Continuing a years-long push, the California Air Resources Board cracked down further on emissions, sharpening the debate over the scope of its plans.

“The new rules, green-lighted [March 23] … seek to curb methane emissions at oil and gas production plants by up to 45 percent over the next nine years,” the San Francisco Chronicle reported. “The cuts will come from a combination of heightened efficiency requirements, inspection mandates and rules meant to ensure that leaks are discovered and fixed swiftly. The regulations apply to both onshore and offshore oil and gas centers.”

“The standards, which experts said mark the first major piece of environmental regulation passed by any state since the turnover of power in Washington, were hailed as a triumph by environmental activists, but criticized as cumbersome, costly and ultimately unnecessary by oil and gas producers.”

Federal fortunes

CARB’s actions took on a particular edge as political battles in Washington have concentrated around environmental standards put in place over the previous eight years. “In the works for over a year, the rulemaking comes as the Trump administration and Republican lawmakers work to unravel Obama-era measures to control emissions of the potent climate pollutant at oil and gas production sites nationwide,” according to Bloomberg BNA.

The foray into gas indicated CARB wasn’t satisfied with controlling vehicle emissions, although those make up the lion’s share of regulated pollutants. “The state’s proposal is its first attempt to reduce greenhouse gas emissions at its onshore and offshore oil and gas facilities and natural gas storage sites and is part of broader effort, now mandated under state law, to curb emissions of short-lived climate pollutants like methane,” the site added. 

The automotive industry, working to pivot toward lower- and zero-emissions vehicles without surrendering market share in a still-robustly gas-powered economy, was instrumental to the inside-the-Beltway shift. “The CEOs of Ford, General Motors, and Fiat Chrysler moved fast to cut a quick deal with Trump to reopen a review by the Environmental Protection Agency and the Department of Transportation of emissions and fuel-economy standards that had been closed under President Barack Obama,” Business Insider noted. “The automakers don’t like that California effectively plays by its own environmental rules and as a subplot in the Trump deal had argued for a single national standard to govern fuel-economy and emissions standards.” 

Fight for money

But California hasn’t budged. In fact, it has been rewarded for holding the line on its strict enforcement of auto emissions rules. “As part of its court-ordered payback for cheating on diesel vehicle emissions tests, Volkswagen might bring a heap of green – in the form of money and technology – to Sacramento,” observed the Sacramento Bee. “Under a settlement with federal officials and the California Air Resources Board, the disgraced automaker is poised to spend tens of millions of dollars promoting zero-emission vehicles in Sacramento and four other cities. In addition, Sacramento is the lead contender for Volkswagen’s first ‘Green City’ designation, which would bring the city $44 million between now and 2020 for public outreach and other programs related to zero-emission vehicles, according to a proposal Volkswagen has filed with CARB.”

Adding to the adversarial climate, automakers have grown frustrated with CARB’s unwillingness to loosen up on standards for zero-emissions vehicles despite what have become disappointingly flat sales. “With state rebates, federal tax credits and manufacturer discounts, the effective monthly payments in California for zero-emission vehicles including the Nissan Motor Co. Leaf and Ford Motor Co. Focus Electric can add up to zero – or less – a month, the Alliance of Automobile Manufacturers said in written comments to the California Air Resources Board,” according to Automotive News. “Yet the ZEV market share has remained at the 3 to 3.5 percent level,” the alliance said in its 80-page submission, asking the agency […] to ease up on plans to require more sales of the vehicles.”

“Wholesale prices in Southern California jumped by about 70 cents late last week. A report on gasoline inventories from the U.S Department of Energy appears to have sparked the run-up,” as U-T San Diego reported. “Statewide inventories of low-polluting gasoline blends, meanwhile, shrank to 10.04 million barrels on July 3 — the lowest in 12 months, according to the California Energy Commission.”

Regulators in Washington, D.C. added more bad news. According to the San Jose Mercury News, “federal energy officials say California refiners had to use 1.1 million barrels from their storage tanks. It’s so bleak that imports to the West Coast sank to zero last week after averaging more than 100,000 barrels a day over the previous four weeks.”

Infrastructure problems

Despite concern over the state’s gasoline infrastructure, California has remained an outlier relative to the rest of the continental United States. “They have their own refining system. They can’t get the imports the rest of the world does and they have an adversarial relationship system between the refiners and the regulatory community,” Tom Kloza, global head of energy analysis at Oil Price Information Services, told CNBC.

Because of a combination of high taxes and unstable supply, the price floor for California gasoline has long hovered well above per-gallon costs elsewhere. “Retail prices in California are traditionally among the highest in the lower 48 states because of relatively high state and local taxes combined with strict environmental rules governing gasoline blends and pollution,” U-T San Diego observed. But some critics have cautioned that the Golden State’s broadening regulatory effort to further reduce fossil fuel usage could contribute to surprising spikes. Kloza warned CBC that California “can’t tell refiners you are going to put them out of business and expect that everything is going to run smooth.”

