Drilling Moratorium Means Hard Times for Gulf Rig Workers

In addition to the fishermen and hoteliers whose livelihoods have been devastated by BP’s hemorrhaging undersea oil well, another group of Gulf Coast residents is beginning to suffer: the tens of thousands of workers like Ronald Brown who run the equipment or serve in support roles on deepwater oil rigs in the Gulf of Mexico.

Drill ship recovering oil from the ruptured British Petroleum oil well over the site in the Gulf of Mexico off the coast of Louisiana.
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Drill ship recovering oil from the ruptured British Petroleum oil well over the site in the Gulf of Mexico off the coast of Louisiana.

Mr. Brown, known as Rusty to his friends, is a “shakerhand.” In the rugged vernacular of offshore drilling, that means he monitors the mud flowing back from the drill hole thousands of feet below.

He works aboard the Ocean Monarch, which was idled along with 32 other oil rigs when the Obama administration ordered a six-month moratorium on all deepwater drilling after the April 20 Deepwater Horizon disaster. The rig’s owner is now seeking customers in other parts of the world. If the rig moves, Mr. Brown and his fellow motormen, roughnecks and roustabouts will be left behind, jobless, with few alternatives that would pay anything close to the $3,500 to $4,000 a month typical for such jobs.

On Wednesday, President Obama and BP announced that the company had voluntarily agreed to create a $100 million fund to compensate such rig workers. That’s a modest sum, critics say, given the potential economic losses. Each rig job supports roughly four additional jobs for cooks, supply-ship operators and others servicing the industry. Together, they represent total monthly wages of at least $165 million, according to estimates by a Louisiana oil industry group.

Still, Mr. Brown is grateful for any assistance. “Every little bit is going to help until we figure out where else to go,” he said. “But I’m not looking forward to unemployment, and I don’t know how quickly we’ll be able to get some of it.”

In an address to the nation Tuesday night, Mr. Obama apologized for the effect on oil workers who had nothing to do with the BP accident. “I know this creates difficulty for the people who work on these rigs,” he said. “But for the sake of their safety, and for the sake of the entire region, we need to know the facts before we allow deepwater drilling to continue.”

The full economic impact of the drilling moratorium is still unclear, since many of the layoffs are just beginning and no one knows how long the ban will last.

The Louisiana Mid-Continent Oil and Gas Association has warned that many of the affected rigs will seek to drill in other countries, imperiling roughly 800 to 1,400 jobs per rig, including third-party support personnel.

The securities firm Raymond James & Associates predicts that the moratorium could last well into 2011, directly jeopardizing 50,000 jobs and potentially gutting blue-collar communities that rely heavily on the economic activity that comes with deepwater work. “Just as the demise of auto plants and steel mills in the Upper Midwest devastated entire towns, an extended drilling ban could eventually have a similar effect in the Gulf Coast,” the company said in a report Monday.

Lawrence R. Dickerson, the chief executive of Diamond Offshore Drilling, which owns the Ocean Monarch and five other deepwater rigs in the gulf, was less pessimistic, suggesting that 15,000 to 20,000 rig and associated service jobs were at risk. He predicted that some deepwater rigs would remain in the area awaiting a resumption of drilling, but that all would be forced to cut staff as the moratorium continued.

Three Diamond rigs are already prospecting for jobs in the Mediterranean and West Africa. Should they leave, they would take less than half of their crew with them, Mr. Dickerson said.

The halt in drilling in waters deeper than 500 feet came in response to the still-unchecked gusher of oil that followed the Deepwater Horizon explosion, which killed 11 workers. The goal was to give the government time to review the rules and oversight of such wells, and the shutdown was welcomed by many Americans who have watched the environmental disaster unfold.

But like fishing and tourism, deepwater drilling is also crucial to the Gulf economy.

At a Congressional hearing last week, Senator Mary Landrieu, a Democrat from Louisiana, confronted Interior Secretary Ken Salazar with a list of local companies that serviced and depended on offshore energy development. She said that a temporary drill ban, even if it only lasted a few months, could affect as many as 330,000 people in Louisiana alone. That would “potentially wreak economic havoc on this region that exceeds the havoc wreaked by the spill itself,” she said.

