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LBBJ: Opportunities To Be Energy Independent

July 11, 2017

The Long Beach Business Journal published an article, Economic Outlook Oil and Gas: Despite Opportunities To Be Energy Independent, California Is Importing Two-Thirds Of Its Oil, which explains the challenges faced by the California Oil industry while trying to provide California with energy independence.

David Slater, Executive Vice President and COO for SHP states, “Our pitch is always, we need the energy and the access. The clean, affordable energy is what differentiates our society from a lot of other places in the world,” Slater said. “And it is just an all-around winner if we could just produce that energy right here in our own backyard.” For the complete article continue reading below.

 

Economic Outlook Oil and Gas: Despite Opportunities To Be Energy Independent, California Is Importing Two-Thirds Of Its Oil

July 5, 2017, Brandon Richardson, Senior Writer

The oil and gas industry is a leading economic driver and major employer in the State of California, creating more than 368,000 jobs, according to a June report by the Western States Petroleum Association. The report also states that the industry produces $33 billion in labor income, $148 billion in total economic output and more than $50 billion in local, state and federal taxes.

Oil

While oil-drilling activity has increased dramatically nationwide, according to Bob Barnes, executive vice president of operations for California Resources Corporation, activity in California remains low.

“California has been the third-largest oil producing state for decades, but domestic statewide production levels are decreasing,” Barnes said. “At a time when our state is embracing the mantle of environmental leadership for America, California is missing an opportunity to be a shining example that a state or country can achieve energy self-sufficiency while applying the most stringent standards in the world.”

Instead, Barnes explained that California is becoming increasingly dependent on oil produced in areas with lesser environmental, labor, human rights and safety standards. In 2016, Barnes said California imported a record 67% of its oil from other countries and Alaska to meet the ever-increasing demand.

The growing dependence means California’s working families are subsidizing energy development, jobs and taxes in other states and foreign countries, according to Barnes.

“In an ever-changing and uncertain world, increasing California’s energy supply is the best way to ensure that all Californians have access to affordable and reliable energy,” Barnes said. “Our mantra is ‘Energy for California by Californians,’ and we are dedicated to ensuring that California has a vibrant and sustainable future by all measures – environmental, economic and social.”

Catherine Reheis-Boyd, president of the Western States Petroleum Association, said that while the prominent political atmosphere in California is promoting a well-funded off-oil agenda, residents in the state consume approximately 2 million gallons of gasoline and diesel fuel per hour. According to the California Department of Motor Vehicles, as of December 2016, there were about 32 million registered vehicles on the road.

California oil producers must be more calculating when it comes to exploration and drilling activity due to stringent regulation. Reheis-Boyd explained that it is a major challenge to comply with state regulations and still remain competitive in the open market.

The fees associated with the oil industry are not restricted to producers, Reheis-Boyd noted, but are also felt by consumers at the pumps. Prior to Senate Bill 1, the cost of gasoline included 74.83 cents per gallon and the cost of diesel included 82.71 cents per gallon in taxes for low carbon fuel standard, cap and trade, underground storage tanks, and state and federal taxes. Beginning November 1, SB 1 increases gasoline tax by 12 cents per gallon and diesel tax by 20 cents per gallon for road maintenance and rehabilitation.

According to Reheis-Boyd, there are opportunities in the state to ramp up exploration and production, which would mean less imported oil brought in on tankers and trains, thereby reducing emissions harmful to the environment.

“So we would love to do more exploration and production in California if the regulatory environment would allow us,” Reheis-Boyd said. “I’m not going to say that it’s just the regulations, because one of the biggest factors for producing crude oil is the price you get for it when you sell it.”

Currently, oil prices are in the low $40 range, according to David Slater, executive vice president and chief operating officer of Signal Hill Petroleum (SHP). Slater said that for SHP, current prices mean they can maintain current operations and remain profitable, but both the company’s drilling rigs have been mothballed for the time being.

“We’re definitely in a lower activity mode as far as discretionary spending,” Slater said. “But we’re maintaining our high-caliber operations and keeping our focus on safety and keeping a focus on being environmental and neighbor friendly.”

While SHP’s and other California companies’ activities are low, Slater said that United States production has essentially doubled with recent drilling of shale plays in Texas and other states. This introduction of millions more barrels of oil per day into a full market is what is creating price volatility, which Slater said is likely to continue through the year.

Slater said he hopes prices at least swing up into the low $50 range so that California companies can begin ramping up activity to help meet the demands of residents.

“Our pitch is always, we need the energy and the access. The clean, affordable energy is what differentiates our society from a lot of other places in the world,” Slater said. “And it is just an all-around winner if we could just produce that energy right here in our own backyard.” […]

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