[Senate Hearing 111-1172]
[From the U.S. Government Publishing Office]
S. Hrg. 111-1172
THE DEEPWATER DRILLING MORATORIUM: A
REVIEW OF THE OBAMA ADMINISTRATION'S
ECONOMIC IMPACT ANALYSIS ON U.S. SMALL BUSINESSES
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 16, 2010
__________
Printed for the Committee on Small Business and Entrepreneurship
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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
ONE HUNDRED ELEVENTH CONGRESS
----------
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 F. WICKER, Mississippi
MARK L. PRYOR, Arkansas JAMES E. RISCH, Idaho
BENJAMIN L. CARDIN, Maryland
JEANNE SHAHEEN, New Hampshire
KAY R. HAGAN, North Carolina
Donald R. Cravins, Jr., Democratic Staff Director and Chief Counsel
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................ 12
Witnesses
Blank, Hon. Rebecca M., Under Secretary for Economic Affairs,
U.S. Department of Commerce.................................... 13
Fernandez, Hon. John, Assistant Secretary of Commerce for
Economic Development, Economic Development Administration, U.S.
Department of Commerce......................................... 44
Alphabetical Listing and Appendix Material Submitted
Blank, Hon. Rebecca M.
Testimony.................................................... 13
Prepared statement........................................... 16
Fernandez, Hon. John
Testimony.................................................... 44
Prepared statement........................................... 46
Responses to post-hearing questions from Chair Landrieu...... 58
Harbert, Karen A.
Prepared statement........................................... 35
Landrieu, Hon. Mary L.
Opening statement............................................ 1
Chart titled ``Department of Interior Study: Job Loss Caused
by the Moratorium''........................................ 3
Chart titled ``LSU Study: Job Loss Caused by the Moratorium'' 4
Chart titled ``Total Number of New Wells Approved in Water
Depth Less Than 400 Feet''................................. 5
Chart titled ``Total Number of New Wells Approved''.......... 6
Chart titled ``New Wells Approved in Water Depth Less Than
400 Feet''................................................. 7
Chart titled ``Total Number of New Wells Approved''.......... 8
Vitter, Hon. David
Opening statement............................................ 12
THE DEEPWATER DRILLING MORATORIUM: A REVIEW OF THE OBAMA
ADMINISTRATION'S ECONOMIC IMPACT ANALYSIS ON U.S. SMALL BUSINESSES
----------
THURSDAY, SEPTEMBER 16, 2010
United States Senate,
Committee on Small Business
and Entrepreneurship,
Washington, DC.
The committee met, pursuant to notice, at 10:05 a.m., in
Room 428-A, Russell Senate Office Building, Hon. Mary L.
Landrieu, Chair of the Committee, presiding.
Present: Senators Landrieu and Vitter.
OPENING STATEMENT OF HON. MARY L. LANDRIEU, CHAIR, AND A U.S.
SENATOR FROM LOUISIANA
Chair Landrieu. I would like to call the Small Business
Committee meeting to order. We will start with opening
statements and go for a round of questioning after we hear from
our witnesses.
Unfortunately last night the Senate schedule changed and we
will have a vote at 10:45 I understand, and then a final vote
on the small business package at noon. So we are going to break
at 10:45 to go to the votes, come back, and finish up the
hearing.
I thank you all for joining us this morning as this
Committee holds its third in a series of hearings on the
current deepwater drilling moratorium and the impact on its
effects to the Gulf Coast economy.
Today's hearing is quite possibly the most important.
Today, the Administration will present its analysis of the
moratorium. We have had two previous hearings on this subject
where we heard from dozens of small business owners, the
Chamber of Commerce, Dun and Bradstreet, LSU economic analysts,
and others along the Gulf Coast to try to point out the impact
to the economy along the Gulf Coast based on this decision.
Some 150 days ago the Deepwater Horizon explosion took the
lives of 11 men and sent an estimated five million barrels of
oil spewing into the Gulf, onto our shores, and into our
marshes. This accident has injured 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 ensuing moratorium continue
to impact communities in Louisiana and many communities
throughout the Gulf Coast.
Louisiana 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 perhaps more damaging, the
perception that our seafood may not be safe to consume. It is.
But we are having a long battle to convince people otherwise.
Secondly, our offshore energy exploration industry and the
hundreds of businesses that support it have been put in
jeopardy, in my opinion, by the heavy hand of the Federal
Government.
Regrettably, the Administration reacted to the Deepwater
Horizon tragedy by halting all deepwater explorations in the
Gulf and canceled the scheduled Western Gulf lease sale that
would have occurred in August. They halted all deepwater
exploration, but in fact, which I will show you today on the
charts that I have, there is a de facto moratoria on shallow
water as well.
Before the BP spill, the Mineral Management Service
approved an average of three to six shallow water permits per
week which averages about 12 to 24 permits per month. In
contrast, since May, the Bureau of Ocean Energy Management has
issued only five shallow water permits for new wells, roughly
one per month.
Another way to say this, which I am going to submit to the
record, is in the five months prior to the official deepwater
moratoria there were 29 deepwater rigs, drills in the Gulf or
new wells approved. Of course after the moratoria, there was
one in May. Basically zero.
That is a problem. But the shallow is also a problem. In
the five months prior to the deepwater moratorium, there were
49 permits issued; and since the five months following, there
have been seven. That is a precipitous drop in permitting in
the shallow water. And the charts will show that.
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I noted as recently on July 10, two days before the
issuance of the second moratorium, the Department of the
Interior estimated that a six-month moratorium would cost 9,000
direct jobs, 13,797 indirect jobs; and that a freeze would
capture about $10 billion in industry spending.
I find it stunning that the Administration was aware that
their actions might eliminate nearly 23,000 jobs in an already
faltering economy and proceeded anyway. However, that is
precisely what it seems like they did. We will get updated
figures from you all today.
Early indications are there may not be 23,000. We do not
know. We are going to analyze your data pretty carefully but
nonetheless it is fairly significant.
The decision to stop virtually all new energy exploration
in the Gulf of Mexico was unwise, and in my view, borders on
reckless.
Today thousands of Gulf Coast businesses are fighting their
way out of this government-imposed economic disaster that not
only threatens jobs and businesses, including oil and gas field
service, transportation, fabrication companies, but also a way
of life just as surely as the massive oil spill did and perhaps
even more.
The Administration's decision to halt drilling activity did
more than threaten the livelihoods of thousands of rig workers
and oil service crews, it substantially reduced the total
amount of economic activity taking place along the Gulf of
Mexico in Texas.
