But the honeymoon could be over for millions of Southern California residents served by municipal utilities. Moody’s Investors Service warns they will be hard-hit by the state’s latest edict on increased use of renewable energy to supply electricity:

On Oct.. 7, Gov. Jerry Brown signed a bill requiring all California utilities to generate 50 percent of the electricity they sell to retail customers from renewable energy by 2030. The legislation will be credit negative for municipal utilities if ratepayers balk at higher prices that come with the transition to renewable energy from coal-fired generation.

 

Municipal electric utilities in Southern California would be particularly affected given their reliance on coal-fired generation. Coal-fired generation has historically supplied cities like Los Angeles and Anaheim with more than 40 percent of their electricity. In contrast, Northern California cities such as San Francisco and Sacramento derive all of their electricity from sources other than coal such as solar, hydroelectricity and natural gas.

 

The Los Angeles Department of Water and Power and other Southern California municipal utilities have thus far managed the shift to other sources from coal without major ratepayer protest, allowing them to increase rates and maintain a sound financial performance. But Los Angeles ratepayers are facing a likely 3.4 percent annual water and power rate increase over the next five years to help support the further transition to cleaner energy.

 

For utilities, the Clean Energy and Pollution Reduction Act of 2015 increases the percentage of electricity coming from renewable energy to 50 percent by 2030 up from the current 33 percent by 2020. We expect the utilities will meet the 33 percent requirement. However, ratepayer affordability and technical challenges will become increasingly difficult as utilities reach towards the more significant 50 percent renewable standard.

Infrastructure costs also likely to buffet ratepayers

Moody’s says another factor could also yield future rate shocks:

[Municipal] utilities will face another major challenge in whether the transmission grid can adequately handle the intermittent renewable resources that will begin to dominate California’s power supply mix. LADWP benefits from owning and operating its transmission system and has variable resources such as a pumped storage facility and gas-fired units to balance the system. The city of Anaheim recently added the Canyon natural gas fired unit and Southern California Public Power Authority financed the Magnolia unit in Burbank to help compensate for shortfalls in solar or wind energy. In the long term, the need to successfully integrate more renewables into the grid will likely require similar additional capital investment.

But while customers of the region’s two giant investor-owned utilities — Southern California Edison and San Diego Gas & Electric — won’t be as hard hit by the latest state edict, they will also pay unique bills in coming years not borne by customers of municipal utilities. Unless a California Public Utilities Commission decision is overturned, customers of the two utilities will pick up 70 percent of the $4.7 billion cost of shuttering the broken San Onofre nuclear power plant. SCE owns 80 percent of the plant, SDG&E 20 percent.

This is unacceptable to greens in California, who broadly reject the Obama administration’s conclusion that fracking is safe. Instead, they depict it as ruinous to the environment, as causing earthquakes and as using up enormous amounts of water that could be put to much better use.

The latter argument — because of its specific implications for drought-wracked California — is a constant presence on state message boards, letters to the editor and talk radio.

But some crucial research is rarely if ever cited. In a 2010 report, Harvard scientists concluded that energy produced by fracking appeared to use less water than the same amount of energy produced by conventional fossil-fuel extraction. “The increased role of shale gas in the U.S. energy sector could result in reduced water consumption,” wrote authors Erik Mielke, Laura Diaz Anadon and Venkatesh Narayanamurti. According to the energy industry, that’s just what has happened in the five years since.

Some big drillers no longer use freshwater

One reason is that technological advances have made it easier for drillers to recycle water than ever. This is from a 2013 Reuters story:

MERTZON, Texas, Nov 21 (Reuters) – At a dusty Texas oilfield, Apache Corp has eliminated its reliance on what arguably could be the biggest long-term constraint for fracking wells in the arid western United States: scarce freshwater.

For only one well, millions of gallons of water are used for hydraulic fracturing, or fracking, the process that has helped reduce U.S. reliance on foreign oil over the past five years by cracking rock deep underground to release oil and gas.

