Greenbacks Beat the Greens in Uber-Green California
If there is anyplace the gang green can expect to get its way, it would surely be California. The state has the highest renewable energy standards in the country, the legislature is currently dominated by a liberal supermajority, and Governor Jerry Brown’s environmental record runs deep.
When the Energy Information Agency reported that California’s Monterey Shale potentially contains more than 15 billion barrels of oil—a supply three times greater than North Dakota’s Bakken and the Texas Eagle Ford formations, environmental groups ratcheted up their efforts to keep the resource in the ground. The weapon of choice? Demonize the technology that allows the oil and gas to be released from the sedimentary rock: hydraulic fracturing—commonly called “fracking.”
California’s legislature had nearly a dozen different bills designed to impede, restrict, or ban fracking. With lawmakers on their side, environmentalists grew cocky. When the bills made it out of committee, Patrick Sullivan, of the anti-fracking group Center for Biological Diversity claimed: “There’s huge momentum in the legislature to halt this dangerous practice.”
Imagine their shock when the rank and file Democrats revolted and defeated AB1323, 37-24—with 12 Democrats voting with 25 Republicans. Another 18 abstained. According to the Wall Street Journal (WSJ), “It’s a good bet they were ‘no’ votes who didn’t want to publicly cross their leadership.” The WSJ called the vote: “a rare rout for The Sierra Club and other greens.”
It seems that California’s “politicians are beginning to wonder if cultivating greenie obsessions has been worth stopping economic development,” writes Mark Whittington for Yahoo.com. “The environmental lobby … has seen the limit of its power.”
This is especially interesting in light of the columns I’ve been writing lately. Remember Environmentalists Endangered and, more recently, Renewable Energy’s Reversal of Fortune? Then, last week, in my column The Sierra Club Exposed, I referenced a Sierra Club director who claims that Latino voters care more about conservation than energy drilling. Yet, who are the Democrats who split with their party to block the fracking bans that would “throw thousands of Californians out of work?” Those representing poor and minority areas with unemployment rates of 12% or more. Six of the seven black and most of the Latino assembly Democrats refused to vote for the ban, while wealthy, mostly white Democratic coastal districts voted for it. Whittington says the vote is “dividing the state’s all powerful Democratic party, pitting rich against poor, white against minorities and coastal California against central California. … powerful rich elites who have pushed an environmentalist agenda at the expense of the common people.”
Fracking has been used in California for 60 years, and is used in about a third of California’s active wells. Since the start of 2011, 974 California wells have been fracked. Catherine Reheis-Boyd, President of the Western States Petroleum Association, asserts: “California has never recorded a single documented instance of fracking wastewater leaking out and contaminating the surrounding groundwater supply.” Meanwhile, environmentalists, such as Adam Snow of Food and Water Watch claim “there’s no safe way to frack.”
Fracking foes want a complete ban. But, California can’t afford not to frack.
The Global Energy Network & Price School of Public Policy, the University of Southern California, and The Communications Institute recently collaborated on a study called “Powering California: The Monterey Shale & California’s Economic Future.” The study found that Development of oil from the Monterey Shale using hydraulic fracturing and other recovery technologies could result in:
- The creation of 512,000 to 2.8 million new jobs,
- Personal income growth of $40.6 billion to $222.3 billion,
- Additional local and state government revenues from $4.5 billion to $24.6 billion, and
- An increase in state GDP by 2.6% to 14.3% on a per-person basis.
In a state with $167.9 billion in long term liabilities—not counting pensions and retiree health benefits, those numbers can’t be ignored. Fresno Assemblyman Jim Patterson wants to “unleash this magnificent potential for jobs.”
Apparently, Democrats, even with a supermajority, have accepted defeat on a fracking ban and are now moving toward taxes. A driving force in California environmentalism, State Senator Noreen Evans (D-Santa Rosa), author of SB 241—which would impose a tax on harvesting oil and gas—says: “California is poised to allow fracking on a monumental scale in the Monterey Shale, and if we don’t enact an oil severance prior to the time we do that, then we’re allowing … California’s resources to be extracted without taxing it.”
• Oil production tax: 4.6% (.046) of market value of oil.
• Regulatory Tax: 3/16 of a cent ($.001875) per barrel.
• Regulatory Fee: 5/16 of a cent ($.003125) per barrel for report periods prior to September 2001. For report periods September 2001 and later, 5/8 of a cent ($0.00625) per barrel Reduced Oil Production Tax Rates for Certified Exemptions:
• Enhanced Oil Recovery Exemption (EOR) 2.3% (.023) of market value of oil; Two Year Inactive Well Exemptions 0.0% (.000) of market value of oil.
With a potential of more than 15 billion barrels of oil in the Monterey shale, saying no to fracking means saying no to California’s economic salvation.
No wonder Governor Jerry Brown has yet to take a position on fracking. In fact, he sounds like he is willing to abandon his solid green credentials—angering environmentalists who are staging protests outside his office. Like the Sierra Club pushing President Obama to use his executive order pen to designate national monuments and block oil and gas development, California’s greens are demanding that Brown short-circuit the democratic process and ban fracking. The Center for Biological Diversity’s Rose Braz claims: “Fracking pollution threatens our air and water and Gov. Brown’s legacy as an environmental leader.”
The green state is going brown.
In March, Brown said “The fossil fuel deposits in California are incredible, the potential is extraordinary. But between now and development lies a lot of questions that need to be answered.” Last month, he seemed to move even closer to supporting fracking: “This is not about just saying, ideologically, yea or nay. It’s about looking at what could be a fabulous opportunity. . . . And if you remember about oil drilling, oil drilling in Long Beach, which was really pioneered I think when my father was governor, poured I don’t know how many billions into higher education.”
California Senate Republican Leader Bob Huff supports developing the Monterey Shale. “While everyone is giddy about the on-time budget just passed, it does not do anything to pay down the state’s unfunded pension and health care system for state employees. If we had the revenues from Monterey Shale we could pay down that debt and truly build a high class education system to continue what Governor Brown’s father began.”
While Brown doesn’t take the doom-and-gloomers all too seriously, most of the state sees through the fear mongering, too. A recent poll found that 60% of Californians were in favor of properly regulated hydraulic fracturing. Only 30% said they prefer a ban. Generally Democrats opposed fracking while Republicans support it; those on the coast and in the San Francisco Bay area oppose it while support was highest in the central valley and in Southern California counties outside of Los Angeles. Support increased if it could be shown that fracking would reduce energy and gasoline prices. Dan Schnur, director of USC’s Unruh Institute of Politics, states: “It’s clear that a majority of voters is comfortable with the procedure, as long as they believe appropriate regulation is in place.”
Of the flurry of bills aimed at either explicit or de facto moratoria on fracking, one did make it out of the Senate after the author agreed to remove the fracking moratorium provision to get the bill to the Assembly. SB 4 originally called for comprehensive regulations and a fracking moratorium until January 1, 2015—by which time the guidelines would be in place. The bill’s author, Senator Fran Pavley (D-Agoura Hills)—usually an environmentalist ally, describes the bill: “This is not a bill to ban, prohibit or regulate hydraulic fracturing. It’s to provide transparency to the public.”
Investors are now buying up property in the regions surrounding the Monterey Shale, knowing that development will mean economic recovery and a need for new housing and services. The gang green is losing to greenbacks.
Once again, energy could make California great.
[Originally Published by Townhall Finance]