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Trump: "California Open for Fracking"

Written by Luke Burgess
Posted October 7, 2019

On Friday the Trump administration formally announced it will permit the leasing of over 700,000 acres of federal land in central California for new oil and gas development, ending a five-year prohibition on fracking in the state.

The Bureau of Land Management has not leased any federal land for oil and gas exploration in California since 2013. That was when a federal judge ruled the agency violated the National Environmental Policy Act by issuing oil leases without considering the environmental impact of fracking.

But on Friday, the BLM said it would make a total of 722,000 federal mineral estates available for leasing and approved a resource management plan for central California that would permit 14 legally disputed leases in Monterey and San Benito Counties, which were blocked by environmental groups six years ago.

The BLM said in a press release that the decision promotes “environmentally responsible energy development while creating jobs and providing economic opportunities for local communities.” They estimate the oil and gas industry on private and public lands directly supports approximately 3,000 jobs and $620 million in tax revenue in the central California coast area.

Of course, the announcement was not without protest. Clare Lakewood, a senior attorney at the Center for Biological Diversity, one of the groups that sued the BLM in 2013, said in a press release:

This reckless move is the toxic convergence of Trump’s climate denial, loyalty to the oil industry and grudge against California. Turning over these spectacular wild places to dirty drilling and fracking will sicken Californians, harm endangered species and fuel climate chaos. We’ll fight tooth and nail to make sure it doesn’t happen.

Jenny Binstock, campaign representative for the Sierra Club, said in the same press release:

The Trump administration is putting California's communities and our climate at risk as they prioritize fossil fuel industry profits over our public lands and the health and safety of our families. We will continue to use every tool at our disposal to push back against this irresponsible decision and to protect our public lands from fracking.

And, of course, many others on social media chimed in as well, all pretty much saying the same thing. But there's something all of these folks are purposely ignoring. And that's this: These 722,000 acres will account for less than 1% of the oil and gas development in California.

The other 99% is already taking place on privately owned land. The oil and gas that will come out of these leases is just a drop in the bucket compared to the bigger picture.

And how do I know these folks are purposely ignoring that?

Because that fact comes directly from the BLM press release about opening the lands up. Unless they've read a different version of the BLM press release, it reads:

California is highly developed, with some oilfields having been in production for more than 100 years. Less than one percent of oil and gas development is located on Federal minerals in the Central Coast Field Office planning area. The BLM anticipates most new oil and gas development within the planning area to occur in or near existing oilfields in Fresno County.

It's impossible not to understand the perspective of environmental groups. No one wants to live in a polluted world. But they don't seem to understand (or they purposely ignore) that we can't live without polluting — unfortunately. We must make a footprint. We can try to minimize it. But a footprint must be made. And in this case, it's necessary.

Again, we're really only talking about a relatively small area. But opening the region up is also a message. It's a message from the Trump administration to the oil and gas industry that's saying: "Hey, guys, we're going to do what we can to get you working."

Does that mean Trump is loyal to the oil industry? That he's some kind of corporate shill?

No.

Now, don't get me wrong. I'm assuming that Mr. Trump does, in fact, have some sort of personal monetary interest in supporting the oil and gas industry. I mean, sure. Why wouldn't he?

But again, we need to consider the bigger picture. And that's energy independence.

The rise in fracking and new techniques to allow for the production of tight oil resources has made America closer to energy independence than ever before. The United States is, in fact, the world's #1 producer of oil.

And that has just recently played a role in protecting the nation's economy. Without the development of tight oil resources in the U.S., which were so protested, events such as the recent Abqaiq attack in Saudi Arabia would have affected oil prices much more directly.

In states like Texas, oil and gas development has been growing so fast that infrastructure in areas around the Permian Basin have been strained. Local authorities have been dealing with electricity, water, and housing shortages as well as heavy truck traffic that quickly deteriorate roads.

But thank God for them.

Today, the Permian Basin is the largest producing oil field in the world — even bigger than Saudi Arabia’s Ghawar. The EIA reports oil production from the Permian is currently at 4.2 million barrels per day. That's compared to Ghawar's production of 3.8 Mbbls/d.

The Permian Basin is the largest oil and gas region in the world right now in terms of production, and estimates of its underdeveloped energy resources are growing.

But the Permian Basin is just one of a small handful of other undeveloped oil and gas basins. And there could be more tight oil and gas in and around Texas than anyone ever thought, just waiting to be discovered and developed.

Resident Permian Basin expert Keith Kohl says, “For sure, there are billions of barrels of recoverable oil in and around the Permian Basin that haven’t even been counted yet. Potentially trillions of dollars just waiting to be found.”

Keith has recently published an entire report that discusses these “secret” oil and gas basins in Texas. I highly urge you to look into these alternative basins before Main Street learns about them.

Until next time,
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Luke Burgess

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As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bubble and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.

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