In Irion County, where Apache is drilling dozens of Wolfcamp shale wells in the Permian Basin, the company is meeting its water needs for hydraulic fracturing by using brackish water from the Santa Rosa aquifer and recycling water from wells and fracking using chemicals.

The company’s approach could have broader significance for areas prone to drought. Apache, which has the most rigs running in the Permian, the oil-rich region that spans 59 Texas counties, says the model can cut costs and truck traffic rattling small towns stretched by the country’s drilling boom.

“We’re not using freshwater out here,” Lucian Wray, production manager for Apache’s South Permian region, said of the company’s Barnhart operating area, which is run out of a former hunting lodge. “We are recycling 100 percent of our produced water. We don’t dispose of any of it.”

“Produced water” is a byproduct of oil and natural gas drilling. “Flowback” water is the fluid pushed out of a well during fracking. Apache is recycling both types, which are typically trucked away and put into underground disposal wells.

Some drillers frack without water entirely

And some drillers have stopped using water entirely. This is from a 2013 Houston Chronicle story:

The use of one precious fluid — water — to recover another — oil — chafes in dry country. Rivers and groundwater are receding in Texas for lack of rain and over-pumping just when the demand for water in new oil and gas fields is growing.

Now one exploration and production company in San Antonio is fracturing its wells mostly without water, using gas liquids instead, in a practice that’s beginning to spread. …

BlackBrush Oil & Gas LP is using a butane-rich mix for fracking after being confounded by many of the same obstacles other energy companies face in buying, moving and disposing of large amounts of water.

“Ranchers don’t want to give up their water,” said Jasen Walshak, production manager at BlackBrush.

The term gas liquids refers here to three fluids – propane, butane and pentane – that occur together with natural gas. They’re extracted from natural gas and sold, mostly as fuels.

Switching to gas liquids also seems to reduce controversy for BlackBrush.

“People don’t see water transfer lines all over the place,” Walshak said, referring to the yards and miles of pipe that move water from rural wells to oilfield tanks and rig trucks.

Environmentalists concerned about fossil fuels and global warming are certain to see a downside to these new approaches to fracturing even if they lead to far less water use.

But at the least, these developments show that energy exploration firms are listening to their critics. They realize that it’s in their interest to counteract the gripes about water use that are a staple of much fracking criticism.

But this summer, we’re seeing something freaky. Prices are going down, even with unrest in many oil-producing nations and rising tensions throughout the Middle East. The Christian Science Monitor has the details:

The average US gas price is now $3.52 per gallon, according to a Thursday report released by automotive group AAA, making current prices the lowest since March of this year. This July, US consumers saw a bigger drop in gas prices than in any July over the last six years. The price at the pump fell every day but one over the course of the month, according to AAA. Gas prices generally rise in the summer months, as Americans hit the road and drive up demand for gas. The federal government also mandates that refineries produce a more costly, lower-emission blend of gas in the summer – and those increased costs are passed onto motorists. …

Though forecasters expected that expanded domestic oil production would translate into good prices for consumers, they couldn’t have predicted prices quite this low.

July gas prices drop by amount they usually increase

Gas prices have averaged going up 16 cents in July in the U.S. This July, they went down 16 cents.

The fracking revolution is real. The 21st century was supposed to be when green-energy sources took over from fossil fuels. But instead, fossil fuels are having a renaissance, almost entirely based in the U.S.

It’s why the U.S. is now the world’s leading producer of both oil and natural gas. It’s why a nation that used to consider energy independence a major foreign-policy goal could soon be on the brink of becoming a major exporter of oil and natural gas. And it’s why we see freaky things like plunging gasoline prices in the summer in a world of rising unrest and discord.

California could join in this Texas- and North Dakota-led revolution. Occidental Petroleum believes the state has more recoverable oil than Texas and North Dakota combined.

But so long as the green religionists control so much of state government, the Golden State is likely to stay on the sidelines — and only enjoy the indirect benefits of fracking: lower gas prices. Not the direct benefits of well-paying jobs and a revenue gusher.

Great. Just great.

