Dan Walters: California oil could boom again

dwalters@sacbee.comJuly 8, 2013 

When the Legislature's 2013 session began, one of its hottest topics – as indicated by the number of bills – was hydraulic fracturing, a technique to extract oil from shale thousands of feet below the earth's surface with high-pressure injection of water and chemicals.

"Fracking," as it's popularly termed, has ignited an oil boom in other states and California is believed to have the nation's largest shale oil deposits in the Monterey Shale Formation, a 1,750-square-mile chunk of the state, mostly in the lower San Joaquin Valley.

That region was the site of a major oil boom in the early 20th century and continues to produce. California, in fact, is still the nation's third-largest oil producer and the U.S. Energy Department estimates that Monterey shale could contain 15-plus billion barrels of oil, two-thirds of the nation's shale oil reserves.

Simply put, California could see another oil boom of monumental proportions – but that would depend on fracking and other "well stimulation" techniques.

California's shale oil is so different from that in other states that fracking may not be sufficient to recover it. A legislative report indicates that oil drillers may have to use "acid well stimulation treatment" instead.

Therein is the rub.

Fracking has been used in California for many years and is generally considered a relatively low-risk technique. But pumping deadly acids into the ground is, to many, potentially dangerous.

The bills introduced on the issue were all over the map, including one that would have imposed a fracking moratorium. But, one by one, they fell by the wayside except one, Senate Bill 4, which has cleared the Senate and is now pending in the Assembly.

It would not prohibit "well stimulation" but would impose extensive permitting and reporting requirements. "We need to get this right," Sen. Fran Pavley, D-Agoura Hills, told the Assembly's Natural Resources Committee last week. But there's no consensus on what's right.

Generally, environmental groups back Pavley's bill and the oil industry doesn't, but some environmental groups believe it doesn't go far enough.

Meanwhile, Gov. Jerry Brown's administration is writing its own regulations. Brown has indicated, by past words and deeds, that he's favorably disposed toward expanding oil production to boost the state's economy.

One wonders whether there might be the ingredients of a grand bargain – the oil industry given the green light to develop Monterey shale with some stringent but not crippling regulation, in return for which the state could impose a severance tax on new production that would benefit state and local governments.

Shale oil is jump-starting the economies of other states, and there's no reason why it couldn't do the same in California.

Call The Bee's Dan Walters, (916) 321-1195. Back columns, www.sacbee.com/walters. Follow him on Twitter @WaltersBee.

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