Frack or Fail: Is It Time For California's Liberals to Go?

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.

Frank Marchant: California Can Frack or Fail

In January Gov. Jerry Brown proudly told every media outlet who would listen, "California's budget is balanced." Not true!

California's budget is not even close to being balanced.

Unlike the nonsense spewed by my compatriot on the opposing side of this argument, a man, by the way, who wears baseball hats and makes fun of some very stylish sweaters, California will frack the Monterey Shale, and soon.

This is the truth: California is broke. The budget isn't close to being balanced and there is no surplus. It is because California is so far under water financially that Brown is looking closely at fracking.

Fracking may be the only way this state will not go belly up and follow the lead of some of its fair cities like Stockton and San Bernardino!

The state of California has spent its way very close to bankruptcy.

On California's Budget:

According to Sacramento Bee Columnist Dan Walters: "You need to add in all the other spending that is not included and suddenly, the state is spending over $145 billion in 2013-14, not $97.7 billion as Brown has been touting."

The Department of Finance puts it this way: In 2011, the level of outstanding budgetary borrowing totaled $35 billion.

But Cali's financial problems are even worse when you add in all of the unpaid pension funds. California's combined unfunded liability for their three state pension funds is $497.9 billion.

Even if California doubled the state tax rate that's currently chasing residents to other states, it still wouldn't come close to balancing the budget.

The Fracking Solution

Because the entire state of California is on its way to a complete and total fiscal meltdown, what many tree-huggers would consider desperate measures - opening up the Monterey Shale for energy exploration and production -- are being carefully considered by Gov. Brown and the state legislature.

Fracking will pull California out of its financial malaise, just like the tech boom, the Space Race and the Gold Rush helped boost the state. It will actually help the state prosper. If done correctly, it could even mean lower, or even no taxes, for the Golden State.

California's Monterey Shale is one of largest natural gas and oil reserves on the planet. It could yield as much as 15.4 billion barrels of oil, two-thirds of the nation's shale-oil reserves, according to the U.S. Energy Information Administration.

The development of oil-shale deposits through Central California using fracking and other techniques could boost the state's economic activity by as much as 14.3%. That's certainly enough to solve state budget problems and put California back on its way to prosperity.

Running Out of Time...and Options

Drilling in the Monterey Shale Formation, in addition to increasing per capita gross domestic product, may add as much as $24.6 billion in state and local tax revenue, and as many as 2.8 million jobs by 2020, according to a report released by the University of Southern California.

Using new technology always frightens people. But new fracking methods are safe, efficient and effective. They're actually environmentally safer than even the oil rigs seen off the coast of California.

But there's no doubt that whatever the technology, some environmentalists will be looking to fight it.

California, however, is out of options and sometimes Democrats can do things a conservative Republican could never do. It's the Nixon dealing with the Chinese or Clinton getting rid of Great Society-style welfare. This may be such an opportunity for Gov. Brown and state's Democratic super majority.

Jerry Brown may be just another liberal Democrat, but he is far from stupid. Brown can -- and must -- start the fracking process soon. The new jobs created simultaneously would multiply the benefit.

Jerry Brown will start fracking soon, not because he wants to but because he has to. And Brown will be the hero who saved California from bankruptcy and brought $24.6 billion to the coffers of the Golden State.

Put that in your baseball hat and frack it!

Now that you've seen this bare knuckles brawl, it's time to turn in your scorecard.

Choose the winner of this tussle by voting below.

Pick Today's Fight Club Champion

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