Why? I think Dennis Prager is on to something with his theory about what’s driving this thinking:

Yes, of course, as individuals with a heart, most people, right and left, care about people losing their jobs. But in terms of what matters to the left and the policies they pursue, they don’t care. The left and the political party it controls do not care if their policies force to companies to leave the state (or the country). They don’t care about the …  job-depressing effects of high taxes, or energy prices that hurt the middle class, or compelling businesses to leave.

They don’t care because the left is not interested in prosperity; the left is interested in inequality and in the environment. Furthermore, the worse the economic situation, the more voters are likely to vote Democrat. The worse the economic situation, the greater the number of people receiving government assistance; the greater the number of people receiving government assistance, the greater the number of people who will vote Democrat.

Therefore, both philosophically and politically, the left has no reason to be troubled by bad economic news. And it isn’t. It is troubled by inequality and carbon emissions.

–In the last 20 years, about 4 million more people have left California than came in from other states. Most of those leaving are young families.

–In the last 15 years, one-third of California’s industrial employment base has disappeared. That’s 600,000 jobs that have disappeared.

–California has the 48th-worst business tax climate. (The Tax Foundation)

–California’s electricity prices are 50 percent higher than the national average.

–Middle-class workers, those who earn more than $48,000, pay a top income tax rate of 9.3 percent. That’s higher than what millionaires pay in 47 other states.

–California’s unemployment rate is fourth highest in the nation.

–From 2010-13, California produced fewer than 8,000 jobs, while the country added 510,000.

“The biggest onshore story is the potential of the Monterey Formation (also known as the Monterey Shale), a zone of petroleum-rich rock that extends much of the state’s length. The Monterey holds an enormous amount of oil, estimated at up to 500 billion barrels. Though it has long been difficult to extract oil directly from it, advancing technology, along with rising oil prices, has put much more of its oil within reach. If even a small fraction of its reserves proves accessible, the Monterey would be the biggest shale oil play in the nation. In July 2011, the federal Energy Information Administration (EIA) estimated that the Monterey had 15.4 billion barrels of recoverable crude—four times what’s estimated to lie within the Bakken shale formation, which is fueling North Dakota’s current oil boom. Those 15.4 billion barrels would be worth about $1.5 trillion at today’s crude prices.

“The potential impact of 15.4 billion barrels of oil is enormous. Even if California managed to tap just half of that quantity over the next 35 years, the state would be adding an average of 220 million barrels a year—doubling its current output and matching its peak year of 1985. It would also be pumping $22 billion each year into its economy if crude prices stayed near their current levels (in light of global demand, it’s more likely that prices will rise). If the EIA estimate is reasonably close to the mark, the Monterey Formation would be in a class with oil fields in Saudi Arabia.”

Since then, Gov. Jerry Brown has signed legislation that sets the framework for hydraulic fracturing, or fracking, to be expanded in California to access this huge resource. But this has triggered a backlash from his fellow Democrats, and there are signs everywhere that a multifront legal war will be mounted on all aspects of any plan to sharply increase energy exploration in California, whether it involves fracking or not. The president, at least ostensibly, declares his support for an “all of the above” approach to creating additional energy for America. Not California liberals.

No better option for middle-class job growth

Too bad. Allowing California’s natural resources to be developed could trigger a massive boom in middle-class energy-exploration jobs — which don’t necessarily require college degrees.

Joel Kotkin, the wonderful Los Angeles writer and futurist, took a road trip to Fargo, North Dakota, to see how fracking and other economic initiatives had transformed the remote state:

“North Dakota leads the nation in virtually every indicator of prosperity: the lowest unemployment rate, and the highest rates of net in-migration, income growth and job creation. Last year North Dakota wages rose a remarkable 8.9%, twice as much as Utah and Texas, which shared honors for second place, and many times the 1% rise experienced nationwide.”

Fargo isn’t in the drilling area, as Kotkin notes, and owes its transformation to many factors. But the old JFK line about a rising tide (economy) lifting all ships certainly holds for North Dakota in general. California could benefit immensely from the same economic multiplier — at least if it can overcome the green religionists and their trial-lawyer buddies.

