By Kelly Nolan Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--BP PLC's (BP, BP.LN) $20 billion escrow fund for the Gulf Coast oil spill "is a good start," but may not be enough to compensate the individuals and businesses that may be affected, Louisiana Treasurer John Kennedy said. "I support it, and I've been one of the ones that asked for it," Kennedy said in an interview, referring to the fund. "I hope damages don't reach that level, but everything I see right now leads me to believe they will." It's difficult to know how much of an impact the spill could have on Louisiana's economy, "because damages are still being sustained as we speak," Kennedy said. However, it's likely the effects will be significant. Louisiana's tourism and fishing industries, which together account for about 5% of the state's roughly $210 billion gross domestic product, will be most directly affected, Kennedy said. But "the ripple effect will also be huge," he noted, as businesses connected to those key industries--like restaurants or even supply-boat manufacturers--could also suffer a blow. The Obama administration's moratorium on deepwater drilling will also be "devastating economically," Kennedy said. Louisiana is considered the home of the U.S. offshore oil and gas industries, and those businesses directly or indirectly contribute nearly one-third--or roughly $65 billion--of the state's GDP, Kennedy said. Last week, Louisiana Gov. Bobby Jindal said the moratorium could cost the Bayou State up to 6,000 jobs in the first few weeks and potentially 10,000 jobs within a few months. Kennedy noted a recent local industry association study that estimated lost wages could total $165 million to $330 million per month. That means the separate $100 million fund BP devoted to helping out-of-work oil-industry workers wouldn't even cover one month's loss, he said. "It's not even close," Kennedy said. Louisiana's reliance on underwater oil production was one reason Moody's Investors Service said earlier this week it was the Gulf state most at risk from the oil spill. Moody's said about two-thirds of the rigs affected by the government's deepwater drilling ban operate near Louisiana, which has about 17,000 workers in the oil and gas production industry. Despite the likely damage to Louisiana's economy as well as its environment, rating agencies and investors generally feel the state's finances shouldn't take much of a hit. In a research note last month, Moody's said Louisiana had more than $5 billion in cash as of Dec. 31 last year, so the state's "ability to absorb the short-term costs associated with the oil spill are strong." Adam Weigold, vice president and portfolio manager at Eaton Vance, which manages more than $26 billion in municipal bond assets, added that "it seems that BP and possibly the federal government are going to shoulder most of the financial burden." -By Kelly Nolan, Dow Jones Newswires; 212-416-2167; kelly.nolan@dowjones.com (END) Dow Jones Newswires June 18, 2010 14:13 ET (18:13 GMT)
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