Why Has Oil and Gas Boom Skipped CA?

February 8, 2012 - By admin

FEB. 8, 2012

By WAYNE LUSVARDI

New extraction technologies are creating an oil and gas boom that is lifting the economics of several states, as reported by the Wall Street Journal’s recent article “Oil and Gas Boom Lifts U.S. Economy.”

Median incomes are growing since 2007 in such states as Wyoming, Alaska, North Dakota, Oklahoma and Texas. Conspicuously absent is the State of California, which ironically has the third largest oil reserves in the United States and two-thirds of all the shale oil reserves, according to the U.S. Energy Information Service.

About 158,500 new oil and gas jobs have been created over the last five years across America. But it is the economic multiplier effect that this boom is creating in the wider economy that is spreading the boom beyond the oil patch.  Jobs and incomes are growing for truck drivers, manufactured home builders, energy traders and landowners with oil and gas leases.   According to independent economist Tim Considine, every oil and gas sector job supports four additional jobs.

But perhaps more importantly, natural gas is providing such cheap energy that manufacturing plants are reportedly returning to the America, or considering a return.  Reportedly, Asian-based industries have to pay up to six times as much for natural gas as industries in Texas or Louisiana. To lay the base for reindustrialization, cheap energy may be the key.

The question remains: Why is California suffering from economic lag when other states are lifting their economies out of the recession through oil and gas drilling?

Red States Booming — Blue States Lagging

Perhaps California’s turn to expensive green power is one reason why, thus far, it has not been a part of this new oil and gas boom, or the reindustrialization. But Texas has been as expansive with green power as California.

Perhaps the table below is indicative of why California has not shown a recovery in median incomes since 2007.  The table shows the shale oil reserves in several oil and gas producing Western states compared with the change in median incomes since 2007.  Also shown is the political majority of the legislature of each state.   Red states are booming and Blue states are showing no recovery.

Since 2007, several western states have shown growth in median incomes. Most notable are those states with active oil and gas drilling.  Median income have grown since 2007 in Wyoming by 3.68 percent, in North Dakota by 2.9 percent, in Oklahoma by 1 percent and in Texas by 0.8 percent.  But the median income in California has dropped by -3.4 percent and in New Mexico by -0.2 percent.

Median Income Change in Oil & Gas Producing  States in Western U.S.

States Shale   Formation/
Percent Total
Median   Income 2007 Median   Income 2010 Percent   Change Red/Blue   State Legislature Majority
California Monterey Formation64.4 Pct. $62,114 $60,000 -3.4 Pct. Blue
Democratic
North Dakota Bakken Formation15 Pct. $46,905 $48,245 +2.9 Pct. RedRepublican
Texas Eagle FordFormation

13.9 Pct.

$48,218 $49,600 +0.8 Pct. Red Republican
Wyoming Green River FormationUnk. Pct. $52,794 $54,700 +3.68 Pct. Red Republican
Oklahoma Barnett and Woodford
Formatio
Unk. Pct.
$42,468 $42,900 +1.0 Pct. Red Republican
New Mexico(W. Texas) Avalon & Bone SpringsFormation

6.5 Pct.

$43,603 $43,500 -0.2 Pct. BlueDemocratic

 

As reported in the Wall Street Journal, communities that are benefitting from oil and gas drilling are seeing it as an economic “game changer.”

However, communities in California are faced with:

* The only active Cap and Trade tax on large industries in the United States.

* The only Green Chemistry Law that requires industries to prove at great cost that there chemical products do not have a safer alternative.

* A proposed near-zero standard for perchlorate in drinking water with no discernible health benefits, but huge cleanup costs on industries and water and electric utilities.

* The highest combined tax rates in the United States.

* An environmental impact law that can be gamed worse than Enron ever did to protect monopolies and erect trade barriers.

