Billionaire helps poke holes in oil industry's argument for drilling Monterey Shale

Tom Steyer is a billionaire and also

“We’ve been told that there’s a great oil boom on the immediate horizon,” billionaire investor and Pac Heights resident Tom Steyer noted at the start of a March 27 talk in Sacramento. 

But Steyer (who has pledged to spend $100 million on ad campaigns for the 2014 election to promote action on climate change) wasn’t there to trumpet the oil industry’s high expectations. Instead, he introduced panelists who dismissed the buzz on drilling the Monterey Shale as pie-in-the-sky hype.

Dr. David Hughes, a geoscientist with the Post Carbon Institute, and researcher Robert Collier had been invited to speak by Next Generation, a policy group focused on climate change that was co-founded by Steyer.

Last year, researchers from the University of Southern California released a study that wound up being cited time and again as the basis for the oil industry’s arguments in the context of a statewide debate on fracking ignited by environmentalists.

Partially funded by the Western States Petroleum Association, oil industry lobbyists, the USC report outlined a rosy economic outlook stemming from oil extraction in the Monterey Shale, a vast geologic formation touted as “a new, economy-spurring natural resource.”

The Monterey Shale spans 1,750 square miles, running beneath much of the San Joaquin Valley and into Southern California. Authors of a private-sector report produced by INTEK, referenced by the USC report, estimated that 15.4 billion barrels of oil could be extracted from the shale formation – mostly through nontraditional methods such as fracking or acidizing, a process that involves pumping acid underground.

But Hughes, the geoscientist, characterized this estimate as unrealistic. “The Monterey Shale certainly will produce more oil and gas, but likely only a very small fraction of what’s been reported in the INTEK report,” he said. “Projections are highly unlikely to be realized.” The Post Carbon Institute and Physicians, Scientists and Engineers for Healthy Energy published their own report, Drilling California: A Reality Check on the Monterey Shale.

Also unlikely to be realized are the optimistic figures on job creation and economic activity, Collier noted.

California is the nation’s fourth largest oil producer, but its production has been on a steady decline for the past two decades. “So the hopes for the Monterey Shale come in the context of a gradual decline, and the hopes that California will echo the big boom of North Dakota and Texas,” he said.

The USC report contained sensational projections, predicting that 2.8 million net new jobs would be created statewide in sectors indirectly or directly associated with oil. The most optimistic scenario predicted 4.4 million net new jobs. The report also predicted that opening up the Monterey Shale for drilling would result in a 14 percent increase in per capita GDP, as well as  $24 billion in state and local tax revenues.

And as the debate about regulating fracking raged on, the findings in this study were “echoed by politicians of both parties,” Collier noted.

But prominent economists, tapped by Next Generation to analyze the study, said they could find no basis for certain claims.

Next Generation researchers turned to University of California economists Jerry Nickelsburg of UCLA, Jesse Rothstein of UC Berkeley and Olivier Deschênes of UC Santa Barbara. “They said: ‘We cannot see any justification for these incredible numbers,” Collier reported. “They seem too big to be believable.”

Instead, the economists believed the potential job creation was closer to 100,000 in total direct and indirect employment, he added. More information is presented in Next Generation's report.

So arguments that the oil industry has been using in favor of opening up the Monterey Shale might be based on flimsy math. 

Steyer, at the close of the talk, put in a plug for focusing on clean-energy sector growth instead.

“When we sit here and talk about jobs, let’s remember that the clean energy jobs are most likely to solve our employment problems,” he said. “If we want a boom in energy production, then we have a boom in energy production. I think it’s clear, our future is in advanced energy.”