May 6, 2013

WSJ Compares California and Texas on Energy Policy (and Prosperity); Guess Who Wins?

Filed under: Economy,Environment,Taxes & Government — Tom @ 10:53 am

There’s lots of interesting and not widely known information in a Wall Street Journal editorial which appeared online last night and in today’s print edition:

A Tale of Two Oil States
While the shale boom lifts Texas, California sits on vast resources.

Texas and California have been competing for years as U.S. growth models, and one of the less discussed comparisons is on energy. The Golden State has long been one of America’s big three oil producing states, along with Texas and Alaska, but last year North Dakota surpassed it. This isn’t a matter of geological luck but of good and bad policy choices.

Barely unnoticed outside energy circles, Texas has doubled its oil output since 2005. Even with the surge in output in North Dakota’s Bakken region, Texas produces as much oil as the four next largest producing states combined. The Lone Star State now pumps nearly two million barrels a day, and Texas Railroad Commissioner Barry Smitherman (who is also oil commissioner) says “total production could double by 2016 and triple by the early 2020s.” The entire U.S. now produces about seven million barrels a day.

… More than 400,000 Texans are employed by the oil and gas industry (almost 10 times more than in California) and Mr. Smitherman says the average salary is $100,000 a year. The industry generates about $80 billion a year in economic activity, which exceeds the annual output of all goods and services in 13 individual states.

Now look to California, where oil output is down 21% since 2001, according to Energy Department data, even as the price of oil has soared and now trades in the neighborhood of $95 a barrel.

This is not because California is running out of oil. To the contrary, California has huge reservoirs offshore and even more in the Monterey shale, which stretches 200 miles south and southeast from San Francisco. The Department of Energy estimates that the Monterey shale contains about 15 billion barrels of oil, which is about double the estimated supply in the Bakken.

… in April a federal judge blocked the breakthrough drilling process known as hydraulic fracturing, or “fracking,” in the state. The judge ordered an environmental review of the drilling process that Texas, North Dakota and other states have safely regulated for years.

California has also passed cap-and-trade legislation that adds substantially to the costs of conventional energy production and refining. The politicians in Sacramento and their Silicon Valley financiers have made multibillion-dollar and mostly wrong bets on biofuels and other green energy. Texas has invested heavily in wind power but not at the expense of oil production.

Another contrast is that most Texas oil is on private lands, which owners are willing to lease at a price. In California much of the oil-rich areas are state or federally owned, and leasing doesn’t happen because of political constraints. In California it can take weeks or even months to get approval for an oil rig. The average in Texas? Four days.

In short, Texas loves being an oil-producing state while California is embarrassed by it. And it’s no accident that Texas has been leading the nation in job creation since the recession ended.

… California has the natural resources and technical expertise to be the next Texas if it wants to be.

Imagine how fast the U.S. economy would grow if California were more like Texas.

Here’s an unstated point: If California goes broke, which is well within the realm of possibility, and comes crying to the rest of the nation for a bailout, the answer should be “Hell no!” — not just because it’s bad public policy in the first place, leading to any number of additional states and locales which will want to get in line, but because it has had the resources to sustain itself, and has refused to do so.



  1. you sir, are insane.

    Comment by Tim Russo — May 6, 2013 @ 11:10 am

  2. As usual, a mature, substative comment from the left. (/sarc)

    Oh, I’d say California’s government and the radicals who won’t let it exploit its Gog-given resources, along with those in Washington hell-bent on trying to do the same thing to the rest of the country, pretty much have a monopoly on that.

    Comment by Tom — May 6, 2013 @ 12:57 pm

  3. #1, you sir, are pointless.

    Comment by zf — May 6, 2013 @ 6:59 pm

  4. [...] Compares California and Texas on Energy Policy (and Prosperity); Guess Who Wins? May 6, 2013 BizzyBlog No comments WSJ Compares California and Texas on Energy Policy (and [...]

    Pingback by WSJ Compares California and Texas on Energy Policy (and Prosperity); Guess Who Wins? | PERSUASION IN INK — May 6, 2013 @ 7:05 pm

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.