STATES OF WONDER

In our most recent SOS blog, we asked Why on Earth? – wondering why, on Earth Day, some are so concerned about environmental impacts without really knowing what is impacted and how.

We are still in a State of Wonder. This time, about the economic state of two…States.

A May 6, 2013 editorial in the Wall Street Journal (WSJ) compares California and Texas – two states that are similar in having an abundance of oil and gas, but quite dissimilar in how their citizens view and, therefore, use the resource. Economic indicators show how this difference can impact our daily lives.

The editorial, entitled A Tale of Two Oil States, provides a graphic that says it all...

Texas and California have been competing for years as models of U.S. growth, but with few comparisons based on energy. The following differences were highlighted in the editorial:
--Texas has doubled its oil output since 2005. Texas Railroad (and Oil) Commissioner Barry Smitherman told the WSJ (2013) "total production could double by 2016 and triple by the early 2020s."  In contrast, California's oil production has fallen 24% from 2001 to 2012, with an average yearly decline rate of 17%. At this rate, production would fall to zero well before 2050 (Energy Information Administration [EIA] 2013, Energy & Capital 2012).
--Large investments have been made by California financiers on biofuels and alternative/renewable energy sources. (Our SOS blog entry Why on Earth discussed positive and negative aspects of the development of renewable energy sources.) Texas has invested heavily in wind power but not at the expense of oil production (WSJ 2013).
--Most Texas oil is on private lands, which owners are willing to lease at a price (WSJ 2013).  In California many oil-rich areas are state or federally owned, and a moratorium blocks new offshore leasing.
--Monterey Shale also comes into play – as discussed in the SOS blog What the Frack, this formation has the potential to provide energy resources that would provide tax and royalty income to fill the coffers of our cash-strapped state. However, the process of hydraulic fracturing, used safely for years in California, has become the dirty word “fracking” – influencing decisions on project approval.  It’s a drilling process that Texas … and other states have safely regulated for years (WSJ 2013).

These differences in production do not occur because California is running out of oil. To the contrary, California has huge reservoirs offshore.  A large part of the explanation for the Texas boom and the California bust is the culture. Despite our cars, Californians consider fossil fuels to be "dirty energy."  Texas loves being an oil-producing state while California is embarrassed by it (WSJ 2013).

In fact, not only is California not producing the energy most available within its borders – but it is increasingly reliant on foreign imports. That really makes you wonder!  According to the EIA (2013), California refiners process large volumes of Alaskan and foreign crude oil received at ports in Los Angeles, Long Beach, and the Bay Area. Crude oil production in California and Alaska is in decline and California refineries have become increasingly dependent on foreign imports. Led by Saudi Arabia, Iraq, and Ecuador, foreign suppliers now provide more than two-fifths of the crude oil refined in California.

California has the natural resources and technical expertise to reap the economic benefits that Texans enjoy through their openness to oil and gas exploration and production. What it needs is the political will (WSJ 2013).

SOS is committed to educating the public on the potential benefits that California would realize by producing oil from offshore seep areas. Our second documentary, The Road2Energy Independence, places particular focus on the potential economic windfall.

SOS is featuring the WSJ editorial in our blog, California Oil, to highlight the economic consequences endured by California because of misconceptions associated with using our most abundant energy source. A few examples:
--Texas has been leading the nation in job creation since the recession ended. The energy boom is creating thousands of jobs related to drilling but also in downstream industries such as transportation, high-technology, construction and manufacturing (WSJ 2013).
--According to the Bureau of Labor Statistics (BLS) Unemployment Rate for States Monthly Rankings (Seasonally Adjusted, March 2013), the Texas jobless rate is 6.4% while California's is the third highest at 9.4% (BLS 2013).
--More than 400,000 Texans are employed by the oil and gas industry.  This is almost 10 times more than in California. In addition, in Texas, Mr. Smitherman has stated that the average salary is $100,000 a year (WSJ 2013).
--In Texas, the oil industry generates about $80 billion a year in economic activity.  Texans are realizing another benefit from oil production: money to fund government services. James LeBas, a fiscal consultant who also works as a lobbyist for the Texas Oil and Gas Association, estimates that oil and gas interests paid about $12 billion in taxes in Texas in fiscal 2012, up from $9.25 billion in 2011 and $7.4 billion in 2010 (State Impact 2013). This helps Texas avoid a state income tax. California's top marginal income-tax and capital-gains tax rate is 13.3% (WSJ 2013).

