U.S. House Committee on Natural Resources

Energy Independence: Domestic Opportunities to Reverse California’s Growing Dependence on Foreign Oil
April 4, 2014

David Quast, California Director, Energy in Depth — Representing the Independent Petroleum Association of America and the California Independent Petroleum Association

Thank you, Mr. Chairman, for the opportunity to address the Subcommittee on this important topic.

Many people don’t realize the significant role that oil and natural gas have played in California’s history, or the incredible opportunities that increased in-state production would afford us. These opportunities include high-paying jobs in our most economically troubled region, increased investment and tax revenue, environmental protection, and, of course, energy security.

California’s oil and natural gas industry has been part of the backbone of our state’s economy for more than 150 years. We have abundant energy resources – particularly in Kern and Los Angeles counties — and our laws and regulations reflect the high priority we place on environmental stewardship. Californians of all political persuasions know that economic development and environmental protection are not mutually exclusive – on the contrary, this has been our tradition for more than a century.

As the President frequently and proudly points out, for the first time in 20 years the United States produces more oil at home than we buy from the rest of the world. Unfortunately, in California we still import half of our oil from overseas.

But it doesn’t have to be this way.

California is the third largest oil producing state, and Governor Brown has said that he intends for this energy leadership to continue.

But this requires making a choice – we can generate more of our energy at home, as the rest of the country has been doing in recent years, or we can import it, often from politically fraught regions with all of the geopolitical risk that this entails — not to mention the environmental disadvantages.

Happily, we have what appear to be the ingredients for success right under our feet, not only in California’s established oil fields but also in the Monterey Shale.

As the Subcommittee is no doubt aware, the U.S. Energy Information Administration estimates that the Monterey Shale may contain as much at 15 billion barrels of recoverable oil, which would account for two-thirds of the U.S. resource and may very well be the largest such reserve in the world. For perspective, this is approximately five times the size of the Eagle Ford shale in Texas.

Currently, in California, the petroleum industry supports approximately 95,000 direct jobs and more than a quarter of a million indirect jobs. And there is good reason to believe that this is only scratching the surface of our potential, as producers discover new ways to access our reserves.

According to a recent study by California State University, Fresno – which used relatively conservative production forecasts — if technical challenges can be surmounted and depending on the pace of innovation and deployment — the development of the Monterey Shale could lead to as many as 195,000 new jobs in the San Joaquin Valley and boost personal income there by $22 billion, all by the year 2030. This could be the beginning of an economic renaissance in a region suffering from crippling, double-digit unemployment.

It’s worth remembering that the history of energy development is really the history of technology development. North Dakota’s economic miracle didn’t happen overnight. It took decades of work – including trial and error — until the techniques that we now consider routine were perfected. But that reality should not hide the fact that technological innovation is itself a powerful job creator, all the better when it comes from private investment.

Unfortunately, in California, there is a small but vocal group of radical anti-industry activists with the goal of shutting down domestic oil and natural gas development, starting in California. They have tried to cloak this goal in a misguided and ill-informed attack on hydraulic fracturing.

The good news is that, despite the activists’ repeated claims otherwise, the scientific consensus – that fracking technology is fundamentally safe and has manageable risks – – has prevailed in California. Last year the state’s overwhelmingly Democratic legislature soundly defeated a bill to put a moratorium on the practice. The legislature instead passed the nation’s most sweeping regulations on well stimulation, which we in the industry thought were overreaching, but which nevertheless mean the companies can continue to responsibly and safely produce oil and gas — albeit in an even more heavily regulated environment.

Not to be deterred, the most radical of the activists continue to hold rallies and chant demonstrably untrue slogans, like “climate leaders don’t frack.” But the fact is that the United States leads the world in carbon emissions reductions thanks to the increased use of low-cost natural gas in the nation’s power plants – something not possible without shale and hydraulic fracturing.

And, just as importantly, even though overall demand for oil is down, California remains the third largest consumer on the planet of gas and diesel – behind only the United States and China. In fact, 96 percent of our state’s transportation is petroleum-based, and the EIA estimates that by 2040, 80 percent of our energy will still be fossil-fuel based. Meanwhile, every barrel of oil we produce in California is a barrel that we don’t import from countries with significantly fewer environmental protections.

Californians tend to be proud of our state’s environmental leadership, and it is, frankly, bizarre that political activists would suggest that their elected leaders follow blind, anti- scientific talking points rather than sound science. Whether we are talking about oil or natural gas, increased domestic production is good for both the economy and the environment. This is something environmentalists should celebrate, not oppose as a matter of ideology.

In any case, the groundwork has been laid for the next chapter in California’s long history of oil production, a history that should include many more jobs for Californians, more state revenue, more economic activity, lower global carbon emissions and, yes, less reliance on imported oil.

Thank you.

NOTE: Dave’s full testimony, including all associated appendices submitted for the record, can be downloaded here.