Businesses which rely on oil and gas activity off Louisiana's coast fear that fossil fuels could track a similar demise as the coal industry and that jobs could disappear without enough renewable fuels jobs to replace them.
President Joe Biden wants to substitute fossil fuel production and consumption with policies that promote renewable energy, such as wind and solar power, and could be a problem if tackled too quickly.
"It's going to devastate our communities," Paul Danos, CEO of Houma-based Danos, said during a recent industry panel discussion. "We know that long term, there is going to be an energy transition … but it's got to be done in a way that's paced appropriately. We're not going to flip a switch; it's not going to happen like that," he said.
The Houma-based oilfield services business holds a three year contract to supply 144 workers across Royal Dutch Shell's offshore fleet ferrying crews to oil platforms on helicopters regularly.
State and federal officials have acknowledged there needs to be an equitable transition for Gulf Coast residents, but there were few references to Louisiana during a recent virtual public session hosted by the U.S. Department of Interior. And there were no representatives with strong ties to Louisiana involved in the meeting, which some industry advocates say was a misstep.
The Department of Interior expects to draft a report for the Biden administration — while there is a temporary ban in place on new oil and gas leases on federal lands and waters. An auction of federal leases in the Gulf was halted in March, and one scheduled in November likely won't happen either.
Faced with no new offshore lease auctions for at least a year, some wonder how that might affect future activity in the Gulf, although companies do have a stockpile of leases from previous auctions that have not yet been drilled and could be used.
"It would be a tragic mistake for the federal government to hastily restrict offshore development," said Chett Chiasson, executive director of Port Fourchon.
Port Fourchon is a hub for upward of 90% of deepwater oil production-related activity in the Gulf of Mexico, and there are more than 250 tenant companies at the site in Lafourche Parish, between Houma and New Orleans. Each day, hundreds of large supply vessels travel along the port channels. It is also the land-based hub for the Louisiana Offshore Oil Port, which transitioned from an import terminal to exports as production ramped up in the U.S. in recent years.
Serving on the panel, Chiasson argued that industrial development is not always at odds with the environment and that local businesses want work, whether it's fabricating wind turbines for offshore or oil rigs.
"I know the companies in Bayou LaFourche in our region. If anything needs to be fabricated and go offshore, they want to be able to do it, no matter what type of energy services," he said. "We have the technology and expertise; we want to be a part of it."
Chiasson criticized the lack of new jobs created after solar farms are constructed.
While south Louisiana is on track to become a larger hub for solar farms in the coming years as utilities look to purchase more renewable energy, each solar project requires only a handful of jobs after construction.
"There's no correlation between what we see in the oil and gas sector and in particular the offshore oil and gas sector in terms of job numbers created to what we're seeing in renewables. On the construction side, yes, but on the permanent jobs, no, and that's a major concern," Chiasson said.
He also noted the manufacturing of renewable energy products, such as a wind turbine or solar panel, still requires the petrochemical industry for components that go into their development. Offshore wind is another potential for the Louisiana coast, likely near its border with Texas where winds are stronger.
"It's about a realistic transition," he said.
Separately, Biden has proposed establishing 10 facilities to demonstrate retrofits and installations to capture carbon from processes in the petrochemical and refining industries and putting thousands of people to work capping orphaned oil and gas wells around the country; there are more than 4,500 in Louisiana.
Danos' CEO said that his workers have asked about whether there are any renewable energy jobs in their communities in Louisiana, and for now, the answer is no.
Founded in the 1940s as a tugboat business, Danos has grown to offshore services, construction, fabrication and logistics over the years. It has more than 2,300 employees around the globe across nine offices. The company has branched out to renewable project maintenance in recent years and hired a crew to work on electrical repair of a solar farm in Arizona, but it's not the majority of the company's business.
Meanwhile the number of people required to run offshore oil platforms has largely stayed the same, even while onshore oil wells have needed fewer workers as more technology is leveraged in the field. At Shell's Auger oil platform which began production in 1994, it still requires 192 workers on board to operate as those technology upgrades are not replacing jobs.
