COMMENTARY

COMMENTARY

Here’s Another View Of Fracking

By Jack Cox, President of The Communications Institute

There has been a great deal of coverage in the news media in southern California about the use of the 60-year-old oil production technology in our state, hydraulic fracturing.

Nearly all the coverage in urban media has focused on proposed legislation by state legislators in urban southern California to ban the use of the technology until more studies are undertaken.

The use of this technology has enriched states and communities around the nation, dramatically lowering the unemployment rate. With the expansion of the use of this technology nationally it’s also appropriate for policy makers to examine the total impact of this technology.

In March the USC School of Public Policy, the USC Global and The Communications Institute released a study on the economic impact of development of the Monterey Shale. We underscored the need to look at the environmental issues but we also found the potential economic benefit staggering at a time that the residents of Central Valley are suffering with high unemployment and little economic growth.

As a 40-year resident of the San Fernando Valley and native of our state, I am well aware that we do not suffer those same problems in most of southern California and the San Francisco Bay Area. House prices were up 10% in March here and the unemployment rate is significant lower that the more rural parts of the state.

I continue to read stories in local media here calling for the banning of fracking as an serious environmental risk with no understanding of the significant benefit it could be in other parts of the state that are suffering.

It is interesting that media coverage in urban media focus on the risks but the bulk of any major fracking operation will not occur in these areas but rather in the areas of the state suffering economically. The Monterey Shale extends from roughly Modesto to south of Bakersfield.

The research team used sophisticated economic models to determine the likeliest economic consequences of shale-oil development on California’s economy. Using these models, the study’s authors determined that, over the period 2015 – 2030, developing the Monterey Shale could:

1. Create more jobs. Job growth in California could range from 512,000 to 2.8 million new jobs on an annual basis, depending upon the year.

2. Stimulate economic growth. Total economic activity in the state, on a per-person basis—as measured by the state’s gross domestic product (GDP)—could increase by 2.6% to 14.3%.

3. Increase personal income. On a statewide basis, aggregate personal income could grow by an average of from 2.1% to 10.0%, depending on the year.

4. Boost government revenue.The amount of tax revenue collected by California state and local governments could grow by $4.5 billion to $24.6 billion, depending on the year.

Therefore the potential economic benefit would be significant. Recently the Huffington Post noted that Fresno has the highest poverty rate in the nation. Most of the central valley counties have unemployment rates of 13%+.

For example, the city of Mendota has an unemployment rate of more than 40%. McClatchy Newspapers has reported:

“Welcome to life in Mendota — the unemployment capital of California. With a 41 percent jobless rate, the town's social fabric is tearing at the seams. Alcoholism and crime are on the rise. To save money, some mothers wash and re-use disposable diapers. Unemployed men with nothing to do wander the streets and sit on benches.”

Our study found that by 2020 2.7 million jobs could be created and that was a median number. Tax revenue to state and local government would be as much as $25 billion a year by 2020. Many central valley counties and cities have had dramatic drops in services to those in need because of the impact of really depression level economics in the region. Stories by media in the coastal areas simply ignore this reality.

The fundamental question is how can we use new technology to develop our natural resources while protecting the environment. First—the major use of fracking will be in the central valley and not Culver City or the Los Angeles Basin nor next to Apple in Cupertino!.

We are all one California and as a former journalist I would hope more news organizations would look at the full story that impacts all Californians. We live in one state and those in the wealthier areas of the California ought to consider those families in the valley that are having a tremendously difficult time just surviving .

So as we look at the risks lets also urge policy makers to look at the costs and the benefits and create a balance.

We are not here to lobby for or against fracking but want to insure that policy makers and voters have the full story. This is what journalism is all about and what the public policy process should be all about using accurate economic and science to understand the issues of the day. We need less politics and more compassion and common sense.

For more information check out www.poweringcalifornia.org.

Note: Jack Cox is a former California journalist who serves as President of The Communications Institute (TCI). The Institute does not advocate public policy positions but works with leading academic and research institutions to support objective analysis of critical public policy issues including health care, immigration, state fiscal finance, and energy.