As I have said before, this moratorium and the analysis
shows this is not hurting big oil. Those rig workers, many of
them, are still employed doing other jobs, not drilling or
exploring but cleaning up. Your data will show that. They will
survive.
But the problem is it is hurting Big Al's, the restaurants,
the sandwich shops, the hotels, the motels, the salons. The
corner grocery stores in South Louisiana have seen their sales
decline precipitously since this moratorium went into effect.
At our first hearing in July, we heard testimony from
Louisiana State University Professor Joseph Mason whose study
echoed the findings of the Administration's own economists. He
stated that under the current moratorium the Gulf Coast region
will lose more than 8,000 jobs, nearly $500 million in wages
and over 2.1 billion in economic activity as well a hundred
million in state and local taxes.
The moratorium spill over effect could mean 12,000 jobs and
nearly three billion nationwide, et cetera. He found that the
moratorium if it lasts longer than six months 25,000 jobs could
be lost, a finding directly in line with the Administration's
earlier records.
You all seem to indicate this morning that that job loss is
lower and that you are fairly confident all these jobs will
come back. We shall see.
Another expert from a research firm, Dun and Bradstreet,
testified that in Lafayette Parish alone 780 businesses
employing close to 10,500 people could be negatively affected.
Businesses in Lafayette Parish, which is one of our larger
parishes in Southwest Louisiana, are some of the hardest hit by
the moratorium which is why I chose to have the second
hearing--this is the third hearing--the second hearing on this
issue in Lafayette at the LITE Center.
We heard from a number of local small businesses impacted.
In particular we heard from Charlie Goodson, the owner of
Charlie G's restaurant, a very well known and famous and
popular restaurant in our state.
Charlie G's, which just celebrated their 25th anniversary
as a family-owned business with 44 employee. He testified that
similar to the oil bust of 1980, if the moratorium continues,
their bottom line which they carefully project because it is a
small family-run business, which was projected to have a four
or five percent net income before taxes could run into the red
for this year.
As with the oil bust, Charley G testified his first
response was to institute a hiring freeze which he has already
done, a salary freeze which he has already done, and to halt
all leasehold improvements which has already done.
If that does not work, he said he will be forced to
discontinue lunch service which will eliminate 11 staff
positions. That equates to a 25 percent reduction in one
business.
While eleven jobs lost in Layafette, Louisiana, may not
make the front pages of the New York Times or the Washington
Post, I am aware of the many similar situations described by
Gulf Coast small business owners worried about the uncertainty
surrounding this ill-conceived moratorium. Small business
owners have to make quick and tough business choices every day
based on local economic conditions, not macroeconomic policy.
In a difficult economic time nationally, I must remind the
Administration that our Gulf businesses are also dealing with
lingering effects from the 2005/2008 storm season which is some
of the worst years on record, the Deepwater Horizon disaster
itself, and now this moratorium.
Everyday that this moratorium remains in place, it is
another challenge that our Gulf Coast small businesses must
deal with on their road to recovery.
I think it is noteworthy that the Administration was forced
to revise its ban in July after a federal court decision ruled
that the Administration's action was arbitrary and capricious.
Yet even the Administration's revised drilling ban was struck
down again in the federal court in a decision that was handed
down on September 1. The court found ``no rational nexus exists
between the fact of the tragic Deepwater Horizon blowout and
placing an attainder of universal culpability on every other
deepwater rig operator in the Gulf of Mexico.'' I could not
agree more.
But let me be clear 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. But the
blanket moratorium on all deepwater drilling does nothing to
advance that goal, and in fact the de facto shallow water
moratorium has even less of a nexus to the original problem.
The drilling is not a risk-free proposition. Never has and
never will be.
In general, I believe that we can and do drill safely both
on shore and off. But the BP spill did occur. It was terrible.
There have been other spills nearly as bad but the record is
clear. They are few and far between.
But accidents do happen and sometimes they are quite
terrible like this one. But we should ensure that we enforce
rigorous regulations to reduce the chances that accidents will
happen, of course. But when an accident does happen, I cannot
think of another situation where we brought an entire industry
to a screeching halt.
I want you to consider the following. On April 5 of this
year, 29 miners were killed when an explosion rocked the Massey
Energy-owned mine in West Virginia. Although investigators were
unable to enter the mine for more than two months due to the
concentration of poisonous gases in the mine, other coal mines
continued to work unabated.
In February 2008 a sugar refinery in Georgia exploded,
killing 29 people. No one suggested shutting all sugar
refineries or plowing under the sugar cane fields across the
United States.
According to data from the Aircraft Crashes Records Office,
there has been an average of 1,200 deaths every year for the
past 11 years resulting from aircraft accidents. But as our
Lieutenant Governor Scott Angelle has noted, airline service
resumed four days after the tragedy of September 11 and since
then airline safety records show a marked improvement and
airlines continued to fly every day. The industry goes on
although 1,200 people lose their lives every year.
I recite these statistics not to single out any of these
industries but to highlight them to illustrate how radical and
unprecedented, in my view, a blanket moratorium on deepwater
drilling appears in comparison to the reactions that have
typically accompanied industrial disasters.
The fact is, regardless of how it is reported, the fact is
that Louisiana's coast line is a working coast that brings this
country an abundance of seafood, energy, and navigation assets
unmatched by any coast in the United States and unmatched by
any in the world.
The Mississippi Delta is our home. There is no one who
wants to do drilling safer than we do. No one wants the water
to be cleaner than we do. No one wants the seafood to be the
fresher than we do.
We have balanced these industries safely for four decades
and I am confident that we can strengthen the record of safety
as we move forward while promoting a balanced and diversified
economic future.
But we also know that any hope for a prosperous future will
have to involve the prompt resumption of off-shore exploration
activities both in the shallow and the deepwater. We know full
well what a prolonged suspension of deepwater drilling will
mean for hundreds of oil service companies and more importantly
or equally importantly other businesses that support that
industry in a variety of different ways.
It will mean economic disaster not just for the rigs
themselves but for the many grocery stores, restaurants, real
estate companies, local banks, and other small businesses that
comprise our economy.
Our Federal Government has a responsibility particularly in
these difficult economic times to make sure these paychecks do
not turn into pink slips.
Our Committee has received testimony from Louisiana State
University, Dun and Bradstreet, the Chamber of Commerce, we
have heard from elected officials, small business owners,
testifying about the important local impacts of this
moratorium.
