The California economy could be in the midst of a major upswing—something it desperately needs after years of continuous downfall. The key holder: the Monterey Shale, an oil rich region spanning nearly 1,700 square miles from Los Angeles to San Francisco.
Experts are reporting that this natural gas reserve could make the state of California the nation’s top oil producer, as the New York Times reports, in turn rectifying its troublesome economy much like the Bakken Shale deposit did for the state of North Dakota.
But the Bakken is only a quarter of the size of the Monterey.
Experts have known there was shale oil in the Monterey since the ‘70s, but it’s only been recently that the thought of harvesting it has become a real possibility due to the improvement of fracking technology.
In fact, Monterey is believed to hold 400 billion barrels of oil, 15 billion of which can be extracted and used—that's about half of what was found in Alaska’s North Slope before it was tapped, CNNMoney reports.
And considering the U.S. uses roughly 19 million barrels of oil each day, the oil industry has a keen eye on California.
From Fox News:
Geoffrey Styles, energy consultant, recently wrote in the online forum The Energy Collective that drilling the formation “could slash California’s imports while adding billions of dollars a year to the local economy and to the shaky state budget, along with lots of good jobs.”
Oil companies have already been there for decades, fracking away at the earth, but with the advent of new technology, operations can take place on a much larger scale.
Western States Petroleum Association spokesman Tupper Hull told the NY Times, “Nobody can point to any incident or impact that has taken place.”
And that may be true, but knowledge about the environment and regulations set forth to protect it are much more stringent than ever before. Many believe the geology of the Monterey is too fragile, and with the San Andres fault being part of the landscape, the potential for earthquakes will greatly intensify.
Water contamination is also feared; fracking uses millions of gallons of water per well, and this could pose problems in a state that already sees water shortages. And if chemicals used in the fracking process leak into groundwater, it would lead to a whole slew of other problems.
Environmental groups are demanding strict regulations for fracking operations. In December, the State Department of Conservation released a first draft of rules, but it also left out one vital element: it did not require companies to disclose what types of chemicals were being used.
But if fears are alleviated, the amount of jobs created would be monumental; that alone could change the economic outlook for California.
Already, 600,000 jobs have been generated due to the shale boom, CNNMoney reports.
With controversy looming, the oil industry is marching right in and planting its roots, putting together research teams and teaming up to take the Monterey Shale by storm.
Occidental Petroleum (NYSE: OXY) and Venoco (NYSE: VQ) are the two biggest stakeholders in Monterey Shale, and they have formed a triad with Hess Corp. (NYSE: HES).
Occidental has recently been using a new technology called deep acid injection: injecting hydrofluoric acid deep into the ground to eat away at shale rock and release oil for extraction. It’s cheaper, less controversial, and may be a good alternative in seismic areas, CNNMoney reports.
After time and money are spent, there still is no promise that an oil boom will ever take place in California. As Fox News reports, the state has seen its history face similar scenarios—the discovery of oil outside of San Francisco in 1865 and again in Los Angeles in 1894. They both fizzled out right along with the hype.
Maybe the third time is the charm.