Report: Louisiana oil and gas would suffer with restrictions on leasing, drilling permits

Louisiana's oil and gas industry, already struggling from too little demand and too much supply, could see substantial decline if the federal government restricts new leasing or drilling permits in the Gulf of Mexico, according to a report from the National Ocean Industry Association. 

The report comes after presumptive Democratic presidential nominee Joe Biden indicated he would restrict new drilling on federal lands and offshore. The group notes that Biden's plan "to limit offshore oil and gas production would not only devastate Gulf Coast economies but would damage the U.S. as a whole."

Louisiana — particularly regions that rely on the oil industry, like Acadiana and the Houma-Thibodeaux region — have been hit hard in recent months by the industry's decline, which was spurred on by the Saudi Arabia-Russia price war that increased supply and the effects of COVID-19 that reduced demand.

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The Louisiana Oil and Gas Association has warned the industry needs drastic measures to help oil producers across the state and that, without aid, these producers may be forced to lay off workers. 

LOGA has promoted a few measures that would make the state more appealing to oil and gas companies after COVID-19, but the NOIA report indicates federal measures could also heavily impact the state's industry.

"While some elected officials and political candidates have promised to stop American energy production, including oil and gas production in the Gulf of Mexico, the reality is that these pledges would do untold harm to America," NOIA President Erik Milito said.

The report details some of the potential impacts to coastal states under three scenarios related to leasing and drilling permits: current policies, no new leasing permits, or no new drilling permits. 

"Gulf of Mexico oil and natural gas production is a powerful driver of economic, energy and national security," said Milito. "Every barrel of oil produced in the Gulf is a barrel produced under one of the toughest safety and environmental regulatory regimes in the world, and is a barrel that Americans do not have to import from countries like Russia and Iran."

The report projects that, if no changes are made and current policies continue, Louisiana could have an average of 105,000 employees working offshore for 2020 to 2040, up from about 99,000 in 2019.

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The study also estimates about a $2.5 billion increase in gross domestic product contribution for Louisiana by 2028. The state also could see about $165 million annually in government revenues, the report said. In 2019, Louisiana received about $100 million — the most of any state included in the Gulf of Mexico Energy Security Act's revenue-sharing program.

Under the scenario where new coastal leases for tracts in the Gulf of Mexico are restricted, Louisiana and other coastal states take a financial hit. Louisiana could see a 25% drop in oil and gas and related jobs to about 79,000 jobs on average from 2020 to 2040, according to the projections.

The state could also lose about $4 billion in GDP contributions in 2040, and government revenues from oil and gas could drop about 26% across the Gulf states.

The third scenario, where no new drilling permits would be issued after 2022, could have an even more devastating impact on Louisiana's economy. If no new drilling permits are issued, the projections for oil and gas and related jobs for 2020-2040 is 50% lower than the projections if there were no changes to policy — around 52,000 jobs on average.

The state could also see declines in GDP contributions of around $8 billion. Louisiana could also see government revenue fall up to $100 million by 2040.