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Next Generation drills down on California's Monterey Shale

After decades of declining production, unconventional oil drilling has put the United States on track to become the world’s largest oil producer in 2017. North Dakota’s enormous Bakken Shale oil deposits and subsequent oil boom have been national news for months – you’ve probably heard a lot about the possible impact on U.S.-Saudi relations, the bonuses McDonald’s is being forced to pay employees in boomtowns, and the President’s deliberations on the Keystone XL pipeline.

But now a new oil boom is set to transform California, and most Californians know nothing about it.

Deep underground beneath the Central Valley and the southern California coast, the federal government estimates as much as 15.4 billion barrels of oil are locked up in a rock formation called the Monterey Shale. That’s two-thirds of the shale oil in the United States.

Like the Bakken Shale that started the oil rush in the fields of western North Dakota, the Monterey Shale wasn’t just suddenly “discovered”– geologists have known about these rocks for decades. In fact, California is already the nation’s fourth biggest oil producing state, and most of that crude comes from deposits geologically related to the Monterey Shale.

One reason things are different now is that in the last decade, steadily improving drilling technology has made extracting oil from unconventional deposits like the Monterey Shale technically feasible. In many ways it’s the same story that we’ve seen play out with natural gas from shale deposits, fueled by many of the same technologies.

But the real game changer here is high prices.

 

Consumers willing to pay = drillers willing to drill

Americans – and increasingly affluent people around the world – have proven that we’re willing to pay top dollar for oil, and its stubbornly high cost has provided companies with the only economic incentive they need to drill in places where they wouldn’t have dreamed of investing a decade ago. Depending on whom you listen to and the particular rock you’re drilling into, oil companies need prices to be between $55-70/barrel or $80-90/barrel just to break even on their investments. That’s a big reason why, as Next Generation’s Kate Gordon explained in the Wall Street Journal, increased production won’t necessarily mean lower prices: if oil prices go down, the oil stays in the ground.

Given the possible opportunity, it’s no surprise that many companies have been actively exploring, buying up leases, and trying to figure out the best way to get the oil out of the Monterey Shale. It’s even less surprising that Californians want some questions answered before the Monterey becomes the next Bakken.

 

When is a frack not a frack?

First and foremost, we need assurances that drilling can be done safely. Late last month, three bills advanced in the State Legislature to place a moratorium on hydraulic fracturing, or “fracking,” until legislators and regulators have had time to give the issue proper consideration. One area of particular concern is the impact that large scale fracking might have on California’s water supply and quality, and what plans could be put in place to deal with wastewater that is produced. Another is ensuring that the public knows what chemicals are being used during that process, itself the subject of seven other bills currently advancing in the Legislature and a regulatory push by the state’s Division of Oil, Gas, and Geothermal Resources.

And this leads to another question: is fracking really the right name for what’s happening in the Monterey Shale? Fracking has become the drilling term du jour, but in fact the Monterey Shale is so geologically heterogeneous that different tools and techniques are likely to be used in different areas. Matrix acidization, in particular, goes unmentioned in most conversations about the future of oil drilling in California, despite industry reports that it may be the most promising technique available. The process – which involves the injection of huge amounts of hydrofluoric acid into the ground to eat away at the rock and stimulate production – has been used in a limited way, but never as widely as it would be used here. Little information is publicly available about the potential effects on subsurface water supplies of hydrofluoric acid, which is well known in industrial settings as one of the most corrosive and dangerous chemicals available.  And even if California’s fracking regulations pass, they might not cover this other technique. 

 

Unanswered questions on climate

Finally, what will all this drilling do to our climate – and how will it affect our state’s climate commitments? Many California oilfields are about as carbon-intensive as Canadian tar sands – and in some cases more so. Can the state meet the ambitious carbon-reduction goals we’ve set for ourselves and drill for billions of barrels of oil at the same time? Or would a new oil boom destroy the state’s ability to cut its emissions? Until we have better data about unconventional drilling in the Monterey Shale, it’s hard to say with any certainty one way or another.

In the coming weeks, Next Generation will be rolling out an in-depth analysis of the Monterey Shale and its implications for California. Our two-part series, authored by award-winning journalist Rob Collier, will try to answer all of these questions about California’s next possible oil boom – and what it will mean for our state, and the nation. Stay tuned. 

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