Bloomberg News

California Fracking May Boost State Economy 14%, USC Says

March 13, 2013

Development of oil-shale deposits through Central California using fracking and other techniques may boost the state’s economic activity by as much as 14.3 percent, a University of Southern California study said.

Such drilling in the Monterey Shale Formation, in addition to increasing per-capita gross domestic product, may add as much as $24.6 billion in state and local tax revenue and as many as 2.8 million jobs by 2020, according to the report released yesterday by the Los Angeles-based university.

“Based on the experience of other states, not only would state unemployment fall, but significant migration of properly skilled workers into California would occur,” according to the study. “More job gains can be captured by Californians with appropriate education and training.”

Unlocking the oil within the 1,750-square-mile (4,532- square-kilometer) swath of rock southeast of San Francisco could require hydraulic fracturing, which injects water and chemicals into the shale. Environmentalists say it may damage water supplies.

The Monterey Shale may hold 15.4 billion barrels of oil, two-thirds of the nation’s shale-oil reserves, according to the U.S. Energy Information Administration.

California Governor Jerry Brown, a 74-year-old Democrat, said yesterday that he would defer to state regulators to develop a fracking policy.

“Between now and development lies a lot of questions that need to be answered, and I feel confident that the people are in place in my administration to handle the issues as they come up,” Brown said at a news briefing on renewable energy.

Environmental Advocates

The Sierra Club and the Center for Biological Diversity called for stringent oversight of fracking yesterday at a meeting with regulators in Bakersfield. The city about 120 miles north of Los Angeles is the seat of Kern County, home to an estimated 70 percent of California’s oil reserves.

“A ban on fracking is necessary,” said David Hobstetter, a San Francisco-based lawyer for the environmental diversity group based in Tucson, Arizona. “There are some very serious harms from it and we don’t think it can be controlled.”

The organization sued California in January, seeking to prohibit fracking until the state regulates.

Representatives of Occidental Petroleum Corp. (OXY:US) and Chevron Corp. (CVX:US) said fracking is vital to the state’s economic growth.

“These methods have been used safely and effectively for over 60 years,” Susie Geiger, a Bakersfield-based Occidental spokeswoman, said at the meeting. “Unreasonable burdens could deprive more Californians of opportunities to create jobs.”

California’s Conservation Department released a “discussion draft” of fracking regulations in December. The proposal includes rules for storing and handling fracking fluids, well monitoring after fracking and preventing water contamination.

USC said its study of the economic effects of fracking in the formation was funded in part by a grant from the Western States Petroleum Association, a Sacramento-based industry group, though it “was conducted by an independent USC research team.”

To contact the reporters on this story: Alison Vekshin in San Francisco at avekshin@bloomberg.net; James Nash in Bakersfield, California at jnash24@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net


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