While California currently seems engrossed with High-Speed Rail projects, renewal of public funding for redundant stem cell research and putting more pro-tax initiatives on the upcoming November ballot, other states are proceeding with a renaissance of the oil and gas industries.  This has serious implications for the upcoming presidential and congressional elections outside California in November.

CA’s De-Modernization Model 

Going all the way back to when the state limited the influence of the monopoly Southern Pacific Railroad, California has embraced counter-modernization and de-industrialization as its economic and political model.  This has provided an alternative to the harshness and alienation of the modern world.  But the United States is on the verge of near energy self-sufficiency and re-industrialization that may leave California behind.

Conversely, California remains an over-regulated state whose only way to compete is to erect trade barriers and impose taxes wherever possible.  This will continue to wreak serious consequences on its state budget and the unsustainability of its government pension funds.

It is unlikely that California will change from de-modernization back to reindustrialization in the near future.  As such, California is likely to continue to lag behind other states that are benefitting from the oil and gas boom and the re-industrialization that comes with it.

 

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Comments(15)
  1. CalWatchdog says:

    We’re California. We’re different. We don’t need real jobs. We all can just live off welfare paid for by tax increases on the rich.

    — John Seiler

  2. Susan says:

    I think it’s “funny” (hear my hollow laugh) that liberals in California have always sought to be “in the forefront,” “on the cutting edge,” to be trendsetters in entertainment, fashion, technology, etc. They’re big snobs who are better than everyone else and look down their noses at the “backwardness” of other states. And yet, when it comes to energy, here we are, frumpy, out of step, out of fashion, left behind, clueless, and pathetic. Isn’t that these people’s worst nightmare??

  3. Bob says:

    Wayne, we all should be happy that the oil & gas boom skipped Cawleefornia (as Ahnode sez).

    Would you really want all that tax revenue flowing to our DemoNcrat overlords in Sucramento?

    Just imagine all the insane new programs Jerky Brown, Porky Perez and Darrell Stinkbug would demand.

    Better for the DemoNcrats to outlaw or regulate out of existence as much economic activity as possible so the DemoNcrats’ socialist paradise will starve to death.

  4. JoeS says:

    This November, Conservatives in the other 49 states can point to California and say, “That is how Democrats run a beautiful, prosperous, state into the toilet. Don’t let the Democrats do that to our state.”

  5. Dancquill says:

    Governor Brown is finally getting his way.. Remember the governor Moonbeam era book “Small is Beautiful”? Increasing the size and scope of the government has indeed shrunk the private sector… the intended result. California’s gov’t school systems are teaching the very same philosophy of big green overbearing government as a mass movement. We now know that the big green monster they are creating eats money and freedom for lunch.. While this model of governance and education will likely self destruct it may take a while.. exactly like it did in the Soviet Union.

  6. SkippingDog says:

    The 1969 oil spill in the Santa Barbara Channel when one of the Union Oil rigs blew out was the largest oil spill in U.S. history until the Exxon Valdez and the recent BP spill in the Gulf. That was the primary reason we passed the California Environmental Quality Act, the Coastal Protection Act, and why most sane people recognize the need to avoid the kind of practices that caused such damage to a hundred miles of our coastline.

    When industries or people can’t or won’t properly regulate themselves to prevent harm to others, it’s entirely appropriate for the people or their government to step in and do so. Most of the environmental laws with which you so disagree were passed by initiative, so you can hardly say they were implemented without the full support of the people affected.

  7. queeg says:

    Your worst fear….no gas for your car….your second fear…forced out your housing due to regulations and taxes.
    Your least fear…I can still walk out of California!!!

  8. Wayne Lusvardi says:

    Skippy Dog
    For clarification the article said that environmental laws could be “gamed” – not that they were unnecessary.

  9. SkippingDog says:

    One man’s gaming is another’s necessity in politics, Wayne. You know that as well as anyone.