A consolidated market

At the same time, some consumer advocates put forth a competing argument, pinning the blame for this most recent spike on refiners themselves. Jamie Court, president of Santa Monica-based Consumer Watchdog, told the Los Angeles Times that circumstantial evidence suggested prices were being manipulated. “Part of the problem, Court said, is that the state has a small group of companies able to set prices as they please — the definition of an oligopoly.” Court cited “a recent streak of high premiums charged to brand-name stations by refineries” and the export of “record amounts of fuel to other countries, which can keep state inventories low.

Charges of price manipulation have been explored in the past. As the Los Angeles Times noted, investigations conducted more than a decade ago revealed “major oil companies worked diligently in the 1990s to reduce refinery capacity so that profits would improve.” But investigators “found no evidence of collusion or price fixing.” Nevertheless, the Times added, California’s production capacity has been dramatically limited and consolidated. “In 1982, the state was home to 30 gasoline-producing refineries; now there are 11. Chevron Corp. and Tesoro Corp. control more than 50% of the state’s refining capacity.”

Calls for relief

Californians routinely consider how policymakers can make prices and supply more reliable and predictable. In an unusual move, GasBuddy itself launched a petition for relief directly from Sacramento. “We’re anticipating increases that could surpass 50-cents a gallon in Southern California and up to 20-cents a gallon in Northern California by next week,” said Patrick DeHaan, the site’s senior petroleum analyst for GasBuddy.” That’s why we’re asking Governor Brown to intercede and issue a waiver in the public interest.”

In Brea, residents started researching fracking, gathering information about polluted water wells and increased seismic activity in other areas across the country, such as Oklahoma, where scientists have linked wastewater injection wells with an increased number of earthquakes.

Initially, Fujioka – the Brea fracktivist – didn’t even know fracking was happening near homes and schools, but she soon found out using online mapping tools.

So, Fujioka scheduled a meeting before the City Council. It transformed into a presentation by the main driller in the region, LINN Energy.

At an alternative meeting, 100 residents showed up seeking information on fracking. Another meeting followed, this one sponsored by Cal State Fullerton and paneled by academics and industry representatives, at which 500 residents sought information.

Residents in other Orange County cities are joining the movement. At the very southern end of the hills, Yorba Linda activists are just getting started. Karen Hill, an active member of Brea Congregational United Church of Christ, an anti-fracking hotspot, believes fracking will contaminate groundwater near her community, even though most water is imported.

Given that the California media still refuse to report that the Obama administration considers fracking safe, this alarmism isn’t that surprising.

But what’s also interesting is that the international and national media increasingly have figured out that fracking has been profoundly good for the U.S. economy. This is from a Financial Times analysis of how cheaper energy was helping U.S. exporters:

The price gap has led to a 6 per cent average increase in US manufactured product exports, the IMF wrote in its twice-yearly World Economic Outlook. […]

Lower prices for natural gas favour energy- and gas-intensive industries, such as steelmaking, oil refining, and nitrogen fertiliser production. The International Energy Agency has previously warned that Europe will lose a third of its share of global energy-intensive exports over the next two decades because its energy prices will remain stubbornly higher than those in the US.

And then there’s this remarkable development. At a time when international opinion of the U.S. seems to be largely negative and even baffled — a president sending mixed messages for years will do that — fracking has created a positive aura around the U.S.

New York Times: Fracking ‘gust’ lifts U.S. reputation

Who says so? Lots of analysts and academics, including the Harvard professor who popularized the idea that nations wield not just military might but “soft power” that influences global opinion. This is from the New York Times:

It has become fashionable to note a decline of American global power and influence, but don’t tell that to the energy experts.

Many see increased domestic production of oil and gas as driving more muscular United States energy diplomacy, power that exists in curious tandem with the Obama administration’s efforts to wean the world off fossil fuels.

“The rapid rise in U.S. oil and gas production, together with the decline in oil consumption and the elevation of climate change as a priority, is completely scrambling the way policy makers think about energy diplomacy,” said Michael A. Levi, a senior fellow at the Council on Foreign Relations.

Joseph S. Nye Jr., the Harvard professor who articulated the notion of “soft power” in international affairs, sees a “shale gale” propelling America’s status: “If you are attracted to a country or any leader, a lot has to do with the feeling, ‘Do they have momentum? Is the wind in their sails or are their sails flapping?’ We’ve got a gust.”

Carlos Pascual, a former senior American diplomat, agrees. Increased energy production “strengthens our hand.” he said.

Will California’s vast Monterey Shale ever be tapped to add to this U.S. momentum? I’m not optimistic. But if it does happen, it would produce more middle-class jobs for California than any dozen government initiatives.

And it would also yield vast new revenue. Which state has seen the sharpest percentage increase in education spending in recent years? The state that has the lowest unemployment and the fastest economic growth.

That would be North Dakota, global ground zero for the fracking revolution.