Could California be on the verge of a new gold rush? That’s the finding of a new study from USC about the potential economic impact of oil that lies deep beneath the Central Valley, known as the Monterey Shale. But extracting that oil isn’t easy, and it would require the use of a number of advanced techniques, including hydraulic fracturing. And that’s attracted concerns from environmental groups and state regulators. Valley Public Radio’s Joe Moore reports on some recent developments in the fracking debate.
Experts says there could be more than 15 billion barrels of oil locked deep within the Monterey Shale formation under Central California. That’s about two thirds of the entire nation’s shale oil reserves, and around four times the amount found in a similar formation in the Dakotas, which is currently fueling a Midwest oil boom.
Adam Rose is a research professor in the Price School of Public Policy at USC. Last month, his group released a study that examined the potential economic impact of the Monterey Shale on California through 2030.
“The economic potential is immense, and it’s not just in the San Joaquin Valley, where most of the drilling will take place,” says Rose.
He says the petroleum rich formation covers over 1,700 square miles in the center of the state, including a good part of the San Joaquin Valley. His study projects that statewide, oil production from the Monterey Shale could create over 2.8 million jobs and grow the state’s economy by 14 percent. It could also be a boon to state and local government, filling coffers with an estimated $4.5 billion. With numbers like that, it’s not surprising that Rose’s report draws comparisons to the California Gold Rush. In more ways than one.
"This is something that could be a major boost to the state’s economy and it’s not just incremental but really a dramatic shift much like a gold rush could be. So it’s really a boon to the state. But at the same time the gold rush did have some negative side effects, environmental, that we still see today," says Rose.
And according to Rose, for this boom, weighing the possible economic rewards with the potential environmental risks will be essential.
"One needs to look at this in a more modern way, and for us to learn from the past. How this pans out depend a lot on the way its managed," says Rose.
Part of the problem with the Monterey Shale is that while geologists have known about it for decades, getting to the oil in a cost effective manner, has been difficult. "The shale does not yield the resource in it, whether it’s oil or natural gas, easily," says Tupper Hull, a spokesperson for the Western States Petroleum Association, which helped fund the USC study.
"For many decades it was perceived as a resource that wasn’t really available. And then along came a couple of significant technological developments," says Hull.
He says those include something called directional drilling, which allows wells to travel horizontally through the richest oil bearing rock, and hydraulic fracturing (also known as fracking), "where fluids, with a propent in it, which is typically sand, gets forced down there with pressures that cause some very small fractures to take place, therefore releasing that resource, whether it be gas or oil into the well bore where it can be produced."
In addition to water, those fluids also contain toxic chemicals that environmentalists say could contaminate groundwater. What happens to those fluids is a big concern for Brendan Cummings, a lawyer with the Center for Biological Diversity. His group, along with the Sierra Club filed suit earlier this month to stop fracking operations on 17,000 acres of public land in Fresno, Monterey and San Benito counties.
"Our lawsuit essentially argues that the federal government was required by existing law to fully disclose and analyze the risks presented by fracking. What are the chemicals used? What groundwater bodies may be put at risk by these? What is the relationship between fracking and earthquakes? Where will the water come from to frack these wells," says Cummings.
He says the risks to the environment and human health are real.
"The chemicals involved in fracking are something that we’re very concerned about, both in terms of the potential of groundwater contamination, as well as the fact that it generates a lot of wastewater," says Cummings.
His organization also supports a bill in the state Assembly by Santa Monica Democrat Richard Bloom, that would put a moratorium on fracking in the state until lawmakers develop more regulations to govern its use.
"Until and unless the state the feds and industry can really demonstrate that fracking is safe, and until there’s some way we can demonstrate that extracting the oil out of the Monterey Shale is compatible with a renewable energy economy, we shouldn’t be fracking at all, and we need to be leaving that oil in the ground," says Cummings.
That bill and two others which would further regulate fracking passed their first tests in the Assembly Natural Resources Committee on Monday on identical 5-3 votes. They will now go to the Assembly Appropriations Committee.
At the same time, the state’s Department of Conservation is following its own path to develop new regulations for fracking. Under a draft set of guidelines, the state is proposing to tighten some testing and disclosure requirements about where and when wells are fracked. But the rules stop short of full public disclosure of all chemicals used in the process, calling them trade secrets.
The oil industry says the concern over fracking is misplaced, saying the practice is time tested and safe.
"This is a technology that has been used in convention oil production in California for 60 some odd years, and during that time, no one has ever identified a risk to the environment or hazard to the environment. So this idea that this is a technology that has somehow inherent risks or is otherwise exotic really is not an accurate portrayal of the technology," says Hull.
But Professor Rose from USC admits that when it comes to the Monterey Shale, there are some environmental risks.
"We acknowledge there are concerns about water contamination, both in the drilling itself, which is less likely to be significant because you’re drilling below the water table. As long as you have a good well casing you should be in good shape, but there’s a water disposal problem with the chemicals that are used. There’s also the possibility of induced seismicity, meaning the creation of small earthquakes that could potentially pose some problems," says Rose.
Even with advanced drilling technologies, some in the industry question the predictions of a California shale oil bonanza. They say the complex geology of the Monterey Shale could make it difficult to recover all of that oil.
But John Cox, president of The Communications Institute, which partnered with USC on the study, says that while the risks are there, so is the potential reward, including a big boost to the valley's economy.
"What is being raised in California basically involves a four letter word that starts with the word [sic] "R" and it's "risk." How do we basically deal with the risks to public health and safety while allowing for the constructive economic growth that provides for jobs and economic opportunity for people. We have become extremely risk averse in this country," says Cox.
To what degree California remains risk averse remains to be seen. But professor Rose and environmental groups seem to agree on one thing. More study and analysis will be necessary before any 21st century gold rush begins.
“The public should insist that not only should there be further study of the economics, but also study of the potentially negative side effects of this oil development, so that it this big issue can be assessed properly and wisely on behalf of all citizens of the state," says Rose.
It's a balancing act that in one way or another could dramatically change the future of the San Joaquin Valley and California.