Introduction

Is off shore drilling a safe and economically sound way to obtain oil? This is a question which
has been asked by many over the years. We have seen many off shore disasters over the years
such a Deep Water Horizon, oil leaks and fires.
Offshore drilling is a process in which oil and gas resources are extracted from underwater
locations this can include the ocean and lakes. With technology getting better the depths at
which drilling rigs are able to drill is getting deeper and allowing oil companies to drill farther
offshore because we have exhausted a lot of the near shore and shallow fossil fuel reserves. The
problem with drilling deeper is there are more risks of accidents, spills and fires.
The dangers are brought on by the complex equipment that is necessary to dig at deeper depths.
These new technologies come at a cost for both the environment and the companies. The danger
of the harsh offshore environments poses another problem for the engineering of these drilling
rigs. It is impossible to predict how harsh the conditions are going to be with ice, rain and snow.
Unfortunately, it is not possible to test this equipment except during the actual weather. Being
this far out in the ocean also makes it harder for emergency personnel to reach the site for both
human rescue and to prevent environmental damages.
Due to the disasters caused by deep water drilling there was a hold placed on any new permits.
At what cost does the uncertainty of deep water drilling cause. How much does it really cost to
drill and how much does it cause to clean up these disasters? Is it an economically sound idea to
keep drilling? These are some of the questions we will be looking at.

Cost of Deep Water Drilling

Over $10 billion is spent each year (by the offshore oil and gas industry) in drilling. Of
that $10 billion, $2.5 billion is wasted by having a very complex piece of equipment drilling in
less demanding environments. Since November 2000, 12 of the 35 ultra-Deepwater rigs (rigs
capable of drilling in water depths greater than 5,000 ft) drilled in less than 4,000 ft water depths,
including five working in mid-water range (2,000 ft or shallower). The amount to lease an
offshore drill rig is $250,000 a day. Are we drilling in shallower water to find more oil or are we
drilling in shallower water to prevent disaster like the Deep Water Horizon spill so the oil
companies have to deal with all the new regulations put in place? Oil companies are spending
this much because the demand for oil is growing greater each year. Oil prices keep going up and
down as do gas prices, is it the cost of doing business or are the oil companies really making a
profit, if they were not making a profit they would not be in business for very long. Some of the
benefits of off shore drill are the land is not disturbed and kept in the natural state, but do the
benefits really out weight the costs, only time will tell as we continue to develop other energy
sources.
Cost of a Spill
When you look at the cost of a spill we have to look not only look at clean up but the
impact the spill will have on the surrounding towns and city on the coast of the water as well as
wild life and jobs. It has been calculated that each working Deepwater drilling rig employs
approximately 230 workers, between 36% and 50% of whom live in (and pay taxes to)
Louisiana. In addition, each working rig employs 920 indirect support workers, between 36%

and 67%of whom are based in Louisiana. Thus, each rig directly or indirectly employs
between415 and 732 Louisiana workers, and a total of 33 rigs would employ between
13,695and 24,156 Louisiana workers. Each working Deepwater rig also contributes significantly
to state and parish tax revenues. Each month the direct impact of 33 rigs results in an estimated
$2,337,167 to $3,238,243 in monthly tax revenue to state and parish governments. Indirect
impacts account for between $6,930,883 and $12,868,061 to the state and parish budgets every
month. Additionally, total rig royalties to the state and parishes amount to between
$600,749 and $758,281 monthly. Thus, over the course of seven months (June to
December) 33 working Deepwater rigs would have accounted for state income between
$9,868,799 and $16,864,585.

References
Remy, Melina (28, May 2010) Why Is Offshore Drilling So Dangerous?. Livescience
http://www.livescience.com/32614-why-is-offshore-drilling-so-dangerous-.html
Alan Krupnick, Sarah Campbell, Mark A. Cohen, and Ian W.H. Parry (January 2011)
Understanding the Costs and Benefits of Deepwater Oil Drilling Regulation
http://www.rff.org/files/sharepoint/WorkImages/Download/RFF-DP-10-62.pdf