By Chris Reed

A visit to the California Sierra Club’s priorities page illustrates one of the funniest and most ironic public-policy developments of our time. The club’s top three priorities are getting California “Beyond Coal,” “Beyond Oil” and “Beyond Natural Gas.” All fossil fuels are evil, you see.

But it is the gigantic boom in natural gas — not the subsidized, largely failed green energy revolution — that has helped the U.S. lead the world in reduction of the emissions believed to contribute to global warming. This reduction has come almost entirely because U.S. utilities have shifted from dirty coal to relatively clean natural gas, which is newly abundant because of hydraulic fracturing, which uses underground water cannons to free up energy supplies. The process has been around nearly 70 years but has become vastly more efficient in recent times because it has been enhanced by information technology that allows for much more precision in aiming of the water cannons. (This has also made the process much cleaner.)

Green think tank makes heretical case to green movement

Now an environmental group, the Breakthrough Institute, has broken through green dogma and put out a report making the case that it’s good to have abundant natural gas, even if it is an allegedly evil fossil fuel.

By Wayne Lusvardi

A recent lawsuit filed by the Securities and Exchange Commission alleged Victorville city officials and bond underwriters defrauded bondholders of $13.3 million in 2008 due to failure to disclose actions and risks of “inflated property values” backing redevelopment bonds.  SEC prosecutors alleged Victorville and its bond underwriters failed to disclose these risks to bond investors in the bond prospectus. 

Another charge made by the SEC is that Victorville undertook a so-called “ill conceived” gas-fired power plant project financed with redevelopment bonds.

The president of Inland Energy Tom Barnett, developer of the proposed Victorville 2 Hybrid Power Plant, had his personal bank account records subpoenaed on Jan. 26, 2013 to peek into his political campaign contributions. 

Victorville: Texas West

Victorville is a community of about 115,000 people in the high desert area of inland Southern California. It is about 100 miles east of Los Angeles. It has a Texas-like feel to it due to its desert topography, former military residents, libertarian newspaper and pro-growth policies.

Victorville was the second fastest growing area in the U.S. in 2008.  Its economy is dependent on the conversion of the former George Air Force Base into a cargo transport airport, rail transport hub and warehousing center for wholesale goods.

In 2006, California mandated a shift to 33 percent green power by 2020 under AB 32, the Global Warming Solutions Act of 2006.  Victorville poised itself to benefit from this shift toward cleaner power.  In 2008, Victorville and Inland Energy had obtained permits to build a 563-megawatt hybrid natural gas-solar power plant on the land near the former George Air Force Base, now called the Southern California Logistics Airport.

In 2007, BNSF Railway Company, the largest railroad company in the U.S., had also tentatively picked Victorville for the site of a new regional transport hub.

The boom in Victorville took about 5 years to emerge but only about a month to bust. 

Inflated or deflated property values?

At the heart of the SEC’s complaint is that Victorville and its consultants inflated property values on four airport hangars that served as collateral for redevelopment bonds.  However, prior to issuance of the bonds during a worsening credit market, the bond markets demanded a higher debt coverage ratio of 1.25 from the 1.10 ratio of prior bonds issues.  A debt coverage ratio is the amount of the prospective future rental income from the four hangars above the amount of bonds issued.  It serves as a cushion in the event of an unanticipated downturn in the economy.

As a result of the higher debt coverage ratio, Victorville hardly had any resources left to continue redevelopment activities. So it borrowed $35 million, of which $13.3 million was to be paid back in debt (e.g., bonds).  The $13.3 million bond was secured by the $65 million value in four airport hangars.  The SEC claims the value of the hangars was only about $28 million.  But the bond underwriter — Kinsell, Newcomb and DeDios — claims it spent $56 million just to build the four hangars, let alone the value of the land.  But did the underwriter inflate the value or did market values plummet?

