Oil-Drill Moratorium Hits Small Businesses

WASHINGTON(TheStreet) -- The federally imposed six-month moratorium on off-shore drilling following the BP (BP) rig explosion may hurt area small businesses more than the oil spill itself.

That was the consensus of the Senate Committee on Small Business and Entrepreneurship, which heard testimony on the subject this week.

"My concern is not for major oil companies like Shell ( RDS/A) or Exxon ( XOM) or BP," said Mary Landrieu (D-La.), who co-chairs the committee. "We want to focus on the impact on small businesses."

In the decidedly one-sided hearing that rarely addressed the oil spill itself, several consultants and Gulf Coast business executives argued that the moratorium has led to job losses from which independent drillers -- and the businesses that serve them -- might not be able to recover even after the moratorium is lifted.

Ethan Terese, a vice president at Dun & Bradstreet ( DNB), forecast that 153,000 small-business employees will be affected by the moratorium to some extent, while Louisiana Oil and Gas Association President Don Briggs estimated that the moratorium, which is due to be lifted on Nov. 30, could kill 17,500 rigging jobs in the meantime.

Joseph Mason, the chair of banking at Louisiana State University's E.J. Ourso School of Business, said the moratorium would mean losses of $2.1 billion in economic productivity and $487 million in job wages. He argued that the moratorium added insult to injury for the Gulf's small-business drillers, who are still dealing with the after-effects of Hurricane Katrina and the current effects of a bad economy.

"The administration seems to understand that businesses will be hurt, but what they don't understand is that some companies, worried about taking on debt after Katrina, are worried about having to take on more debt in the wake of the moratorium," he said.

Kimberly Nastasi, head of the Gulf Coast Chamber of Commerce, said 23% of the region's businesses and 35% of employees are "heavily affected by the policies imposed on the oil and gas industry."

And Charlotte Randolph, president of Louisiana's Lafourche Parish, said the moratorium was eroding consumer spending because of job uncertainty.

"Familes are now making decisions about whether the fathers and husbands will live elsewhere," she said. "These are the lucky ones. The others will be terminated."

Regarding the fact that there was nobody on the panel that favored the moratorium, Sen. David Vitter (R-La.) said the White House had been asked but had neglected to send a representative to defend the moratorium.

"The most important witness we should have before us is some significant representative of the administration that imposed this moratorium," he said. "I think the absence is very, very telling and really a shame."

Landrieu summed up the moratorium as "wrongheaded and reckless."

"From 1947 until 2009, there were 42,645 wells drilled in state and federal waters in the Gulf of Mexico, and 99 days ago one of them blew up," she said. "Eleven men lost their lives. But an entire industry has virtually been shut down."

-- Reported by Carmen Nobel in Boston.


More from Investing

General Electric Extends Declines After Shares Dropped From the Dow

General Electric Extends Declines After Shares Dropped From the Dow

Why Starbucks Stock Is Being Pounded After Revealing 150 Store Closures

Why Starbucks Stock Is Being Pounded After Revealing 150 Store Closures

REPLAY: Jim Cramer on How to Navigate the Stock Market Amid Tariff Worries

REPLAY: Jim Cramer on How to Navigate the Stock Market Amid Tariff Worries

Will Kraft Heinz Buy Pepsico or Mondelez?

Will Kraft Heinz Buy Pepsico or Mondelez?

Jim Cramer: 4 Stocks Could Get Throttled By a 'Knock Down Drag Out' With China

Jim Cramer: 4 Stocks Could Get Throttled By a 'Knock Down Drag Out' With China