ladder. And this will
reach Washington very shortly. When this and many others don't
work, local sales taxes are down. That affects the services
that we provide as public servants when it comes to our schools
and our drainage issues that we have along the coastline.
We need the rest of the nation to understand how hard
Louisianans work to provide the many products that are derived
from this industry. We are the energy corridor. We don't have
to be dependent on foreign oil.
As a wife, mother, and sister of oil field employees, I
understand the hazards of the industry. I also understand the
dilemma that families face firsthand about the layoffs that
they soon will see. My husband and I went through the 1980s,
the oil bust of the 1980s, with two small children to feed. The
uncertain future for these families will cause great stress
amongst them. We have hard working, resilient people in
Louisiana. Allow us to continue to provide the quality of life
our constituents deserve and have worked for for years to
accomplish.
Katrina and Rita issued a huge blow to the Louisiana
economy. Gustav and Ike kicked us in the gut. The oil spill
brought us to our knees. But this moratorium and the cease of
drilling permits will sign our death sentence.
I ask the Administration to please lift the moratorium, not
in October or November or September, but today. Let us get back
to work. Thank you.
Chair Landrieu. Thank you.
[Applause.]
Ms. Williams.
STATEMENT OF HON. ARLANDA WILLIAMS, COUNCIL CHAIRWOMAN,
TERREBONNE PARISH CONSOLIDATED GOVERNMENT
Ms. Williams. Thank you. Good morning, Senator Landrieu and
Senator Vitter. Thank you guys for inviting us here.
I bring you greetings from the good earth, Terrebonne
Parish, where I currently chair the Parish Council. The French
words ``terra bonne,'' meaning good earth, good soil, and good
land, are more than fitting, as the citizens of our parish have
supported themselves and their families with the blessings of
nature, our unique geography that creates abundant fisheries,
our beautiful landscapes, and a warm culture that draws many
every year. Our parish symbols, the oil rig and the fishing
vessel, represent the importance of the oil and gas industry
and the seafood industry to the economy of our great parish,
with approximately 60 percent of our workforce directly or
indirectly related to the oil field and approximately 20
percent directly or indirectly related to the seafood industry.
The explosion of the Deepwater Horizon caused devastation
to 11 families who lost fathers, sons, brothers, or friends,
something that many of us have probably never experienced, a
death with no proper closure. Moreover, the events after the
explosion have caused detriment to thousands along the Gulf
Coast, a reality that some of us never thought we would be
faced with.
Although we understand the position of safety, a six-month
moratorium would destroy parishes and counties along the Gulf
Coast that rely heavily on oil and gas as a way of revenue. In
our case, six months is the equivalent of two to four years.
When a company that installs and dismantles offshore platforms
in the Gulf of Mexico ties up a derrick barge, that act ripples
through the region and States' economies. It results in
employee layoffs, approximately a crew and staff of 100 people,
and the subsequent reduction of their income, the impact on
their ability to pay mortgages, household bills, tuition, fewer
dinners out, shopping trips, and other dollars that can be
spent in our local economy.
My parish depends more or less on services related to the
oil field industry, so when one company reduces its spending
with numerous other companies who supply that operation--
groceries, welding suppliers, pipe, sheet metal, safety
supplies, chemicals and cleaning fluids, field, truck
transportation, water, driving companies, and even the
scrapyard that would be used to buy those scrap materials--and
those suppliers lose their business, when this happens, they
lose their ability to spend dollars on those supplies and
services and can be forced to lay off employees. This is just
from one derrick barge that services shallow waters, where
permits are still not really being issued.
In Terrebonne Parish, all of this reduced disposable income
has hurt a local restaurant. Big Al's, known to many when they
come and visit our parish, is a long-established seafood
restaurant that had to close one of its locations. The closure
was the result of a decrease of income of $15,000 to $20,000 a
month for the last 90 days and the difficulty in buying seafood
to prepare and sell. He was affected by both the loss in
seafood and the lack of employees coming in because the oil
field services always came in and did lunch meetings or dinner
meetings with Big Al's. While this means no purchases are being
made from seafood suppliers, neither are purchases being made
from suppliers of other ingredients, supplies, or utilities.