The purpose of this hearing today is to now hear from the
Administration. We are really looking forward to hearing your
testimony today about the impacts of this moratorium. I believe
we cannot continue to support a policy that will close the
doors of our small businesses. We need to keep Main Street open
for businesses in Louisiana, Mississippi, and Texas across the
country.
There are several questions that I am very interested in
getting your answers to. I have reviewed carefully all of your
testimony and I will now acknowledge Senator Vitter, who is
representing Senator Snowe.
OPENING STATEMENT HON. DAVID VITTER, A U.S. SENATOR FROM
LOUISIANA
Senator Vitter. Thank you very much, Chairman Landrieu.
Thanks for holding this additional hearing. Thanks to our
witnesses today.
As Senator Landrieu said, this is the third hearing on this
subject in the Small Business Committee and the third time we
on both sides of this Committee have explicitly invited and
asked the Administration to testify and justify their Draconian
action. I am glad you all are finally here to do that.
The Administration sent absolutely no one to offer any
testimony the first hearing here in this room. The
Administration sent absolutely no one to offer testimony and
explanation at our field hearing in Lafayette. So while it is
long overdue, we welcome you.
We want that explanation to be very detailed and very
explicit. For that reason two days ago I sent both of you a
letter outlining nine very clear, specific questions; and I
would like either in your opening statements or in your answers
for you to fully respond to those nine questions and take as
long as you want before we leave to fully answer those nine
questions in detail. And again I sent those all to you in
advance to make sure we could get to the bottom of the clear
issues.
I can tell you from the Louisiana perspective, from the
Gulf perspective, as Mary has said, the perception and I think
the correct perception is that all we have heard is knee jerk
reactions and excuses, not anything based on sound science or
economics.
Let me mention a few of the facts that back this up. We
know that the Interior Department's Inspector General is
currently investigating the Administration's initial 30-day
review done by the National Academy of Engineers for
inappropriate behavior at the department, basically changing
those recommendations in terms of the public document.
We know that only five new well permits for shallow water
drilling have been issued since May when rigs need about 20 per
month to continue operations and just maintain current
production.
We know that crude oil production in the Gulf currently
makes up about 30 percent of total US production and yet the
moratorium is endangering all of that and forcing rigs out of
the Gulf to overseas.
We know that since 2001 the GMO outer continental shelf has
reported federal royalty revenue of nearly 60 billion dollars.
When there is enormous focus up here on deficits and debt and
revenue, we are very curious why the Administration would adopt
a policy that is just throwing that revenue away.
We know that from recent economic analysis that if the
Administration shuts independent oil companies out of the Gulf
medium to long term, it will not be the few thousand jobs you
all have identified. It will be more than 300,000 jobs and $147
billion in tax revenue.
So again from the Louisiana and the Gulf perspective, we
have heard nothing but knee jerk reaction and excuses. We are
very eager to hear something more substantive and I am very
eager to hear specific answers to the nine questions outlined
in my September 14th letter.
Thank you.
Chair Landrieu. Just to clear the record, Senator Vitter is
correct. We did request the Administration on all three
occasions but they said they were not prepared to come to the
first hearing. They did send a representative from the
Department of Commerce which we were grateful for who sat in
the hearing at the LITE Center and took copious notes and
actually got to visit with some of the small business people.
So people were grateful for him being there.
But today, as I tried to explain to this Committee, is the
time for the Administration to testify and give you all an
opportunity to present the economic data you all have used, if
you used it at all, to make this decision, if it had any
bearing on the decisions that the Administration has made. Does
it have any bearings on their continued review of the
situation? So that is what this hearing is about.
We heard from small business owners that are extremely
concerned. We have heard from organizations like the Chamber of
Commerce representing businesses. We have heard from
independent analysis done by our universities of great
standing. We have not heard from the Administration.
Mrs. Blank, that is what we hoped to hear from you and Mr.
Fernandez today so why do we not begin.
STATEMENT OF REBECCA M. BLANK, UNDER SECRETARY FOR ECONOMIC
AFFAIRS, U.S. DEPARTMENT OF COMMERCE
Ms. Blank. Chairwoman, Senator Vitter, thank you for
inviting me here today to discuss the Administration's report
that we are releasing this morning on the economic impact of
the drilling moratorium on the Gulf Coast. I request that this
interagency report be included in the record in its entirety.
Recent changes in the labor market in those Gulf Coast
areas that rely heavily on deepwater drilling can provide an
initial sense of the possible impact of the moratorium. We
looked at changes in unemployment, employment, and unemployment
insurance claims in five Louisiana parishes reported to be
heavily dependent on the deepwater drilling industry.
Figure 1 shows employment in these five parishes since
March 2009. Employment is at about the same level as in July of
this year, the last month for which we have data as in March
2009. Employment in these five parishes actually increased from
April to July by 0.7 percent, similar to the change in the
Nation and the State of Louisiana. We also looked at
unemployment insurance claims in our report and find they had
been trending down in absolute numbers and as a share of all
state claims.
These data do not indicate that there had been no
employment impacts associated with the drilling moratorium but
they do suggest losses have not been large to date since
significant losses would have shown up in the employment,
unemployment, and UI claim activity data.
Our analysis of the economic impact of this moratorium is
based on data from a variety of publicly available industry and
government sources. Our staff also spoke at length with a
number of companies that work in the Gulf including drilling
contractors, operators, and well service firms. Taken together,
the firms we spoke with had direct knowledge of over 50 percent
of the deepwater rigs in the Gulf of Mexico at the time the
moratorium began.
Earlier studies assumed that many of these rigs would leave
the Gulf Coast as a result of the moratorium and that virtually
all of the 9,700 workers employed before the moratorium would
become unemployed. This did not happen. Of the 46 rigs located
in the Gulf of Mexico in April 2010, 41 of them are still there
as of September 13.
Even for rigs that are idled, drilling contractors and rig
operators have to date held on to most of their employees.
Primary reason for this is that these employees are highly
skilled and it would be expensive to recruit and rehire them
again in the near future.
In addition, these highly skilled workers are able to
conduct some backlogged rig maintenance and improvement work.
Some rig workers have been employed to work outside the Gulf.
We estimate that fewer than 2,000, about 30 percent of the
9,700 rig workers have been laid off or have left the Gulf to
work elsewhere.
While deepwater rig employment has not fallen
substantially, rig spending has declined because rigs are no
longer conducting drilling operations. In particular, spending
on drilling supplies, materials, and services has fallen.
Some of this reduced spending is offset by other sources.
