The People of America's Oil and Natural Gas Indusry

Energy Tomorrow Radio: Episode - 114 Measuring the Moratorium's Impact on Alabama

Jane Van Ryan

Jane Van Ryan
Posted August 10, 2010

GNC.jpgIn today's episode, I interview George Clark, president of Manufacture Alabama, about the impact of the drilling moratorium on Alabama's economy and jobs. Use the audio player below to listen to information about the article and follow along with the show notes. I hope you find the podcast informative.

00:16 BP has stopped the oil from flowing in the Gulf and the remaining oil appears to be dissipating rapidly, but the economic damage from the spill continues. Companies of all types operating in the Gulf states are experiencing difficulties due to the spill or the de facto offshore drilling moratorium, and many Gulf Coast citizens are worried about their jobs. To give us his perspective on the economic impact in Alabama, we have George Clark, president of Manufacture Alabama, a trade group, on the telephone with us today.

00:53 George, let's start by having you tell our listeners about your organization. Who do you represent?

01:00 Mr. Clark: As the name implies, we represent manufacturers. We represent several major industry sectors here in the State of Alabama, including the chemical industry, pulp and paper industry, steel industry, ship building industry and the oil and natural gas industry. We are concerned about governmental affairs, including representing our member companies before the Alabama state legislature and regulatory agencies. We also represent them along the same lines on the federal level.

01:49 You're obviously very interested in how your members are being affected by the deepwater drilling moratorium and, as you know, the moratorium is also impacting shallow-water drilling. How would you say all of that is affecting Alabama's economy?

02:06 Mr. Clark: I think you have to take a look at the history of the offshore activity in Alabama. We started drilling for natural gas primarily in state waters back in the mid-80s. And as a result of that activity, we began to develop a very strong industry on land to support the drilling activities offshore. As the government has opened up additional areas in the Gulf of Mexico, particularly in the eastern areas, we've seen an even greater increase in supportive industries that supply the needs of offshore drilling in federal waters. In fact, it's gotten to be such a promising growth industry in the state that the Mobile Chamber of Commerce has launched an initiative called Offshore Alabama to help capitalize on the recently opened up area of the Gulf of Mexico. We have a very robust industry, especially in Mobile and Baldwin counties that support offshore drilling in both state and federal waters. The moratorium impedes the growth of that business activity. There's a lot of apprehension among those businesses and they're a little concerned about their jobs. And all of that obviously has an impact on Alabama's economy.

03:54 I think it's very interesting that you would mention all of these supportive industries because when most people hear about a drilling ban they think of the people that work directly on the rigs, but offshore development involves a lot more people than that. What businesses are really affected by the moratorium in your state?

04:12 Mr. Clark: The people on the rigs are just a small fraction of the employment. We have maritime ships that go out to supply work boats that take rig workers and supplies back and forth in Mobile, Bayou La Batre and other areas. We also repair and build boats to specifically support the oil and natural gas industry. We have companies that build and construct the umbilical cables that pump hydraulics down to the well and electronics and other communication lines down to the sea floor. When you start adding up all of the supportive industries in the Mobile area, it dwarfs the number of people actually working on the platforms.

05:20 If the moratorium continues indefinitely, how could Alabama's budget be affected? Doesn't Alabama receive royalty payments from development in state waters?

05:29 Mr. Clark: Yes, Alabama does. Back in the 80s, Gov. Bob James created an Alabama Trust Fund which invested the royalties that Alabama received from in state waters. That investment has grown steadily over the years. We initially funded a huge transportation infrastructure project with the proceeds of that revenue, and it has continued to fund major infrastructure projects. In addition to those projects, the Trust Fund aids our ailing General Fund which supports everything other than education in the state. Alabama's General Fund is basically made up of revenue sources that are not growth oriented, so the income that we receive from the Trust Fund really aids the General Fund of the state. This November there's a constitutional amendment on the ballot that will call for a $1 billion highway transportation program and that is directly tied to the Trust Fund. It's very important that the General Fund of Alabama have additional revenue coming in. Those royalty payments have provided income that has helped every citizen in the state of Alabama.

07:20 Michael Bromwich, the new director of the Bureau of Ocean Energy Management Regulation and Enforcement, which used to be the Minerals Management Service, is going to be holding a hearing in Mobile this week about the moratorium. If you could meet with him personally, what would you tell him about the moratorium's impact on Alabama, the state budget and the folks that live there?

07:41 Mr. Clark: I think I would tell him that Alabama's offshore oil and natural gas industry is just beginning to boom and a moratorium that could last indefinitely is just not the correct thing to do. We have already had a lot of economic hardship brought to the state because of the oil spill. Our State General Fund and Education Fund are ailing right now due to the loss of sales taxes that are directly related to the consequences of the oil spill. To declare a moratorium and to keep it on for anymore length of time just adds more injury to Alabama's economy and more suffering to the people, especially along the Gulf Coast.

08:33 In your view, you're saying that the moratorium should be lifted as soon as possible?

08:38 Mr. Clark: Yes, I think it should be lifted as soon as possible for the benefit of not only the state's revenue flow, but for the people along the Gulf Coast that make their living working with and supporting the oil and natural gas industry that we have in the Gulf of Mexico and our state waters.

09:01 Very good. Thank you so much for your perspective today.