These workers have lost their jobs and no longer have the
ability to spend money as freely as they previously did.
The effect of the moratorium will have more of a lasting
effect than anyone can conceive. With a Master's in criminal
justice, I understand social strain, and this is a theory used
in criminal justice to describe increased criminal activity and
certain offenders. It is the inability to live the quality of
life you are accustomed to, thus resulting in increased
criminal activity which happens when that father or that mother
cannot bring home the food and the money that they are used to
and their children cannot live the lives that they have been
accustomed to living. They result in doing things that are
unseen and unknown to many because they want their family to
continue to go and live the life that they have lived for so
many years.
But the most important thing are our children. The
Terrebonne Parish School District went into Reduction in Force
for the 2010-2011 school year, highly related to a $9 million
sales tax decrease, a drop in child enrollment causing their
MFP to decline because of migration out of the parish. The
school system receives 46.22 percent of sales tax revenue and
will begin this school year in need of $11.3 million to balance
the general fund, and that is before the true effects of this
moratorium begins. These numbers are expected to almost double,
and to put a burden on an already financially burdened school
system.
The basis for which this country's future lies is in our
children and they are now becoming the sacrificial lambs at the
end of the situation. Because the public school system will
have to prepare for an increased amount of students that will
transfer in from the parochial system, thus causing overcrowded
classrooms mixed with all types of behavioral problems, yet
there will be no increase in the sales tax, to increase the
teaching staff will be unattainable, thus making ``No Child
Left Behind'' to be changed to ``No Generation Left Behind.''
Am I my brother's keeper? Am I my sister's keeper? E.
pluribus unum, out of many, one. It is this fundamental belief,
I am my brother's keeper, I am my sister's keeper, that this
country works off of. But if you live in a little area called
Pointe-Aux-Chenes, a community built on the seafood industry, a
community rich in faith and hope, a community strong enough to
weather every catastrophic storm that has touched the Louisiana
Gulf Coast, and yet not another disaster has taken away the
very industry that they need to survive, and now many is taking
away the only backup plan that they ever had.
I beg upon you to take back these fundamental beliefs to
the administration to let them know that we are a people that
can stand and we can weather anything. But when you take food
out of our mouths, when you stop educating our children, then
we begin to fight, and our fight is not one, but it is all
standing together.
I thank you guys for your support and I thank you guys for
having this meeting today.
[The prepared statement of Ms. Williams follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chair Landrieu. Thank you.
[Applause.]
Thank you, Madam President, very much for that moving
testimony.
Mayor Matte.
STATEMENT OF HON. TIMOTHY MATTE, MAYOR, MORGAN CITY, LOUISIANA
Mr. Matte. Good morning, Chairwoman Landrieu and Senator
Vitter. Welcome to South Louisiana and the Cajun Coast. My name
is Tim Matte and I am presently serving my 14th year as Mayor
of the City of Morgan City.
Morgan City is a community located 70 miles south of here
at the bottom of the Atachafalaya Basin, the largest overflow
river swamp in the United States. We are very proud of the fact
that we are the birthplace of the offshore oil and gas
exploration business. In 1947, Kerr McGee drilled the first
successful oil well outside of land just south of Morgan City
and brought about this vital industry. At the same time, our
community was known as the Jumbo Shrimp Capitol of the world in
recognition of the huge fleet of shrimp boats ported out of
Morgan City, harvesting the jumbo shrimp from the waters of the
Central Gulf of Mexico. Today, both of these industries are
prominent contributors to our local economy, although the
support of offshore oil and gas exploration and production make
up the majority of our economic base.
The businesses that call our community home include small
marine fabricators, shipyards for both new construction and
repair, diesel repair shops, equipment rental companies
providing equipment utilized by drilling companies for all
phases of exploration and production of oil and gas, vessel
operators, food supplying catering companies, and diving
contractors and remote operating vehicle manufacturer and
operators, as well as companies providing support for all of
these businesses.
