Oil and gas exploration has the power to unleash a powerful job-creating force. California, with the worst unemployment rates in the country at 9.6% (tied with Mississippi and Nevada), could join in the jobs boom that would have it rival best-in-the-nation North Dakota, which boasts a 3.3% unemployment rate. But unfortunately for those looking for work in the state, a recent court victory shows the state has no chance of participating in that job-creating machine anytime soon.
Turning a blind eye
A federal judge ruled that the U.S. Bureau of Land Management ignored its responsibility in assessing the environmental impact hydraulic fracturing would cause when the agency doled out leases in California’s Monterey Shale Formation, which is estimated to hold some 15 billion barrels of oil. That’s akin to 64% of all the estimated shale oil reserves in the U.S. and is double the combined reserves of North Dakota’s Bakken Shale and Texas’ Eagle Ford Shale.
Occidental Petroleum Corporation (NYSE:OXY) was one of the biggest winners of leases when they were handed out, but analysts at Raymond James have identified privately held Venoco and Plains Exploration & Production Company (NYSE:PXP) as among those also highly exposed to the Monterey formation.
Rockin’ the Bakken
It was of course the Bakken boom that ignited North Dakota’s economy and sent its unemployment rate to the lowest level of any state (Texas is 17th on the list at 6.4% unemployment). It also happens to be one of the few states with a budget surplus. An oil and gas boom in California would go a long way to shoring up its chronic fiscal problems and pension woes, let alone leading the U.S. in surpassing Saudi Arabia as the top oil producer in the world.
The court decision, however, effectively bars any drilling on the contested 2,500 acres leased for oil and gas development until the fracking question is resolved.
A fractured future
In the fracking process, water, chemicals, and fluids are pumped into wells under high pressure to fracture rock formations. Proppants are injected to prop open the fissures and allow the oil and gas to flow more freely. Environmentalists charge that the process opens up the entire ecosystem to contamination, and in the past it has been blamed for everything from groundwater contamination to earthquakes. Considering California’s history with quakes, its nervousness is perhaps understandable.