After years of bureaucratic wrangling and public outcry, a landmark decision in California was just handed down… swinging the doors open to a $1.5 trillion oil bounty…
What may appear to be a setback for oil companies in California is actually a thinly disguised green light of mammoth proportions.
Over the past decade, angry citizens and environmentalists have put up one heck of a fight to prevent one of the world’s most resource-rich landmasses from being exploited further.
Through public protests and multiple petitions, various groups have tried to get the highly controversial practice known as hydraulic fracturing banned in California. Hydraulic fracturing – or fracking – involves the drilling and injecting of fluid and sand into the ground at a high pressure in order to fracture shale rocks to release the natural gas and oil inside.
But in a classic “bait and switch” right out of a Hollywood movie, local politicians just hammered the last nail in the coffin on what could’ve been a complete ban on fracking all across the state.
You see, on September 20th, Governor Jerry Brown signed a bill requiring more disclosure from energy firms on their fracking activities within the prolific Monterey shale formation.
Presently, producers and explorers have been reporting to the government on a voluntary basis. The new legislation is scheduled to take effect at the start of 2014.
But while this may sound restrictive to California’s oil industry, it’s actually the best piece of news they could have gotten.
With its passage, the government has now publicly and legally accepted hydraulic fracturing in the state – thereby crushing people’s last hopes of ever getting the practice banned.
Instead of getting tough on fracking, they’re welcoming it with open arms.
And I can think of 1.5 trillion reasons why…
Let’s Get Fracking, And Quick
Last year, California had the not-so-distinguished pleasure of being the most debt-ridden state in America, according to State Budget Solutions, a non-partisan watchdog.
At over $617 billion in the hole, California had more than double the amount of debt incurred by second place New York.
On top of that, the state has the fifth highest unemployment rate in the country at 8.9%.
Needless to say, California is in trouble.
But thankfully, there’s now a $1.5 trillion solution waiting to get tapped. Let me explain…
Over the past two decades, California’s crude oil production has fallen by nearly 50%.
Conversely, the likes of North Dakota and Texas have experienced incredible growth due to the shale oil and gas revolution.
North Dakota has seen oil production soar nearly four-fold in just the last 5 years while their unemployment rate of 3% has become the lowest in the entire country.
Similarly, statistics show Texas has one of the lowest unemployment rates in the nation, and more people are moving to the state. Midland has the lowest unemployment rate in the state, and reported just 3.1% unemployment last December — thanks to the oil boom.
The common themes behind these success stories is that state governments embraced fracking early on and are now reaping the economic benefits of increased oil and gas production. Today, these states enjoy ultra-low unemployment and budget surpluses that would’ve never been possible in the past.
But what’s incredible is that California has the potential to blow North Dakota and Texas right out of the water… with the Monterey Shale.
For those who don’t know, the Monterey Shale formation is roughly 1,750 square miles that stretches across much of the San Joaquin Basin.
The US Department Of Energy estimates that the Monterey holds more than 15 billion barrels of oil – which would make up about two-thirds of all the shale-oil reserves in the US.
At today’s prices, that would mean there’s more than $1.5 trillion worth of oil sitting just beneath SoCal — yet the state has done next to nothing to exploit this whale of a formation.
According to a recent study by the University of Southern California (USC), exploiting a bounty of that magnitude would yield significant economic prosperity beyond its energy sector:
- Job Creation. Developing oil from the Monterey Shale could add more than 2.8 million new jobs between 2015 and 2020.
- Economic growth. Total economic activity in the state, as measured by the state’s GDP, could increase by 2.6% to 14.3% on a per-capita basis.
- Increased personal income. The average personal income in California could grow from 2.1% to 10.0%.
- Increased government revenue. Tax revenue collected by state and local governments could grow by $4.5 billion to $24.6 billion.
The study further estimates that every sector throughout the energy supply chain would be positively impacted, which in turn will boost jobs, incomes, and consumer spending across the board.
It concludes by stating, “Through the prudent and carefully regulated development of the Monterey Shale, the state of California could potentially achieve proportionately large increases in the production of crude oil, leading to similarly large economic gains.”
So while opponents of fracking have lost the battle to ban the extraction technology outright, the people who live in California can look forward to a number of economic benefits that will help transform the debt-ridden state in the near future.