Current and Proposed Oil and Gas Production in Southern California

By Nathan Chen

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Recent price crises on gasoline in Southern California have led residents and traders to worry about the future of fossil fuels. As gasoline prices reach record highs and supply levels reach record lows, consumers and producers statewide worry if Southern California will have what it takes to make it through the next few seasons. To combat this, plans for gasoline production and increased use of natural gas have been set in place to prevent potential dilemma.

2004 saw traders and consumers worried about $3.00 gasoline prices, a trivial fear in comparison to the recent record breaking spikes seen 8 years later. These spikes were contributed to the at- present methods of gasoline production. Three refineries in Willmington produce about 16% of California’s oil supply, and when power outages struck the Los Angeles Area in 2005, power was cut off to these refineries. As a result, gasoline production and refinery was shut off for over three days- causing an 8% loss in weekly production. [Douglas, California and the West] When traders realized this, they quickly bid up the wholesale cost by 8-cents/ gallon, spiking the overall price per gallon for consumers. While the refineries recovered within the week, the backset by the halt of production put a dent in Southern California’s oil supply that had to be made up for in the following seasons.

*Photo of refineries in Wilmington, California.

Summer in particular was the roughest to make up for. As heat waves attacked Los Angeles and the surrounding areas, more and more residents resorted to full time use of their cars, as well as their car’s air conditioner. Such spikes in use resulted in spikes in oil consumption- leading to drastic decreases in state supply. To balance, by 2006 nearly all refineries in Southern California were producing special “summer blends” that met the California Air Resources Board’s specifications for safe vapor pressures. In fact, by early March of that year, California was producing more than 17% of the gasoline than it had just one-year prior. [White, " State's Gasoline] This influx of new state -supplied gasoline was pivotal in bringing California out of the rut it was headed into, yet just 2 years later would be the cause of the next huge crash. When fires shut down 2 major pipelines in upper California, the flow of crude oil to refineries was disrupted. In addition, the previously endeared summer blends proved to be inefficient both time and cost wise, as making specific blends took more than what producers had expected. The combination of halted supply as well as inefficient production led to a 10-cent spike in prices over the course of a week. These prices devastated consumers and caused a tremendous struggle to survive the summer to ensue.

For the next few years, price fluctuations would continue as the war overseas and declining local supplies caused oil traders to bid up and down the market. In response, many private companies saw the need to adjust their own consumption of gasoline- leading to large companies such as PrimeTime Shuttles to switch to liquid propane systems. Doing so saved approximately 1.5 million gallons alone, and continued cooperation by similar companies helped to conserve what little gasoline was available to Southern California.[ Newswire, Prime Time Shuttle] On a larger scale, the government of California approved a bill to allow drilling off the coast of California for oil. With citizens growing ever impatient with near $4.00 per gallon prices, the House voted to pass the “Reversing President Obama’s Offshore Moratorium Act”. This act would in effect triple the nation’s offshore oil production to nearly 4.5 million barrels per day until 2027. By exploiting the 5.74 billion or so available barrels from Southern California coasts, government officials hoped to offset the dwindling supply of oil, as well as lower overall gas prices by 3cents a gallon by 2030. [Kovner, "House Approves]Although this new legislation was met with much controversy as many officials struggled against its passing, the act still went into effect as a current means of producing gasoline for Southern California. The new offshore drilling act would go in accordance with the current drilling already taking place in Kern County and the surrounding Los Angeles Basin. All things combined, California at present produces 1/10th of the US total capacity of refined oil, taking crude oil from Alaska and foreign suppliers. With these imports, California refineries then create cleaner fuels to meet Federal and State environmental regulations- making California 3rd in the nation in terms of petroleum refining. These current gasoline production methods have been sustaining Californians for the past few years, yet it is ever more apparent that more gasoline must be had in order to satiate growing needs for it.

The growing need for gasoline despite the current installed methods of production have led developers and state officials to new measures. The Department of the Interior for example recently proposed a new plan for outer continental shelf oil and gas leasing that would take effect between this year and 2017. This proposed plan would give the Secretary of the Interior the authority to maintain an oil and gas leasing program, which would provide lease sales in 6 offshore areas of hydrocarbon potential. The plan will hopefully ensure that the American public receives fair market value on petroleum resources, as it will encourage the quick development of those areas in order to produce more oil. The designated areas for production will include the western, eastern, and central parts of the Gulf of Mexico, as well as the Beaufort, Chukchi, and Cook seas of Alaska. A total of 12 annual area wide lease sales will be made in the Gulf of Mexico, and one sale per area in Alaska, with the promotion of discovery and development in those areas as the ultimate goal.

*Map of Alaska and the seas that will be exploited for offshore drilling

Another plan for the future will take place more immediately than the larger plan for offshore drilling will. With gas prices nearing $5.00 a gallon, immediate changes must go into effect to preserve the future of gasoline in California. One plan that has already been proposed, was by Governor Jerry Brown to allow oil refineries to produce winter blend gasoline, effective immediately. This proposition will allow California to get ahead of the typical instituted time for winter blends, and in turn should bring gas prices down to a more survivable range for consumers.

Moves such as these will help sustain the remaining gasoline production in Southern California, in order to answer for the previous (present) methods that are beginning to weaken as oil supplies dwindle from consumption. However, no matter how many new ideas are proposed to counter the draining of gasoline, the fact of the matter is that oil production in California is, and has been, decreasing significantly over the past years. The use of fossil fuels is a costly one, and their existence is far from renewable. Consequently, there will come a day soon that Californians no longer can rely on the precious hydrocarbon that has carried this state and nation for so long. When this day comes, the state of California as well as the nation as a whole will have to look to alternative sources of fuel.