Our resident companies are primarily small businesses, but
we also are home to some of the larger names in this vital
business, such as the fabricator of many of the offshore
structures and production facilities, J. Ray McDermott,
Transocean, Halliburton, Cameron, the manufacturer of sub-sea
equipment, such as blowout preventers, and Oceaneering
International, the manufacturer and operator of those ROVs, or
underwater robots that we all watch working on the plugging of
the Deepwater Horizon well.
We are also home to the companies that developed and
constructed the Big Gulp, the barge skimmer that successfully
worked in removing large quantities of oil from the Gulf, and
the sealing plug was fabricated here in our parish. We are also
home to a variety of small retailers that rely on the
employment provided those that work offshore and for those
service companies.
I would like to make a few initial comments as an overview
of our feelings towards the moratorium, offer some examples
from my community of the impacts we are seeing and anticipate
seeing as a result of the moratorium, and wrap up with a few
comments about the need for safety in the industry.
It is my understanding that there are 33 rigs seeking
permits to drill in deepwater in the Gulf of Mexico. I also
understand that two rigs have already left the Gulf for other
projects in foreign waters. And I understand that up to six
rigs have already sent notification that they will be leaving
the Gulf of Mexico. My view of the moratorium is that it is
punitive to small business in Coastal Louisiana. I believe that
this is not the intention of the effort, but without a doubt,
that is the result.
The larger oil companies will not be adversely affected by
the withholding of drilling permits as they will simply exploit
a resource in some other part of the world. The drilling
contractors may only suffer minimal impacts as they compete on
a worldwide basis and have opportunities to drill elsewhere.
But our small business community primarily serves the Gulf of
Mexico activity. The movement of these rigs will cause a loss
of jobs and economic opportunity for our resident companies as
they will not be in a position to follow the activity to
foreign areas. In some cases, they would even be prohibited
from doing so.
Let me offer a few examples from my community. Morgan City
is the home of an offshore caterer, a family-owned business
that has been operating here since the 1960s, serving companies
with their food and related product needs out of a downtown
Morgan City location. They employ 70 to 90 people, depending on
workload, and of the 33 rigs in question, they have contracts
with six. When operating, those six rigs represent 30 percent
of their gross revenue. The loss of these rigs would lead to a
reduction of the staff by as many as 30 people. Since he would
not have the workload, he would also have to return a number of
trucks that he has presently under lease, and, of course, the
fuel purchases and all of the other costs associated with that
would have to be reduced.
One of our small fabricators, another example, builds flow
line jumpers for these offshore wells once the well is drilled
and moved to development. He has reported that he has had
orders postponed for nine jumpers from one oil company and from
six from another company delayed. He expects this to impact his
revenues by over $1 million. He does market to companies that
do work in foreign areas. However, he has not been very
successful in doing that in that he finds that fabrication is
one area where some foreign governments have put a requirement
of local content in their projects, therefore putting him at a
competitive disadvantage.
Each of these 33 drilling rigs will have one to two ROVs
for its drilling operation. One of our resident companies had
committed 29 ROVs to those 33 drilling rigs. From a company
perspective, he hopes to continue to serve those rigs if they
move. However, they will be crewed by employees from those
foreign offices that he has. That is going to result in the
loss of United States employment, without a doubt.
Our area is also the home to a helicopter company which
happens to probably have locations in every one of our
locations. They have contracts with 22 of those 33 rigs. That
is going to have an impact all across the Gulf Coast.
These are just a few examples that we have seen thus far
with the moratorium. This burden is falling on small business,
and consequently it is going to fall on a community like mine
as we are forced to adjust our budget by reducing the number of
people we have working for us, thus exacerbating this problem.
St. Mary Parish was in the disaster area for each one of
the hurricanes, Katrina, Rita, Gustav, and Ike. We have come
through some pretty tough times. These tough times, one of the
results of that is that it causes a depletion of our reserves.
We just don't have reserves to fall back on to wait around. We
don't have the luxury of waiting out better times when a
drilling moratorium might be lifted and when these rigs might
come back to the Gulf of Mexico.
In my conversation with some of the business community, I
was told that the economic downturn and the effect the
moratorium has had in some cases has been softened by the
opportunities derived by responding to the spill or providing
services to BP and their contractors, and this has had the
result of putting some offshore supply vessels and towboats
back to work and barges to work.
