Shutting Down California Energy Production Would Be Foolish

Shutting Down California Energy Production Would Be Foolish

Of the 50 states, only Texas and North Dakota have more proved oil reserves than California. The state should be capitalizing on the riches, shouldn’t it?

But, no. That’s not the plan. California politicians want to leave crude in the ground where it doesn’t do anyone any good. And it’s not just state lawmakers. A couple of California Democrats in Congress have asked Gov. Jerry Brown to shut down all fossil fuel production in the state.

In the Aug. 22 letter, Reps. Ro Khanna and Barbara Lee told the governor that “ending the issuance of new permits for fossil fuel development and infrastructure will establish the standard for climate policy worldwide.” The members of Congress also complain of “pollution from oil and gas field operations and refinery facilities.” They are principal contributors, Khanna and Lee believe, to a range of “air quality related health problems that hurt our most overburdened communities.”

Khanna and Lee urge Brown to stop issuing “permits for new wells and enacting a health and safety buffer” because doing so “could keep 660 million barrels of oil, equivalent to 425 million metric tons of carbon pollution, in the ground through 2030.”

This is a form of madness. Let us explain.

Policymakers cannot force the state to go “green” simply because that’s the they want it to be. Renewable energy sources might one day be cheaper, more efficient, and more reliable than fossil fuels. But no amount of legislating, wishing, hoping, and demanding will make that happen any faster than the advancement of technology allows. Forcing such a complex transition will only produce higher consumer costs (which will hurt “overburdened communities” the most), and saddle us with spotty, Third World reliability.

As a side note, we should mention that once green energy costs less than conventional energy sources and becomes more efficient than hydrocarbons, there will be no need for lawmakers to outlaw fossil fuels and order consumers to use renewables. The market will abandon the former and happily adopt the latter.

For now, though, just as it has been for decades, oil is California’s blood. It provides good jobs, fuels our economic engine, and contributes heavily to the public fisc.

The industry generates more than $148 billion in direct economic activity annually according to the Los Angeles County Economic Development Corporation and employs roughly 368,000 Californians. Yes, some of those workers can be retrained to produce green energy. But let it happen through natural economic churn. Using public policy to replace today’s oilfield roughnecks with tomorrow’s taxpayer-subsidized solar panel installers is an economic sham.

But those 368,000 workers would not be the only ones impacted by shutting down fossil fuel production. The LAEDC says “vulnerable user industries of refined petroleum products, like transportation/warehousing, manufacturing and agriculture represent 1.7 million jobs in California.” What will happen to them, and the “associated $111 billion in labor income” they produce, which accounts “for 8.4 percent of the state’s GDP,” when their jobs are gone?

Also lost, says the LAEDC, would be $26.4 billion in state and local tax revenues and $28.5 billion in sales and excise taxes. If that revenue goes away, how will state and local governments make up for the losses? Will green energy, which has a history of being subsidized, be taxed in the same heavy-handed way?

And what of lost investment? California’s oil production, also historically third in the country, has fallen to sixth, largely due to conscious policy decisions to step away from petroleum. Policymakers should instead create a regulatory and statutory environment that attracts rather than repels investments. Imagine the surge of capital and the economic boom that would result.

No matter what officials say or do, California’s thirst for energy isn’t going to be quenched. Gasoline demand in California continues to increase, while consumption of electricity is projected to keep growing into the late 2020s at least. Total energy consumption “ranks among the highest in the nation,” says the U.S. Energy Information Administration. Does shutting down fossil fuel production make any sense under these conditions? Not when we know what oil and gas are capable of and still have questions about renewables.

Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.