California: Energy Rich, Decision Poor
- May 9, 2013
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The Wall Street Journal has an incisive editorial this week that compares the diverging trajectories of two big, energy-rich states: Texas and California.
Texas is flush with well-paying oil and natural gas jobs, supported by shale development spurred by advances in hydraulic fracturing and horizontal drilling. The Journal notes that more than 400,000 Texans work in the oil and natural gas industry – nearly 10 times as many as in California – and the state has doubled its oil output since 2005. California? It used to be mentioned in the same breath as oil giants Texas and Alaska, but oil production is down 21 percent since 2001 and it has slipped out of the top-three tier of oil-producing states. The editorial:
This is not because California is running out of oil. To the contrary, California has huge reservoirs offshore and even more in the Monterey shale, which stretches 200 miles south and southeast from San Francisco. The Department of Energy estimates that the Monterey shale contains about 15 billion barrels of oil, which is about double the estimated supply in the Bakken (in North Dakota and Montana).
The contrast between these two states – not unlike the differing paths (and fortunes) of pro-fracking, pro-energy Pennsylvania and no-fracking, no-energy New York – points to the national discussion of expanding domestic oil and natural gas production, which President Obama has backed in calls for an “all-of-the-above” energy strategy.
The question is whether we’ll embrace America’s oil and natural gas wealth with comprehensive pro-development policies. Texas and Pennsylvania have, New York and California haven’t. The Journal:
Texas loves being an oil-producing state while California is embarrassed by it. … So the oil remains locked in the ground, as one million Californians look for work, as its schools and roads deteriorate, and as it keeps raising taxes to balance the budget. What a tragedy. Imagine how fast the U.S. economy would grow if California were more like Texas.
Again, we’re seeing a similar contrast between Pennsylvania and New York: Pennsylvania supports safe and responsible shale development; New York has spent five years studying fracking while its residents watch farms, business opportunities and their futures slip away. A new report by the Manhattan Institute describes what New Yorkers are missing:
- Pennsylvania counties with fracking have performed better economically than those with no wells. Between 2007 and 2011, per-capita income in counties with more than 200 wells rose 19 percent, by 14 percent in counties with between 20 and 200 wells and by 12 percent in counties with less than 20 wells. In countries with no fracked wells, income went up just 8 percent.
- Pennsylvania counties with more than 200 wells added jobs at a 7 percent rate over the same period, while in counties where there was no drilling or only a few wells, the number of county jobs shrank 3 percent.
Using the Pennsylvania data to project hydrofracking’s effect on New York counties, we find that the income of residents in the 28 New York counties above the Marcellus Shale has the potential to expand by 15 percent or more over the next four years—if the state’s moratorium is lifted. Our data also suggest that had New York allowed its counties to fully exploit the Marcellus Shale, those counties would have seen income-growth rates of up to 15 percent for a given four-year period, or as much as 6 percent more than they are experiencing.
The question is, if the relationship between oil and natural gas development and economic growth is so strong, why do California and New York remain on the outside looking in? An important factor, as the Journal editorialized, is that California’s predominant political culture doesn’t like oil and natural gas, the wealth right under Californians’ feet. So, though Democratic Gov. Jerry Brown backed drilling on some level during a press conference last month:
“[When people in California] can get around without using any gasoline, that’s the time for no more oil drilling. Maybe. Because they’ll be many other people still driving. … Now, do you want to get the oil from Venezuela [or from] 100 miles away? … So we want to get the greenhouse gas emissions down, but we also want to keep our economy going. And that’s that balance that’s required … Whether it’s fracking, or whether it’s a low-carbon fuel standard, or anything else, we keep our eyes open and we’re not jumping on any ideological bandwagons.”
… His party remains obliged to powerful environmental interests that have blocked development, largely through scare tactics designed to generate public doubt and fear. The same influences are at work in New York.
The fact is our industry is subject to federal environmental standards, contrary to suggestions otherwise (debunked in detail here). At the same time energy-producing states have strong, efficient regulatory regimes in place, tailored for each state’s geology, hydrology and other characteristics. And they’re doing a good job, which federal officials acknowledge.
It’s time for California, New York and perhaps other states to make energy policy decisions based on fact. Both states have vast oil and natural gas reserves that could put residents to work in good jobs and stimulate their economies. The energy-jobs-economy model that’s working in Texas, Pennsylvania, North Dakota and other states can work elsewhere, too.