BP Oil Spill Rips Through Gulf Small Businesses | North America > United States from AllBusiness.com
Facebook Twitter Google+ You Tube RSS Feed

BP Oil Spill Rips Through Gulf Small Businesses

More

Mike Voisin, owner of Motivatit Seafoods, Inc., in Houma, La. has seen his fair share of Gulf Coast disasters, usually from hurricanes like Katrina in 2005. But the BP oil spill in the Gulf of Mexico is unlike anything he’s ever experienced, and his family has been harvesting and processing gulf oysters for seven generations.

He has a son and a daughter working for him, and for the first time in his life, he’s not sure if another generation will be able to carry on the family’s small business.

With thick crude spewing into the gulf for nearly two months now -- and no way of knowing, at the moment, when it will completely stop -- uncertainty about the long-lasting effects of the spill is making this disaster far worse than even Katrina for small businesses up and down the gulf region.

The only comparable disaster is the wreck of the tanker Exxon-Valdez in Alaska in 1989. It dumped more than 11 million gallons of oil into Prince William Sound. Four years after the spill, frustrated fishermen blockaded the Valdez narrows and stopped tankers for two days because of delayed reimbursements. Claims against Exxon were tied up in courts for years, and the environmental impact is still evident today.

So far, no one knows exactly how much oil has leaked in the gulf; estimates have ranged from nine million gallons to 39 million gallons, and anywhere from 200,000 to about 500,000 gallons are being added to the spill each day, according to the Coast Guard, BP, and private estimates.

For Voisin and other fishermen, the spill couldn’t have come at a worse time. "Processing plants are idle and we are in middle of spring larval season," the oysterman said, referring to the time when oysters produce their offspring for the next season.

"I’m concerned about the long-term and the emotional stability of the people," he added. "A lot of people are on edge about what’s going to occur."

Hurricane Katrina disrupted operations at most processing plants for about two months. The Deepwater Horizon platform blew up on April 20 and sank two days later. That means oil has been leaking for 55 days as of Wednesday, June 16. State officials began restricting fishing in late April, which means the spill could easily surpass Katrina’s disruption.

While the Louisiana fishing industry, which employs about 27,000 people, mostly small businesses, has been most immediately affected, the spill has had a rippling effect across the region, although not all of its impact has been bad.

The lodging industry has reported an increase in business because of the influx of oil workers who are fighting the spill and reporters covering clean-up efforts. Aside from that, however, businesses from car dealers to retail outlets are being hurt, according to state and federal officials.

Carmen Sunda, director of the Louisiana Small Business Development Center in the Greater New Orleans area, said the spill is having a "multiplier effect" on charter boats, vacation property owners, and tugboat owners among others, who are seeing customers cancel contracts.

Used car sales are off 20 percent because potential customers are holding off on spending out of fear of the spill’s impact, according to Sunda, and fishing-related sales are down 80 percent at sporting goods stores. Even the festive Mardi Gras is being hurt because the spill coincides with the due date on float deposits and businesses are also holding off, Sunda said.

"The small businesses in the region are still struggling daily, and many small businesses are laying off employees," Sunda added.

"Countless related business -- restaurants, ice houses, processers, grocery stores, convention centers, and suppliers -- are being affected," added Sen. Mary Landrieu, D-La., who chairs the Senate small business committee. "We are doing everything we can to help."

Indeed, this time around, the Small Business Administration is trying to capitalize on the lessons it learned from its scandalous response to the Katrina disaster. Still some lawmakers and small business owners question whether the government and BP are doing enough.

James Rivera, associate administrator in the SBA’s Office of Disaster Assistance, told the committee at a recent hearing that 28 SBA outreach centers had been set up throughout the gulf region. The agency is providing up to $2 million in working capital loans at 4 percent interest for five years.

So far, the SBA has approved 23 loans totaling $823,000 and is turning around loan applications in five days. Typical loan turnarounds are 18 days. Small business owners can also request deferments on loans from previous disasters, he said.

Since Katrina, he added, the SBA has increased its disaster assistance work stations from 300 to 1,750. It has added 25 loan officers and created a 10-person legal team dedicated to the spill and has set up a web site to handle loan applications online. About one-third of those who apply are doing so over the Internet, he said.

"Our people don’t need more loans they can’t pay; they don’t need arbitrary deferrals with balloon payments at the end," Landrieu said at the hearing and noted that 11,735 SBA small business disaster loans are still outstanding from Katrina. "Our people have borrowed up to the hilt."

Darryl Willis, a BP vice president who is overseeing the oil company’s claims process, told the committee that BP has established 24 walk-in claims offices, has call centers operating around the clock, and has also set up an online claims filing system. All together 700 BP employees have been dedicated to handling claims, he said.

The energy company has paid out 13,700 claims totaling $37 million to date. Still, the average claim payment is only $ 3,100, he acknowledged.

"Our focus is on the individuals and small businesses who have been directly affected: fishers, crabbers, oyster harvesters," he said and added that many are receiving expedited interim payments until their full claims can be established.

Fishermen say the interim BP checks, typically $5,000, are equal to one day’s catch and won’t even come close to sustaining them.

BP is also hurting the processing houses by drafting fishing boats to fight the spill. Voisin told the New York Times his fleet of available boats, which are independently chartered, has fallen between 60 percent and 80 percent.

"A level of urgency is needed. Livelihoods and a way of life are at stake," said Sen. Olympia Snowe, R-Maine, the committee’s ranking Republican. "People face tremendous uncertainty about future, and [the spill] will continue to devastate the economy for years or even a decade."

Newsletter

Weekly Roundup

Sign up for our weekly Experts roundup, delivered to your inbox each Saturday morning.

Most Recent From our Experts

AllBusiness Experts
;
Close

Real Business Owners, Real Business Advice!

Sign up for practical, real-world solutions from successful business owners delivered to your inbox each Saturday morning. FREE.