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Capital Report


April 2013 Issue

Energy and Mineral Resources Subcommittee Holds Hearing on Offshore Activity and US Economy
The U.S. House Natural Resources Subcommittee on Energy and Mineral Resources held an oversight hearing in March entitled “America’s Offshore Energy Resources: Creating Jobs, Securing America and Lowering Prices.” The hearing focused on the significant economic growth that increased production of offshore oil, natural gas and wind energy could spur.

Natural Resources Committee Chairman Doc Hastings (R-Wash.) said, “The United States has yet to reach its full energy potential” and criticized President Barack Obama’s offshore drilling moratorium.

Subcommittee Chairman Doug Lamborn (R-Colo.) pointed out that 85 percent of the Outer Continental Shelf is closed to drilling for the next half decade.

Cory Kief, Crosby Tugs LLC’s (Golden Meadow, Louisiana) business development director, told the subcommittee offshore energy production would create downstream jobs.

Chett Chiasson, executive director of the Greater Lafourche Port Commission, told the subcommittee that Port Fourchon, Louisiana’s 8,000 direct oil and gas jobs support “more than $63 billion in total value of oil and gas” and “should be seen as an example of what could happen in areas along Florida’s coast, and the East and West Coast if these areas would be available for conventional and renewable energy development.”

For offshore wind, Brian Kroll, senior economist for the Virginia Economic Development Partnership, conducted an economic analysis to estimate the benefits of installation off the coast of Virginia. “Offshore wind energy has significant potential to create career-length jobs in the supply chain, which will build and support the equipment used in the wind farms,” he said. The 10-year analysis shows “Virginia’s GDP would gain $9 billion and state-level tax revenues would gain $119 million.”

Atlantic Grid Development LLC (Chevy Chase, Maryland) is developing an undersea electricity transmission cable for offshore wind. CEO Robert Mitchell said a “Mid-Atlantic build-out [of offshore wind] can create approximately 310,000 job-years of work, about 31,000 workers, in the U.S.” He added, “additional economic activity would increase the GDP by $33 billion.”

Sally Jewell Undergoes Senate Confirmation Hearing for US Secretary of Interior
The U.S. Senate Energy and Natural Resources Committee held a confirmation hearing in March for Sally Jewell, who has been nominated to replace Ken Salazar as secretary of the U.S. Interior.

The hearing was relatively mild, compared to harsher nomination hearings, such as Chuck Hagel’s for secretary of Defense.

According to The Atlantic, Chairman Ron Wyden’s (D-Ore.) opening remarks for the two-hour, 45-minute hearing included him saying: “We’ve got to make sure that we can increase the number of jobs in resource-dependent communities where there is federal land and federal water, and we believe that can be done consistent with protecting our environmental values.”

Jewell echoed the emphasis on economic development: “Public lands are also huge economic engines,” she said. “Balance is absolutely critical. Our public lands and our waters have to be managed wisely.”

Jewell expressed a commitment to President Barack Obama’s “all of the above” energy strategy. She brought up the industry side, as well: “I also understand, as a businessperson, it’s important to bring certainty and clarity to industry,” she said. “Industry doesn’t mind the rules, they just want to know what the rules are, and they want predictability as they make investments.” 

Tension Grows Among US Gulf States Over Deepwater Horizon Recovery Funds
The U.S. Congress passed the Resources and Ecosystems Sustainability, Tourist Opportunities and Revived Economies of the Gulf Coast States (RESTORE) Act of 2012 to provide funding to the gulf region in the wake of damage from Deepwater Horizon. The act established the Gulf Coast Restoration Trust Fund, consisting of 80 percent of any administrative and civil penalties paid to the U.S. by the responsible parties in connection with Deepwater Horizon.

The RESTORE Act affects Alabama, Florida, Louisiana, Mississippi and Texas. Lawmakers from each state have been negotiating for part of the recovery funds, The New York Times reported. This has exacerbated growing tension among the states.

“Up until last year, all the states were rowing together,” a lawyer told the paper.

In November, the U.S. Justice Department announced a $4.5 billion settlement of criminal charges against BP plc (London, England).

In late February, a civil trial began in New Orleans, Louisiana. Billions of dollars are at stake.

US Navy’s Submarines, Nuclear Reactors And JHSVs Could be Cut Back by Sequestration
Cuts worth $46 billion will affect defense spending over the next seven months as sequestration took effect in March.

Except for military pay, every Pentagon account will be cut by 7.8 percent from full-year levels, the U.S. Office of Management and Budget said in a report to Congress, according to Businessweek.

The cuts apply to funds from this fiscal year not yet obligated under a contract. The cuts also apply to unspent money from previous years.

If sequestration continues, defense programs would be cut by about $500 billion over nine years from planned levels.

Signed contracts would rarely be affected because they come with heavy cancellation charges.

The U.S. Navy will begin contract modification negotiations that could cut funding for Virginia-class attack submarines, nuclear reactors and joint high-speed vessels (JHSVs). This could affect the Navy’s submarine builders, Huntington Ingalls Industries Inc. (Newport News, Virginia) and General Dynamics (Falls Church, Virginia). The Babcock & Wilcox Co. (Charlotte, North Carolina), which makes nuclear reactors, and Austal (Henderson, Australia), which makes the JHSV, also could be affected.


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