One of the most popular options for alternative fuel is natural gas. With a much higher energy capacity than gasoline, natural gas makes for a more cost efficient product. Furthermore, the effects of combustion of natural gas are much less severe than the combustion of traditional fossil fuels. On the other hand however, the extraction of natural gas for human use is often debilitating to the surrounding environment, as well as dangerous to human residents who face risks of gas explosions. This trade off however is beginning to look more and more appealing as current gasoline supplies to the US dwindle.

Currently, California gets natural gas from an interstate pipeline that delivers from Canada and the Southwest. The rest of the natural gas to California comes from natural gas basins located out of state. Aside from Canada, these basins are in the Rocky Mountains and the areas surrounding it, as well as a little from Northern Baja. The pipelines that carry that gas are the Gas Transmission Northwest Pipeline, Transwestern Pipeline, Mojave Pipeline, and the Ruby Pipeline. The Transwestern Pipeline brings natural gas from the San Juan basins as well as New Mexico, southern Colorado, and the Texas-Oklahoma panhandle. It services the west coasts of California, Arizona, Nevada, as well as Texas and New Mexico. The Mojave pipeline brings gas strictly from Arizona into California, and is run under the El Paso Corporation. The Ruby Pipeline stretches nearly 700 miles from Wyoming to California, and brings up to 1.5 billion cubic feet of natural gas per day. Its existence is fueled by the Rocky Mountains, and its use reduces the strain placed on the primary pipeline from Canada to California pipeline. That pipeline, the Northwest Gas Transmission pipeline, serves about 60% of all the natural gas to California, with the remaining 40% supplied by the aforementioned pipelines combined. Canadian supplied gas travels through Idaho, Washington, and Oregon before reaching California, where it is distributed to the California Gas Transmission Company. Once all these gas supplies arrives, they are distributed amongst several large gas companies- serving 98% of California’s natural gas consumers. In total, this process can easily cost billions of dollars, and reached a high of $20Billion in 2005. [EIA,Natural Gas] Yet the costs of natural gas to California grow ever less when compared to the costs of conventional gasoline. Aside from long-term threats of carbon dioxide and other greenhouse gas pollutants, gasoline drilling wrecks natural habitats forever and ruins bodies of oceans. For these reasons, the use of natural gas is predicted to increase as conventional oil supplies dwindle, and natural gas providers must constantly think of new ways to supply Californians and the rest of the nation with a cleaner, alternative fuel supply.

*The Ruby Pipeline as it stretches from Wyoming into California, where it is then transported to Southern California

These new ways of supplying natural gas will be crucial in maintaining the current lifestyle of millions of California residents. With natural gas being the cleanest burning fossil fuel, it produces fewer emissions than coal or oil. Additionally, natural gas is highly prevalent in America, lending to prospects of ending reliance on foreign countries for our nation’s energy. These advantages make natural gas highly sought after, and therefore scarcer. Future demands for natural gas then will be met with liquefied natural gas imports, and already 13 terminals to receive this gas have been proposed around California and the west coast. Liquefied natural gas is natural gas heated to 259 degrees. As a liquid, it is neither toxic nor corrosive, and is made mostly of methane rather than traditional hydrocarbons. The majority of LNG supplies come from other countries that naturally have large reserves. Countries such as Australia, Algeria, Nigeria, and Malaysia all have large reserves that they export to the US. Exportation occurs through large ships that are designed to handle the extreme temperatures necessary for storing LNG, and there are about 130 ships worldwide that transport over 120 million tons of LNG per year. Upon delivery to America, that gas is then stored through terminals before being pumped out to reach their final destinations. States like Massachusetts, Louisiana, Boston, and Texas all have LNG import terminals that do storing, and more are being proposed for the future influx of more natural gas. [LNG Information ]When the LNG is ready to be used, it is warmed into regular natural gas, which can then be used easily for heating and cooking and other needs. Alternatively, LNG can serve as automobile fuel, a primary use in the growing need for alternative fuels. These LNG terminals will be the future of natural gas in America, and their combined use with current natural gas pipelines just may be the quick solution Californians need to battle the dying supply of gasoline.

*LNG terminal in Louisiana

As fossil fuels become more and more scarce, and ever more harmful to the environment, researchers and businesses are working together to find alternative fuels that the general public can use instead of conventional gasoline. While current gasoline supplies are doing their best to keep up with consumer demands, future plans for gasoline supply are just too dangerous to the environment to be fully supported by the government. In turn, the next best alternative fuels are examined- leading to the support of natural gas instead of traditional gasoline for use in automobiles. With a large span of pipelines to deliver to Southern California, as well as proposed plans for futuristic LNG terminals, natural gas sees promise in quickly becoming the next dependent fuel source for Californian’s and Americans nationwide. Yet at the end of the day, it must be taken into these citizen’s hands to reduce their personal use of fuels altogether, in order to ensure that natural gas does not burn out as quickly as its predecessor before it.

Nathan Chen is a Sophomore pursuing a Bachelor of Sciences in the Dana and David Dornsife College of Letters, Arts, and Sciences, as well as a minor in the Marshall College of Business. He is interested in following a career in environmental business.

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