Budget Cuts Leave Oil and Gas in Dark

Little is known about sequestration other than this: The Pentagon will lose about $500 billion. The rest of the government will lose the rest of the money.

The oil and gas industry remain in the dark. They don’t know what to expect. Nor do environmentalists. Neither camp likes envisioning what could be coming down the pike.

The Department of Interior would not answer questions about sequestration. But the assumption is Interior, like other non-defense agencies, will have to trim between eight and ten percent of its budget.

Most believe it will evenly hit everything: the Environmental Protection Agency, the Bureau of Ocean Energy Management, the National Park Service.

“I think we’ll have less environmental protection. We’ll have less meaningful management of wildlife from Fish and Wildlife Services,” said Charles Clusen, with the Alaska Programs at the Natural Resources Defense Council. “So I think with all these agencies it’s going to be a real problem where there are important services that the public has to come to expect that won’t be there.”

Clusen said he’s worried a cut of 8 or 10% would lead to layoffs – from seasonal rangers in the National Parks to oil and gas inspectors.

Just last week Interior Secretary Ken Salazar approved Shell Oil for operations in the Arctic Ocean.

“Salazar and others have been promising there going to have all these inspectors on all the ships and rigs and so on. So if there were a real cut back of personnel, conceivably, there won’t be all those people watching,” Clusen said.

Until OMB releases its directive, that cannot be verified.

And there’s a thought that a reduction in force could slow down the permitting process, said Dan Kish, a longtime aide to former Senator Frank Murkowski and Representative Don Young.

Kish now works as Senior Vice President for Policy at the Institute for Energy Research.

“Unlike a lot of activities the government does, these act ivies actually result in more money for the federal government. Issuing the leases for the Chukchi was over $2 billion up front,” Kish said.

Signs indicate Congress will pass legislation delaying the sequester, but expect a showdown over budget cuts and taxes between now and the end of the year. A delay will not come easily, even if both parties support it.

And if the cuts do come January 2nd– either in full or part – pay attention.

Both Clusen and Kish talked about the “Washington Monument Syndrome.” It’s fairly well known in D.C. … And it means if the government shuts down, it shuts down the popular things first. People feel that.

And then, maybe, with even more pressure, this time from constituents, Congress might pass a deficit reduction package.