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The Two Faces of California

How the greenest state in the country copes with an oil and gas boom.

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A kitesurfer sails through the surf near an oil tanker off the coast of Seal Beach.(Photo by David McNew/Getty Images)

HERMOSA BEACH, Calif.—Locals call the boardwalk along the beach the "Strand." In this small Los Angeles suburb 15 miles south of the famous Santa Monica pier, it's easy to run into someone you know, and you can walk just about everywhere. But this is still Southern California. Most people have cars, too.

The city's 20,000 residents, whose average income is roughly $100,000 (almost double the national average), also have noble sustainability commitments. The city has banned Styrofoam cups, installed electric-car charging stations downtown, and in 2010, the mayor pledged to make Hermosa Beach carbon-neutral.

 

"The clean-tech, clean-energy, green-jobs economy is coming and coming fast," then-Mayor Michael DiVirgilio wrote in an op-ed. "We share a vision for our city's future as a fertile home for new green ideas, businesses, technologies, and practices." Hermosa Beach resident and former mayor George Schmeltzer is fighting a proposal to drill for oil in this wealthy, beach town. (Amy Harder)

But even idyllic Hermosa Beach—so fastidious it does not allow weddings on the beach—cannot escape the nation's oil and natural-gas boom. Four blocks up from the Strand, E&B Natural Resources, an independent oil company based in Bakersfield, Calif., is seeking to drill as many as 35 wells to recover up to 35 million barrels of oil on a site that's just 1.3 acres. New directional-drilling technology would allow E&B to drill underneath the beach and out into the ocean floor.

Hermosa Beach's struggle reflects a broader battle taking place in California: The greenest state in the union, with a fierce regulatory regime combating pollution and fostering environmentalism on almost every level, is having to simultaneously cope with an energy boom along its oil-rich shoreline.

 

California has always had a lot of oil. Fifteen of the country's 100 largest oil fields are there, according to 2009 data from the federal Energy Information Administration. After decades of declining oil production, the one-two combination of stable, high oil prices and new drilling technology, including directional drilling and hydraulic fracturing, more commonly known as "fracking," is prompting companies to ramp up production, both in California's rural Central Valley near Bakersfield and in urban Los Angeles.

The Monterey Shale formation in the San Joaquin Valley is estimated to hold two-thirds of the country's onshore oil-shale deposits. If producers can develop the technology to tap into this rock—a big if—California is poised for an even bigger oil comeback than anticipated.

"With the likelihood of oil staying at $100 a barrel or more, we will likely see an increase in both the research and development and the production side," said Mark Nechodom, director of California's Conservation Department, the agency tasked with regulating the oil and natural-gas industry. "People don't even realize that California is an oil producer, let alone that it's the fourth-largest oil and gas producer in the country."

Most people do realize, though, that the Golden State is a global leader in combating climate change and developing renewable energy. In 2006, then-Gov. Arnold Schwarzenegger signed a bill into law that attempted to slash greenhouse-gas emissions from all corners of the California economy.

 

On top of a cap-and-trade system for emissions in all sectors of its economy, California also imposes a low-carbon standard for transportation fuels and one of the most ambitious renewable-electricity standards in the country, mandating that 33 percent of the state's electricity come from renewable sources by 2020.

Indeed, California is the country's renewable-energy leader. It has installed almost five times more solar power in the first quarter of this year than the second-closest state, Arizona, according to the latest data from the Solar Energy Industries Association. Early next year, the largest solar project in the world is slated to begin generating electricity for up to 140,000 homes from the Mojave Desert.

The state trails only Texas in installed wind capacity and is first in geothermal production.

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But everything is relative. Nechodom points out that, despite the impressive leadership on renewable energy, California's economy—the eighth largest in the entire world—is still 96 percent reliant upon oil and natural gas. California drivers use 14 billion gallons of gasoline every year, according to the Air Resources Board, the state's clean-air regulatory agency.

"The reality is, civilization is about the concentration of energy, and right now hydrocarbons are our most abundant and economic resources," said Nechodom, whose career includes stints working on climate change at the federal Agriculture Department and in the biomass industry. "But if we are not in the longer term working on the transition to a lower carbon intensity, what are we doing? I've had that position for years, and that's why I've worked actively on the federal climate bill. We need to move to some other way of powering our economy."

That fight is taking place now at almost every level of government, from regulations in Washington to fights like the one in Hermosa Beach. As the result of a convoluted legal battle dating back to 1985, Hermosa residents will vote next year on whether to allow E&B's project. If the company wins, it would be the first oil drilling here in more than 80 years. If it loses, the city owes the company $17.5 million.

"Our company has a few projects in California where we have a lot of reserves, and those reserves have become economic because of high oil prices," said Mike Finch, a vice president at E&B. He cited high oil prices and new technology as key reasons the company is pursuing drilling in Hermosa. "But the main thing is, we're very confident in the fact that there is oil here in Hermosa Beach and there is a lot of it," Finch said.

The unique circumstances are triggering a small-town debate about oil drilling, its potential benefits and drawbacks for the city, climate change, and the U.S. addiction to oil. Hermosa is trying to do its part, with its carbon-neutral goal, but there's no denying that oil drilling will make that goal tougher to meet.

Hermosa residents Stacey Armato and George Schmeltzer are among the leaders in the fight against drilling, recently forming a political action committee, Stop Hermosa Beach Drilling, to campaign against E&B's project. They're worried about a whole host of things, including that the company might frack to tap the oil (both the company and city officials say no fracking will occur). Most of all, they just don't want drilling in their backyards.

"We think it's inherently not something that goes into an urban environment," said Schmeltzer, a former mayor of Hermosa. "I don't have a problem with oil as long as it's part of a process that looks to a future that eliminates it."

But for now, oil is very much part of the present, even in the greenest state in the U.S.

This article appears in the October 15, 2013 edition of NJ Daily.

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