Reportedly, the County Assessor’s office assessed value for property tax purposes fell far short of $65 million for the hangars.  A sufficient assessed value was needed to issue tax increment bonds used in redevelopment.  The assessor’s low valuation ran against Rule 6 (a) of the State Board of Equalization’s “Assessor’s Handbook 410, Assessment of Newly Constructed Properties,” which states on p. 19:

 “The reproduction or replacement cost approach to value is used in conjunction with other value approaches and is preferred when neither reliable sales data nor reliable income data are available and when the income from the property is not so regulated as to make such cost irrelevant.  It is particularly appropriate for construction work in progress and for other property that has experienced relatively little physical deterioration….” 

How could the bond underwriter have reasonably foreseen that the assessed value would fall 57 percent less than $65 million? The state’s own assessment rules would have indicated a much higher value based on the cost to construct the hangars.   And the assessor’s valuation reportedly did not come until after the bonds were issued.

Moreover, Standard and Poor’s bond rating service originally rated Victorville’s $13.3 million tax increment redevelopment bond BBB.  This is considered a borderline non-investment speculative grade bond (“junk bond”). Victorville’s subordinated bonds involved in the lawsuit were given a “CC-” rating by Moody’s bond rating service in 2009 (on a scale of Aaa1 is best and C worst).

Backdrops and contexts

A backdrop totally ignored in the SEC lawsuit was the effect of the sudden collapse of credit, bond and real estate markets in 2008.  What drives land values in Victorville’s import-based economy is the amount of incoming goods at the Ports of Los Angeles and Long Beach.  Container counts at the Port of Los Angeles dropped from 8.4 million in 2007 to 6.7 million by 2009.  That had a ripple effect that could be felt 100 miles away in Victorville.  Demand for wholesale warehouse space and a regional air and rail hub suddenly vanished.

With the deep depression also came an unplanned decline in the consumption of electricity in California.  Electricity use dropped by 19,564 gigawatts from 2007 to 2011.  A gigawatt is enough to supply the demand of about one million average homes.  California used 264,234,911 gigawatt hours in 2007, but only 250,384,248 by 2010.  Demand for the 563-megawatt Victorville 2 hybrid power plant vanished almost at the flip of a switch. A megawatt is 1/1,000th of a gigawatt.

Power plants in California are not built “on spec.”  The California Energy Commission and the California Independent System Operator schedule new plants to fill growing demand and the loss of power from the decommissioning of older, dirtier power plants.

The California Energy Crisis of 2001 was partly caused by not issuing enough permits for new power plants and banning power plant operators from coordinating power demands during the crisis. How could Victorville’s proposed power plant have been “ill-conceived,” as the SEC alleges, when the market for new power plants is so highly regulated?

Probable cause for prosecution? 

There remain a lot of questions about the SEC action.

For example, why has the SEC singled out Victorville, a Republican-run city, and not bond deals in the Democratic-leaning City of Stockton with its $59.6 million in nearly defaulted redevelopment bonds?

Or why has the SEC not delved into the widely known conflicts of interests involved with the California Communities Development Authority and its creation of Public Financing Authorities that are being copied throughout the country?  California State Treasurer Bill Lockyer has opened a conflict-of-interest probe.

But the SEC seems obsessed with $2.3 million in “management fees” used by Victorville’s bond underwriter Kinsell, Newcomb, and DeDios.  The SEC is concerned that a 10 percent bond-underwriting fee is excessive. But even Investopedia.com says 10 percent is a typical fee for issuance of a revenue bond.

The attorney representing Victorville and the Airport Authority is Terree Bowers, a former U.S. Attorney for the Central District of California. He said, “It’s a mistake for the SEC to treat municipalities the same way they treat corporations.”  Bowers added, “These actions [the SEC lawsuit] are somewhat questionable given the city’s emerging recovery from the Great Recession.  It is certainly worth debating whether this lawsuit is in anyone’s best interest.”

