[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


         Available via the World Wide Web: http://www.fdsys.gov


                                 ______

                   U.S. GOVERNMENT PRINTING OFFICE 
86-868                     WASHINGTON : 2014
____________________________________________________________________________ 
For sale by the Superintendent of Documents, U.S. Government Printing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202ï¿½09512ï¿½091800, or 866ï¿½09512ï¿½091800 (toll-free). E-mail, [email protected].  

            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

                              ----------                              

                           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.
    [The information follows:]

    [GRAPHIC] [TIFF OMITTED] T6868.028
    
    [GRAPHIC] [TIFF OMITTED] T6868.029
    
    [GRAPHIC] [TIFF OMITTED] T6868.030
    
    [GRAPHIC] [TIFF OMITTED] T6868.031
    
    [GRAPHIC] [TIFF OMITTED] T6868.032
    
    [GRAPHIC] [TIFF OMITTED] T6868.033
    
    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:]

    [GRAPHIC] [TIFF OMITTED] T6868.001
    
    [GRAPHIC] [TIFF OMITTED] T6868.002
    
    [GRAPHIC] [TIFF OMITTED] T6868.003
    
    [GRAPHIC] [TIFF OMITTED] T6868.004
    
    [GRAPHIC] [TIFF OMITTED] T6868.005
    
    [GRAPHIC] [TIFF OMITTED] T6868.006
    
    [GRAPHIC] [TIFF OMITTED] T6868.007
    
    [GRAPHIC] [TIFF OMITTED] T6868.008
    
    [GRAPHIC] [TIFF OMITTED] T6868.009
    
    [GRAPHIC] [TIFF OMITTED] T6868.010
    
    [GRAPHIC] [TIFF OMITTED] T6868.011
    
    [GRAPHIC] [TIFF OMITTED] T6868.012
    
    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:]

    [GRAPHIC] [TIFF OMITTED] T6868.013
    
    [GRAPHIC] [TIFF OMITTED] T6868.014
    
    [GRAPHIC] [TIFF OMITTED] T6868.015
    
    [GRAPHIC] [TIFF OMITTED] T6868.016
    
    [GRAPHIC] [TIFF OMITTED] T6868.017
    
    [GRAPHIC] [TIFF OMITTED] T6868.018
    
    [GRAPHIC] [TIFF OMITTED] T6868.019
    
    [GRAPHIC] [TIFF OMITTED] T6868.020
    
    [GRAPHIC] [TIFF OMITTED] T6868.021
    
    [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:]

    [GRAPHIC] [TIFF OMITTED] T6868.022
    
    [GRAPHIC] [TIFF OMITTED] T6868.023
    
    [GRAPHIC] [TIFF OMITTED] T6868.024
    
    [GRAPHIC] [TIFF OMITTED] T6868.025
    
    [GRAPHIC] [TIFF OMITTED] T6868.026
    
    [GRAPHIC] [TIFF OMITTED] T6868.027
    
    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.]

                      APPENDIX MATERIAL SUBMITTED

[GRAPHIC] [TIFF OMITTED] T6868.034

[GRAPHIC] [TIFF OMITTED] T6868.035

[GRAPHIC] [TIFF OMITTED] T6868.036

[GRAPHIC] [TIFF OMITTED] T6868.037

[GRAPHIC] [TIFF OMITTED] T6868.038

[GRAPHIC] [TIFF OMITTED] T6868.039

[GRAPHIC] [TIFF OMITTED] T6868.040

[GRAPHIC] [TIFF OMITTED] T6868.041

[GRAPHIC] [TIFF OMITTED] T6868.042

[GRAPHIC] [TIFF OMITTED] T6868.043

[GRAPHIC] [TIFF OMITTED] T6868.044

[GRAPHIC] [TIFF OMITTED] T6868.045

  

                                  
