US Government Cuts Estimate of Recoverable Oil in Monterey Shale by 96 Percent

It turns out that the Monterey Shale play, that holy grail of oil and gas lying beneath much of California, might not be the “black gold mine” Big Energy (and the state) had been counting on.

This week, the Los Angeles Times reported that the US Energy Information Administration (EIA) has slashed the amount of barrels of oil considered “recoverable” using current technology.

By 96 percent.

Is there a stronger word than “slash?” Let’s put it this way: It’s a pretty spectacular statistical fail.

600 million barrels of oil are still considered recoverable right now, but a far cry from the 13.7 billion barrels projected back in 2011 by a firm contracted by the US government.  Why the mega-disparity? Simple: it was assumed that tapping the Monterey Shale would work the same as any other US shale formation. And it turns out that the geology isn’t so simple in this case. That’s in part due to California’s tectonic plate activity, which has been a concern as fracking fever hit the state.  Instead of nice, flat pancake layers of rock, a crumpled accordion is keeping the Monterey Shale oil out of reach. (It’s a “tight oil” play.)

It’s important to bear in mind that two-thirds of the nation’s shale oil reserves are still deep underground in the Monterey Shale.  Should some future technology evolve that oil industry can use to tap those reserves, it’s a good bet they’ll try to do so then. For now, however, the state has other projections that will likely need fixing, such as the total state GDP, future tax revenues and new jobs. In that sense, the state has its own enormous budget gap to fill. (Perhaps the Los Angeles Times put it best: this is both “a setback and an opportunity” for California.)

Post Carbon Institute and Physicians, Scientists & Engineers for Healthy Energy published “Drilling California: A Reality Check on the Monterey Shale,” written by J. David Hughes, in December 2013. The report was prescient. Based upon analysis of data from wells in the Monterey Shale that were actually producing, the Hughes report alleged that industry estimates were wildly inflated and that California needed to plan for a future without a new shale oil boom.

Environmentalists have cheered this week’s news, partly as it does at least slightly slow the steady march towards further gas extraction. While it’s been a sobering week for some in the oil and gas industry, the pros are bucking up and falling back on the old “this is a tough business” chestnut, while asking investors not to pull funds.

Elsewhere in the US, however, plans continue moving forward to frack here, there and everywhere, including offshore, encouraged by the Obama Administration and European Union’s backing. How much will this news impact the larger debate about fracking oil and gas? It’s hard to say just yet. As long as the federal government backs the philosophy of natural gas as the perfect transition fuel, it’s likely drilling will keep right on going.