Gulf Coast Braces for Economic Disasater In Wake of BP Oil Spill
As if the ecological destruction weren't enough, the Gulf Coast economy faces billions in losses from BP's recklessness.
May 7, 2010 |
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The industries that drive the GulfCoast economy—fishing, tourism, and gaming—are bracing for the impact of the catastrophic British Petroleum oil spill, as businesses across the region face the prospect of billions in damage that could last for years to come.
The GulfCoast seafood industry alone is a $2.4 billion annual business. Four of the top seven fishing ports in the country are in the Gulf of Mexico. The beaches and wildlife areas support a $20 billion tourism industry.
BP, which was leasing the Deepwater Horizon rig that continues to gush tens of thousands of gallons of oil each day, will have to pay out of its own pocket to clean up the spill. But it might not have to pay for the economic losses the spill inflicts on the GulfCoast. Lawyers have already lined up to extract retribution from the company; one firm in Houston filed a suit claiming that the fishing industry alone stands to lose $2.5 billion. And lawmakers in Washington working to hold BP accountable for the costs are working off of damage estimates as high as $12 billion.
Despite the certainty of economic consequences, current federal law actually caps BP's liability for economic damages at $75 million. Sen. Bob Menendez (D-NJ), along with Sen. Frank Lautenberg (D-NJ) and Sen. Ben Nelson (D-FL), introduced a bill that would raise the cap to $10 billion.
It's a problem similar to what we've seen on Wall Street in recent years. If companies do not face serious penalties for wreaking serious economic havoc, they have little incentive to alter their behavior.
"We're glad that the costs for the oil clean up will be covered, but that's little consolation to the small businesses, fisheries and local governments that will be left to clean up the economic mess that somebody else caused," Menendez said in a press release. "There is no such thing as a 'too big to spill' oil well, which is why we need this economic protection in place."
The epic oil spill is only the latest disaster to rip through the GulfCoast economy. David Butler, an associate professor at the University of Southern Mississippi , has been studying the effects of the 2005 hurricane season on the region and says that coastline counties still have not reached their pre-Katrina employment levels. The recession hit this area hard, too. "This is a bad sign for Mississippi," he says. "We're one of the slower states when it comes to recovering from the recession, and this could prolong the employment battle that we're having."
While economists are still trying to place a hard figure on the cost of the cleanup, many industries are already feeling the pinch. The Louisiana seafood industry has ceased operations in areas that provide close to 25 percent of their yearly harvest. "So much of Louisiana revolves around Louisiana seafood," says Ashley Roth, a spokesperson for the Louisiana Seafood Promotion and Marketing Board. "More than 27,000 jobs are in the seafood and fishing industry, so we know the impact on the industry will be huge. We just don't know what exactly it might be."
The same worries are seeping east as the oil drifts toward the Mississippi, Alabama and Florida coasts. "Obviously our seafood industry is facing what could be a catastrophic impact on them if the oil settles down here," says Scott King of the Gulf Coast Business Council.
And commercial fishing isn't the only industry that stands to lose big from BP's blunder. In 2006, the Louisiana Department of Wildlife and Fisheries estimated the total economic effect of fish, wildlife and boating resources at $6.75 billion. Major tourism attractions like recreational fishing and boating, hunting and wildlife photography are already slowing down.