Jackson Free Press

Captain Louis Skrmetta is on the front lines. So far, Skrmetta, whose family has operated tour boats between the mainland and Mississippi's barrier islands in the Gulf of Mexico since 1926, is fighting a winning battle to rebuild his business to pre-Hurricane Katrina levels.

Before the 2005 storm, Skrmetta's Ship Island Excursions ferried 65,000 people per year on average. Last year, it shuttled 43,000 people.

"It grows every year," he said of his recovering business. "It's just very confusing as to why the state would push an activity that would hurt cash flows (of tourism business owners)."

Skrmetta's voice is one among a growing chorus of Coast residents opposed to a state plan to potentially ramp up mineral exploration and drilling. In mid-December, former Gov. Haley Barbour directed the Mississippi Development Authority to start the process of opening up state waters to drilling.

Dan Turner, spokesman for the MDA, explained that energy companies would bid on blocks the Legislature established in 2004 and, if lawmakers choose to accept the bids, would also pay a royalty on whatever minerals are extracted.

Before leaving the post in January, Leland Speed, former MDA executive director, wrote an open letter estimating the state could collect between $241 million and $523 million in royalties alone, with more than 97.5 percent going to the state's education trust fund. Turner added that the actual royalty amount would depend on market conditions.

But Skrmetta and other critics wonder whether the benefits of the gas royalties outweigh the long-term damage that could be done to tourism and the environment.

Jeffrey K. Bounds, an MIT-trained engineer who has family ties to Mississippi's Gulf Coast region, drilled down to the numbers in a report published in January 2012.

In "Drilling by the Numbers, Again: The Economic Impact of as Exploration Offshore of Mississippi," Bounds picks apart several of the state's assumptions, including the size of the state's natural gas reserve and how much in royalties the state might collect based on price trends.

Even accepting the MDA's claim that 350 billion cubic feet of natural gas lies under the seabed, Bounds finds that the figure is one-seventeenth of neighboring Alabama's 6.5 trillion cubic feet. How fast the reserve diminishes also depends on the market--the higher the price, the more incentive energy companies have to draw and sell it quickly.

The U.S. Energy Information Administration bolstered Bounds' claim about the smallness of Mississippi's gas resources, concluding in its more recent energy profile of Mississippi that the state is a "minimal" producer of natural gas and electric power given its high per-capita consumption.

"We understand the economy is bad, and everyone wants a free lunch. And we'd like to believe that elected officials supporting drilling are just not paying attention to the beat of the market drum, or are simply so desperate and panicked that they are making bad choices," Bounds wrote.

"But, in this case, the facts are plain enough that we believe citizens need to start asking state officials at least this simple question: Why now? Who profits? It is clear that it will not be residents of the state."

Looking at companies that operate or have recently purchased oil and gas leases in the Gulf of Mexico answers the question of who profits. In Alabama, which ranks 14th in U.S. gas production, just three operators produced 240 billion cubic feet in 2010, which is almost the size of Mississippi's total estimated reserve.

ExxonMobil Corp., Legacy Oil + Gas Ltd. and W&T Offshore Inc., which recently acquired a gas field in Mobile Bay from Shell Offshore. Alabama's oil and gas revenue totaled $311.2 million in fiscal year 2010, according to the state oil and gas board.

During the most recent sale for federal waters in the western Gulf, 20 companies paid $712 million for 191 leasable plots. Among the big players in the auction that took place in New Orleans Dec. 14 were ConocoPhillips Co., BP Exploration and Production Inc. and ExxonMobil Corp.

Despite the potential for a windfall for the state, Bounds' report makes the point that the biggest loser in the deal will be people like Skrmetta who depend on tourist activities.

If one in 20 visitors--5 percent--stay away from the Gulf Coast, Bounds estimates, the loss of state tourism revenue over the life of the reserve would amount to $168.5 million dollars, gobbling up the state's anticipated revenues. MDA refutes this argument, saying on its website that tourism remains robust in Alabama.

Andrew Whitehurst, assistant director of science and water policy for the Gulf Restoration Network, worries about contamination resulting in the event of drilling-fluids spillage or pipeline ruptures such as the BP disaster of 2010. He also took issue with what he characterized as MDA's hurried public comment process.

"The way that they've done this, putting out their notice during the Christmas holidays, was unfair," he said.

"When you're a state agency considering something this big and this controversial, and you choose that time of year to publish your rules, you're trying to hide from controversy."