California’s economy has been powered for decades by technology, trade and tourism — businesses and jobs mostly near the coast from San Diego to Los Angeles and around the San Francisco Bay Area. The state’s great inland valleys, while serving as a breadbasket for the world, have not been a land of high-paying employment or tax-producing industry.
A glance at the most recent unemployment numbers reflects this reality. While the state’s overall jobless rate is still high by historic standards, it has fallen to 6.3 percent in Orange County, 6.0 percent in San Francisco and 5.7 percent in San Mateo County. In the Central Valley, by contrast, unemployment remains in double digits from Kern County (13.6) all the way to San Joaquin (14.1).
Could Big Oil change all that?
A revolution in the oil industry that’s been taking place in Pennsylvania, Ohio and North Dakota is poised to sweep through California’s oil patch, with the potential to produce hundreds of thousands of jobs and billions in tax revenue for the state.
But there’s a big catch. That same revolution also brings the chance of environmental degradation, threatening the water supply and abetting a carbon-based economy that many were hoping would soon become a thing of the past. That might not be a problem in the rust belt or the job-starved upper Midwest, but environmental protection is one of California’s passions. It is also one of its attractions.
At issue is the future of what is known as the Monterey Shale, a geologic formation that stretches beneath the Central Valley from Bakersfield to Modesto. Parts of this region have been a source of oil for generations. Despite recent declines, California still ranks fourth among the states in crude oil production, behind Texas, Alaska and a surging North Dakota, and most of that oil comes from the southern Central Valley and the surrounding hills.
Geologists say the Monterey Shale dwarfs the oil fields now under development. It holds an estimated 15 billion barrels of oil, or two thirds of the shale-oil reserves in the United States, according to the US Energy Information Administration. If fully developed, the oil field could create as many as 2.8 million jobs and, on an annual basis, $24 billion in extra tax revenue, according to an industry-funded study by University of Southern California economists.
Those numbers might be inflated. But even a fraction of that benefit could transform California’s economy. To put things in perspective, consider that California today still has 140,000 fewer jobs than it did before the recession in 2007, and before that, it took the state more than 20 years to create 2.8 million jobs – from all sources.
The oil in the Monterey Shale, however, can only be retrieved using the technique known as hydraulic fracturing, or fracking. This involves injecting massive amounts of water and, possibly, chemicals into the ground thousands of feet below the surface to break the rocks and free the oil locked within them.
The oil industry has used fracking in California for generations, without incident, according to industry trade associations. But operations in other parts of the country have been blamed by residents and environmentalists for contaminating the water table with toxic chemicals. No one wants that to happen here.
And even if every local environmental risk could be resolved, fracking raises another question for California. The state has been a leader in the fight to limit greenhouse gases, which are blamed for warming the earth and come primarily from the burning of carbon-based fuels. Does California now want to be in a position of enabling the retrieval of vast amounts of oil that will postpone the day at which we might have to confront our carbon dependency?
Gov. Jerry Brown, who all his life has straddled the line between environmentalists and the business world, seems eager to see fracking move forward in California, if he can be assured that it will be done safely. From building a bullet train to transforming the state’s water system and overhauling the way we finance education, Brown is using his second round as governor to build a record that might one day rival his famous father’s. Ushering in a new economic boom that puts the state’s budget on firm footing at last would help cement that legacy.
But Democrats in the Legislature, alarmed at what they say has been lax oversight from Brown’s administration, are trying to put a stop to new fracking operations. Legislation moving through the state Assembly would place a moratorium on the practice and order state regulators to study it and then allow fracking again only if it poses no risk “to the public health and welfare, environment or economy of the state.” The moratorium could last until 2019.
Would Brown sign such a measure if it reached his desk? Probably not. The bill’s intent implies that the governor does not already have the state’s best interests at heart, and it infringes on his powers as chief executive. If Brown wants more studies of fracking, or wants a pause in the practice, he can make that happen without orders from the Legislature.
Absent a moratorium, Brown will remain in the driver’s seat. It will be fascinating to watch him balance so many competing interests on a decision that, one way or the other, could have a profound effect on California’s future.
Daniel Weintraub has covered California public policy for 25 years. He is editor of the California Health Report at www.calhealthreport.org