The Future of Offshore Drilling in the Gulf Coast

The federal government’s moratorium on deepwater offshore drilling—which was expected to continue through November 30th in order for the government to devise new safety regulations and environmental response measures—has faced a stumbling block in court today as the federal judge overseeing the case permitted the challenge to proceed.

The ban has drawn criticism from states in the Gulf and industry over the potential job losses to the region as well as loss of profits from inactivity.  Governors in Texas, Louisiana, Mississippi, and Alabama are eager for a return to drilling, and have been pressing for a greater share of the revenues to offset the associated risks, though that would require a change in federal legislation.

So what will the offshore drilling landscape in the Gulf look like after the moratorium is lifted?  New regulations will likely require more stringent inspections, mandatory environmental impact statements, and robust capture equipment to contain a potential worst-case scenario spill, and will increase the cost of drilling, but not to the point of discouraging investment in our nation’s richest petroleum resource area.   

Ultimately, offshore drilling will remain an integral part of the Gulf Coast economy, but it will become more tightly regulated, possibly more profitable for those states that permit it, and still only a partial and temporary answer to our dependence on foreign oil.