Tuesday, February 5, 2013

Green v Brown in California Shale Oil Fight

Much to the chagrin of environmentalists everywhere the US sits astride several hundred years of oil and gas reserves trapped in tight shale formations. For many years technical challenges limited access to those reserves.  Advances in horizontal drilling techniques and fracking processes, developed ad deployed successfully in Texas, North Dakota and Pennsylvania, provide California with the means to unlock similar resources.

Whether California experiences an economic boom similar to the booms underway in other regions with oil and gas reserves in tight shale formations depends, in part, on whether companies can afford to extract those resources in California.  Just as their counterparts have done in New York, environmentalists in California have declared war on fracking and have sued to prevent oil and gas companies from developing those resources.  It will be interesting to see whether the coastal elites in San Diego, Los Angeles and San Francisco succeed in barring poorer citizens in the interior of California from enjoying the financial rewards associated with a shale oil and gas boom of the kinds seen in other states.

The New York Times, of all publications, noted the battle may soon be joined.  Below are excerpts from the article and a link to the full story.

Comprising two-thirds of the United States’s total estimated shale oil reserves and covering 1,750 square miles from Southern to Central California, the Monterey Shale could turn California into the nation’s top oil-producing state and yield the kind of riches that far smaller shale oil deposits have showered on North Dakota and Texas. 
For decades, oilmen have been unable to extricate the Monterey Shale’s crude because of its complex geological formation, which makes extraction quite expensive. But as the oil industry’s technological advances succeed in unlocking oil from increasingly difficult locations, there is heady talk that California could be in store for a new oil boom. 
The Monterey Shale has also galvanized California’s powerful environmental groups. They are pressing the state to strictly regulate hydraulic fracturing, or fracking, the drilling technique that has fueled the shale oil and gas boom elsewhere but has drawn opposition from many environmentalists. In December, the State Department of Conservation released a draft of fracking rules, the first step in a yearlong process to establish regulations. 
Though production has been declining for years, California remains the country’s fourth-largest oil-producing state, after Texas, North Dakota and Alaska. So far, little of the crude is derived from the Monterey Shale, whose untapped deposits are estimated at 15.4 billion barrels, or more than four times the reserves of the Bakken Shale in North Dakota, according to the United States Energy Information Administration. 
But the oil companies’ plans for the Monterey Shale are already drawing increasing scrutiny from environmental groups. Though oil companies have engaged in fracking in California for decades, the process was only loosely monitored by state regulators. 
The Monterey Shale’s geological formation will require companies to engage in more intensive fracking and deeper, horizontal drilling, a dangerous prospect in a seismically active region like California, environmental groups say. 
Environmental groups, including the Sierra Club and the Center for Biological Diversity, are suing the Bureau of Land Management and the Department of Conservation to prevent the opening up of further land to oil exploration and to enforce stricter environmental practices.

Again, it will be interesting to see if Californians act to improve their economy.  

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