Family-owned Galliano Food Store has seen the boom and bust cycle of the oil and gas sector impact on its own workforce. The grocery store caters to oil and gas services businesses and workers because it sells grocery items for many boats near the Gulf Coast. In recent years, the company has grown to upward of 60 employees and contracted to as few as 30 workers; this year, it has 50 employees so far.
"It just depends on what's going on in the economy," said Jaedon Burregi, director of sales at Galliano Food Store, which his grandfather founded decades ago.
Burregi, who participated in the panel discussion on the Gulf lease ban and future of the fossil fuels industry, was concerned about whether there would be enough demand for groceries if supply boats stopped going offshore.
The industry has been struggling in recent years with a glut of oil produced using advanced drilling technology and then reduction of demand during the coronavirus pandemic. During the initial oil price crash in 2015, Louisiana lost 18,000 oil and gas production jobs, and through last year's pandemic and declining fuel demand edged down to 28,700 total jobs in September. While economists at LSU's Center for Energy Studies project gaining back 2,600 jobs by the end of this year, the number dwindled to 27,700 jobs statewide in January.
Louisiana fossil fuel industry groups sent letters to new Department of Interior Secretary Deb Haaland in last week regarding the upcoming interim report about the federal oil and gas leasing program recommendations. The Louisiana Mid-Continent Oil and Gas Association touted the industry’s strides toward environmental stewardship during the oil and gas extraction process offshore and noted how offshore royalties funding is critical for the state’s coastal erosion master plan. That includes $389 million in revenue projected in the next three years.
The Gulf Economic Survival Team requested that the Department of the Interior “collaborate with state and local community leaders in the Gulf Coast states who are directly impacted by the current offshore leasing ban.”
In Lafourche and Terrebonne parishes alone, there are more than 5,400 workers in the energy industry with annual salaries of $81,402, which support $24 million in local property taxes. Port Fourchon estimates 15,000 people are flown on helicopters to offshore oil platforms supported by the port.
Oil futures for U.S. benchmark oil, at around $60 per barrel in January 2020, dropped to negative $36 in late April 2020. Since then, it's been on a relatively steady upward climb, driven more recently by expected future demand as vaccination efforts roll out across the globe and demand for jet fuel and gasoline increase. The price hit $65 per barrel in March.
During that period, overall U.S. crude oil production dropped to 11.3 million barrels per day on average in 2020, down 8% compared with 2019.
Gulf of Mexico federal offshore oil production accounts for 17% of all U.S. crude oil production and was on track to hit new records in 2020 before the pandemic. Instead, it was hardest hit as average production dropped by 13% to 1.65 million barrels of oil per day during 2020.
Oil production is expected to increase through 2022 as projects are brought online, according to the Energy Information Administration forecast released in mid-April. There are 13 new projects on track to bring 200,000 more barrels of oil each day or 12% more production. It is expected to reach 1.75 million barrels of oil each day by 2022.
New projects such as Shell's Vito oil field anticipated to drill in 2022 are estimated to break even with oil prices below $35 per barrel.
All of those oil platforms were shut down during the busiest hurricane season on record as hurricanes Marco and Laura prompted work to halt in August. Crude oil production in the Gulf of Mexico during that time dropped to its lowest in seven years, totaling 1.2 million barrels of oil each day in August compared with nearly 2 million barrels each day in 2019.
There were 12 active oil and gas rigs off the coast of Louisiana for the week of April 1, down from 18 active rigs one year earlier, according to Baker Hughes data. In early April 2014, there were 42 active rigs off the coast of Louisiana.
Environmental activists questioned the strength of market demand for more federal oil and gas leases offshore because the vast majority are not producing oil. Industry representatives have countered that offshore development often takes years and millions of dollars to develop because only profitable wells are tapped for oil and gas, meaning it's not a fair snapshot of market demand.
Despite headwinds from corporate mandates to reduce carbon emissions, a temporarily halt for new federal leases in the Gulf of Mexico while th…
There are 12 million acres of federally managed offshore waters, and 77% are either not producing oil or sit unused so far.