The Two Faces of California

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

A kitesurfer sails through the surf near an oil tanker off the coast of Seal Beach.
National Journal
Amy Harder
Oct. 14, 2013, 4:52 p.m.

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.

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.

What We're Following See More »
Trade Bill Would Ban Imports Made with Slave Labor
23 minutes ago

“A bill headed for President Barack Obama this week includes a provision that would ban U.S. imports of fish caught by slaves in Southeast Asia, gold mined by children in Africa and garments sewn by abused women in Bangladesh, closing a loophole in an 85-year-old tariff law.” The Senate approved the bill, which would also ban Internet taxes and overhaul trade laws, by a vote of 75-20. It now goes to President Obama.

Sanders Closes to Within Seven Nationally in New Poll
36 minutes ago

Bernie Sanders has closed to within seven points of Hillary Clinton in a new Morning Consult survey. Clinton leads 46%-39%. Consistent with the New Hampshire voting results, Clinton does best with retirees, while Sanders leads by 20 percentage points among those under 30. On the Republican side, Donald Trump is far ahead with 44% support. Trailing by a huge margin are Ted Cruz (17%), Ben Carson (10%) and Marco Rubio (10%).

Sanders and Clinton Spar Over … President Obama
12 hours ago

President Obama became a surprise topic of contention toward the end of the Democratic debate, as Hillary Clinton reminded viewers that Sanders had challenged the progressive bona fides of President Obama in 2011 and suggested that someone might challenge him from the left. “The kind of criticism that we’ve heard from Senator Sanders about our president I expect from Republicans, I do not expect from someone running for the Democratic nomination to succeed President Obama,” she said. “Madame Secretary, that is a low blow,” replied Sanders, before getting in another dig during his closing statement: “One of us ran against Barack Obama. I was not that candidate.”

THE 1%
Sanders’s Appeals to Minorities Still Filtered Through Wall Street Talk
13 hours ago

It’s all about the 1% and Wall Street versus everyone else for Bernie Sanders—even when he’s talking about race relations. Like Hillary Clinton, he needs to appeal to African-American and Hispanic voters in coming states, but he insists on doing so through his lens of class warfare. When he got a question from the moderators about the plight of black America, he noted that during the great recession, African Americans “lost half their wealth,” and “instead of tax breaks for billionaires,” a Sanders presidency would deliver jobs for kids. On the very next question, he downplayed the role of race in inequality, saying, “It’s a racial issue, but it’s also a general economic issue.”

Clinton Already Pivoting Her Messaging
13 hours ago

It’s been said in just about every news story since New Hampshire: the primaries are headed to states where Hillary Clinton will do well among minority voters. Leaving nothing to chance, she underscored that point in her opening statement in the Milwaukee debate tonight, saying more needs to be done to help “African Americans who face discrimination in the job market” and immigrant families. She also made an explicit reference to “equal pay for women’s work.” Those boxes she’s checking are no coincidence: if she wins women, blacks and Hispanics, she wins the nomination.