August 12, 2010

August 12, 2010 | Commentary on Energy and Environment

Left in Limbo: Businesses Affected by Obama’s Drilling Ban Won’t Get BP Claims Money

As businesses along the Gulf Coast await the expiration of President Obama’s offshore drilling moratorium, they’re faced with a new hardship: Neither BP nor the Gulf Coast Claims Facility appear willing to pay for lost income resulting from the ban.

Last week BP announced it was deferring all moratorium-related claims to Ken Feinberg, the Obama-appointed administrator of the $20 billion claims fund. That news came as a surprise to Feinberg, however. He maintains the moratorium claims are BP’s responsibility.

“Those claims are not under Feinberg’s jurisdiction with the GCCF,” spokeswoman Amy Weiss told me. She referred questions to BP.

But a spokesman for BP said the company is planning to transfer all outstanding claims to Feinberg, including those from businesses that cite the drilling ban.

“There are claims in the system that are moratorium-related,” BP spokesman John Curry said. “The entire database will transition to the Gulf Coast Claims Facility when Feinberg gets it up and running.”

The uncertainty — and apparent unwillingness of either BP or Feinberg to take responsibility — leaves businesses in the dark about their moratorium-related claims. Those businesses could be mom-and-pop stores that rely on the steady flow of customers working on rigs or suppliers of oilfield equipment. Each is affected by the moratorium in its own unique way.

So far BP hasn’t rejected any claims, but many of the 147,194 remain unresolved. The company has made 116,063 payments, totaling more than $340 million. It does not have a breakdown of how many claims are related to the moratorium.

Obama’s drilling ban creates a tricky situation for BP and Feinberg. At the president’s request, BP pledged $100 million for oil rig workers affected by the moratorium. But those grants are limited to the estimated 9,000 people who worked on the 33 deep-water rigs when the federal moratorium began on May 6. Workers have a 30-day period to apply beginning on Sept. 1.

Because the Gulf Coast states are so reliant on the energy industry, the moratorium is having a widespread impact beyond the 33 rigs that were idled when Interior Secretary Ken Salazar first instituted the drilling ban. Two of those rigs have already left the Gulf for Egypt and Congo.

A study commissioned by the American Energy Alliance with Louisiana State University estimated the six-month moratorium could cost more than 17,000 jobs and $1.2 billion in economic growth. The impact is also felt beyond the Gulf Coast region for businesses that supply parts and support the deep-water rigs.

Loss of income is the most frequent factor cited in claims to BP, which has made the claims statistics publicly available. Despite the transparency, critics have complained about delays, particularly for businesses. During a series of town-hall meetings last month, Feinberg admitted BP had done a poor job handling claims related to businesses.

Last week BP implemented a new fast-track process for businesses, but it also announced that all moratorium-related claims would be deferred to Feinberg, who plans to make the transition on Aug. 23. BP also deferred decisions on restaurants or tourism businesses not located near an oiled beach or marsh and seafood processors outside the Gulf Coast states.

In recent days, the Obama administration has faced renewed pressure to end the moratorium. Even the president’s own Oil Spill Commission asked Obama to lift the ban on certain rigs — a major reversal for a group that didn’t even plan to study the impact of the moratorium.

Yesterday a federal judge in New Orleans heard arguments on the drilling moratorium. Hornbeck Offshore Services, which successfully challenged the first drilling ban, argued that the Obama administration simply repackaged the first moratorium when Salazar hastily announced the new moratorium on July 12. The case hinges on whether it’s new policy or the same policy Judge Martin Feldman struck down on June 22.

During an appearance on NBC’s ”Meet the Press,” Carol Browner, the top White House aide on energy and climate change, acknowledged the administration did not complete an economic analysis of the moratorium in advance of Salazar’s July 12 decree.

Meanwhile, businesses affected by the drilling ban continue to take a wait-and-see approach. Thomas and Melissa Clements of Broussard, La., were in Washington, D.C., last week to protest the moratorium. They said the impact on their business, Oilfield CNC Machining, has been devastating.

Bluey directs the Center for Media and Public Policy at The Heritage Foundation.

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Robert B. Bluey Vice President, Publishing and Editor in Chief
The Daily Signal

First appeared in Big Government