I had one crewboat operator tell me that he has had four
jobs canceled in deepwater, but he has got five boats working
on the spill. I believe he has already got notification on one,
and the notification on those other four are coming shortly.
Those boats are going to be laid off. So in addition to losing
these four from the deepwater projects, he is going to have
another five vessels sitting at his dock, not spending money,
not employing people, and so forth. Two vessel crews have
already been let go. That is 24 people. You know, you operate
those vessels around the clock. It takes a lot of people to
operate them.
Another contractor, another offshore supply vessel operator
told me that he has fully one-half of his fleet today committed
to BP and has already received a notification about those
contracts. So while we have talked about some very bad things
that will happen as a result of this, I think the worst is yet
to come with the moratorium because this BP work will and has
to end.
We all see that this work is now coming to an end, and our
parish right now has an unemployment rate of ten percent. That
is as of June 2010. That is up from 8.7 percent last year. Once
again, I think that clearly demonstrates that this moratorium
is punishing the wrong people.
A common theme I am hearing from my business community is
that the new office replacing MMS, namely the Bureau of Ocean
Energy Management, is contributing to a reduction in economic
activity in the Gulf of Mexico causing the de facto moratorium
that we have referred to. One local businessman referred to the
office as chaotic in processing a permit request, and delays
are resulting in the processing of permit requests for
activities that have absolutely nothing to do with deepwater
drilling activities other than the fact that they both occur in
the Gulf of Mexico. And I will add to that, not only is it
shallow water drilling permits, but it is permits for
activities in shallow waters that have nothing to do with
drilling. This is having an impact on many of the service
providers in our community that have traditionally served
shallow water and the shelf areas going back to the early days
of the Gulf of Mexico.
And lastly, let me finish up with one point that I would
like you all to leave here regarding--my comments regarding
safety of offshore oil and gas production and exploration. I
think the Macondo Well incident, most of you would agree that
prior to that incident, the industry had a pretty good safety
record. While there is and will be much debate about the cause
of this very tragic incident and what should be done about it
to prevent a future incident, I want to offer this observation.
I think it is very significant that the loudest voices
protesting the institution of this moratorium is coming from
mayors and parish presidents and workers and their families
from Coastal Louisiana. Those are our sons and daughters on
those rigs. Those are our brothers and sisters on those rigs.
None of us take their health and safety for granted. We demand
a safe workplace. We have proudly served our nation by putting
ourselves at risk by undertaking this important task because it
is noble work, it is important work, and it is work that this
country needs done.
I think our willingness to continue this work deserves some
recognition. Our citizens want to go back to work. And I thank
you for this opportunity to share these thoughts with you.
[The prepared statement of Mr. Matte follows:]
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Chair Landrieu. Thank you.
[Applause.]
Well, ladies and gentlemen, we have had two excellent
panels this morning and I think the testimony has been some of
the best that I have heard, either chairing a meeting or
participating, in the hundreds that I have participated in
since becoming a Senator. So I really appreciate it.
I want to submit for the record, following up Scott
Angelle's testimony, the letter from the five experts, the
Administration's own experts, who have testified and advocated
against the moratorium. I want to make sure that that gets in
the record.
[The information follows:]
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Chair Landrieu. I also want to submit for you,
Representative Champagne, the document, the survey of small
businesses that you referred to in the record.
[The information follows:]
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Chair Landrieu. I have one question for the whole panel,
and we will then turn it over to Senator Vitter so we can wrap
up at the appropriate, expected time.
Part of the feedback that we have gotten when we have been
discussing the ending of this moratorium with people is, well,
the situation isn't as bad, Senator, as you describe because
there are so many people being employed or hired by the clean-
up. We try to explain that that in no way substitutes for the
loss of the permanent jobs and the anxiety that is out there
because of just the unknown.
