Editor's Note: California is in a LOT of trouble financially. Cities are going under and the state can't balance its budget. It also has almost half a trillion in state pensions to fund and revenue is drying up.
But there is one way out: Tap the largest oil and gas play in the Lower 48.
The question is whether this left-leaning state crowded with special interests like the Sierra Club will actually let oil services companies begin to start fracking on state land.
In our inaugural Money Morning Fight Club brawl, Frank Marchant and Garrett Baldwin square off on this contentious issue. The best part is we are asking you to turn in your scorecard and pick the winner at the end.
So let's get ready to rumble…
Garrett Baldwin: There's No Way California Gives a Frack
Although I'm highly bullish on natural gas in the United States, I hesitate to believe there will be much development of the enormous Monterey Shale in California within this decade.
And there's one simple reason for doubt: The Sierra Club.
Let me tell you why Frank's irrational understanding of California natural gas development is trumped only by his questionable taste in sweaters.
Just two weeks ago, a Federal judge sided with environmental groups and stopped development of 2,700 acres of the basin due to a "technicality."
The Federal court ruled on April 8 that authorities at the Bureau of Land Management (BLM) broke the law when they leased government-controlled land to oil and natural gas drilling companies. The court argued that the BLM failed to provide proper environmental oversight and failed to assess "the risks of hydraulic fracturing."
This shouldn't be a surprise. At the center of the lawsuit was the Sierra Club and the Center for Biological Diversity (CBD). The organizations sued and argued that Monterey County objected to the lease sale in 2011, citing its water agency's views that development would potentially hurt the municipal water supply. They want more time and more taxpayer-funded studies.
Of course, fracking won't put the water supplies at risk. This has been debunked time and time again. No one's tap will light on fire. No one is going to end up drinking fracking fluids. But that's not going to stop environmental groups from tying down the court systems and stalling development to the point that it no longer becomes economically viable to develop natural gas and investors start to withdraw from the state (much like other businesses).
Liberal academia dominates public policy in California. Yes, there is overwhelming evidence that fracking is safe, and it could usher in a whole new era of much-needed prosperity to the Golden State.
But good luck getting environmentalists to change their ideology.
About three years ago, I lived in Washington, DC and advocated for more development of U.S. natural gas resources. I would convince one environmental group that fracking was safe and could lower carbon emissions.
They'd be happy, and we'd shake hands. Then, when I turned around, there would be five more people I'd have to convince. It was a constant cycle, and finally, I just decided to stop giving myself ulcers.
In Washington, there is a misconception that the NRA or the AARP are the two strongest lobbying arms. That's incorrect.
The strongest force in Washington is the environmental lobby due to its incessant usage of the U.S. court system to tie down and prevent development long after the pseudo-science many of them peddle has been debunked. The reality is, they simply don't like economic development and the "pursuit of profit."
Earlier in the decade, California decimated wide swaths of its agricultural community in pursuit of protecting an endangered fish known as the Delta Smelt. At the center of this litigation was, you guessed it, the Sierra Club.
Over the last four years, the Keystone Pipeline has been delayed time and time again… and the Sierra Club has been right there, doing everything it can to keep the earth as undeveloped as it was 10,000 years ago.
This entire situation is ironic, since, four years ago, the Sierra Club lobbied that natural gas was an alternative solution to coal and oil. But then a funny thing happened; fracking made it easier and cheaper to drill for natural gas.
Carbon dioxide levels in the U.S. plummeted, but the environmental lobby continues to do all it can to put the brakes on natural gas development. It seems to have nothing to do with the environment anymore. It's bigger than that. California, which is run by a Democratic Super Majority, isn't going to stop listening to the environmental lobby, especially given its deep pockets.
My colleague Frank wants to give California legislators the benefit of the doubt and suggest that they now have developed common sense and a desire to fix their budget. Here's the problem: They'll never have any. So long as the Sierra Club has lawyers, California won't have very much fracking.