California Balancing on a Knife Edge

California's Monterey Basin oil field is believed to hold reserves of more than 13-billion barrels.  That, for California, is the good news.  After that, the news is all bad.

The Monterey Basin oil is "tight oil" meaning it's shale oil.  That oil can only be recovered by hydraulic fracturing or 'fracking.'  Fracking uses something California is desperately short of right now, water - lots of water. 

Governor Jerry Brown has already declared California in a state of severe drought emergency.  Things are looking grim in the Sierra Nevada where last year's meagre snowpack was vastly greater than this year's. 

There's simply not nearly enough water to go around and major oil extraction will massively increase demand.

A major portion of the basin’s estimated 13.7 billion barrels of oil  sits squarely within California’s Central Valley aquifer system, the state’s largest groundwater reservoir. Here, oil and water resources are layered on top of each other—freshwater resources are at depths up to 3,000 feet; the aquifer, a layer of underground rock and soil through which water flows, reaches down to 9,000 feet; and oil stores are buried from 8,000 to 14,000 feet. Folds, fractures, and fragmentation in this seismically active region have deformed the source rock, which ranges from 1,000 to 3,000 feet in thickness.

This makes Monterey shale oil difficult to characterize—and even more difficult to produce—with its structure changing markedly throughout the play. It also increases the risk that accessing this oil will negatively impact the state’s water supply because the jumbled geology does not lend itself to the accurate underground assessments needed for safe well and fracturing control.

...the Monterey oil basin—along with the agricultural and urban areas with which oil developers must share limited water resources—is located in some of the most water-stressed regions in the state, in which less than 50 percent of average annual precipitation fell over the previous two years. 

Additional oil-water strains exist in this region due to its active seismicity, which exacerbates the threat of water contamination. The Monterey oil basin is located near several fault lines, including the San Andreas Fault, the Garlock Fault, and numerous known smaller faults near Bakersfield and in the central and south coast regions. Earthquakes affect the earth’s intricate plumbing system. As such, seismic activity has the potential to damage both oil wells and wastewater injection wells, where the toxic byproduct of fracking is injected deep underground for permanent storage. Damage to either type of well type could contaminate water resources.

You might think it would be obvious that the state's shale oil should be left untouched at least until the water crisis is over but producers have a huge incentive to frack and drill.  California does not levy an excise tax on extracted oil.  Texas charges 4.75%, Alaska levies 50%.