Until two weeks ago, the Ocean Monarch — a mammoth, $300 million semi-submersible not unlike the Deepwater Horizon owned by Transocean — was poised to drill a well in 4,000 feet of water at a spot more than 100 miles offshore. About 115 workers from a variety of companies were onboard.

After the moratorium, Cobalt International Energy, the company that had hired the Monarch and spent $60 million preparing to drill the well, said it was looking to dissolve the contract.

Those negotiations continue, but when two New York Times reporters visited the rig last week, it was squatting in just 50 feet of water 27 miles off the coast of Louisiana. On the deck, 75-foot segments of riser pipe were stacked in tidy rows two stories high, and the rig’s manifest listed just 77 crew members aboard.

At a meeting with the crew, Mr. Dickerson talked about the uncertain future. “You know, if we can’t go back to work for a minimum six months or longer, it’s awfully hard to leave rigs sitting here,” he said.

Once a rig moves, it tends to stay put, fulfilling multiyear contracts. Lower-level jobs are normally filled using the host country’s work force.

After the meeting with Mr. Dickerson, a handful of rig workers — burly men in oil-stained T-shirts and overalls — shared their gnawing fear that the jobs that paid their modest mortgages, doctor bills and children’s tuitions were about to disappear.

Louis Alvarez, a motorman and 21-year veteran with Diamond Offshore, said that a layoff could hinder plans that he and his wife had made to send their son to college in the fall. “It’s a shame that I have to tell my 18-year-old son that he might have to help his daddy buy groceries,” he said.

Mr. Brown, the shakerhand, began to cry when he said that his wife, Athena, was now looking for a job.

A broad-shouldered, broad-faced man, Mr. Brown, 29, is paid roughly $22 an hour to work the rig’s standard two-week-on, two-week-off cycle, supplemented by occasional overtime. That’s enough to support Athena and their three children: 5-year-old Shiloh, 3-year-old Maelah, and 1-year-old Bennett, who wears a brace to help correct club feet.

The job prospects around their home in Magee, Miss., a dilapidated town of about 4,000, are few. Tyson Foods and Polk’s Meat Products have plants in the area, but would be unlikely to match a rig worker’s paycheck.

In an interview at their home, Mrs. Brown said that someday, the country might find a low-cost alternative to oil.

“But we don’t have an option right now,” she said. “For us to stop drilling in the gulf is like ending our lives as far as the way we live. It’s really that scary.”

- Rob Harris contributed reporting.

First there was General Motors, whose chief executive was summarily dismissed by the White House shortly before the government became the company’s majority shareholder. Chrysler was forced into a merger. At the banks that received government bailouts, executive pay was curbed; at insurance companies seeking to jack up premiums, scathing criticism led to rollbacks.

BP CEO Tony Hayward
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BP CEO Tony Hayward

But President Obama’s successful move to force BP to establish a $20 billion compensation fund that the company will have no voice in allocating — just a down payment, the president insisted — may have been the most vivid example of what he recently called his determination to step in and do “what individuals couldn’t do and corporations wouldn’t do.”

With that display of raw arm-twisting, Mr. Obama reinvigorated a debate about the renewed reach of government power, or, alternatively, the power of government overreach. It is an argument that has come to define Mr. Obama’s first 18 months in office, and one that Mr. Obama clearly hopes to make a central issue in November’s midterm elections.

To Mr. Obama, this is all about rebalancing the books after two decades in which multinationals sometimes acted like mini-states beyond government reach, abetted by a faith in markets that, as Mr. Obama put it at Carnegie Mellon University a few weeks ago, “gutted regulations and put industry insiders in charge of industry oversight.” When Representative Joe L. Barton, the Texas Republican, opened hearings Thursday about the gulf oil gusher by accusing Mr. Obama of an unconstitutional “shakedown” of BP to create a “slush fund,” he was giving voice to an alternative narrative, a bubbling certainty in corporate suites that Mr. Obama, whenever faced with crisis that involves private-sector players, reveals himself to be viscerally antibusiness.