Since the WSJ editorial touched on issues pivotal to the mission of SOS, and on the subjects of postings in our blog thus far, our Treasurer, Jim Nelson, wrote a response. The WSJ hopped on it, and Jim’s comments were published May 11, 2013.

Jim knows whereof he speaks. Prior to joining SOS, Jim was Chief Financial Officer, Vice Chairman and a Director of Cal Dive International, Inc., a marine contractor and operator of offshore oil and gas properties and production facilities. Jim currently serves on the boards of 5 publicly traded and privately owned energy companies.  He was asked to join our board by SOS co-founder, Lad Handelman.  Lad was an abalone diver in the 1960s who formed the original California Divers and pioneered the first use of mixed gas diving when oil exploration in the Santa Barbara Channel went beyond 250 feet.  It is hard to recall but just four decades ago California was at the leading edge of offshore technology.

Jim’s extensive experience analyzing the economics associated with all aspects of oil and gas exploration and production is what drew him to SOS. He is able to see the potential that California’s vast resources offer.  Jim’s response to the WSJ editorial states, in part:
--An estimated 2-4 billion barrels of oil are thought to be in the Santa Barbara Channel with a total of 14-19 billion barrels in waters offshore California
--Development of those reserves not only would generate the economic benefits (the editorial) discuss(es) but would also clean up the environment.
--There are 2,100 natural oil and gas seeps in the Santa Barbara Channel, second largest in the world, which each year emit oil into the ocean that is the equivalent of the 1969 California oil disaster and every four years the equivalent of the Valdez oil spill.
--Hydrocarbon offshore seeps are the largest source of air pollution in Santa Barbara County.
--Producing the underlying oil reserves has been documented to clean up our beaches and our air.
--(Californians) pay $1.00 a gallon more for gasoline than in Texas.

A Santa Barbara County economic boom could mirror or surpass that of the State of California’s if oil and gas were to be developed locally.  Mark Schniepp, head of the Goleta-based California Economic Forecast, spoke before a November 8, 2012 gathering of the Santa Barbara Technology & Industry Association. Regarding the economy, he stated “I don’t see any change in the next four years….But people will continue to mistakenly hope more green industry jobs will bail us out.”  Schniepp said that won’t begin to happen until after the year 2030, but “will cost us a lot.” (Santa Barbara View 2012).

Dr. Schniepp added that some 230,000 California jobs will be created in 2013 (in construction due the need for houses, and in school hiring due to Proposition 30) , but the unemployment rate won’t begin to decline to pre-recession levels until 2015.  He added, “We need a new (job) engine.” Schniepp said if California used its vast, untapped oil and natural gas deposits during the next 40 years, it would have billions of dollars in revenue and hundreds of thousands of new jobs.  He admitted state and federal moratoriums on new oil leases make increased petroleum exploration in California unlikely for the moment (Santa Barbara View 2012).

Given our crumbling roads and an education system that is ranked 49th out of 50 states in per-pupil spending (EdSource 2013), it’s a wonder California is not following Texas’ lead. AND with the potential for a healthier environment from offshore oil production, we could do them one better.

Now we wonder…who’s ready for a little state competition?
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REFERENCES
BLS 2013. U.S. Department of Labor, Bureau of Labor Statistics. http://www.bls.gov/web/laus/laumstrk.htm

EdSource 2013. California drops to 49th in school spending in annual Ed Week report. John Fensterwald, January 14, 2013. In EdSource, Highlighting Strategies for Student Success.
http://www.edsource.org/today/2013/california-drops-to-49th-in-school-spending-in-annual-ed-week-report/25379#.UZSBrO3n9jo

Energy & Capital 2012. California Oil Production, Is This a Fool’s Oil Rush? Keith Kohl, November 20, 2012 http://www.energyandcapital.com/articles/california-oil-production/2819

EIA 2013. U.S. Energy Information Administration. http://www.eia.gov/state/print.cfm?sid=CA