For instance, unemployed rig workers are eligible to receive up
to $30,000 in rig spending through the BP rig worker wage
assistance fund. I'm sorry, wage replacement spending through
the rig worker assistance fund.
Based on these assumptions, we estimate that over the six
months of the deepwater moratorium net spending will be reduced
by $1.8 billion. This direct reduction in spending reduces
employment in the industries that supply the Gulf Coast
drilling industry and then in all other industries affected by
declines in consumer and business spending.
To measure this effect we apply a multiplier that
translates the direct reduction in spending into the full
effect of the reduced spending in the drilling industry on
employment throughout the Gulf Coast.
The standard multiplier is designed to measure the impact
of a long-term and permanent policy change. Our report
describes at length the problems with using a full multiplier
including the fact that the moratorium is temporary, and the
fact that the moratorium assumes, the multiplier assumes no
offsets in spending. In reality, BP has publicly stated it
spent over $8 billion during the first three months of this
moratorium on spill response and cleanup activities.
Given this, we basically estimate a range of employment
effects based on range multipliers that we think are likely to
capture the possible impact of the temporary moratorium. From
our analysis, we estimate that the six-month moratorium may
temporarily result in up to 8,000 to 12,000 fewer jobs in the
Gulf Coast. These jobs would not be permanently lost but would
return following the resumption of deepwater drilling in the
Gulf of Mexico.
It is also important to note the deepwater drilling
activities would likely have been curtailed even without a
moratorium as rig operators and contractors reviewed their
safety procedures. For this reason our estimate is likely to
overstate the true economic impact of the moratorium.
Our estimate differs from earlier studies and the earlier
Department of the Interior estimate because we have information
available they did not. Most of these earlier studies assumed
that virtually all employees on these rigs would be let go and
estimated a spending reduction based on that assumption. Our
results are, therefore, lower than some of these earlier
studies.
Due to limited time, I will not discuss the effect of the
moratorium on oil production but we do have a section on that
in the report that I know you will read.
In conclusion, the current evidence suggests the job
impacts among workers and larger companies, particularly the
companies involved with operating the drilling rigs in the Gulf
of Mexico, may be relatively limited because these companies
have chosen to retain their skilled labor.
Most of the businesses impacted provide supplies and
support to the drilling industry in the Gulf Coast. The
magnitude of the spill response and clean-up spending in the
Gulf is large enough, however, that some of these businesses
may have been able to replace some of their lost earnings by
serving other customers.
While any job loss due to a moratorium, even temporary, is
deeply regrettable, it is important to place these effects in
the context of the economic, environmental, and safety threat
including the potential loss of life that the BP Deepwater
Horizon explosion created.
Given uncertainty about the adequacy of existing safety
regulations, the moratorium was designed to provide greater
certainty that deepwater drilling in the Gold Coast is being
conducted in a safe manner with effective safeguards and
responses in place should problems arise.
These safeguards are highly important given the expectation
that Gulf Coast oil and gas will continue to provide a
significant share of domestic energy production.
Thank you, Madam Chairwoman. I am happy to take any
questions.
[The prepared statement of Ms. Blank follows:]
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Chair Landrieu. Thank you. I would like to do the questions
now to you, Ms. Blank. And then we will take a break and come
back for your testimony and do questions, Mr. Fernandez.
It is very keen what you said about your analysis of the
large companies and the oil service companies. As you know,
this Committee is not a committee for large business. It is a
committee for small business, and the whole purpose of this
hearing and the whole purpose of our request of economic
analysis to you and the Administration was actually to find out
the data as it affected small businesses, unrelated really to
some of the large oil companies.
I have even said in any public speeches the large
companies--there are five large ones as you know--they will
weather this beautifully. It is not them that we are worried
about on this Committee. We are worried about the small
businesses. So specifically to Charlie G., who testified, his
restaurant, (a) how many restaurant owners did you talk to or
did your staff speak to, how many chambers of commerce did you
talk to, and how many other businesses, not oil companies or
drilling operators did you all speak to in your analysis?
Ms. Blank. Thank you. That is an important question. So we
have to understand what happened to the oil companies, the
drillers and the contractors, in order to say something about
how much their spending has been reduced because it is that
reduction in spending that in turn is going to affect everybody
on the shore, small businesses and large businesses that are a
part of the drilling support industry.
So we start with the oil companies and then go from there
to describe with this multiplier analysis what the impact is in
the whole area which is the 8- to 12,000 fewer jobs including
the 12,000 jobs lost on the rigs.
We did not speak directly, for the purposes of this report,
to small business owners. We relied on the analysis that I
think almost all of the earlier studies that I have read and
have looked at and that you cited in your opening statements
have done similar types of multiplier analysis.
It is partly because of a concern to understand what is
happening on the ground that I think my colleague, Mr.
Fernandez, will talk about some of the assessment teams that
are down there really looking at what is happening in
individual communities.
Chair Landrieu. So I just want to get for the record you
are claiming that they were saying, not claiming but testified
that there were how many do you think, 9,700, what was your
figure?
Ms. Blank. There are 9,700 rig workers on the rigs
immediately prior to the explosion. We estimate that
approximately 2,000 of those workers were either laid off or
went elsewhere, left the Gulf so there is no longer spending on
them in the Gulf Coast.
We also made some estimates about the amount of other
reduced spending on drilling supplies and things that the rigs
were spending that went directly to the shore and supported all
the businesses you are discussing. So our estimate is $1.8
billion in reduced spending by the rigs, and then we estimate
what effect that has on employment which leads us to the
negative 8,000 to 12,000 fewer jobs.
Chair Landrieu. But I would say that it is 2,000 rig
workers that have been laid off to date in your analysis, but
there are 8,000 to 13,000. So the other loss of jobs is coming
from where?
Ms. Blank. This is because as I tried to say in my
testimony----
Chair Landrieu. Is it coming from small businesses or other
businesses?
Ms. Blank. It is all the businesses in the Gulf Coast that
support those rigs, and as you know for every rig worker, there
are large numbers of businesses that provide supplies to the
drilling operations, to the food, to the things they are doing
on the rig. The multiplier is the multiplier from that direct
spending to the whole effect on the full economy.
Chair Landrieu. We know when we see headlines like this,
Drilling Ban Job Losses Smaller than Estimated, it has the
effect of sort of communicating to the public that 8,000,
9,000, 10,000, 11,000 jobs to South Louisiana is not a
significant loss.