So I would like to ask you all to respond to this. This
hasn't been officially on the record, but we get these comments
in private meetings that we have. Would you try to take a
minute, each of you, to explain to the public the difference
between the jobs for the clean-up, which might be temporary and
sometimes are hiring workers that aren't even from our area, as
versus the jobs being lost from the moratorium? I don't know,
Mayor, if you want to start----
Mr. Matte. I would be happy to. I think what we have seen
in our community, primarily, those jobs have involved the
hiring of vessels. And in some cases, these boats were not
working, so they were able to put those back on. The best
example I have, the two marine operators that I mentioned
earlier, both of them have crew boats and supply boats, and the
crew boats are the--that is the low cost per day rentals. They
are very thankful for the fact that they were able to put those
vessels to work because what is happening is the larger
offshore supply vessels, those in the 260 even up to over 300-
foot-long vessels that leave Port Fourchon for the deepwater
areas, those are the much higher day rates, require much more
employment to staff those vessels. Those are the ones that are
laid off. They are kind of supplementing it with these crew
boats and some of the smaller boats that are serving the spill.
But they have already gotten notification, that is it. That
is over. That is gone. Will it be another week, another month?
That is probably the outside time frame we are talking about.
Over the next month, those jobs will go away.
Chair Landrieu. So it was an inadequate and temporary
substitute for the jobs lost, and now that is even coming to an
end.
President Williams.
Ms. Williams. Yes, Senator. In Terrebonne Parish, as you
know, BP has one of their stations is right, unfortunately,
right in my district, as well. But we had a serious problem
with them even hiring our local vessels of opportunity. So to
say that people are working, people are making money, that is
true, but it will not last past 90, maybe 180 days at most. But
these people that have been placed out of these other jobs, it
is going to take them, just like I said earlier, two to four
years before they can make the living that they used to make.
So you are going from $2,500 a week, example, to $235 a
week. So that is the false that they are being sold that they
are making money, but you are not making money every day. You
are not guaranteed to go out every day. I have been stopped
several times. ``Ms. Williams, we go down there and they sent
us back home.'' So that is not a job. A job is you know that
you have to go from eight to five or eight to six, not if I go
and they feel like bringing me, then I am going to work that
day. So that is a false that everybody needs to understand. You
may see people working today, but tomorrow, you may not.
Chair Landrieu. Representative.
Ms. Champagne. Thank you, Senator. Yes, I agree, and I
think where we get this false sense is people are confusing the
oil spill with the moratorium, and every day when we go out in
our districts, I know in District 49, my fishermen, my
shrimpers and my fishermen have been put to work by BP and they
are working their boats. What the moratorium is doing is it is
affecting the stable industry that we have with oil and gas
throughout Iberia and Vermilion Parish as well as the whole
coastline.
We have oil field service companies and fabrication
companies at the Port of Iberia that are already setting up
shop in Brazil. These will not come back. If they leave totally
and the economy base in Brazil helps them and the climate in
Louisiana and the United States is not good enough, they are
not going to come back. But they can't take all of our people
with them when they do this.
So the false sense that people are actually working is
exactly that, a false sense of people actually working. The
moratorium is longstanding, and when I say longstanding, not
today or tomorrow, a month from now. This is years. It will
take years for our economy to come back, if it will at all.
Chair Landrieu. Senator.
Mr. Chabert. One point that has not been touched upon that
I know both of you have a tremendous amount of experience in,
in terms of those jobs that are out there relative to the oil
spill, what you have during a time of emergency and tragedies
like this is the influx of profiteers. Unfortunately, we have
seen that up and down all of our parishes, where you get folks
who are not even from the State, much less from the area
affected, coming in and capitalizing on some of the
opportunities that were there, be they vessels of opportunity
or catering contracts or any of the number of things that have
been discussed thus far today.
You know, secondly are those jobs that have absolutely
nothing to do with the oil spill that we have talked about
repeatedly today. How do you equate a teacher who is going to
lose their job due to a reduction in MFP and a decrease in the
workforce, how do you say, well, that person can go to work for
an oil spill clean-up job? It is unfortunate that there is that
misconception out there, but completely understandable that it
does exist.
Chair Landrieu. Thank you all for clearing that up.
Senator Vitter.
Senator Vitter. Thanks. I just have two questions. First,
for the Senator and Representative. You mentioned you both
represent significant ports, Port Fourchon, Port of Iberia.
What percentage of those ports' activity is directly related to
offshore oil and gas? And if the formal or de facto moratoria
continue for six months or more, what will those ports look
like?
