Is California Next in Line for an Energy Boom?

Is California ready for an energy boom? The federal government just auctioned off oil leases for nearly 18,000 acres of Central California public land containing one of the largest shale oil deposits in the country. Several groups bid for parcels in rural stretches of Monterey, San Benito and Fresno counties were auctioned, Bureau of Land Management spokesman David Christy told the Associated Press. (Full results of the auction can be found here.)

Just last year the U.S. Energy Information Administration estimated that California's Monterey Shale formation contained over 15 billion barrels of "recoverable" shale oil, more than four times bigger than the Bakken oil fields of Montana and North Dakota, where oil drilling has turned North Dakota into an economic dynamo.

A very different geology than the Bakken

Some production companies got an early start on California's latest gold rush. The BLM's biggest 2011 lease was a 200-acre parcel by Vintage Production California, a Bakersfield-based subsidiary of Occidental Petroleum, the third-largest US oil and gas producer, which now controls over 20 billion barrels of potential California shale oil reserves.

The auction's winners still need permits before they can start fracking and then drilling. While fracking has been used here for decades, fracking has become much more

sophisticated over the last 10 years, making bidders justifiably optimistic about extracting oil that was technologically out of reach just a decade ago.

Tupper Hull, of the Western States Petroleum Association, an oil industry group, told NPR that fracking could boost the state's oil production, which has been declining for two decades. He added:

"If hydraulic fracturing proves to be as successful here as it's been elsewhere, it's an extraordinarily optimistic future we're looking at from an energy point of view."

Unfortunately, California's geology is very different from the Bakken. The shale layers are more difficult to access, bent by the state's unique and volatile seismic forces, which makes typical horizontal drilling problematic. With lots of natural faults in the rock, drillers can't easily control the flow of oil through faults they create. Also, the rock is not under especially high pressure, so there is less force pushing the oil to the surface. And like much of the California oil already in production, it may be thick and viscous, slowing its flow.

Among the most productive farming region in the US

If the Monterey had performed as well as the Bakken field in North Dakota or the Eagle Ford in Texas, it would already be delivering an additional 300,000 barrels of oil per day by now. Instead, production in California has been flat.

There is also a concern when it comes to disposing of fracking wastewater underground in one of the most productive agricultural areas in the United States. Democratic Rep. Sam Farr had requested that the agency put the auction on hold over concerns that the bureau wasn't doing enough to monitor the potential impacts of hydraulic fracturing.

"Fracking is not something that we have yet accepted as a proven technology," Farr told the Associated Press. "The oil lies deep and the water is shallow and in the Salinas Valley (known for its agriculture), healthy water is more important than oil. It's our economic base for agriculture." The new parcels - never drilled before - include scenic stretches of southern Monterey County, where cattle ranchers and wine grape growers rely on tight water supplies to irrigate their pasturelands and vineyards.

Oil wells are nothing new for many ranchers in southern Monterey County. The area is home to the San Ardo oil fields, where companies such as Chevron have been pumping for 60 years. Rancher Mary Orradre, who already leases land to drillers, is enthusiastic about the new auction. "It's been very good the last couple of years," Orradre told CBS. Under the fields where her cows graze, there is an abundance of oil, which is a constant source of revenue that helps keep her ranch going.

How will California's shale oil affect the US economy?

Images: San Joaquin valley, Downtowngal; San Joaquin pump jacks, Downtowngal; pump jack, techcollector