No BP Aid For Laid-Off Shallow-Water Rig Workers

Like many along the Gulf Coast made jobless by the nation's worst ever offshore oil spill, Joe Gonzales figured he could turn to one of BP PLC's (BP, BP.LN) compensation funds for help. He was wrong.

As BP's billions are spread along the Gulf Coast to compensate everyone from bartenders to real estate brokers for income lost this summer, employees of one industry seem to have been excluded from the payouts: shallow-water rig workers.

"We were thinking we'd be included," said Gonzales, 59, of San Antonio, who worked until July as a galley hand a shallow-water rig belonging to Seahawk Drilling Inc. (HAWK). "They have millions and millions of dollars."

Gonzales, whose rig, the Seahawk 2504, has sat idle since completing a job for Mariner Energy Inc. (ME) on June 8, is one of about 300 Seahawk employees who've been laid off since July. That number represents about 30% of Seahawk's work force, company officials said.

Seahawk Chief Operating Officer Kurt Hoffman said the Houston-based company, which operates only in the Gulf of Mexico, tried to wait out permitting delays on prospective jobs and keep workers on idled rigs as long as it could, but it was too expensive to keep them staffed indefinitely. "How long can you wait at $25,000 a day?" Hoffman said in an interview.

The shallow-water workers' case represents a gap in the financial safety nets set up to carry Gulf Coast residents through a year when some of their most important industries -- tourism, seafood and offshore energy production -- were crippled. Hercules Offshore Inc. (HERO) general counsel Jim Noe, who is also a spokesman for the Shallow Water Energy Security Coalition, an industry advocacy group, said that since the Deepwater Horizon rig exploded on April 20 some 500 have been laid off across the sector. Larger companies, like Hercules, that haven't cut jobs "are burning through the cost of keeping idled workers on the payrolls," Noe said.

BP pledged to pay $20 billion into a far-reaching restitution fund, the Gulf Coast Claims Facility, which is repaying waitresses for lost wages and condo owners for cancelled bookings, but rig workers are not eligible from funds coming from the facility. They must apply to a separate entity -- the Rig Worker Assistance Fund, where BP pumped $100 million exclusively for workers who lost their jobs after the federal government enacted a six-month moratorium on deepwater drilling. The fund is limited, however, to those employed on one of the 33 deepwater rigs operating in May when the moratorium began, according to a fund spokesman. Shallow-water workers need not apply.

Sen. Mary Landrieu (D, La.) recently asked the oil giant to allow shallow-water workers access to that money. But fund spokesman Mukul Verma said there are plans to add deepwater support workers to the fund's recipients early next year, and there probably isn't enough money to pay them and their shallow-water peers too.

BP spokesman Daren Beaudo said the company would respond to Landrieu's request "in due course."

Drilling at depths of less than 500 feet is technically allowed to continue. But on Friday, in Houston, Landrieu told reporters that she blames shallow-water job losses on a "de facto moratorium" on new drilling permits, which she and industry leaders say have been slow coming since the new safety regulations were put in place in early June.

"It may be the federal government that has to step up and provide relief to the shallow-water rig workers that they've put out of business," said Landrieu, who predicted further offshore layoffs.

Industry advocates said despite not being subject to the moratorium, permitting has radically slowed down; only seven permits have been approved since June 8, compared to 16 last year, according to Bureau of Ocean Energy Management, Regulation and Enforcement data. All told, there were 96 new wells permitted in 2009 and there have been 53 so far this year, according to the Interior Department's offshore drilling agency. Shallow-water drillers' problems are aggravated by the fact that they operate on contracts that range from a few days to a few months. While idle deepwater rigs, which lease out for years, keep bringing in cash for their owners, shallow-water rigs are stuck in a limbo when their contracts end.

According to a Sept. 24 fleet report, only six of Seahawk's 20 rigs were leased and each of those contracts were set to expire by Oct. 16.

Regulators acknowledge that it now takes them longer to review drilling applications. And Michael Bromwich, who leads the Interior Department's offshore drilling agency, said no permits will be issued unless plans fully comply with the new regulations: "That will not make everyone happy but it is the right way to proceed," Bromwich said in a statement.

For his part. Gonzales, who filed for bankruptcy protection after losing a previous job, said he's fallen behind on his bills. "I don't want to face my trustees," he said. "I don't know what to do."

After Gonzales was rejected by both relief funds, he contacted Rep. Charles Gonzalez. In a letter viewed by Dow Jones Newswires, the San Antonio Democrat told Gonzales that it appeared there was not much he could do. The congressman's advice to his constituent: talk to a lawyer.

-By Ryan Dezember, Dow Jones Newswires; 713-547-9208; ryan.dezember@dowjones.com

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