Let me assure you that 5,000, 8,000, 10,000, 12,000 jobs
lost to this particular area is a significant impact on
businesses of all sizes, and this just may be the tip of the
iceberg.
You are correct that only 2,000 rig workers have been laid
off to date. These companies are large enough to keep some of
these workers on for some months. How long this will go we do
not know. But there still is a dramatic impact on employment
that I think some of the headlines of this report are failing
to actually capture.
I am going to turn the questions over to Senate Vitter and
then come back.
Senator Vitter. Thank you, Madam Chair.
Ms. Blank, can you thoroughly discuss the economic analysis
done at Commerce and Interior and other federal agencies prior
to the moratorium being issued? I know this is a new analysis.
When was it done? Can you describe it in the total prior to the
decision?
Ms. Blank. As you know, at the time of the BP Deepwater
Horizon explosion there was enormous uncertainty over the cause
of that explosion and a great deal of concern over whether the
correct safety provisions were in place. That was much of the
focus of the conversation.
Early planning efforts and analysis focused on making sure
the moratorium would serve its purpose relating to safety and
getting safe drilling back to business as quickly as possible.
To my knowledge, though I was not directly involved with
that, there was no economic analysis done prior to the issuance
of the moratorium. The initial focus was on the environmental
preservation and the safety of the drilling industry.
Senator Vitter. So you are saying prior to this major
decision to shut down activity in the Gulf, there was no
economic analysis done?
Ms. Blank. The focus prior to bringing on the moratorium
was on the range of safety and environmental issues which the
explosion immediately raised.
Senator Vitter. Okay. So activity was shut down. No
economic analysis went into that decision. Am I actually
hearing this? No economic analysis of consequence was done
prior to that dramatic decision?
Ms. Blank. Given the uncertainty of the current
environment, the concern for protecting the environment, for
protecting the safety of the drilling industry was the
paramount concern.
Senator Vitter. Okay. At least it is a direct answer. It is
a stunning one but it is a direct one. By the end of this
month, and I know you have gone through some of this, how many
rigs do you anticipate being idle?
Ms. Blank. Our estimate is that at present there are 41
operating rigs and only five rigs have left the Gulf. In terms
of idle rigs, some of these rigs are doing quite a bit of
operations of cleanup, and looking at safety provisions and the
sort of stuff that you do while you are waiting for the
moratorium to come to an end.
The Department of the Interior is closely tracking rig
activity inside the Gulf, and I would encourage you to speak
with them if you actually want projections of what is going to
happen in terms of rig activity.
Our estimates are based on our knowledge of what has
happened to date and our conversations which suggest that
between now and the end of the moratorium, which has been
announced for November 30th, there is not likely to be further
changes in who is drilling and who is not drilling and what
rigs are present in the Gulf.
Senator Vitter. So do you know how many rigs you anticipate
being idled by the end of the month? That was one of the
written questions I sent you.
Ms. Blank. Yes, and the reaction is, our reaction is based
on what we know through the 13th of September.
Senator Vitter. And what is that?
Ms. Blank. That at this point there are 41 rigs that are in
the Gulf. Of those, many of them are doing a variety of
activities. They are obviously not drilling given the
moratorium but they are engaged in all sorts of cleanup and
safety renovation type procedures.
Senator Vitter. Remind us, and I know you testified about
this, how many of those workers have been laid off to date?
Ms. Blank. There were 9,700 workers we estimate on the rigs
that are affected by the moratorium prior to the Deepwater
Horizon explosion, and of those, 2,000 have either been laid
off or have left the Gulf area so there is no spending on those
workers in the Gulf.
Senator Vitter. Presumably that number goes up over time,
would you agree with that?
Ms. Blank. Our expectation from what we have heard talking
to these rig workers or talking to the contractors and drilling
operators, is that they have decided to retain these workers,
given their skills, given they can do things on the rigs, and
it is highly unlikely that further workers are going to be laid
off between now and the end of the moratorium. If they have
chosen not to retain the workers through the middle of
September, they are likely to keep them on waiting for the
moratorium to end.
Senator Vitter. So your assumption is that that number will
not go up over time?
Ms. Blank. That is our assumption and this is based on the
conversations we have had with the drilling contractors and
operators themselves.
Senator Vitter. I have to tell you I talk to these people
every day and it sure as heck is not what they are telling me.
I would love to know about these conversations because every
day I hear the exact opposite, and in particular I hear the
exact opposite in the context of not just the continual formal
moratorium but the fear of what will be left after the formal
moratorium is lifted; and to get a sense of that, people look
at shallow water and they see a de facto moratorium.
So it is not as if they have any confidence that the day
after the formal moratorium is lifted they are back in
business. They quite frankly are pretty certain of the opposite
when they look at shallow water.
Ms. Blank. And yet I would note that 41 rigs have chosen to
stay clearly intending to resume operations as soon as they
can.
Senator Vitter. Do you to know if any of those are
considering leaving?
Ms. Blank. I do not know if any of them are considering
leaving. I do know that there are some rumors that some rigs
are actually planning to come into the Gulf sometime in the
near future and particularly at the time the moratorium leaves.
These things are incredibly mobile as I am sure you know,
Senator. They are not permanent installations. They can leave
but they can also come back quite quickly.
Senator Vitter. As part of your economic analysis, did you
explore whether any of the 41 were actively looking at leaving
any time soon?
Ms. Blank. We did not talk to all of the rig operators. Of
those we talked to, we covered about 50 percent of those that
were operating in the Gulf prior to the explosion. Among those,
the people who had stayed basically said that they stayed
because they expected that they were going to be drilling again
in the Gulf in the near future.
Senator Vitter. What to date is the impact of the
moratorium on federal revenue and the deficit, and what do you
project it to be continuing into the future?
Ms. Blank. I want to emphasize that in terms of the gas and
oil drilling that this is not lost production. It is simply
delayed production. Indeed the revenue effects depend heavily
upon what the price of oil might be a year and two years from
now relative to now. If the price of oil goes up, you might end
up with greater revenues because of delayed production. If that
goes down, you might end up with lower production. It is simply
difficult to speculate about what the impact of the moratorium
would be over a five- or ten-year budget horizon. We do not do
that in the report and we do not do such estimates.
Senator Vitter. I included that in the letter. Is anybody
in the Administration looking at that?
Ms. Blank. I can tell you that we are not looking at the
revenue effects. Our statement is in terms of the gas and oil
production that the effects are going to depend on future
prices of oil. That is not something we forecast in my unit.