Santa Barbara View 2012. Santa Barbara Business Beat, Ray Estrada. November 9, 2012.
http://www.santabarbaraview.com/santa-barbara-business-beat-2/

State Impact 2013. Shale Boom Has Major Impact on Texas’ Budget. Kate Galbraith, Texas Tribune. In State Impact, A reporting Project of NPR Member Stations/ Texas, Reporting on Power, Policy and the Planet.
http://stateimpact.npr.org/texas/2013/04/30/shale-boom-has-major-impact-on-texas-budget/

Wall Street Journal (WSJ) 2013.  A Tale of Two Oil States.  http://online.wsj.com/article/SB10001424127887324695104578416871045535226.html?

WHY ON EARTH?

April is the month our nation celebrates Earth Day. As we Santa Barbara locals know, the first Earth Day was in 1970, mere months after the event that inspired it - the Santa Barbara Oil Spill of 1969.

Uh oh – why on earth would a non-profit that supports ongoing oil and gas exploration and production want to highlight the first polluting incident that made the country look negatively at that very industry?

 

Why on earth, indeed…

Exactly!!!  It’s because of the earth – and the fact that we care about its health and sustenance as much as any other Santa Barbara-based environmental non-profit – that we started our organization six years ago and, more recently, this blog.

 

Earth Day started a movement that galvanized a nation, and rightly so. The reaction to the 1969 spill was also the impetus behind the passage of the National Environmental Policy Act (NEPA) of 1969, as amended (Pub. L. 91-190, 42 U.S.C. 4321-4347, January 1, 1970, as amended by Pub. L. 94-52, July 3, 1975, Pub. L. 94-83, August 9, 1975, and Pub. L. 97-258, § 4(b), Sept. 13, 1982) (CEQ 2013). NEPA requires the formal evaluation of the environmental impact of any federal action. California was one of the first states to follow suit, and passed the parallel California Environmental Quality Act (CEQA) for state project review (California Public Resources Code [Sections 21000 et.al.]) (State of California 2013). For California, this meant that every state or federal oil and gas project planned in California would be evaluated for impacts on air, water, geology, biological resources, cultural resources, and economics. It also required that alternatives to the proposed action (including no action) be created and evaluated, and that the public would have input. Mitigations could be proposed, but would likely not win approval in the process unless they reduced impacts to minimal.

 

Why on earth  bring up legislation that reviews oil industry projects? Because it’s important to evaluate the impact to the earth from human activities.

 

AND because, in California, NEPA and CEQA review applies to ALL projects – not just oil and gas.

 

The fact that seems to get lost in any discussion of oil versus renewables is that every project has impacts. The challenge is to find the project that provides the desired outcome with the least environmental impact.

 

SO – how on earth  do we get the energy we need to support the US economy and our lives without negatively impacting the planet?

 

Well, we all know that, with the risk of spills, drilling for oil is bad – right? Especially in Santa Barbara, since we already had that big spill – right?  Why on earth  would we want oil drilling in Santa Barbara?

 

An important part of NEPA and CEQA is siting – the right project for the right location. Santa Barbara has the second largest natural oil seeps in the world. No one wants an oil spill, because it is bad for the environment. But, in Santa Barbara, oil is constantly spilling into the environment. It is estimated that oil seepage for a single 6-mile stretch, including Coal Oil Point, averages 10,000 gallons (240 barrels) of oil each day. Every 12 months, about 86,000 barrels of oil seep into the ocean – the equivalent of the quantity released during the 1969 spill (soscalifornia.org).  In addition, hydrocarbon offshore seeps are the largest source on air pollution in Santa Barbara County (APCD 2007).   

 

Studies have shown that oil exploration reduces the rate of seepage. Hornafius et al. (1999) studied marine hydrocarbon seeps in the Santa Barbara Channel, and stated, “The decrease in hydrocarbon seepage rate near platform Holly, possibly due to the reduction in subsurface reservoir pressure, suggests that oil production here has resulted in unexpected benefit to the atmosphere and the marine environment….On a local level a reduction in seepage due to oil production can have a profound effect on the air and water quality.”

 

An accidental spill would be just that – a possible outcome of a project but not the intention of the project. In fact, a blowout such as that which occurred in 1969 is now a remote possibility given the significant improvements in technology over the last four decades.

