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Fueling a New Future for the Gulf Coast

The Senate Is Poised to Pass a Critical Economic Development Bill for the Region

SOURCE: AP/ Dave Martin

The RESTORE Act represents a tremendous step toward rebuilding the Gulf Coast region and diversifying the states’ economies, which were devasted by the Deepwater Horizon oil catastrophe. Above, cleanup crews search for oily tar balls along the beach in Gulf Shores, Alabama in 2011.  

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Drill, drill, and then drill some more. As gas prices rise, the chorus of pro-drilling voices continues to grow louder. Even though the number of oil rigs operating in the United States quadrupled since President Barack Obama took office, the massive influx of supply did nothing to reduce the price consumers pay at the pump this spring. The reason? Put simply, economic growth at home and abroad produces more demand for oil—demand that cannot ever be matched by enough supply given that the United States only has 2 percent of the world’s oil reserves but uses 20 percent of the world’s oil.

Regardless, the calls to open more of our lands and oceans to be drilled for oil have only increased. The heart of our offshore domestic production is the Gulf of Mexico, a region significantly affected by the 2010 Deepwater Horizon oil catastrophe. Though many families and businesses throughout the region continue to struggle with the lingering effects of the massive spill, discussions involving energy and economic growth remain centered on opening up more of the Gulf for drilling.

Absent from these conversations is any mention of the long-term strategies that might actually start to move Americans off our dependence on oil—and toward a future where we have real choices in what kinds of cars we drive, fuels we use, and transportation systems we frequent. Absent, too, is any mention of a future economic-development path for the Gulf Coast states; a path that diversifies this region away from oil jobs and toward a more balanced economy that includes new sectors, new innovation, and a broader range of jobs.

The RESTORE the Gulf Coast States Act, a bipartisan bill co-sponsored by 9 of the 10 Gulf Coast’s states’ senators, will likely be passed out of the Senate tonight as an amendment to a broader transportation bill. The RESTORE Act represents a tremendous step toward rebuilding the region and diversifying the states’ economies. If signed into law the measure would direct 80 percent of the Clean Water Act fines charged to global oil giant BP Plc. and other parties responsible for the Deepwater Horizon disaster directly to the states damaged by the oil spill, rather than sending the money to the Oil Spill Liability Trust Fund, which is used to clean up spills when the responsible party either cannot be found or can’t cover expenses.

While this trust fund has a critical role to play, it contained a grand total of $1.6 billion when the BP spill occurred. Fines in this case could run into the tens of billions of dollars—far more than the fund has ever managed. Rather than allowing that money to lie fallow, it makes sense to direct it toward economic development in the region affected by the disaster and desperately in need of diversifying its sources of employment.

Once under the authority of the Gulf Coast states, these funds will be used to immediately begin the process of economic and environmental recovery. For a region long at the mercy of the oil and gas sector, RESTORE offers a much-needed opportunity for the residents of the Gulf Coast states to begin recovering from the worst environmental disaster in U.S. history and to begin moving their economies beyond oil.

In an opinion piece in Sunday’s New York Times, writer Thomas Friedman highlighted the dangers inherent in any region putting all its eggs into an economic strategy based on fossil-fuel extraction. Friedman explains that these countries hamstring the ability of their citizens to develop the knowledge and skills necessary to compete in the 21st century.

Friedman cites a recent study by the Organization for Economic Co-operation and Development, or OECD, to prove his point. The study mapped the correlation between students’ performance on the Program for International Student Assessment, or PISA, exam and the total earnings on natural resources as a percentage of economic growth in 65 countries. They found “a significant negative relationship between the money countries extract from natural resources and the knowledge and skills of their high school population.”

As Friedman explains, while vast supplies of oil, gas, and precious metals can “buy jobs,” natural resources alone do not indicate how well a country will fare long term. Andreas Schleicher, who oversees the PISA exams for the OECD, argues that “The only sustainable way is to grow our way out [of difficult economic times] by giving more people the knowledge and skills to compete, collaborate, and connect in a way that drives our countries forward.”