Senator Vitter. Again I specifically asked that question
ahead of time. Presumably somebody in the Administration can do
that sort of calculation. Can you provide that to us?
Ms. Blank. I can look into that.
Chair Landrieu. Let me ask to be clear on these numbers
because I think it is very important to clear these numbers and
we have a discrepancy here we need to clear up. You testified
there were 41 rigs idling in the Gulf.
Ms. Blank. There are 41 rigs that are remaining in the
Gulf.
Chair Landrieu. They are idling. They are not drilling
right now because there is a moratorium. Of those 41, how many
operate in the deep and how many operate in the shallow?
Ms. Blank. We are looking only at deepwater drilling in
this report. The request that came to us was to study the
impact of the deepwater drilling moratorium. So that is what we
looked at and we are talking about only deepwater rigs in all
of this report.
Chair Landrieu. Correct. But the deepwater drilling
moratorium has had an immediate and dire effect on all drilling
activities in the Gulf. And if your report does not cover that,
then we are going to have to re-ask the question to get the
kind of data that we need because it was I thought very clear
that we are not asking for just the data relative to the rig
workers on the 41. Our number is 33 deepwater rigs; but if you
have 41, then we need to get our numbers updated.
We had 31 deepwater rigs in the Gulf when the Horizon
happened and another four that were being constructed. That is
our data. So we have got to see how that can be meshed. But
there are 45 shallow so let us just say 35 deep and 45 shallow.
So we are talking 80 rigs.
We are going to have to figure out which of these are
operating and which ones are not. Our numbers, and this is from
the website of the Interior Department. This is not Mary
Landrieu's numbers. But our numbers show that prior to the oil
spill, prior to the moratorium there were 49 shallow water
permits issued month by month. We have it here, 11 in January,
six in February, eight in December, March, and April for a
total of 49 after the deepwater moratorium. But the shallow de
facto moratorium there have only been seven permits issued.
Of course, you can see in the deepwater there were 29
permits issued and then since the spill only one. I am not sure
when that was done but in May. But there have been zero in
June, zero in July, zero in August, and zero in September.
So I do not want to leave this hearing, Ms. Blank, in
communicating to the country that these rigs are somehow
operating. You cannot operate without a permit, and there are
virtually no permits being given.
They could be idled on shore. Some of them can move as you
know. Some of them are shut down in position and some of them
are moved on shore. Some maintenance work may be going on but
there is virtually no drilling of any magnitude either in deep
or shallow water going on in the entire Gulf of Mexico is what
we are trying to explain to people.
So if you think these numbers are incorrect, maybe you
could reconcile them with the Interior Department so we can
actually for the record of this hearing, we may not do it in
the next five minutes but for the official record figure out
actually if the government even knows how many shallow rigs are
in the Gulf and how many deep and where they are.
We have a map that shows where they were before the spill.
We know where they all are. These are on the website. You can
actually count them. This is 25 deepwater rigs. The 25 that
were positioned, drilling, are all idled. So their crews have
left. There is not a lot of activity going on. They are doing I
guess some cleanup and reviews but they are not operating, and
the all shallow water that operates along here is virtually
shut down.
So you know it is a little difficult for us to figure out
how the headline can be limited loss but the entire industry
seems to be shut down.
I do not know what to tell our restaurants because I am
sort of the same as Senator Vitter. I mean all we hear from
restaurant owners is that they are freezing, getting ready to
lay off. The word ``panic'' is not really an overstatement in
some of these parishes. They do not know what the future holds.
Do you have a comment?
Ms. Blank. I do want to note that we have focused solely on
the deepwater environment here which is what the moratorium
directly affects. The estimate of 8- to 12,000 fewer jobs as
notes if you take out the rig workers means that there is 6- to
10,000 jobs on-shore of exactly the sort that you are talking
about.
And we note in the report that the larger companies are
probably able to retain labor and deal with this much better
than expected. The major effect of this is on small businesses.
Chair Landrieu. Go ahead.
Senator Vitter. Just to clarify this point, do these
numbers, does your report reflect the impact on the job losses
of the de facto shallow water moratorium?
Ms. Blank. We were asked to look at the effect of the
deepwater moratorium and we have focused only on the deepwater
effects in this report.
Senator Vitter. So there is a de facto shallow water
moratorium. The numbers reflect that. A typical month before
the explosion there were on the order of 39 to 43 shallow water
permits. In the several months since the explosion, there is a
total of less than ten. Let us see then. That illustrates
behind the debate there is a de facto moratorium. You have not
accounted for the that impact?
Ms. Blank. Since June 8, I know what the Department of the
Interior has received 13 shallow water drilling applications,
and as of September 10, it approved five permits which the
other eight are still pending, and I can simply ask that you
perhaps follow up with Secretary Salazar and the Department of
the Interior for details on exactly what their plans are with
regard to oversight of shallow water drilling.
Senator Vitter. My point is not about that permitting. That
has clearly moved from 39 to 43 a month to five over many
months. That is the de facto moratorium.
My point is that that is a dramatic change as significant
as the deepwater formal moratorium, and your economic analysis
does not touch it.
Ms. Blank. We were not asked to look at any issues related
to shallow water. We were asked to look at the deepwater
moratorium, and that is what our report focuses on only.
Chair Landrieu. Can I ask this, David?
One of our analysis, it is very interested how you might
count a job so I want to ask this to be clear.
If two people are working a 40-hour work week and both
their hours are cut by 20 hours, do you in your analysis
estimate that as one job because it is 40 hours lost or is it
two jobs affected?
Again two people working 40 hours a week, they are both cut
back because their rigs are idling. So instead of working a
full eight or nine hour day, they come in to do some part-time
clean up. Do you count that as one job affected or do you put
those lost hours together and count them as one?
Ms. Blank. So this multiplier analysis that we do is based
on the average relationships between reductions in spending and
changes in employment. Employment includes both part-time and
full-time workers. So embedded in that loss of jobs is a mix of
part-time and full-time workers. When we talk about jobs lost,
it is sort of the mix of jobs that are in the economy and not
all of those are exactly 40 hours a week.
Chair Landrieu. So would you say that is a yes or a no?
Would you say that in that category there were two jobs lost or
one job lost?
Ms. Blank. So the multiplier would assume that you know it
is looking at the numbers of jobs lost. So if there are two
jobs, it would be two jobs lost.
Chair Landrieu. Do you know, since you did the deepwater
analysis, how long does it take a rig to come back to the Gulf
once it leaves? Did you all do any calculations about that?
