Energy, Jobs and Growth: California Can Lead the Trend
California almost always leads the way. Our state has given birth to leading-edge industries as well as many national and international trends, which is why we are the ninth largest economy in the world. Every now and then, though, it is important even for trend-setters to look at developments happening elsewhere to prevent getting left behind.
This is a time when looking outward makes sense. For those just tuning in, the United States is currently the envy of the world due to the renaissance in domestic energy production from shale formations. This economic renaissance benefits all Americans, but particularly those in the states – Texas, Pennsylvania and North Dakota, among others – that are actively and responsibly developing their oil and gas resources.
While California is home to the Monterey Shale – one of the world’s largest shale formations – it sits largely undeveloped. Some ideologically motivated environmental groups want to keep it undeveloped, and prevent the economic growth it could support, by making unfounded and alarmist claims about hydraulic fracturing (a safe and proven 60-year old method of stimulating well production).
The numbers are dramatic. According to a study co-sponsored by the U.S. Chamber’s Institute for 21st Century Energy, which takes an in-depth look at the state-by-state economic contributions of shale development:
- By 2015, shale and unconventional energy will be responsible for 2.5 million jobs; by 2020, 3 million jobs; and by 2035, 3.5 million jobs
- In 2012, shale energy development was responsible for $62 billion in tax revenue
- Between now and 2035, shale energy development is expected to contribute more than $2.5 trillion in total tax revenue—about half of which will go to the federal government, which last we checked was trying to formulate long-term policies to reduce a mammoth national debt (hint, hint!)
- Overall, between now and 2035, the energy industry will invest more than $5.1 trillion in energy development in the United States.
As Energy in Depth has written, the responsible development of energy from shale is helping to put our economy back on track and it is one of the major reasons why domestic as well as foreign companies are finding the United States to be the most attractive place to invest.
As President Obama’s acting Commerce Secretary, Dr. Rebecca Blank, told the Council on Foreign Relations last October:
“Now, business leaders … list a number of reasons as to why this country looks so attractive for business investment right now. The first thing almost all of them list, particularly in manufacturing, is the energy outlook in the U.S. This is crucial for companies that rely on energy for production, including foreign-based manufacturers, which have accounted for the largest proportion, about 40 percent, of all FDI [foreign direct investment] flow into the United States over the last three years.
We will be meeting more than half of our oil needs with domestic production by 2014, leading to more stable and lower costs of oil. In addition, we’ve seen a very dramatic 14-fold increase in natural gas production from shale in recent years. For example, from just 2009 to 2011, Pennsylvania quadrupled its natural gas production. So it’s no surprise our natural gas prices overall have dropped fourfold just since June of 2008. This provides us with an enormous advantage as our natural gas costs drop relative to other countries. For example, right now natural gas in the U.S. costs about one-quarter of the price in Europe.”
This is all welcome news for the American economy generally, and even better news for state coffers where shale is being actively developed. Producing states have seen a surge in employment with tens or even hundreds of thousands of new jobs coming online. In Texas, shale development has created over 575,000 jobs to date, which is expected to grow to nearly 930,000 in 2020. Close behind is Pennsylvania with 102,600 jobs, California with 96,500, Louisiana with 78,900 and Colorado with 77,600. And by 2020 those numbers all nearly double. No wonder USA TODAY found that “of all the places that America’s new jobs are, the emerging energy business, directly or indirectly, might be responsible for more of them than almost anything else.”
And as for revenues, production is generating billions of dollars for state’s, allowing for new (and much needed) investment in schools, hospitals, roadways and more. Here in California, 2012 production generated nearly $3 billion in taxes for state and federal government. Colorado also saw $3 billion brought into the state, Louisiana $2.5 billion, and North Dakota a whopping $6.8 billion – with expected growth to $13 billion in 2020.
While California has enjoyed a surge in oil and gas employment, and the economic benefits that accompany this surge, our potential is considerably greater. The combination of hydraulic fracturing and horizontal drilling technology has made it possible to extract oil and gas from deposits previously thought unreachable. The future development of the Monterey Shale, said to contain as many as 15 billion barrels of oil, could unleash a surge in employment and revenue that would go a long way toward helping California get its fiscal house in order. While we do not yet know what producers will be able to produce from the Monterey Shale, consider that it is thought to be five times larger than the Eagle Ford Shale in Texas, which generates $25 billion in economic activity, nearly 50,000 jobs, and $600 million a year in tax revenue.
From new public revenues to jobs for American workers, shale development is truly reinvigorating the American economy – even where we don’t expect it. (Check out the Chamber’s nifty rollover map to see how shale may be bringing these benefits to other states today.) California should build on its legacy of responsible oil and gas development and seize on the opportunity to be at the leading edge of this trend. After all, Californians hate getting left behind.