The SEC’s case could be rendered unneeded by the same forces that brought about the bondholder’s losses.  Port of Los Angeles container volumes are up significantly in 2013.  But redevelopment bonds are no longer available after Gov. Brown shut down redevelopment agencies in Feb. 2011.  Victorville’s 2007 and 2008 bonds were reported by the SEC to be currently trading in bond markets around 45 cents to the dollar in value.  Perhaps a settlement could be reached with bondholders?

The SEC wants to protect bondholders from further losses. But given the backdrop of the Obama-administration’s IRS scandal, and the circumstances surrounding Victorille’s $13.3 million redevelopment bond loss, the public will surely be debating whether there is any merit to the SEC’s case.

By Chris Reed

It’s bad enough that the media consistently depict hydraulic fracturing as new when it’s been around for 60-plus years. But what’s also amazing is that the California media covering the state government’s ongoing attempts to develop “fracking” regulations — including occasional contrarian Dan Walters — never mention the fact that the Obama administration has basically said full speed ahead. The U.S. Energy Department accepts the consensus of regulators over the past 40 years that fracking to access oil and natural gas reserves is just another heavy industry — one that’s fairly dirty but manageable.

I made this point in a U-T San Diego editorial which noted fracking’s immense potential to create an economic boom in the Golden State:

“What few seem to understand, and what the media have rarely emphasized, is that the Obama administration dismisses [environmentalists’] alarmism about fracking … .

“This is why the president’s first energy secretary, Steven Chu, said: ‘We believe it’s possible to extract shale gas in a way that protects the water, that protects people’s health. We can do this safely.’

“This is why the MIT physicist the White House recently nominated to succeed Chu, Ernest Moniz, described the risks to water posed by fracking as ‘challenging but manageable.’

“This is why the president’s first Environmental Protection Agency director, Lisa Jackson, told a House committee that she was ‘not aware of any proven case where the fracking process itself has affected water.’”

Have you seen this context in any MSM story about California’s regulation of fracking?

Nah.

The same pathetic bunch that ignored the downside of AB 32 until this year has ignored the fact that fracking has Obama’s blessing.

Pretty amazing.

By Chris Reed

As Californians begin to appreciate the immense economic potential of the state’s underground natural gas and oil reserves, the debate will sharply intensify over the safety of hydraulic fracturing — the newly refined and improved tool used to access previously unreachable reserves. Fracking, the shorthand term for the process, involves using high-powered streams of water, with a small amount of chemicals and solids or sand, to break up rock formations thousands of feet underground.

Of the states most associated with fracking — North Dakota, Texas, Ohio and Pennsylvania — what has happened in the latter is of most interest to Californians. In the Keystone State, the use of fracking to tap vast natural gas reserves in an underground formation called the Marcellus Shale flourished under a liberal Democratic governor, Ed Rendell. The former Philadelphia mayor simply never gave credence to the various scare tactics used to try to block fracking and brushed off the criticism from the Philadelphia Inquirer editorial page, environmental groups and others with an ideological, quasi-religious abhorrence of fossil fuels.

If Democratic Gov. Jerry Brown is to be persuaded to follow Rendell’s path, advocates of fracking need to learn from Pennsylvania and how the debate unfolded there.

Stick to the facts to counter hysterics

Advocates should argue that fracking is not perfect, but that no oil exploration is, and note that when properly regulated, it has a strong safety record. Scott Perry, who was the director of the Pennsylvania Department of Environmental Protection’s Bureau of Oil and Gas Management under Rendell, liked to respond to the harshest critique with this just-the-facts statement: “There has never been any evidence of fracking ever causing direct contamination of fresh groundwater in Pennsylvania or anywhere else.”

The argument that fracking, which is typically at a depth of 5,000 feet or more, might affect water tables thousands of feet higher isn’t one that most scientists take seriously. John M. Deutch, an MIT chemistry professor who served in high posts in the Carter and Clinton administrations and has been a key adviser to the U.S. Energy Department on fracking, says careful regulation addresses environmental fears in comprehensive fashion. He adds that fracking “is by far the biggest event that I’ve seen” in 50 years of monitoring world energy developments.

