There Will Be Oil

Written by Ron Starner; excerpt from California Investment Guide.  Published Wednesday, November 19, 2014 on Kedc.com.

Oil accounts for one out of every 20 dollars of GDP in California, and no California county contributes more to that total than Kern.

“They call us the Texas of California,” says Richard Chapman, president and CEO of the Kern Economic Development Corp., an organization that serves the 800,000-resident Bakersfield-Delano metropolitan area in the southern Central Valley. “The state gets billions of dollars in tax revenue from oil money in our county. We are one of the reasons the state of California is balancing its budget now.”

The Academy Award-winning film “There Will Be Blood” was based largely on the history of this region of California, but there’s no acting behind the raw numbers.

“The oil industry accounts for about 5.4 percent of the state’s GDP and employs about 500,000 people statewide,” says Chapman. “About 75 percent of this industry is in Kern County.” According to an August 2014 report by DrillingInfo, Kern produces more oil than any other county in the US.

At 386 million barrels per day, Kern produces more oil than even the most oil-rich counties in Texas, North Dakota, Alaska and New Mexico. “We are number one in oil and number one in renewable energy in the country,” says Chapman.

“We have the largest wind farm and the largest solar array in the state. We are the undisputed energy capital of California.”

 

The home of the famous Bakersfield Boys of Buck Owens and Merle Haggard and the second-largest agricultural production county in the US, Kern ranks as California’s fastest-growing economy since 2001, and is home to several of the world’s largest energy companies, including Chevron, Occidental and California Resources Corp.

“Ninety-seven percent of all fracking in California is taking place in Kern County,” adds Chapman. “It has been done safely here since the 1950s. We permit projects here in weeks or months, whereas it can take literally years in other parts of the country. And we have a $5-billion energy plan here as well — a plan that includes carbon capture sequestration.”

About 100 miles north of Los Angeles and just four hours from Las Vegas, Kern is home to several prolific oil fields, including the Midway-Sunset, Kern River and South Belridge fields. Some of these fields have been producing oil for more than a century.

AN ECONOMIC JUGGERNAUT

The oil industry, in fact, is the major reason why Kern ranks so highly in a number of key economic performance measures. Brookings rates Kern as the fourth-strongest recovering area in the US; Forbes rates Kern No. 2 in millennial job creation; the Bureau of Labor Statistics reports that Kern has the fastest-growing metro area workforce; and Brookings rates Kern as the No. 4 region for STEM jobs.

"Many of our STEM jobs require technical degrees, not advanced degrees," Chapman notes. "As a result, we rate very high in upward mobility in income." Throughout the state, it's hard to overstate the importance of the oil and gas industry on the California economy. According to an April 2014 study conducted by the Economic and Policy Analysis Group of the Los Angeles County Economic Development Corp., the petroleum industry (oil and gas) in California was responsible for 468,000 jobs statewide in 2012, or 2.3 percent of all employment in the state. Oil and gas contributed more than $220 billion in direct economic activity in California in 2012, the report stated.

The industry also accounted for $40 billion in total labor income, $21.6 billion in state and local tax revenues, $15 billion in federal taxes, $18.7 billion in sales and excise taxes, and $5 billion in corporate profits taxes. According to the Division of Oil, Gas and Geothermal Resources of the California Department of Conservation, nearly 4,680 new wells were drilled in 2012, bringing the total number of wells statewide to 210,000.

Some 570 companies were operating the 88,500 wells that were active in California in 2012. While these wells are distributed across the state, the majority are located in either the Central Valley or the Northern California sub-region. California also ranks 13th in the nation in total natural gas production, accounting for 246.8 billion cubic feet in 2012, according to the LAEDC report. That's about 1 percent of total US gas production.

In crude oil production, California ranks third behind Texas and North Dakota while outproducing such oil-rich states as Alaska, Oklahoma and Louisiana. In refining activity, California ranks third behind Texas and Louisiana. At the end of December 2012, California was producing 2.0 million barrels per calendar day, representing 11 percent of total US capacity.

THE EMPLOYMENT IMPACT

Oil and gas industry wages also exceed state averages for most industries. The average annual wage of workers employed in oil and gas extraction in California in 2012 was $235,946. For petroleum refinery workers, the average wage was $185,488. For natural gas distribution workers, the average wage was $111,009; and the average wage for pipeline transportation workers was $101,326.

Some 45,840 people worked in oil and gas extraction in California in 2012, according to the LAEDC report, while 32,670 workers were employed in natural gas distribution. Petroleum refineries employed 12,760 workers; and oil and gas pipeline construction employed 11,710 workers.

In total output, oil and gas accounted for $264 billion in California in 2012, the report stated.

Huge beneficiaries of this contribution were the coffers of local, state and federal governments.

Of the $15 billion in federal taxes, $3.3 billion was earned in excise taxes, $3.0 billion was earned in personal income taxes, $4.25 billion came from taxes on corporate profits, and $3.4 billion came from social insurance payments. While Kern County produces more oil than any other county in the state, Los Angeles County actually leads in total oil and gas industry production, according to the report. Total value-added production in Los Angeles County in 2012 was $29 billion. Close behind was Contra Costa County, with total value-added production of $28.3 billion.

Kern, meanwhile, registered total value-added production of $10.725 billion. The Southern California Sub- Region — comprised of Imperial, Los Angeles, Orange, Riverside, San Bernardino and San Diego counties — actually contributes more total output than any other region in the state. According to the LAEDC report, this region accounted for $105 billion in total economic output in oil and gas in 2012 and employed 212,000 workers. Those figures amounted to 40 percent of the state's total output and 45 percent of the state's jobs in this sector.