Oil and Gas Operations in the Gulf Have a Lasting Impact on Real Estate
The oil and gas industry has spurred many politically charged debates. On one hand, drilling for oil and natural gas comes with its own environmental risks, contributes to climate change, and is inherently dangerous for workers. On the other hand, it’s a great economic driver for local economies, real estate markets, and it’s a way to make a living for those who need a way to break the cycle of poverty through honest, hard work. Regardless of where your inclinations lie, one thing is certain: When the oil & gas industry hiccups, Mississippians are often the ones who pay the price. At least, that’s true following the 2010 BP Deepwater Horizon disaster.
The Deepwater Horizon Disaster
At 7:45 PM on 4/20/2010, disaster struck an offshore drilling rig roughly 41 miles off the coast of Louisiana. Highly-pressurized methane gas made its way into the drilling rig’s marine riser, resulting in a violent explosion that took the lives of eleven workers. As the rig was engulfed in flames, ninety-four others were rescued by either helicopter or lifeboat. Just two days later, the rig capsized, and the leak was discovered.
Consequences of the Deepwater Horizon Oil Spill
Considered by many to be the worst offshore drilling incident in history, the spill released an estimated 4.9 million barrels of crude oil into the Gulf, causing roughly $60 billion in total damages. The event directly affected 70,000 square miles of ocean. To put that in perspective, the entire state of Mississippi covers 48,430 square miles.
Now, more than a decade after the BP Deepwater Horizon disaster, Mississippi’s Gulf Coast is still experiencing consequences. Its effects range from the workers who lost their lives and tourism busts to extensive coral death and commercial fishing outfits that never fully recovered.
According to a study published in the Canadian Journal of Fisheries and Aquatic Sciences, the oil spill could ultimately have a -$8.7 billion impact on the overall economy of the Gulf of Mexico, including losses in revenue, profit, wages, and close to 22,000 jobs in the maritime industries alone.
Its Effect on Real Estate
Even years after the event, toxic tarballs would wash up on Mississippi shores, making those gulf-facing beachfront properties less attractive to potential buyers. Meanwhile, other unintended economic consequences of the spill, like its negative effect on the other oil and gas rigs drilling in the Gulf, commercial fishing operations, and the local tourism industry, hurt the housing market as a whole. One study published in the Journal of Housing Economics suggests that from 2010-2015 properties suffered a 4-8% decrease in value as a direct result of the spill.
In 2016, a Federal District judge approved a $20.8 billion settlement, the largest environmental damage settlement in United States history. It’s intended to augment the emergency cleanup efforts that immediately followed the event. Of that $20.8 billion, the State of Mississippi is set to receive $2.174 billion, which will hopefully enable a rapid healing process for the area and make the Mississippi Gulf Coast an attractive place to purchase real estate moving forward. State officials are clear that there’s much work to be done in order to restore the Mississippi Gulf’s former glory, but they’re confident it can be done - and even signal that they’re looking to rebuild better than ever before.
“[Receiving this money] is a final hurdle bringing us closer to accessing all of the settlement funds for projects and initiatives to restore and enhance our natural resources and our economy. Our agency has worked diligently since the spill response and in the recovery phase to strategically implement projects to help make the Mississippi Gulf Coast better than it’s ever been,” said Gary Rikard, Executive Director, Mississippi Department of Environmental Quality.
With funding, diligence, and a dedication to the future, we expect Mississippi to recover its beautiful coastline. After all, there are still properties like this 4 bed, 5 bath beach house listed at $549k near the Gulf that deserve some hype!