What’s striking about media coverage of fracking safety questions is how it largely ignores the fact that the Obama administration rejects the alarmism of the Sierra Club and the Natural Resources Defense Council. In House testimony in May 2011, EPA Director Lisa Jackson said she was “not aware of any proven case where the fracking process itself has affected water.” The U.S. Geological Survey dismissed the idea that fracking causes earthquakes. Most definitively, a November 2011 Energy Department study concluded that there were legitimate pollution concerns surrounding hydraulic fracturing. But the concerns involved the worries about surface air and water quality and about community effects that would come with any heavy industrial project, and were not due to the deleterious effects of fracking underground.

Efficiency gains: It’s not the chemicals, it’s the computers

In explaining why fracking is so much more effective than it used to be, advocates should stress that it is a result of computing power — not more toxic and dangerous chemicals. Drillers are now able to use extraordinarily sophisticated sensors to take the equivalent of a gigantic MRI of underground rock formations, then focus their water cannons on weak spots in the formations surrounding the shale formations with natural gas and oil reserves.

Now, as in the past, by volume the chemicals and sand used are less than 1 percent of the total water used. Because of fracking’s increased efficiency, this means much less water is used than in past versions — and thus fewer chemicals.

Another claim regularly invoked by fracking critics is that the process wastes an extraordinary amount of water. But the Marcellus Shale Coalition says 90 percent of the water used is recycled, and that far more water is used in Pennsylvania on golf courses than in fracking. The recycling percentage is only going to improve as focus grows on the importance of reuse.

The ‘Goebbels’-like anti-fracking documentary

Fracking supporters can shore up their case by pointing to the intentional deception in a 2010 anti-fracking documentary, “GasLand.” The movie’s most unforgettable image is residents of a town in a heavy drilling area — Dimock, Pa. — lighting their tap water on fire, leaving the plain impression this was the result of fracking. Instead, even director Josh Fox acknowledged in an interview with McClatchy-Tribune that it resulted from local conditions unrelated to the chemicals used in fracking. Fox, however, insisted it wasn’t misleading.

Defenders of Pennsylvania’s fracking record like to bring up “GasLand” because they know it is so easily discredited. In a 2011 interview with a newspaper in Lancaster, Pa., Teddy Borawski, chief oil and gas geologist for the state Department of Conservation and Natural Resources, relished the chance to tee off on the documentary. “Joseph Goebbels would have been proud,” he said. “He would have given him the Nazi Award. That, in my opinion, was a beautiful piece of propaganda.”

And in the war of talking points, the fact is that fracking has actually led to the single best news on the U.S. environmental front in many years. Natural gas is much cleaner than coal and oil, and fracking has increased supplies so dramatically that it now costs only a third or less of what it did in 2008 in the United States. The result: “The amount of carbon dioxide being released into the atmosphere in the U.S. has fallen dramatically to its lowest level in 20 years,” as AP reported last summer.

The irony could hardly be greater. For decades, environmentalists have argued that renewable energy such as solar and wind power are the only way to reduce the release of dangerous emissions into the atmosphere. But it is plentiful new supplies of a fossil fuel, natural gas, that has been the game changer. The U.S. has reduced carbon dioxide emissions more than any other nation since 2006, according to the International Energy Association.

California could thrive if it joins the “brown energy” revolution. The  Monterey Shale formation under the Central Valley is far bigger than the Marcellus Shale formation under Pennsylvania and other northeastern states. As the Wall Street Journal reported on Jan. 15, “The overall economic benefits of opening up the Monterey Shale field could reach $1 trillion.”

Allowing fracking to work its magic will be especially difficult in a state that is home to AB 32 and that is ground zero for regulatory excesses in the name of preventing pollution. But while governor of Pennsylvania from 2003-2011, Ed Rendell overcame reflexive green objections with his just-the-facts approach. It can work in California, too.

By CHRISS STREET

Gov. Jerry Brown and other California environmental activists are enthusiastic about advancing “sustainable” energy, such as windmill and geothermal. But oil and natural gas exploration are rapidly advancing — if they’re allowed to happen.