 

But why on earth  would anyone support oil drilling when renewables are so much less polluting overall?

 

Californians have high expectations for their state’s renewable energy programs. California Energy Commission’s (CEC’s) 2004 Integrated Energy Policy Report Update recommends a goal of 33 percent renewable energy by 2020.  Santa Barbara’s local Community Environmental Council’s initiative is “Fossil Free by ’33.”  However, the U.S. Energy Information Administration (EIA) forecasts U.S. energy demand will grow by 14 percent between 2008 and 2035, with more than half of the energy demand expected to be met by oil and natural gas, as is the case today. Renewables are expected to grow rapidly between now and 2035 with EIA forecasts showing biomass and other renewables increasing by 110 percent. Despite the rapid growth and because they are starting from such a small base, renewables are expected to supply just about 14 percent of the nation’s energy needs by 2035 (API 2010).

 

Let’s take a look at what’s available…

 

Wind Energy - Californians have equally high expectations for protection of the state’s diverse bird and bat populations. The Altamont Pass wind project is iconic in the state and was the subject of an article in Wired magazine in 2005, at a time when the potential impacts were coming to light. It seems that, even though Altamont Pass is known for its strong winds, it also lies on an important bird migration route, and its grass-covered hills provide food for several types of raptors. The article quotes Jeff Miller, a wildlife advocate at the nonprofit Center for Biological Diversity (www.biologicaldiversity.org) who states "It's the worst possible place to put a wind farm… It's responsible for an astronomical level of bird kills." As an environmental organization, the Center for Biological Diversity ‘supports the development of alternative energy sources as a way to reduce our impact on the environment, including reducing greenhouse emissions and protecting wildlife habitat. However, some wind power facilities, such as the Altamont Pass Wind Resource Area (APWRA) in eastern Alameda and Contra Costa Counties, California, are causing severe environmental impacts to raptor populations due to bird kills from collisions with turbines and electrocution on power lines.’ The CEC, along with the California Department of Fish and Game, has since developed California Guidelines for Reducing Impacts to Birds and Bats from Wind Energy Development to address the coexisting and sometimes conflicting objectives: to encourage the development of wind energy in the state while minimizing and mitigating harm to birds and bats.

 

Wave Energy - Hydrokinetic energy from tidal, current, and wave sources represents immense potential for electrical energy generation. Lagging behind the development of technology and movements to identify the location of coastal wave energy facilities, however, has been the assessment of potential impacts. Any renewable ocean energy project will have associated environmental effects. Construction processes and site preparation, deployment, operation, power transmission, servicing, decommissioning, and the physical structures of the wave energy devices and the mooring systems all may have an uncertain level of impact on the marine environment (Boehlert et al. 2008).

 

Solar Energy - Development of large tracts of land up to several thousand acres for solar energy facilities and related infrastructure could result in impacts. These could include modification of surface and groundwater flow systems, water contamination resulting from chemical leaks or spills, and water quality degradation by runoff or excessive withdrawals of groundwater. Total removal of vegetation is possible at most facilities, and could result in significant direct impacts in terms of increased risk of invasive species introduction, changes in species composition and distribution, as well as habitat loss.  Numerous wildlife species would be adversely affected by loss of habitat, disturbance, loss of food and prey species, loss of breeding areas, effects on movement and migration, introduction of new species, habitat fragmentation, and changes in water availability (BLM and USDOI 2012). Impacts on special-status species, including species of desert tortoise, are of particular concern. From a conservation standpoint, one of the most important species in the desert Southwest is Agassiz’s desert tortoise (Gopherus agassizii) listed as threatened under the US Endangered Species Act in 1990. The flat-tailed horned lizard (Phrynosoma mcalli) is a species of special concern on the Coachella Valley because of solar energy development. The federally protected Coachella Valley fringe-toed lizard (Uma inorata) also occurs in this area (Lovich and Ennen 2011). Solar thermal projects with wet-cooling systems require large volumes of water, with potentially significant environmental impacts (BLM and USDOI 2012).

