California recently established the most stringent energy-extraction restrictions in the nation. As the CEO of a natural gas firm, you probably think I vigorously opposed these rules.
You’d be wrong.
In fact, California’s new law is a welcome step in the evolution of the American energy market. One of the biggest inhibitors of energy development in this country is regulatory uncertainty. By creating smart and streamlined rules, California has eliminated that uncertainty and established a sturdy legal foundation for future exploration and extraction.
Other energy-rich states should follow suit and pass legislation of their own.
Hydraulic fracturing – “fracking” for short – has enabled access to vast underground reserves of oil and gas that were once wholly unreachable. That’s huge for California, which is home to a 1,750-square-mile shale formation. Based on calculations by the Energy Information Administration, this formation alone could bear up to 64 percent of the United States’ shale oil reserves.
But until energy development rules were clearly defined, California couldn’t meet its colossal potential. This new legislation opens up this remarkable resource for responsible exploration, setting an example for other energy-rich states.
California will now require energy companies to obtain permits before fracking. Firms are also required to disclose what chemicals are used in the process, as well as what impact they’d have on the environment.
Thanks to these forward-thinking rules, California could well become America’s biggest oil producer within the decade. And keep in mind that the United States overall is on track to become the biggest oil producer on the globe by 2015.
Now that oil and gas can be properly harvested, the state tax revenue alone will likely add up to $4.5 billion. Meanwhile, shale development will add $10,000 to per-capita economic activity.
Fracking will also create 2.8 million jobs by 2020, according to a recent estimate by the University of Southern California. And unlike Silicon Valley, these opportunities wouldn’t only be for high-skilled, highly educated people. Entry-level energy jobs can easily pay $80,000 a year or more, and they often require no more than a high school diploma.
Other states can reap similar rewards by passing similar rules. Right now, fracking isn’t federally regulated, and state laws vary erratically. Kansas has no laws. Pennsylvania has strict ones. New York has imposed a temporary fracking moratorium. Vermont and New Jersey outright forbid the practice.
Would-be energy investors are scared off by these variant policies. And they’re justifiably wary about new regulations being based on a capricious public’s vague impressions of fracking rather than good science.
California’s new law is all the more notable given the staunch opposition to fracking in the Golden State. More than half of all residents have reported they’re against expanding the practice, according to the Public Policy Institute of California.
Opponents have typically cited environmental concerns. These fears have proven wildly unfounded.
Take, for instance, the claim that fracking contaminates groundwater. Though it’s a popular complaint among green activists, none other than Lisa Jackson, the former head of the Environmental Protection Agency, was forced to concede to Congress that there are “no proven cases where the fracking process itself has contaminated groundwater.”
Likewise, last April, U.S. Energy Secretary Ernest Moniz said he had “still not seen any evidence of fracking per se contaminating groundwater.” And a study last year from the U.S. Geological Survey reported “no significant effects on groundwater quality from shale gas development.”
The much-demonized fracking fluid is often 99.95 percent water and sand. And the “chemicals” purportedly being pumped into the earth are positively harmless – Halliburton’s CEO even drank fracking fluid at a recent Colorado Oil and Gas Association conference.
Fears about air pollution as a direct result of fracking have also proved to be without scientific basis. New “completion” technology captures and controls 99 percent of the emissions from fracking sites.
And when the University of Texas at Austin conducted the most comprehensive fracking-emissions study to date, collecting data from 190 sites, it found that the EPA had overstated methane leaks by about 20 percent in its most recent estimate. That estimate had already been revised downward from previous, higher calculations.
California’s new energy law should serve as a regulatory blueprint for other states looking to reach their full energy potential. Without clear and predictable rules, states will continue to squander their natural resources – and that’s an economic travesty.
Written By: Chris Faulkner, CEO and President of Breitling Energy Corp.