With America on the verge of achieving energy independence in the next five years by dramatically expanding domestic energy production, why should anyone be surprised that it’s Big Oil money that’s out to kill the Keystone XL Pipeline to prevent competition?

Most Americans were stunned when, in an election year, the U.S. State Department on January 18 denied the Keystone XL building permit to construct a 1,661-mile pipeline through Montana, South Dakota Nebraska, Kansas, Oklahoma and Texas. 

The media blamed the rejection on opposition from environmental activists, such as Robert Redford, who commented: “Canada wanted to send the dirtiest oil on the planet through the heart of America so that they could access export routes.”  But polls demonstrated the promise of 6,000 unionized construction jobs and lower-energy costs fostered 67 percent support to build the pipeline and only 25 percent against.

For the last three years, the mantra of the Obama Administration, Gov. Jerry Brown and the Agenda 21 “sustainability” crowd had been the coming of “Peak Oil.” That’s the point in time when the maximum rate of global petroleum extraction would be reached, then the rate of production would terminally decline and the prices would rise exponentially.

“Peak oil” justified more money worldwide for the first time being invested in alternative vs. traditional energy sources to generate electricity.  Projects for wind, sun, water and biomass captured $187 billion, while only $157 billion went into coal, oil and gas.

Unfortunately for “sustainable” investors, this was before the realization that “fracking” and other technology was drastically increasing U.S domestic energy production, causing the gas price to be cut in half.  Based on the U.S. Energy Information Administration data, wind now costs 50 percent more, photovoltaic 300 percent more and solar almost 500 percent more in comparison to burning natural gas to generate electricity.  Retail utility rates in California are 220 percent higher than natural gas due to alternative supply mandates.

Big Oil Backs Alternative Energy

Big oil and gas producers with proven energy reserves quietly supported the Obama Administration’s alternative energy initiatives because they expected the ludicrously high cost of alternatives to drive up prices for their production.  According to the Bureau of Labor Statistics, since Barack Obama has been president, the price of a gallon of gasoline has jumped by 83 percent.

Historically, domestic energy companies drilled for oil and got natural gas as a side product.  If there wasn’t a pipeline to transport the gas in the neighborhood, they usually burned it off at the well head.  Almost all the domestic oil companies at one time had oil and gas pipelines, but the business is highly regulated and allows only annual price increases equal to inflation plus 1.5 percent.

Consequently, energy companies spun off pipelines to the public in the form of highly leveraged Master Limited Partnerships.  Currently, there are 2.3 million miles of oil and gas pipeline in America. Much of that pipeline is ready 40 years old and needs to be updated and replaced.  Pipeline capacity had been growing by only 3 percent per year due the $609,000 construction cost per mile and the expectation domestic production would soon “terminally decline.”

Fracking and other technologies have hugely expanded domestic energy production potential.  Wildcatters are now drilling for spectacular amounts of natural gas and getting oil as the bonus product.  With only five local gas pipelines to service North Dakota’s portion of the Bakken field, drillers have focused on oil production, which skyrocketed to 558,000 barrels a day from 6,000 in 2006.  In just two years, the active drilling rig count vaulted from 33 to 181.

100 Years of Natural Gas

President Obama, who went gaga funding alternative energy projects, admitted in his State of the Union speech last month, “We have a supply of natural gas that can last America nearly 100 years,”  He added, “And my administration will take every possible action to safely develop this energy.  Experts believe this will support more than 600,000 jobs by the end of the decade.”  But that will never happen without big pipelines to transport new oil and gas production to market.

Since the cancellation of the Keystone XL Pipeline, the U.S. average retail price of gasoline for the month of January jumped to its all-time high at $3.51 per gallon, while the price of Bakken oil fell from $95 to $70 due lack of transportation capacity.  Cancellation of the Keystone XL pipeline has been bad for American workers, bad for American consumers and bad for America’s energy independence!  But it sure has been sweet for Big Oil.

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