What's wrong with the State of Mississippi's efforts to open state waters in the Gulf to gas and oil drilling, 2012 edition.

1. Estimated Impact
of Gas and Oil Exploration
in Mississippi State Waters
Dr. Jeffrey K. Bounds
14 February 2012

2. What are the economic risks?
• Subsidence and loss of barrier islands
(unknown risk, catastrophic impact)
• Contamination of Mississippi Sound (known
risk, avoidable with very strict enforcement)
• Economic losses due to damage to Coast
tourism industry (high probability)

3. How much oil and natural gas is there in offshore MS?
Experts say there is no oil in MS state waters
Best estimate of total amount of natural gas under Mississippi’s state waters
according to MDA experts: 350 BCF
Amount of natural gas in Alabama’s
offshore reserve: 9,000 BCF

4. So how much $$ is it worth?
Natural gas prices over the last several years:
2008
2010
2009
2011
2012

5. So how much $$ is it worth?
Hmmm, but is there a trend here?
US Gas Prices, Henry Hub
But why would that be??

6. So how much $$ is it worth?
Basic economics: Supply and demand

7. So how much $$ is it worth?
New technology continues to explode shale production
Natural gas reserves now exceed 1970 levels

8. So how much $$ is it worth?
About those price trends . . .
U.S. EIA projected price
ceiling through 2025

9. So how much $$ is it worth?
Price forecasts by US EIA, vs MDA
Effective min.-max. price
range including yield surplus
assumed by MDA

10. Production glut and price drops lead to production cuts and well shutdowns
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Drillers cut natural gas production as prices drop
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As natural gas prices continue to drop, the recent nationwide boom in drilling is slowing.
Keep your comments clean and respect others' opinions. Profanity and insults are not acceptable. don’t make money if prices go too low — and drilling wells isn’t cheap.
Drillers
Monday, February 13, 2012 Total is safe to say
“It Pageviews that there will be fewer natural gas wells drilled in 2012,’’ said Kathryn Klaber,
president of the Marcellus Shale Coalition, an industry group based in Pennsylvania.
Natural gas production cuts continue 1 5 5 9 4
In recent weeks, several companies have announced plans to cut gas production around the
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fewer natural gas wells drilled in 2012,’’
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said Kathryn Klaber, president of the
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weeks, several companies have announced plans to cut gas production around the nation,
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When the shale drilling boom was starting in 2008 the average price for a unit of gas was about
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adding this is "likely to be maintained until expected economics on dry gas

11. So, how much $$ revenue?
Revenues to state and local governments from offshore oil and gas drilling:
$67–$167 million
Revenues to state from tourism in three Coastal counties:
$3.4–$5 billion
Total revenues over life of reserve assuming 20 years to depletion

13. a flood-regulation compliant structure virtually anywhere along the C
such gas rigs would be visible from 14.7 miles. Anecdotal observatio
BayDistances 60 feet tall. Also, from to some key locations: ma
are about from leasable blocks the MDA-provided leasing
eas, one can easily verify the following distances from well-known po
blocks MDA is making available:
Downtown Gulfport: 8 miles to leasable blocks
Downtown Pass Christian: 5 miles to leasable blocks
Old Town Bay St. Louis: 5 miles to leasable blocks
Biloxi (multiple points): 10 miles to leasable blocks
Ocean Springs Front Beach: 10 miles to leasable blocks
Pascagoula near downtown: 8 miles to leasable blocks
sable areas form an east-west band typically two miles deep (north e
at one point south of Biloxi the leasable band is as much as 8 miles d
ocations listed above, then, gas rigs within the leasable blocks would
action of the leasable areas are sufficiently remote to hide a rig taller
e mainland.

14. Will rigs be visible from the mainland?
Yes.
A 50-foot rig would be visible from about 14 miles from
a typical patch north of U.S. 90, or from 15 miles from
many of the most populous areas along the Coast, which are
5 to 10 miles from the designated leasing areas.

15. Tourism impacts: What’s at Risk
• Second largest employment sector on MS Coast
• 2010 State revenues credited to tourism from 3 coastal
counties (MDA source): $3.37 billion
• Would be $5 billion with full recovery to pre-Katrina
industry size
• 9% of Gulf Coasts non-local tourists are visitors to the
Mississippi barrier islands
• A 3% drop in tourism would leave the state with a net
loss of revenue due to drilling, ignoring associated
costs due to employment loss

16. BP Spill demonstrated & increased
tourist sensitivity
• BP spill caused a 50% drop in tourism on the Mississippi Gulf
Coast
• Brown water of the sound doesn’t help perception
• Visible presence of rigs will reinforce bad memories

17. What about Alabama’s experience?
Alabama protects its revenue-generating Coast tourism
areas with a 15-mile viewshed buffer
• In 1996 after 15 years of gas drilling, Feds tried to open
leasing within view of Baldwin county tourism centers
• Chamber, municipalities, and Baldwin county passed
resolutions opposed to drilling within 15 miles of coast
• State legislature passed resolution opposing drilling within 15
miles of coast
• Governor relented
• State asked Feds NOT to lease within 15 miles, Feds
implemented 15 mile limits

18. What about Mississippi?
• Alabama, with all their drilling, doesn’t allow it within 15
miles of their tourism industry
• MDA’s Dan Turner: “We don’t think it will affect tourism.”
• Turner: Tourism is bigger than gas for now. The reserve
isn’t growing; is MDA that uninformed about the numbers?
• MDA has placed no restrictions on rig size, or aesthetics,
or shown in any way the attention to detail shown by
Alabama in protecting its waters and tourism.
• MDA has provided no budget for enforcement and
environmental monitoring or protection.

19. Our conclusions:
• The Coast economy is seriously threatened by the current MDA
proposal.
• MDA projected revenues are a fantasy
• Relatively speaking Alabama’s efforts were well considered and
meticulously executed. MDA has made NO effort to consider
damage to Coast tourism, to the risks to state revenue, or to
environmental risks.
• MDA has free reign to tailor or forego leasing to
protect the state’s economic interests. Instead they
are acting recklessly.
Anyone with an interest in state revenues or the Coast economy needs
to speak up NOW.