Ms. Blank. No, we did not.
Chair Landrieu. So there are three that testified have
left. Do you think? Three or four?
Ms. Blank. There are five that have left.
Chair Landrieu. Five that have left. I would like you to
answer for the Committee or submit to us in writing, how long
does it take for those rigs to come back and what are the
indicators whether they will or not. I do not know if it takes
a month or three months or six months or two years for them to
come back once they are gone. So we have lost five of the
approximately 40 so far. That is a big number because it was
really 33 but there were some more on the way. So five out of
40, and you know you lose ten out of 40, five is significant
but ten is very significant. I do not believe they come back
very quickly.
We are going to have to go vote. We will recess and go vote
and come back, Mr. Fernandez, for your testimony.
Senator Vitter. Right before we do, if I could ask
unanimous consent to include the testimony of Karen Harbert of
the chamber in the record since she could not testify today.
Chair Landrieu. That will be added with the other testimony
from the other committees. Thank you.
[The statement of Karen Harbert follows:]
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[Recess.]
Chair Landrieu. The recess will come to an end and we will
again commence with our hearing.
Mr. Fernandez, this would be a good time for you to present
your testimony and I appreciate everyone's patience. We
actually had two stack votes and will have a third in about 30
minutes but we have got time to take this testimony and to get
a few more questions in.
So please proceed.
STATEMENT OF JOHN FERNANDEZ, ASSISTANT SECRETARY OF COMMERCE
FOR ECONOMIC DEVELOPMENT, ECONOMIC DEVELOPMENT ADMINISTRATION,
U.S. DEPARTMENT OF COMMERCE
Mr. Fernandez. Thank you, Chairman Landrieu. I am happy to
have the opportunity to testify today before the Committee on
behalf of the Department of Commerce's Economic Development
Administration.
As you explore the economic impact of the Deepwater Horizon
oil spill and the deepwater drilling moratorium, EDA along with
fellow Commerce agencies has been an integral partner in the
coordinated federal response to the oil spill.
Since June, EDA has announced a series of grants totaling
$5.6 million to help the Gulf Coast recover by using our
Economic Adjustment Assistance Program. This program allows for
a wide range of technical, strategic planning, gap financing,
and infrastructure assistance. It is a complete toolbox of
developmental tools which EDA can leverage to create customized
recovery packages for the Gulf Coast region.
An addition of $4.5 million in EDA investments is expected
to be finalized by September 30. These grants will fund a wide
range of activities aimed at promoting long-term recovery,
including revolving loan fund recapitalization and technical
assistance to small businesses.
In addition to projects in our current pipeline, EDA is
finalizing a new federal funding opportunity stemming from the
additional $5 million in economic development assistance money
that was provided to the EDA in the Emergency Supplemental
Appropriations Act to carry out more planning and technical
assistance to oil spill states.
We are grateful to Congress for passing this provision
which was part of the Administration's supplemental request
submitted on May 12.
Currently my Deputy Assistant Secretary Brian McGowan is
leading the economic solutions team which is part of the
national incident command. This team was established to focus
on the transition from response to recovery.
The EST is working to ensure that both short- and long-term
economic growth and job issues are being effectively addressed.
EST which includes federal agency representatives from the
Department of Commerce, Small Business Administration,
Department of Housing and Urban Development, Department of
Labor, Department of Homeland Security, and Department of
Agriculture is working with experienced economic development
and disaster recovery specialists to provide vital expertise
and technical assistance to local communities.
Working in partnership with the International Economic
Development Council, the EST visited 21 Gulf Coast counties
from mid to late August. The teams were deployed to nine
Louisiana parishes, three Mississippi counties, six Florida
counties, two Alabama counties, and one county in Texas.
The first to deploy were two pilot teams that worked with
local leadership in the Terrebonne Parish and Lafourche Parish.
As Under Secretary Blank has noted in her written testimony in
a report that was released today, these two parishes were two
of the five parishes reported to be heavily dependent on the
deepwater drilling industry.
The solutions teams are comprised of economic development
practitioners, industry experts, and government officials who
specialize in economic and workforce development, city
planning, infrastructure and long-term economic recovery. Once
on the ground, the teams work for the local leadership from
regional governments, chambers of commerce, representatives
from key industries, economic development organizations, and
others to address issues ranging from infrastructure challenges
to business recovery needs to concerns about credit and
financing.
The work of these teams is taking place on a separate track
to the work that Under Secretary Blank has just described. The
teams are looking at economic impacts whether from the oil
spill or the moratorium. These teams are still working with
local officials as they continue to accumulate qualitative data
for the final report which will include a set of tailored plans
for addressing some of the identified needs.
I would like to thank the chairwoman again for the
opportunity to be here today. EDA is ready and prepared to do
our best to assist with the devastating oil spill in the Gulf
Coast region. We look forward to continuing to work with
Congress to strengthen the Federal Government's coordinated
response.
I welcome any questions you may have.
[The prepared statement of Mr. Fernandez follows:]
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Chair Landrieu. Thank you, Mr. Fernandez.
I want just to be clear for the record that report that you
all submitted said there would be an impact of 1.9 billion in
spending reductions. Is that what your report has?
Ms. Blank. 1.8 billion.
Chair Landrieu. 1.8 billion which is a significant amount
of money. And you just testified that EDA has given out to date
five million in grants. Of course, there are five states that
are affected so that would be an average of one million per
state. And you have four million in the pipeline?
Mr. Fernandez. 4.5 million.
Chair Landrieu. 4.5 million in the pipeline. We really do
appreciate that help but it does raise to our eyes the gap that
is existing.
In your testimony, Madam Secretary, you said that small
businesses or that you submitted that small businesses are
fairing worst under this the moratorium than large businesses.
The report actually states, ``small firms with less financial
capital will likely experience relatively larger employment
losses. This is consistent with anecdotal evidence from small
businesses in the Gulf Coast.'' It goes on.
Can you outline why these businesses are harder hit by the
moratorium, if they face a tougher time returning? And
secondly, can you elaborate on the eight to ten thousand
indirect job losses? Do you think these are job losses from
small businesses or medium size or large, or do you know?
Ms. Blank. Thank you. So we do not have a breakdown in this
report and have not done so to bring on the size of business
affected. What we do note is that larger businesses like the
rigs themselves are much more able to horde labor, to smooth
over declines in demand. They might be able to solicit business
from outside the Gulf. There are a variety of things that they
can do that lets them carry through in the face of some
reduction in demand due to this moratorium or due to other
effects from the oil spill.
