California’s Brown Says He’ll Consider Fracking Standards

Governor Jerry Brown said he’ll consider opening California (STOCA1), fourth among oil-producing states, to a drilling method known as hydraulic fracturing to increase natural-gas production.

A form of the technique has long been used in the oil-rich San Joaquin Valley, said Brown, 73, a Democrat who returned to office last year after two terms in the 1970s and 1980s. He said he’d be likely to permit more widespread fracturing if environmental consequences can be minimized.

Hydraulic fracturing, or fracking, frees trapped oil and gas by injecting water, chemicals and sand underground at high pressure. Environmental groups say fracking contaminates drinking water and pollutes the air. States including Ohio, Pennsylvania and North Dakota are weighing how to regulate and tax the products of hydraulic fracturing.

“I’m an optimist,” Brown said today at a conference near Santa Barbara. “I’m going to look at it. California is the fourth-largest oil-producing state, and we want to continue that.”

With an estimated 15 billion barrels of crude, the Monterey and Santos shale formations near Los Angeles and in the San Joaquin Valley are the richest U.S. shale prospects, according to the Energy Department in Washington.

Photographer: Ken James/Bloomberg

Jerry Brown, governor of California. Close

Jerry Brown, governor of California.

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Photographer: Ken James/Bloomberg

Jerry Brown, governor of California.

California Shale

California shale holds almost two-thirds of all the shale oil in the continental U.S., the department said in a 2011 report. That amount of crude would be enough to supply every refinery on the West Coast for 17 years, based on Energy Department figures.

Brown told reporters he wasn’t considering new taxes on fracking. The state may benefit from income taxes on people employed in the extraction industry and on corporate income, he said.

T. Boone Pickens, chairman and founder of BP Capital LLC in Dallas, said the environmental concerns associated with fracking have been overblown.

“He should get better acquainted with it,” Pickens said in an interview at the conference today, speaking of Brown. “Fracking is safe, the practices are good. There’s nothing wrong with it.”

California, with 12 percent of the U.S. population, consumed 8.5 percent of the nation’s energy in 2009, or 47th among states per person, according to Energy Department statistics. The state’s comparatively mild weather was one reason, according to the department website.

Renewable Sources

The Golden State generates more electricity from non- hydroelectric renewable energy sources such as geothermal, wind and solar power, than any other state, according to the website.

California was the first, and so far only, state to adopt an economy-wide program to auction allowances for emissions of greenhouse gases.

Bill Gates, speaking at the conference yesterday, suggested a national tax on carbon emissions. The co-founder of Microsoft Corp. (MSFT) said companies need more incentives to develop alternatives to fossil fuels.

California requires investor-owned utilities to generate 33 percent of their electricity from renewable sources by 2020. In 2010, the three major utilities -- PG&E Corp. (PCG), Edison International (EIX)’s Southern California Edison and San Diego Gas and Electric Co. -- generated 17 percent of power from such sources, according to the California Public Utilities Commission.

Brown, in a question to a panel yesterday, asked whether renewable sources would ever account for a “huge” slice of the U.S. energy market.

Tulsi R. Tanti, chairman and managing director of Suzlon Energy Ltd. (SUEL), a wind-turbine manufacturer based in Hadapsar, India, said it’s reasonable to expect 30 percent of U.S. energy from renewable sources by 2050.

“That will bring stability to the grid and the power infrastructure,” he said.

To contact the reporter on this story: James Nash in Santa Barbara, California at jnash24@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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