Study Highlights Impact of Rising Costs on Energy Producers

By August 25, 2010Energy, Regulations

The tax and advisory firm Grant Thornton released a new study this week examining how the new regulations stemming from the Gulf of Mexico oil spill will impact deepwater drilling companies in the region. It finds that smaller domestic energy producers in particular are likely to have a tough time keeping up with the new costs, regulations, guidelines and penalties that lie ahead. Many of these companies may be forced out of business or overseas.

“As all of the costs associated with operating in the Gulf continue to rise, deepwater drilling will increasingly become the province of only the largest, most well-capitalized companies,” said Rob Moore, a director in Grant Thornton’s Corporate Advisory & Restructuring Services practice.

The cumulative effect of these new costs and regulations will be to extend indefinitely the drilling moratorium in the Gulf for smaller companies. The moratorium has already created uncertainty and economic instability, is harming America’s efforts to achieve energy independence and is costing jobs throughout the Gulf region. Every day the drilling moratorium remains in place, jobs, U.S. energy security and the nation’s economy are threatened.

Nevertheless, the moratorium will stay in place for at least a few more months. Michael Bromwich, the Interior Department’s top offshore drilling regulator, made the announcement on Monday in a letter to the presidential oil spill commission and said he plans to propose measures to replace the moratorium by the end of October.

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