Smaller businesses as you know just do not have that type
of cushion. So our expectation is that of the indirect jobs,
those that are created on-shore as a result of the reductions
in rig spending, the indirect job loss, that a disproportionate
share of those are likely to be in smaller businesses rather
than larger businesses.
Chair Landrieu. Okay. Let me ask also. The report submitted
today estimates that the moratorium, of course, is a direct
loss of 2,000, indirect 8 to 10, a reduction in operations of
1.8 billion in spending. The Administration has announced 100
billion set aside for rig workers but I want to clarify those
are only rig workers of deepwater rigs. So shallow rig workers
are not eligible. Is that your understanding?
Ms. Blank. I am actually not familiar with the details of
that with regard to shallow water rigs. We looked at it with
regard to deepwater rigs.
Chair Landrieu. Okay. That is our understanding for the
record that the one hundred million set aside for rig workers
idled by the moratorium is only for the deepwater rig
operators, not shallow, although you can see from the Interior
website they have been idled as well.
I also want to ask that the $20 billion escrow account set
aside by BP at the request of the Administration to cover
economic losses for the spill, is it your understanding that
workers put out of business or having their jobs jeopardized by
the moratorium are entitled to submit claims against this 20
billion or do you know?
Ms. Blank. I do not know the details of exactly what can be
submitted and what cannot be submitted to that fund and under
what circumstances people can do it. I do know that the
Administration has been working to mitigate adverse effects of
the moratorium as well as other things happening in the Gulf on
workers.
As you know in May, the Administration proposed legislation
calling for a new program of unemployment assistance modeled on
the Disaster Employment Assistance Program. Something like
that, if there could be agreement around it, would certainly be
of help to exactly the sort of workers you are talking about in
the small businesses.
Chair Landrieu. If you would check with the Administration
and see if we can get a clarification on that $20 billion fund.
Ms. Blank. I will do that.
Chair Landrieu. We know that claims can be submitted for
business-affected job loss, business loss, business
interruption for the spill itself. The question is clearly the
moratorium is having a direct impact on job loss, the 2- to
10,000 jobs direct and indirect and 1.8 billion in lost
spending.
We want to see if that $20 billion would also be eligible,
and if not, do any of you know any other pots of money or
programs that could be tapped to actually, besides
unemployment, that either would be in any of your shops, in
either Treasury or Commerce that might help small businesses
besides loans, any grant programs, any direct spending programs
that could help them?
Mr. Fernandez. I think the primary source of support has
been through Department of Labor directly to employees. We
certainly do have some grant programs. As it relates to the
businesses themselves, clearly the majority of the programs are
in the loan portfolio, various loan programs. Many of the
grants that EDA makes do work directly to support the small
businesses. Some of them are in terms of capital assistance
that go through intermediaries with some infrastructure
investments, equipment investments, but again many of our
programs work through the revolving loan funds as well.
Chair Landrieu. But this money that you testified to, the
five million and the 4.5 million, that was in the pipeline
before the moratorium, right?
Mr. Fernandez. That is correct.
Chair Landrieu. So you could say that no additional money
has been put into that program. You are just using what you
have to address the economic fallout and job loss, fallout in
the region?
Mr. Fernandez. Correct prior to the moratorium. The
additional $4.5 million that is in the pipeline is part of a
broader, competitive grant system for the entire region,
whether it is the Austin office which includes Louisiana or
Atlanta office which picks up Florida, Alabama, and
Mississippi.
But I can tell you that there certainly has been a
prioritization of projects that were reviewed and competed as
part of our existing pipeline. The additional five million that
the Congress approved is clearly new money and we will move
very quickly once the funding opportunity is finalized to get
those dollars into the marketplace.
Chair Landrieu. I will say that while I think the dollar
amount is too low, and that is a challenge for both the
Administration and for the Congress, I do hear very positive
things said about this particular program and agency and its
strategic help to meet some of the economic needs in this
region.
In fact just yesterday I had a meeting. I met with my
Jefferson Parish chamber and they particularly pointed out to
me the fact that they had gotten very good response from this
particular grant program and they wanted me to pass that on so
I am doing that now and will be in writing to you all as well.
I do not know if we have any other questions for the
record. Is there anything else we want to get in? Let me see.
We just have one more.
There are two underlying assumptions in your report. One is
that job loss as a result of the moratorium will return after
drilling resumes in the Gulf, and number 2, possible job losses
from the moratorium have been mitigated by oil spill clean up
work.
We have heard direct opposite testimony from people that
work along the Gulf. While they were happy for the clean up
work, it in no way compensated them fully. The work is not as
meaningful obviously. So we are hearing different points from
home.
I am concerned about this argument as it seems to miss the
point. If you are employed by these industries or have met with
these impacted businesses, it is clear that it is not an apples
to apples comparison.
So if the Administration determined tomorrow that the
moratorium is impacting the Gulf Coast economy too deeply and
set about promulgating new regulations, when does your analysis
assume that actual drilling will begin immediately or is it
next year? Given that it takes a while for this to slow down,
it is going to take a while for it to start back up. If the
moratorium is in fact lifted, which we hope November 30 or well
before, do you have any understanding of when the permits will
start to be issued as well?
Ms. Blank. So the permit issuance is obviously under the
control of the Department of the Interior, and I just cannot
speak to how they would handle this or are handling it. That
obviously is a question that has to be addressed to them.
I do not think our report is trying to say that the cleanup
response and spill activities completely offset any of the
effects of the moratorium. Indeed, as we noted, we do say that
there is a real and substantial job loss due to the moratorium.
The issue about the cleanup activities, there is some
offset almost surely. BP, as they have noted, has spent $8
billion in three months in the region, that some of that is
going to some of the, almost surely some of the small
businesses and large businesses that have had some negative
moratorium, negative impacts and that at least helps offset
some of the moratorium affects.
Chair Landrieu. Is there anything you all want to add
because I am going to close the meeting because of the twelve
o'clock vote. I have several questions additional I will submit
to the record. Senator Vitter has submitted several questions
that have yet to be answered.
As always, the record of our Committee stays open for two
weeks. Should the chamber of commerce or any other
organizations that have also testified several times before our
Committee want to submit any additional documentation, any non-
profits, any individuals listening to this hearing and have
opinions pro or con, please let us know. We are building a
congressional record to try to get as many right answers as
possible.
Thank you so much.
Meeting adjourned.
[Whereupon, at 11:41 a.m., the Committee was adjourned.]
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