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How the Government Shutdown is Affecting the Oil & Gas Industry

Today marks the 27th day the federal government has been locked in a partial shutdown, extending its lead over the 21-day shutdown that occurred under President Bill Clinton in 1995. With neither the President nor Congress showing any willingness to budge, uncertainty surrounding how long the shutdown will last has caused some in the oilfield equipment and services sector to worry, as it relies heavily on interaction with several of the affected agencies.

Sector-relevant agencies affected by the shutdown include:

  • Environmental Protection Agency (EPA)
  • Department of Interior (DOI)
  • Department of Commerce (DOC)

However, the Department of Energy (DOE) remains open. Despite those closures, reports suggest that some agencies continue to operate normally.

PESA members that have pending business with the DOE will see no unusual hold-ups or lapses in communication, as the DOE is not one of the departments affected by the partial shutdown.

In a similar vein, the DOI has continued issuing drilling permits despite being listed among the closed agencies. Additionally, the Bureau of Land Management (BLM), which falls under the DOI’s purview, met last week to discuss drilling permits near wetlands. The Bureau of Safety and Environmental Enforcement (BSEE), the DOI agency responsible for ensuring environmental safety in the offshore energy industry, has also continued its normal operations and will still process applications for new drilling permits and perform its regular duties. It is unclear, however, how much longer these agencies will be able to continue normal operations during the shutdown.

SUSPENSIONS
The EPA has suspended all environmental reviews for major energy projects.

Like the EPA, the DOC has also suspended most activities and will not be issuing any reports during the shutdown. DOC reports are followed closely by investors and economists and include the latest data regarding the housing market, trade market, retail sales and personal income, among other things. The United States Trade Representative (USTR), which is the DOC agency responsible for negotiating the ongoing trade dispute with China, ran out of funding this week and will now function with less than a third of its staff for the remainder of the shutdown. Despite the staff shortage, the USTR will continue all trade negotiations including talks with China regarding the two countries’ ongoing trade dispute that has resulted in three lists of tariffs that will significantly raise costs on hundreds of different products that directly impact the oilfield equipment sector, such as steel.

More than a third of all government agencies have closed due to the partial shutdown, the effects of which will continue to grow as the shutdown grows longer. While some agencies were able to use previously appropriated funds to continue operations, those funds will soon run out, and agencies will be forced to operate with skeleton crews.

PESA will continue to monitor the shutdown and communicate with individuals in Washington in order to provide Members with the latest information on how the shutdown effects the sector. Should you have any questions regarding the partial government shutdown, please contact PESA VP Government Affairs, Tim Tarpley.