ACCESS NUMBER: 30660-19967 & 30951-16803 

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STUDY TITLE: Modeling the Economic Impacts of Offshore Oil and Gas Activities in the 

Gulf of Mexico: Methods and Applications 

REPORT TITLE: Modeling the Economic Impacts of Offshore Oil and Gas Activities in the 

Gulf of Mexico: Methods and Applications 

CONTRACT NUMBER: 14-35-0001-30660-19967 and 14-35-0001-30951-16803 

SPONSORING OCS REGION: Gulf of Mexico 

APPLICABLE PLANNING AREA: Western, Central, Eastern 

FISCAL YEAR(S) OF PROJECT FUNDING: 1999, 2000, 2001 

COMPLETION DATE OF REPORT: May 2003 

COST(S): FY 1999: $35,784.54; FY 2000: $57,648.83; FY 2001: $1,631.93; 

CUMMULATIVE PROJECT COST: $95,065.30 

PROJECT MANAGER: D.E. Dismukes 

AFFILIATION: Louisiana State University, Center for Energy Studies 

ADDRESS: Energy, Coast & Environment Bldg., Nicholson Extension, Baton Rouge, 

Louisiana 70803 

PRINCIPAL INVESTIGATOR: D.E. Dismukes, W.O. Olatubi, D.M Mesyanzhinov, and A.G. 

Pulsipher 

KEY WORDS: Gulf of Mexico; economic impact; offshore; economic model; outer 

continental shelf 

BACKGROUND: The impact of oil and gas activities on communities surrounding the Gulf 

of Mexico (GOM) has become increasingly more pervasive since offshore activities began 

in earnest in 1947. While there have been numerous intermittent studies of the economic 

impacts these offshore activities have had over the years, no regular, comprehensive 

approach has been developed by either government, industry, or academia. The purpose 

of this research has been to assist the MMS in developing a new and inclusive approach for 

understanding the economic impacts of offshore oil and gas activities on GOM coastal 

communities. 

OBJECTIVES: This research has three goals. First, to compile information on per unit 

costs associated with a host of different OCS oil and gas activities over a number of 

different water depths. Second, and most importantly, to develop an industry-specific 

expenditure profile for a number of different OCS oil and gas activities, over a number of 

different water depths. Third, to developed a general onshore allocation mapping for 

expenditures, by industry classification, to various GOM coastal communities. 
ACCESS NUMBER: 30660-19967 & 30951-16803 

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DESCRIPTION: This study is the first of its kind to comprehensively examine the cost 

structures of offshore activities in the Gulf of Mexico. No other research has examined total 

costs, activity-specific costs, and the allocation of costs to onshore areas in the manner 

presented here. 

SIGNIFICANT CONCLUSIONS: The results of this research are important for the ongoing 

analysis of how offshore activities in the Gulf of Mexico economically impact its surrounding 

communities. The methods and results presented in this research are specific to the Gulf, 

and as such, yield unique, and significantly different empirical results than those developed 

from more generalized economic impact models. The process of creating specific, real 

world models for offshore oil and gas activities in the Gulf of Mexico can yield meaningful 

differences when compared to standardized, secondary IO models. As such, the MMS 

motivation for moving forward with commissioning a study to develop these customized 

approaches appears to be justified.

STUDY RESULTS: The importance and nature of the results from the models developed in 

this research are voluminous. The most important result, however, are a set of tables which 

estimate how economic impacts associated with offshore oil and gas activities are allocated 

to various commodity/industry sectors. In addition, there are a number of detailed total, per 

unit cost estimates by offshore activity phase. Lastly, a number of tables have been 

provided that examine how various industry/commodity sectors supporting offshore 

activities are allocated across the GOM regions used by MMS. Utilizing all of these results, 

the researchers found that there are significant differences between using standardized 

models, and those that are customized to offshore activities in the GOM. 

An example of the differences between standardized results, and those found in the 

research presented in this study can be found by examining the exploratory drilling 

category, in the 0-60 water depth category, for the LA-2 region. The differences in output, 

for instance, are 8 percent lower using the revised method of measuring economic impacts, 

than the standardized approach used in the IMPLAN economic impact modeling software. 

Labor income, however, is about 42 percent higher in the GOM customized analysis relative 

to standard approaches. Value added is 14 percent higher in the GOM customized model, 

while employment opportunities, represented by the number of jobs created by drilling new 

exploratory wells, is 62 percent higher in the customized GOM model than the standardized 

approach. These results, at minimum, support the notion that there are unique economic 

differences in the offshore industry and that the additional research in this project was 

useful in order to better understand the regional economic impacts associated with offshore 

activities in the Gulf of Mexico. 

STUDY PRODUCTS: Dismukes, D.E., W.O. Olatubi, D.V. Mesyanzhinov, and A.G. 

Pulsipher. Modeling the Economic Impacts of Offshore Oil and Gas Activities in the Gulf of 

Mexico: Methods and Applications. Prepared by the Center for Energy Studies, Louisiana 

State University, Baton Rouge, La. U.S. Department of the Interior, Minerals Management 

Service, Gulf of Mexico OCS Region, New Orleans, La. OCS Study MMS 2003-018. 97 pp.