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On Gulf Coast, nail-biting over future of domestic oil drilling

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His uncertainty about the future reverberates through towns along the Louisiana coast. Their economies pegged, directly or indirectly, to offshore drilling, the locals are carefully watching the oil industry response to the US government's reshuffling of the regulatory regimen. Their big worry is that stricter drilling rules will be worse than the moratorium, creating such a financial burden that oil firms will not commit to long-term projects in the deep-water Gulf.

The new federal rules have indeed led to a wait-and-see situation for operators, as they assess higher costs for insurance, equipment maintenance, purchases of new technology, and other factors, says Michelle Foss, chief energy economist at the University of Houston.

"This is an enormous dilemma for all operating [oil and gas] companies, all of their backers and investors and shareholders," she says. "If [operators] can't see through the fog to see where things are heading and feel confident about it, they're going to start cutting back, and that's what everyone [in the region] is dreading."

The oil and gas industry has long been central to Louisiana's economy. In 2009, the state reaped $1.1 billion in revenue from taxes and royalties. The concern is that energy companies will pull up anchor and seek wells elsewhere in the world, such as Bolivia or Egypt, where they perceive the regulatory climate to be friendlier to their interests.

Ms. Foss, for one, sees that as a real possibility.

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