Extreme losses in oil, gas and utility properties along the Gulf Coast over the next 20 years can be averted or mitigated by billions of investment by the public sector and private industry, according to a report released Wednesday by Entergy Corp: and the America’s Wetland Foundation.
The study found that the Gulf Coast is vulnerable to a total of more than $350 billion in economic losses by 2030 — more than 30% in the coastal oil and gas sector.
“With the multiplier effect, the amount of economic loss to the Gulf Coast could rise to $700 billion, the gross domestic product for the entire region for one year,” said Wayne Leonard, Entergy’s Chairman and CEO. Leonard presented the report “Building a Resilient Energy Gulf Coast,” at DELTAS2010: World Deltas Dialogue Conference in New Orleans on Wednesday. “No region in the country can afford to lose their entire GDP once every 20 years.”
The study looked at the impact of climate change, weather and subsidence on the Gulf Coast region from the Florida Panhandle through Texas’ Gulf Coast. Researchers found that the Gulf Coast currently faces hazard-related losses of $14 billion each year. Those losses will increase to $18 billion a year without climate change and will increase up to $23 billion a year with extreme climate change.
That amount can be reduced to kept flat — at $14 billion a year — with $121 billion in capital investment — the majority from oil, gas and utilities.
The study recommends that the oil and gas sector reduce risk through $60 billion in investments: improving standards for offshore platforms, building floating production systems, replacing semi-submersibles with drill ships and building levees around refineries and petrochemical plants. Public investments of $44 billion are recommended, including wetlands restoration and improvement of levee systems.
Shell and Chevron, which are part of the America’s Wetland foundation, have been briefed about the study’s findings, said Brent Dorsey, Entergy vice president for corporate environmental programs.
“We are calling for this investment over a 20-year time frame,” Dorsey said. “We need to begin the evolution.”
The recommendations are weighted toward private investment in oil and gas because those investments have the highest cost-benefit ratio.
The study cites levees around refineries as a measure that has a $1 return on every 44 cents spent. Higher design specifications for offshore infrastructure will return $1 for every 80 cents spent. More commonly discussed coastal protection efforts have a much lower cost-benefit ratio. For example, barrier island restoration cost $5.19 for every dollar of value, while home elevation costs $32.58 for every dollar of value. But Dorsey says the study still recommends some measures, such as wetland restoration, with a cost of $3.82 per $1 of value, because not all the benefits — such as improvements fisheries — can be calculated.
Economic research firm McKinsey & Co. and risk assessment firm Swiss Re performed the $4-million, year-long study, which was paid for by Entergy.