 

Even organizations that view oil & gas use negatively report that even renewable energy development and use can impact the environment. The Union of Concerned Scientists provides information on their website on the Environmental Impacts of Renewable Energy Technologies. The group states that all energy sources have some impact on our environment. The exact type and intensity of environmental impacts varies depending on the specific technology used, the geographic location, and a number of other factors. By understanding the current and potential environmental issues associated with each renewable energy source, we can takes steps to effectively avoid or minimize these impacts as they become a larger portion of our electric supply.

 

The situation offshore Santa Barbara provides an interesting example of environmental impact associated with energy development. Here, the environmental impact occurs when the energy source is NOT developed.

 

A recent Wall Street Journal article entitled “Rise in US gas production fuels unexpected plunge in omissions" states that energy-related emissions of carbon dioxide have fallen 12% between 2005 and 2012 and are at their lowest level since 1994. The significant increase in natural gas production is resulting in less coal being utilized for electricity generation.  And that increase in gas production is the result of new technology -- fracking/horizontal drilling -- over the last five years.

 

Also, the technologies associated with renewable energy have not necessarily reached a high enough level of development to be economically feasible.  At ECO:nomics, the Wall Street Journal’s annual business and environment conference, held at the Bacara, Tony Posawatz, President and CEO of electric car company Fisker Automotive, stated “Just because it’s a good idea doesn’t make it a good investment…This has been a noble way to lose money.” Current renewables are not cost-effective – producing existing resources such as those offshore Santa Barbara buys us time for these new technologies to be developed and introduced.

 

No one is saying we don’t need energy, and in every form that’s feasible.  We have many options – the challenge for each location is to determine the source that provides the most energy for the least environmental impact. In Santa Barbara, right now, that is oil. In other areas, it may be renewables.

 

If we can afford them. Oil and gas exploration off Santa Barbara could help with that part, too.

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References

Air Pollution Control District (APCD) 2007. 2007 Clean Air Plan. Santa Barbara County Air Pollution Control District and Santa Barbara County Association of Governments. Final. August.
 

Boehlert, G. W, G. R. McMurray, and C. E. Tortorici (editors). 2008. Ecological effects of wave energy in the Pacific Northwest. U.S. Dept. Commerce, NOAA Tech. Memo. NMFS-F/SPO-92, 174 p. http://spo.nmfs.noaa.gov/tm/

 

Bureau of Land Management and U.S. Department of Energy 2012. Final Programmatic Environmental Impact Statement (PEIS) for Solar Energy Development in Six Southwestern States. Executive Summary, July 2012. Bureau of Land Management, U.S. Department of Energy,  FES 12-24 • DOE/EIS-0403.

 

California Energy Commission’s 2004.  Integrated Energy Policy Report Update

 

California Energy Commission and California Department of Fish and Game. 2007.

California Guidelines for Reducing Impacts to Birds and Bats from Wind Energy Development. Commission Final Report. California Energy Commission, Renewables Committee, and
Energy Facilities Siting Division, and California Department of Fish and Game,
Resources Management and Policy Division. CEC‐700‐2007‐008‐CMF.
 

Center for Biological Diversity http://www.biologicaldiversity.org/campaigns/protecting_birds_of_prey_at_altamont_pass/pdfs/factsheet.pdf

Council on Environmental Quality (CEQ) 2013. http://ceq.hss.doe.gov/index.html.

Hornafius, S., Quigley, D., and Luyendyk, ZB.P. 1999. The world’s most spectacular marine hydrocarbon seeps (Coal Oil Point, Santa Barbara Channel, California): Quantification of emissions. Journal of Geophysical Research, Vol. 104, No. C9, Pages 20,703 – 20,711.eptember 15, 1999. Institute for Crustal Studies, University of California, Santa Barbara.

Lovieh, J. and Ennen, J. Wildlife Conservation and Solar Energy Development in the Desert Southwest, United States. BioScience, Vol 61, No.12 (December 2011), pp. 982-992

State of California 2013. Governor’s Office of Planning and Research.

http://opr.ca.gov/m_ceqa.php

Union of Concerned Scientists

http://www.ucsusa.org/clean_energy/our-energy-choices/renewable-energy.environmental-impacts-of.html

Wired 2005.  "Unexpected Downside of Wind Power" Will Wade. October 14, 200