Initially released in July 2011, IHS Inc. has updated its original report, “Restarting the Engine – Securing American Jobs, Investment, and Energy Security.” The study used publicly available US government data to analyze the pace of drilling permit approvals for the US Gulf of Mexico (GoM) from October 12, 2010, when the drilling moratorium was lifted, through April 10, 2011, compared to pre-moratorium levels.

The report identified a growing backlog of plans pending approval in addition to a sharp reduction in plan and permit approvals. The indication at the time showed that the new regulatory process was not yet functioning. The resulting lag in activity is expected to result in lost opportunities totaling in the billions.

The current muted approval process would translate into the loss of 150 MMbbl of oil in 2012 – 411,000 b/d – from the deepwater GoM alone. Gross domestic product growth in 2012 would decline by US $44 billion, according to the IHS report. On the job front, the slowdown in the approval process would eliminate 230,000 additional jobs in 2012 and facilitate the loss of $22 billion in the improvement costs of wages and compensation. In addition to these effects, federal, state, and local royalties; bonuses; and tax payments are expected to decline by $18.6 billion over the next three years.

Employment effects would not be limited to the Gulf States. The report showed that one-third of the jobs created would be outside of the Gulf region.

IHS has since updated its original findings using data from the Bureau of Ocean Energy Management/Bureau of Safety and Environmental Enforcement (BOEM/BSEE), formerly the Bureau of Ocean Energy Management, Regulation, and Enforcement (BOEMRE). New information shows that the volume of permit approval has increased in each of the two quarters following the period from January 1, 2011, through April 10, 2011. Annualized 3Q and 4Q volume of permit approval activity was 41% and 56% of the historical annual average, respectively. In the 12 months following the lifting of the moratorium, the 51 permits approved resulted in an annual rate of approval that was 32% of the historical average (151 permits). According to Jim Burkhard, Global Oil Group, IHS CERA, “Regulatory congestion matters because it influences the pace of development and the pace of job creation, and it can drastically decrease domestic production.” Although permit approval is still somewhat diminished from pre-moratorium levels, drilling activity is returning to the US GoM. As the process improves, the region may quickly be back in full swing. Despite recent stoppages such as the Keystone XL Pipeline project delay, demand continues to increase the need for domestic production. With increased safety, more advanced well planning, and a range of new technologies being applied, offshore drillers may soon breathe easy where the deepwater GoM is concerned.

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