In contrast to resource-rich countries, those with few natural resources are forced to invest not only in the development of their citizens but also in the diversity of their economies. Friedman points out that “Israel has one of the most innovative economies, and its population enjoys a standard of living most of the oil-rich countries in the region are not able to offer.” Additionally, “The foreign countries with the most companies listed on the Nasdaq are Israel, China/Hong Kong, Taiwan, India, South Korea and Singapore—none of which can live off natural resources.”

Norway is another illuminating example. It is now an oil-rich country, but it discovered oil fairly recently, and had already developed a strong economic base and social-security system before the discovery. Economists point to this fact to explain why Norway is one of the only oil-rich countries with a strong economic backbone.

Additionally, Norway gathers the revenues gathered from domestic and foreign oil companies and puts it directly into a petroleum fund. The money is then invested and the proceeds used to pay for important national programs such as retirement support, health insurance, and education. The fund is also used to guard against instability in the oil market, which allows Norway much greater economic flexibility and resilience.

The April 2010 Deepwater Horizon catastrophe was a painful reminder of the Gulf Coast’s dependence on the oil-and-gas sector as well as the region’s vulnerability to crippling disaster. If the Gulf Coast states were their own country, they would face quite a few of the same economic problems Friedman points out in his article. As the CAP report “Beyond Recovery” emphasized, the three middle Gulf states of Alabama, Louisiana, and Mississippi face extraordinarily high levels of poverty and are strongly dependent on their proximity to the ocean, as well as their inland resources, and oil spills and coastal erosion pose a significant threat to the jobs and industries that rely on these ecosystems.

“Beyond Recovery” lays out a clear case for how a regional plan for ecosystem restoration can address these challenges while simultaneously creating tens of thousands of jobs:

Such investments in wetlands and coastal restoration can create nearly six times as many jobs as investing in oil and gas. These jobs span a range of skills and occupations, many of which are familiar skills to the region’s oil and gas, shipping, and fishing industries. As companies hire thousands of dredge operators, civil engineers, biologists, landscape architects, nursery workers, boat captains and builders, and monitors, Gulf Coast residents will have a tremendous opportunity to access new livelihood opportunities.

This is a far better future for the Gulf Coast than simply drill, baby, drill.

In addition, there is a great opportunity to support the expansion of firms and occupations associated with restoration activities by advancing science and technology to create a regional innovation center in coastal science and restoration industries. Finally, the region is also home to strong solar and biomass resources that could serve as the building blocks for a long-term economic-development strategy that does not rely so heavily on fossil-fuel resource extraction.

Several provisions in the RESTORE Act are consistent with recommendations put forth in “Beyond Recovery.” They include the creation of research “centers of excellence” to help promote diversification into new sustainable industries and jobs, preferences for firms agreeing to hire local workers, and provisions to develop strategies that address the specific needs of socially and economically vulnerable communities in the region.

In addition to its rare support from both sides of the aisle in Congress, RESTORE also appeals to voters across party lines. Bipartisan polling found that 83 percent of voters nationwide support efforts to dedicate the Deepwater Horizon oil spill penalties to restoration of the Gulf ecosystem, including 76 percent of Republicans and 78 percent of Tea Party supporters.

Passing the RESTORE Act would provide the people of the Gulf Coast with the resources they need to learn new skills and trades, develop new industries to strengthen and diversify their economies, and to restore the precious and fragile ecosystems they depend on. Nearly two years after the explosion aboard the Deepwater Horizon and without a single piece of legislation to aid the families, businesses, and ecosystems that continue to suffer as a result of the spill, it can’t come soon enough.

Kate Gordon is Vice President for Energy Policy at the Center for American Progress. Kiley Kroh is Associate Director for Oceans Policy Communications at the Center.

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