Ms. Champagne. Thank you. The Port of Iberia is 100 percent
oil and gas related, and if we see a decrease, what will happen
is, like we are seeing right now, some of our port facilities
are looking at overseas employment. So they will decrease and
these yards will be substantially decreased in furnished
product here in the United States as well as overseas, but I
can see if this continues, a reduction of at least 75 to 80
percent.
Mr. Chabert. And as we have stated before, 33 of those rigs
that are affected by this moratorium are based out of Port
Fourchon, so that would speak directly to them, but 100 percent
of what Fourchon does.
More importantly, I want to speak to something that we have
all worked on, and I see my good friend, former Senator
Cravens, Chief of Staff of the committee, you know, the hard
work that we put in paying for long-term projects to get money
down to things like Port Fourchon that we all agree are a State
asset but they are a national asset, we are all familiar with
the Leeville Bridge and the money that we have all worked so
hard to allocate to that. We have tied directly the payment of
bonds to pay for that bridge on the amount of traffic that is
going to go to service Port Fourchon via the way of tolls.
Well, no one has been able to calculate the loss of revenue
that has been generated due to the number of trucks and heavy-
load vehicles, which we all know those tolls vary depending on
what type of vehicle passes over that bridge.
So, again, the true impact of this moratorium on things
like that, that folks possibly in DC aren't seeing, has yet to
be measured.
Senator Vitter. Right. And Ms. Williams and Mayor Matte,
again, if the formal and de facto moratoria continue for six
months or more, what revenue impact will your jurisdiction and
your local school systems see, and what service cuts will that
lead to?
Ms. Williams. In Terrebonne Parish, you are looking at a
possible 40 percent reduction in sales taxes, which would
affect not only our school system, which receives 46 percent of
it, but it would also affect our levee board, who receives
about $5 million a year through our sales tax revenues, thus
prohibiting them from continuing with projects that they have
already started. Definitely, we have already started with a cut
in our school system, so we would definitely not be able to
increase the staff.
On the parish side, we have already started looking at
different measures as far as cutting back. We are only hiring
now those positions that are absolutely detrimental to the
parish. So with a 40 percent decrease in our sales tax, you
would definitely see lots of layoffs on the parish side, and
then probably even more layoffs on the school systems side.
Mr. Matte. Well, Senator, in my parish--first off, I am
fairly conservative in my budgeting. I budgeted a five percent
reduction in sales tax for this year and am keeping my fingers
crossed that that is going to be a sufficient number. We are
getting ready to go through the budget process for this
upcoming year, and, of course, this is a big question mark.
Secondly, you heard me say earlier, my unemployment rate is
already ten percent. One of the things that I think you
probably agree with, unemployment has a tendency to create more
unemployment as those dollars--there are fewer and fewer
dollars turning over, it broadens its impact and we are going
to feel it very dramatically.
I am already not buying equipment and not buying supplies
and not buying things to avoid having to lay people off, but
there is no question that that is the only other place that,
from a community like Morgan City, the only other place we can
go is to begin to lay off employees. A moratorium that would
continue on from here would cause--ultimately would cause the
layoff of city employees. That would be the only response I
would have.
Mr. Chabert. And Senators, if I may, on the Mayor's point,
it needs to be noted for the record that the lowest
unemployment in the country prior to this moratorium and the
oil spill was right here in South Louisiana, with Terrebonne,
Lafourche, Lafayette, and St. Mary.
Chair Landrieu. And now it is headed to one of the highest.
All right. This hearing is going to come to a close. I just
want to say again how much we appreciate the testimony,
heartfelt, specific, very detailed, that is going to help us
build the Congressional record necessary to get this moratorium
lifted immediately and permits issued expeditiously. So we
thank you all very much.
The record of this hearing will stay open for another two
weeks. We encourage other testimony to be presented. And I can
commit to you all, as the Chair of this committee and as a
Senator from Louisiana, I am going to put the full weight of
this committee behind the lifting of this moratorium as soon as
possible.
Thank you. The meeting is adjourned.
[Whereupon, at 11:58 a.m., the committee was adjourned.]
APPENDIX MATERIAL SUBMITTED
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