California Could Be the Next Shale Boom State

Thanks to the Golden State's dire fiscal situation, don't be surprised if the governor were to proclaim: 'There will be oil.'

By MARK P. MILLS, WSJ

Could 2013 find California lawmakers and Gov. Jerry Brown finally making the connection between fiscal challenges and energy markets? The Golden State is well positioned to become an exporter of hydrocarbons and enjoy a gusher of oil revenues. While many Californians will find that hard to contemplate, ideology bends more easily than the laws of physics and the imperatives of economics.

The $6 billion a year in additional income taxes Gov. Brown convinced Californians to approve in Proposition 30 last November won't begin to solve the state's fiscal problems. Last year's State Budget Crisis Task Force, co-led by former Federal Reserve Chairman Paul Volcker, estimated the state's long-term debt at no less than $370 billion.

But California has Saudi Arabia-scale oil resources, notably in its largely untapped Monterey shale field, which stretches northeast for more than 200 miles from Bakersfield in central California. New technologies, especially smart, horizontal drilling and hydrofracturing, aka "fracking," make that oil accessible, and cleanly. The U.S. Energy Information Administration estimates that the Monterey shale field alone holds 15.4 billion barrels of oil, rivaling America's total conventional reserves.

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