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California’s Energy Outlook Mixed, Say Industry, Legislators

With carbon emissions and well stimulation now regulated by the state, and with new water rules and energy taxes possible next year, oil and natural gas industry representatives expressed mixed feelings Tuesday about the future of their business at Oil and Gas Awards’ West Coast Energy Summit in Bakersfield, CA.

Members of California's two major industry associations called the recent regulatory pressures the best and worst of times, acknowledging that the state's near-term future as a powerful producer could be viewed positively or negatively. The industry, said supporters, is being attacked by well-funded environmental groups and billionaire activist Tom Steyer that have triggered aggressive campaigns across the state in the name of climate change. 

Having beaten back efforts to put a moratorium on hydraulic fracturing (fracking), industry representatives and lawmakers expressed satisfaction with the ongoing implementation of California's new well stimulation regulations (SB 4) under the Division of Oil Gas and Geothermal Resources (DOGGR) (see Shale DailyOct. 10).

"On the optimistic side you can look to the statewide environmental impact report [EIR] that is going to dispel, I hope, a great deal of the rumors and bad press surrounding fracking," said P. Anthony Thomas, Sacramento-based director of government affairs for the California Independent Producers Association (CIPA). The EIR is required under SB 4.

Elected officials urged the industry to continue to push back against well-organized opposition groups that would shut down a major economic engine in the state.

Republican State Sen. Jean Fuller from the Central Valley in the energy and agricultural heartland, said the majority of the lawmakers would like to maintain status quo, but prevent the industry from growing through an all-out attempt to unlock the Monterey Shale and other areas of California for oil exploration.

"The next step is the growth of the industry to be able to exploit the resources we have with the new technology we have," said Fuller, the ranking minority member of the state Senate Energy, Utilities and Communications Committee. "Everyone who has a job in this industry should be joining with the associations to fight for this now."

Tupper Hull, vice president for communications at the Western States Petroleum Association (WSPA), said on a statewide basis the industry beat back the push for a fracking moratorium and is working with DOGGR to implement the well stimulation rules, but opponents have shifted to local jurisdictions where 22 ordinances or proposals would curb oil/gas activities, including one on the ballot in November in Santa Barbara County (Measure P).

Ironically, the opposition the industry faces and will continue to face comes at a time when the United States is on the verge of becoming energy independent, something Hull said was unthinkable a decade ago.

"Obviously, that is largely the result of technology that has unleashed the shale oil and gas resources in this country, resulting in enormous benefits to consumers and stimulating a reemergence of manufacturing in the central part of the United States…

"At the same time we are facing probably the most vigorous, organized and well-funded opposition to the fundamental business of producing, refining and retailing petroleum products in the United States and certainly California."

Overall the state legislators and industry representatives indicated cautious acceptance of SB 4 and the new regulations, but they are leery of the anti-drilling activity locally, along with legislative proposals expected again next year.

"[With SB 4], the industry is now under a significant microscope," said Thomas, noting there are a lot of added administrative and personnel costs associated with the new rules that involve 18 different state agencies. "This industry in this state needs to be embraced; we're the third largest producer of petroleum in the nation."

Separately on Wednesday, the Natural Resources Defense Council (NRDC) issued a report claiming that 5.5 million people in California live within a mile of one of the 87,000 working oil or gas wells. "The risk to these populations is expected to increase as fracking expands in these impacted regions and throughout the state," the report stated.

"Fracking is moving next door to more and more California homes, schools and neighborhoods," said NRDC senior scientist Miriam Rotkin-Ellman. "From Los Angeles to the state's farms and ranches, this industry must not be allowed to poison our people's health."

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