The reality, not surprisingly, is more complex.

Mr. Obama clearly sees his presidency as far more than a bully pulpit — he has cast himself as a last line of defense against market excesses that take many different forms. “In the past, corporate America was not only at the table, they owned the table and the chairs around it,” Mr. Obama’s combative chief of staff, Rahm Emanuel, said in an interview Thursday. “Obama doesn’t start off confrontational, but he will be confrontational if there is resistance to the notion that there are other equities.”

But at the same moment, as his critics on the left have pointed out, Mr. Obama has been warding off calls for far more stringent regulations of the banks, hoping to win at least a modicum of business support — and to defuse the notion that he is at war with American-style capitalism.

Each of his confrontations with corporate executives had its own rationale. G.M. had become so uncompetitive, Mr. Obama argued, that its imminent collapse was threatening the jobs of millions of workers; the only way to save the company from its own worst instincts was to become its temporary owner and bring new blood into the boardroom. (It will take years to determine if that worked, but on Thursday, though it was overshadowed by the grilling of BP’s chief executive on Capitol Hill, G.M. announced it was forgoing its usual summer shutdown of most of its plants so it could meet renewed demand.)

The Wall Street executives who needed the government to prop them up, but still thought their services were worth millions a year, were cast by Mr. Obama as a shameless privileged class. Toyota was described as seeking profits over safety; Wellpoint , the insurance giant, was castigated for seeking to insulate itself from the new health care legislation by taking actions that the law will soon prohibit.

Against that backdrop, forcing BP to take a $20 billion bath — even before the inevitable lawsuits are filed — seemed an easy decision. Mr. Obama had no legal basis for the demand, but concluded he did not need one. “He had a power other presidents have used — you call it jawboning,” Mr. Emanuel said.

The question is whether the cumulative effects of these actions create an impression that, over the long run, may make it harder to persuade both American and foreign corporations to cooperate with Mr. Obama’s program to reinvest and reinvigorate the American economy.

“He’s walking a very fine line here,” said Jeffrey Garten, a professor of trade and international finance at the Yale School of Management and a former top official in the Clinton administration’s Commerce Department. “He is taking each case on the merits as he sees it, but he runs the risk of sowing a level of mistrust about all big companies. And it’s those companies — not small businesses — that he will need to invest and innovate for the kind of recovery he wants.”

Mr. Obama is betting that Republicans are also walking a fine line. That became evident Thursday as Republican leaders distanced themselves from Representative Barton’s outburst, which included the charge that Mr. Obama was acting illegally by applying “some sort of political pressure that in my words amounts to a shakedown.”

Mr. Obama’s aides clearly relished the idea of a Texas Republican dependent on donors from the energy industry who was actually apologizing to BP. As a political strategy, they appear to be adapting the course taken by Franklin D. Roosevelt, who seized on a mood of distrust when, in the closing days of the 1936 campaign, he said: ”I should like to have it said of my first administration that in it the forces of selfishness and of lust for power met their match.” When the applause subsided, he added: “I should like to have it said of my second administration that in it these forces met their master.”

It is in the “master” role, however, that Mr. Obama and his advisers know he is on dangerous ground. He has responded to his critics by making the case that every time American business predicted ruin from government intervention — that “Social Security would lead to socialism, and that Medicare was a government takeover” — American capitalism survived.

It did. But just as Mr. Obama’s fortunes last year depended on a G.M. turnaround, his fortunes this year depend on demonstrating that the health care legislation that he pushed through both reduces costs for the consumers and saves taxpayers money.

And his fortunes over the next two years depend, in part, on showing that he can both turn off the spigot of oil in the gulf and turn on the spigot of aid — out of the coffers of BP’s shareholders. Along the way, he will have to avoid painting with such a broad brush that foreign and domestic investors come to view the United States as a too risky place to do business, a country where big mistakes can lead to vilification and, perhaps, bankruptcy.