  10. The DA says:

    The problem with SkippingDog’s initial comment is that he doesn’t consider that the regulatory cure often wreaks more havoc than the problem it intends to rectify. As bad as it was, the 1969 Santa Barbara spill did not kill the California coastline, and was paid for out of the pockets of the oil companies responsible. It was a disaster, yes, but it wasn’t the apocalypse. To my knowledge, not one human being lost their life. Unfortunately the alleged cure via legislation treated it like the apocalypse.

    How many billions of dollars have been lost since 1969, and will continue to be lost because people like SkippingDog think that the environment should not be subject to any risk? We’re not talking about risk to actual human life, but rather to the esthetic value of a pristine coastline etc. Evidently no price is too big to pay to avoid the mere potentiality of another oil spill. This is ridiculous. Life is choices that make sense for our overall well-being. We don’t ban automobiles even though thousands of people lose their lives in a car accident each and every year.

    At present, California is billions of dollars in debt without any light at the end of the tunnel. We’re broke, and haven’t even begun to see the darker days. Most sane Californians do recognize the need to reasonably avoid the practices that may cause damage to our coastline. The keyword here is reasonable. The real question is, at what price?

  11. Mechanic says:

    I agree with The DA most times when regulatory laws take effect after disaster like the 1969 oils spill of Santa Barbra it is worse for the economy of that state than just to enforce heavy fines. Look at the southern states like Louisiana there are natural gas and oil wells that we’re pumped dry back in the ’70s but were resurveyed and contain their respective energy resource now. Yes it is bad when an oil spill happens but without those resources we have no leading alternative fuel right now so I suggest the people in California speak up and be heard if they wish that they need more jobs and industry. And one last thing on the job booms and reindustrialization of those states. The reason why California has not seen the benefits of the natural gas and oil jobs is because the companies that are set up to provide the people of the USA with the necessary resources to live comfortably can not and refuse to deal with such strict regulation and high taxes of California where they cannot make a profit. Where there is no profit there will not be capitalism.

  12. SkippingDog says:

    Oh, I certainly agree we should update CEQA and the Coastal Protection Act to prevent anyone gaming the system, DA. But when you suggest that the full costs were covered by Union Oil the facts just don’t back you up. That spill was also one of the primary reasons we have a strong federal environmental intrusion now, since it was the federal government and a Republican administration that provided waivers to Union Oil that allowed it to shortcut the casing and normal safety requirements.

    I’ve attached a couple of articles for your interest, but memories are long and you won’t see a groundswell of support in California to make our coast look like the Gulf as long as there are still a lot of people who remember the Santa Barbara spill and its aftermath.

    http://www.pewenvironment.org/uploadedFiles/PEG/Publications/Fact_Sheet/PEG_SantaBarbaraSpill_May2010.pdf

    http://www.geog.ucsb.edu/~kclarke/Papers/SBOilSpill1969.pdf

  13. PetroRock says:

    SkipDog–the article has nothing to do with offshore oil drilling. How much offshore drilling is being done in North Dakota? The article is about the benefits of onshore drilling, which even Obama says he wants. We shouldn’t use the offshore spill from 43 years ago as an excuse for everything.

    By the way, it is worth noting that most of CA’s offshore platforms were installed AFTER the ’69 spill and we drill offshore CA EVERYDAY, without incident for 43 years. Sounds like a pretty good record to me.

  14. SkippingDog says:

    You’re correct, PetroRock, but the relevance to this article concerns the strict environmental laws in California. I was merely describing the circumstances that led to their enactment and the political hurdles that would need to be overcome in order to gain the necessary authorization to engage in fracking activities, even in that hell-hole area south of Fresno in our Central Valley.

  15. SkippingDog says:

    BTW, PetroRock, the well-known seismic threats in California would provide another strong argument against fracking, particularly since the Monterey Shale area is in close proximity to many large fault systems, including the infamous San Andreas.

    http://dailymaverick.co.za/opinionista/2012-02-14-does-fracking-cause-earthquakes

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