Obama knew beforehand: Gulf oil drilling ban would cost 23,000 jobs

Senior Obama administration officials concluded the federal moratorium on deepwater oil drilling would cost roughly 23,000 jobs, but went ahead with the ban because they didn't trust the industry's safety equipment and the government's own inspection process, according to previously undisclosed documents. Critics of the moratorium, including Gulf Coast political figures and oil-industry leaders, have said it is crippling the region's economy, and some have called on the administration to make public its economic analysis. A federal judge who in June threw out an earlier six-month moratorium faulted the administration for playing down the economic effects. After his action, administration officials considered alternatives and weighed the economic costs, the newly released documents show. The Justice Department filed them in a New Orleans court this week, in response to the latest round of litigation over the moratorium.

Spanning more than 27,000 pages, they provide an unusually detailed look at the debate about how to respond to legal and political opposition to the moratorium.

They show the new top regulator or offshore oil exploration, Michael Bromwich, told Interior Secretary Ken Salazar that a six-month deepwater-drilling halt would result in "lost direct employment" affecting approximately 9,450 workers and "lost jobs from indirect and induced effects" affecting about 13,797 more. The July 10 memo cited an analysis by Mr. Bromwich's agency that assumed direct employment on affected rigs would "resume normally once the rigs resume operations."

Asked to comment, a White House spokesman said the administration "well understood, and understands, the enormous importance of oil and gas to the region's economy," but the potential economic risks from another spill to other elements of the Gulf economy—such as fishing and tourism—also informed the administration's deliberations, "especially as spill-response resources were fully engaged to address the BP Deepwater Horizon spill." A spokesman for the Interior Department declined to comment on the documents. An American Petroleum Institute spokesman said the documents show "the government itself understood there would be significant impacts felt throughout the region."

The newly released document trove shows that a top science adviser at Interior worried in late June that BP PLC, primary owner of the blown-out well, had an "unrealistically optimistic" corporate culture. After working with BP in Houston on spill response, Marcia McNutt, director of the U.S. Geological Survey, told Mr. Bromwich that BP officials "seem to hope for the best and plan for the best."

A spokesman for BP said the firm wasn't familiar with what she said but stated, "BP is committed to the highest engineering, operating and safety standards" and "continuously improving our operations and learning from this tragic accident." Ms. McNutt didn't respond to requests for comment.

In another document, William Hauser, chief of the regulations and standards branch of what was formerly called the Minerals Management Service, outlined the risks of various drilling activities in an email to colleagues and then wrote: "The more I write this stuff the more I believe we can/should/could regulate/stop activities through a prudent management process versus a moratoria scheme."

He added, "I guess the moratoria approach is necessary because the MMS cannot be trusted to regulate." Mr. Hauser couldn't be reached for comment Friday.

The administration has said in court filings that the economic effect of suspended drilling wasn't as severe as the industry asserted. In a filing with federal court in eastern Louisiana June 23, the day after a judge overturned the initial six-month halt, Justice Department attorneys said it affected 33 deepwater wells, "less than 1% of the existing structures in the Gulf dedicated to oil exploration and production."

A study by Louisiana State University economist Joseph Mason—published in July and commissioned by the American Energy Alliance, a group funded partly by oil and gas companies—concluded a six-month shutdown of the 33 deepwater rigs would result in a net loss of 12,000 jobs.

But while some have predicted the moratorium would cause a mass flight of drilling rigs to other parts of the world, so far, 31 of the 33 deepwater rigs that were operating in the Gulf when the Deepwater Horizon exploded remain.

Some industry experts say an exodus is unlikely because companies have few other promising reservoirs where they can immediately transfer rigs and because they want to be ready to resume drilling in the low-tax Gulf of Mexico when the moratorium ends.

In his July 10 memo, Mr. Bromwich, director of what's now called the Bureau of Ocean Energy Management, Regulation and Enforcement, said "some form of a temporary pause in drilling would be reasonable and appropriate," to allow time for improvements in workplace and drilling safety, blowout-containment capability and the capacity to respond to a deepwater spill.

He outlined options for Mr. Salazar, including: allowing drilling to resume; issuing a new order to suspend drilling until Nov. 30; or prohibiting certain deepwater drilling while allowing companies "an early exit from the moratorium based on the achievement of specified requirements" on workplace and drilling safety, blowout containment and spill response.

Two days later, Mr. Salazar issued a new order banning most new deepwater drilling activities until Nov. 30, replacing the May 28 order struck down by federal Judge Martin Feldman in June. To address some of the judge's concerns with the May order, Mr. Salazar cited new evidence about safety concerns, shortcomings in industry equipment to control blowouts, and spill-response capabilities strained by the BP spill.

Mr. Bromwich has said the administration hopes to be able to end the moratorium before Nov. 30. He said his recommendation would depend on what he learned from experts in a series of public hearings over the next few weeks.