Is California the next fracking frontier?

California's Monterey Shale formation contains more shale oil than anywhere else in the country, but its geology and dry climate make it difficult to extract. Extremely dry conditions are also taking a toll on California's power plants.  

Every day, the average American uses nearly 1,500 gallons of water: 190 gallons for his home and business, 600 gallons to grow his food and fiber, and 673 gallons for the industries that make his goods and supply services, including energy.

These practices are unsustainable in the long term, but in water-short California they’re already coming to a head. Amid two years of extremely dry conditions and with summer coming, California utilities are scrambling to ensure that they will be allocated enough water to cool their power plants to produce enough electricity to meet the state’s air-conditioning needs.

But what really makes California a focal point is the Monterey Shale formation that stretches from Central California to Southern California. It holds more shale oil than anywhere else in the country – bigger than the Bakken shale formation, bigger than the Eagle Ford. Think North Dakota’s Bakken times four.

But environmentalists say that the Monterey can’t be tapped because of the lack of water. Hydraulic fracturing (or fracking), the controversial method by which producers extract tight oil and gas, uses seven times the amount of water as does the exploration of traditional natural gas. 

Fracking uses a mix of water, sand, and chemicals to break free the resources. Technologies are being developed that would recycle that water, albeit one that -- for now -- is an expensive solution.

Even in normal times, there’s not enough water to take full potential of the shale formation. But that issue is not what is delaying a Monterey Shale revolution. Those obstacles are tied more to the type of geological formation that exist in California: “The drought is a red herring,” says Rock Zierman, chief executive of the California Independent Petroleum Association in Sacramento, in an interview.

Instead, California’s drillers, which produce 10 percent of this nation’s oil, which is equal to that of Alaska, use single-stage vertical drilling. That is different from multi-stage hydraulic fracturing, which is used in North Dakota and Texas.

Moreover, as of January, producers there undergo what Mr. Zierman describes as the nation’s most stringent set of drilling laws. That is, they must test for water quality before and after production as well as ensure well integrity and report the use of any chemicals that are used to explore.

“With greater competition for water between public and private sectors, look for even greater scrutiny on energy companies’ fracking activities” not just in California but also around the country, says Tony Calandro, a senior partner in the corporate sustainability practice at VOX, a communications firm, in an interview.

Not only is energy development water intensive. So, too, is electricity generation. And they both compete with other industrial concerns, farmers, recreational centers and small residential households for access to it. 

 “The California drought heightens the importance for the energy sector, with its already contentious water use, to make robust water risks-management planning a priority,” says Jason Morrison, program director for the Pacific Institute, an environmental organization based in Oakland, Calif., in an interview.

The Pacific Institute, along with VOX Global, surveyed 50 companies that include AT&T, MillerCoors and Union Pacific Railroad to discuss their concerns over potential water shortages. They maintain that nearly 60 percent of the responding companies said that water is poised to negatively affect business growth and profitability within five years. More than 80 percent of those who responded said that water issues would affect where they choose to locate.

The silver lining is that California’s 18 power plants can be retrofitted with new water-saving technologies.

Utilities now use “once-through cooling” that returns nearly all water to its original source. Newer mechanisms use “closed loop” systems that recirculate the water.

The demand for new energy will assuredly increase, potentially putting developers and utilities at odds with other types of businesses, and consumers. New technologies, though, could ease those conflicts, although any water scarcities won’t go noticed until the lights start to flicker or the bills start to escalate.