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Analysis - Bp Disaster Will Slow Gulf States' Recovery

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The BP Plc oil leak contaminating the Gulf of Mexico will muck up for years the governmental finances and economies of America's Gulf coast region.

Beyond directly sea-related sectors such as fishing and offshore energy production, the gushing oil leak is fouling other drivers of the economy like lodging, casinos, real estate and governments as the overall U.S. economy emerges from the worst recession since the 1930s.

As BP's heavy spending to stop the leak, company compensation payouts and its $20 billion (13 billion pounds) escrow fund blunts some immediate financial damage, policy makers, executives, business owners and economists are beginning to gauge the disaster's long-term consequences.

The spill and its consequences, such as the federal government's deepwater-drilling moratorium, threatens coastal property values, thousands of energy sector jobs and tourism businesses reliant on pristine beaches and sparkling waters.

"Right now tax revenues are a secondary issue to the economic growth over the long term," said economist Mark McMullen of Moody's economy.com. "What's scary is: when will it bounce back? And what will be the lasting damage to the economy and government coffers?"

Looking at those questions, Mississippi's governor last week ordered economists, state tax officials, business leaders and marine experts to put aside current finance pressures and spend a year studying the ramifications of the April 20 catastrophe.

"We need a clear grasp on how this oil spill will impact the State of Mississippi and local communities for years to come," Mississippi Governor Haley Barbour said.

Even before the disaster, in the first three months of 2010, the revenue of states in the Gulf region shrank, according to a report this week from the Rockefeller Institute of Government. While all 50 state governments across America had an overall 2.5 percent rise in revenues, Louisiana, Mississippi, Alabama, Florida and Texas all showed declines in year-over-year comparisons.

A scramble for revenue will remain feverish for the foreseeable future. The Centre for Budget and Policy Priorities last month forecast states face revenue shortfalls of $140 billion in the coming fiscal year.

The projected fiscal 2011 budget gaps for Gulf states total at least $11 billion, including ones for Florida of $4.7 billion, Texas of $4.6 billion, and Louisiana at $1 billion, according to the centre.

Beyond hiking taxes, lifting fees and cutting spending, some governments look to tax medical marijuana and sugared drinks. Others such as Florida are clearing the way for more gambling or casinos, at least in part to raise revenue.

In Louisiana, the Gulf state most reliant on energy businesses, the economic costs of the federal moratorium on deepwater oil drilling, in place through November 30, will be severe and long lasting, according to Eric Smith, associate director of Tulane University's Energy Institute.

Smith estimated the moratorium affects dozens of deepwater rigs that ordinarily employ as many as 10,000 crew making about $100,000 each annually, with most of those wages spent in Louisiana and nearby states.

The ripples from the moratorium may take the number of lost jobs in Louisiana to 24,000, according to Michael Hecht, head of Greater New Orleans Inc, an economic development agency.

Can we expect Obama now to demand BP fill the state funding gaps because they have now wrecked the local recovery?

It would appear that the excuses are already being prepared for state claims against BP. We are spending more than we are getting in tax revenue and it's your fault because of the oil leak.

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It is insanity to have a moratorium on new drilling. The industry can't just sit there waiting for maybe one day the moratorium to be lifted. They have to take the capital and expertise and go elsewhere in the world. Like offshore West Africa and offshore Brazil.

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matt simmons on kwn:


summary - risk of hurricane activity is that the oil reservoir resting on the basin is disturbed such that methane gas will come to the surface in great quantity killing shoreline inhabitants in its path - crank call or real threat? :unsure::ph34r:

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matt simmons on kwn:


summary - risk of hurricane activity is that the oil reservoir resting on the basin is disturbed such that methane gas will come to the surface in great quantity killing shoreline inhabitants in its path - crank call or real threat? :unsure::ph34r:

A nutter is our Mr. Simmons. Recall he predicted BP would be bust and delist from the market by now. Or he's very clever and bought them at $28 and is sitting on a tasty profit.

The oil spill has alleviated the dire employment situation on the Gulf; look at the army of cleaners that BP is employing to clean the beaches/wetlands.

As for the wider issue of trade and protectionism. America is NOT 'open for business' under Obama and the trade barriers will be be erected over the coming decade to basically screw overseas manufacturers and 'foreign' corporations like BP. If I were BP I'd say to to the Obama administration - look, you don't want us here drilling but want us to provide you with a blank cheque, sorry but that's not on. We're going to sell our American interests to whoever bids the most and concentrate on our Middle East operations/Russian.

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Yahoo!Finance reports Federal policy created a Perfect Storm for Louisiana's Economy.

In the blink of an eye, the economic focus in Louisiana has shifted from recession recovery to avoiding actual and potential job losses piling up at a staggering rate.

And there's very little that the state can do: The tally is due to the Obama administration decisions affecting petroleum, defense and space -- all coming together in a perfect storm.

Last Tuesday, Northrop Grumman Corp., faced with tighter Pentagon spending and Obama administration priorities aimed at Afghanistan and away from the Navy, said it would shut its Avondale shipyard -- the state's largest industrial employer with about 5,000 workers -- in early 2013 after two military ships are finished.

Another source of misery is the deepwater petroleum drilling moratorium in the Gulf of Mexico. The six-month "pause" that the Obama administration insists on could kill the drilling business off the Louisiana coast for years, industry and government officials warn.

Of the 33 deepwater rigs in the Gulf when the Deepwater Horizon exploded, two found new long-term homes in Egypt and off the coast of Africa within a week -- just as the industry promised would happen.

Louisiana State University economist James Richardson said a six-month moratorium could slash 18,000 to 20,000 jobs. With that prediction, consider that the entire state, at the lowest point of the post-2008 economic meltdown, had lost about 49,000 jobs.

The oil spill already has had a well-documented effect on fishing and tourism along the coast. Quantifying a number is difficult -- the first state jobs report since the moratorium and the full arrival of the spill is due out July 23 -- but state officials already have warned that it won't be pretty.

Then there's the end of the space shuttle program. Earlier this month, the last external fuel tank expected to fly rolled out of the Lockheed Martin Corp. operation at the NASA Michoud Assembly Facility in New Orleans. By the end of September, only about 200 workers will still be around from a payroll of 2,700 in 2008 and 5,000 during the mid-1980s.

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