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In Louisiana, oil spill's economic impact is muted – so far

Cleanup work is creating short-term jobs, and BP's compensation checks have offset financial losses for many others who lost work or income. But no one is saying the long-term outlook is rosy.

July 09, 2010|By Bob Drogin, Los Angeles Times

Reporting from Buras, La. — Some 200 shrimping boats normally unload their succulent catch and repair their wing-like nets at this steamy bayou port, but only 15 or so tied up to the docks this week.

"Everyone is working on the oil spill now," said Chanda In, a 36-year-old dock hand who just returned from two months aboard a shrimper skimming oil from BP's blown-out well in the Gulf of Mexico. He was paid $300 a day, far more than his usual salary.

"It's easy money," he added with a smile.

Therein lies a paradox to the worst oil spill in U.S. history: Despite individual tales of woe, many people are reaping a windfall in the cleanup. The overall economic impact has been surprisingly muted so far in Louisiana, which has more oil-splashed coastline than all other Gulf Coast states combined.

No one suggests the spill is not wreaking havoc, and the human, environmental and economic costs are certain to grow as long as oil keeps spewing. The crisis could worsen if oil disrupts shipping on the Mississippi River, or if a major hurricane hits.

But nearly three months into the disaster, state records show no increase in claims for unemployment insurance in the coastal parishes most affected by the spill. And initial evidence indicates that BP's compensation checks have largely offset financial losses to many people who lost work or income due to the spill.

"I think the spill has had a negligible economic impact so far," said Eric Smith, associate director of the Tulane Energy Institute. "I know that's politically incorrect to say, but it's the truth."

"If we look at the oil spill on a strictly financial basis, on a cash in, cash out basis, it may be revenue neutral, or even positive," agreed Michael Hecht, president of GNO Inc., a nonprofit regional economic development agency based in New Orleans.

"People have essentially changed occupations," said James Richardson, an economist at Louisiana State University's Ourso College of Business. "One reason there's less local fish available, for example, is because everyone has been recruited to help in the cleanup. So people are adjusting."

Signs of the new cleanup economy are increasingly visible.

"Cash Your Oil Checks Here," reads a banner on a pawn shop east of New Orleans. "Oil Spill Claim? For consultation, call…" says a road sign near Port Sulphur. Nearby, a long convoy of pickup trucks hauled yellow boom, swamp boats and other gear to the operations hub at Venice, a once-sleepy town now as frenzied as a gold rush camp.

Hundreds of contractors and sub-contractors have tried to tap the gusher of money, making oil booms and chemical dispersants, catering meals, manning security posts and otherwise supporting what likely will be a record-setting response to an environmental disaster. Joe's Septic Contractor, in Cut Off, La., operates seven days a week to keep up with the demand for portable toilets.

BP and its contractors have been paying more than 47,800 people — a force larger than the entire Coast Guard — and have hired 6,600 boats for the cleanup, the majority of them in Louisiana. The oil giant has paid $157 million in financial compensation claims so far, more than half of it to Louisiana residents. It has promised to set another $20 billion aside as a fund to compensate victims, and agreed to provide $100 million to assist oil rig workers idled by the Obama administration's proposed six-month moratorium on new deep-water drilling.

While that ban has been struck down by a federal judge, the administration is appealing, and the uncertainty has kept 33 rigs idle.

State officials and energy industry groups say the worst economic impact may be yet to come.

"The economic impact [of a ban] would be much bigger than the oil spill," said David Dismukes, associate director of the LSU Center for Energy Studies. "It's a much bigger deal."

He said the idled offshore rigs provided more than 11,000 jobs and generate taxes, royalties and fees for the state.

Americans devour Louisiana shrimp. But the oil and gas industry is far more important to the state, comprising a third of the economy. Shrimp and other commercial fishing provides only 1%. Tourism is 3%, and the sector, largely centered around New Orleans, hasn't taken the hit that many had feared. Unlike in other Gulf Coast states, there are few beaches here.

Michael Chriszt, who is tracking the economic impact of the crisis at the Federal Reserve Bank in Atlanta, said oil spill crews were filling many motels and fishing camps normally used by recreational fishermen.

"We haven't seen an increase yet in unemployment in tourism," Chriszt said.

Susan Spicer, a celebrated chef and restaurant owner in New Orleans, made headlines last month when she filed a class-action lawsuit against BP for unspecified damages to restaurateurs and the seafood industry. But she said her business hadn't changed much since the April 20 well blowout. Most local seafood is still available, although some of it costs slightly more.

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