(John Kemp is a Reuters market analyst. The views expressed are his own)
By John Kemp
LONDON (Reuters) - Both supporters and critics of horizontal drilling and hydraulic fracturing (together usually known as "fracking") usually portray the technique as novel, with unknown but potentially large risks, and certainly disruptive for surface communities.
It might be possible in far-away places like the north plains of the Dakotas and Montana, they say, but is not appropriate in populated areas, especially ones with sensitive geology and prone to earthquakes.
Strong anti-fracking campaigns in New York state, and in Sussex, on the south coast of England, have focused on the risks of fracking near urban areas, from triggering earth tremors to contaminating ground water and disruption such as heavy traffic.
Critics assume it is radically new and in some ill-defined way more dangerous. But how many realize that almost 50 million barrels of oil a year, and hundreds of millions of barrels of waste water, are already produced from "conventional" oil wells directly under Los Angeles, the second-largest city in the United States?
BEVERLY HILLS HIGH
Right at the heart of one of the most affluent and exclusive communities in the country, oil producer Venoco extracted almost 114,000 barrels of crude and 103 million cubic feet of natural gas, as well as 807,000 barrels of waste water, from 19 conventional wells on the campus of the famous Beverly Hills High School last year, according to state records.
Across Beverly Hills, 95 wells are currently producing from two pools, which lie entirely beneath a heavily built up area, stretching along Pico, Olympic and Santa Monica Boulevards. The wells have been drilled from four clusters (of which the High School is one), and are hidden in windowless buildings, but are otherwise part of the normal urban streetscape.
The field as a whole produced 805,000 barrels of crude oil in 2011, 1 million cubic feet of natural gas and 8.8 million barrels of waste water. The Nileguide blog gives some idea of how the wells have been blended into the urban scene: here
Royalties from oil and gas earn hundreds of thousands of dollars each year for the school's general fund. But the wells have also been at the centre of celebrated environmental litigation.
ERIN BROCKOVICH LOSES
Between 2003 and 2006, six lawsuits were brought against Venoco, the school district and others on behalf of approximately 1,000 former students, alleging that pollution in the air, water and soil as a result of the wells had caused illnesses, including Hodgkin's lymphoma, a form of cancer.
Some of the claims were brought by campaigning lawyer Erin Brockovich - famous for securing $333 million from Pacific Gas and Electric in an earlier pollution case, and immortalized by actress Julia Roberts in an Oscar-winning performance in the film of the same name ("Erin Brockovich fights again", The Economist, June 12, 2003).
But in a setback for the toxic-tort lawyer, twelve test cases were dismissed in 2006. The judge ruled the claimants had failed to prove any medical link between their illnesses and the alleged emissions. In July 2012, Venoco and other defendants entered into a settlement agreement by which all pending cases will be dismissed, according to the company's latest quarterly filing with the Securities and Exchange Commission (SEC).
LESSONS FOR FRACKING
California's aging, exhausted oilfields, many under the modern city of Los Angeles, with their heavy, viscous crude that needs to be steamed from the rocks, are about as different as possible from the prized light oils being fracked from North Dakota's Bakken formation and other fields in the United States.
But they offer lessons for the oil industry and environmentalists. On the positive side, production from Beverly Hills and dozens of other fields under Los Angeles shows it is possible to extract oil and gas even in highly urbanized areas.
Some commentators have suggested fracking will be impossible in the urbanized north-eastern United States and Europe. Experience with the Los Angeles oil fields suggests oil and gas production can be compatible even with heavily developed urban environments, if it is done carefully and sensitively.
On the negative side, the Beverly Hills litigation highlights the intense suspicion between petroleum producers and green groups. As oil and gas production moves into more sensitive areas, the biggest problems are not engineering and safety but dispelling misunderstandings, dealing with environmental and legal challenges, and persuading local communities that oil and gas producers can be good neighbors.
AN EXHAUSTED GIANT
The Los Angeles Basin is one of the most important oil-producing areas in the United States. Until it was overtaken by North Dakota earlier this year, California was the third-largest oil-producing state in the country after Texas and Alaska.
In 2011, the state produced 197 million barrels of oil, mostly from onshore fields, according to preliminary estimates from the California Department of Conservation. Statewide output accounted for about 11 days of annual U.S. consumption.
Three quarters of the state's production comes from the sparsely populated areas west of Los Angeles at the southern end of the Central Valley around Bakersfield in Kern County. The area is home to all the biggest fields, including Midway-Sunset (31 million barrels in 2011), Belridge (28 million barrels), Kern River (27 million) and Elk Hills (14 million).
But most of the rest comes from underneath heavily urbanized areas in and around greater Los Angeles, including the counties of Los Angeles (24 million barrels), Ventura (8 million barrels), Santa Barbara (3.5 million) and Orange (4.4 million).
Unlike the light crude oils found in the Bakken, which typically have an API gravity of 36-42 degrees, oil from Beverly Hills is much heavier, around 24 degrees, and crude from Midway-Sunset and Kern River is very heavy, at 11-13 degrees. Kern River crude will only just float on water.
Oil from Beverly Hills will flow naturally, but Kern is exceptionally sticky. In both cases the oil needs help to flow and improve recovery rates.
California's oil fields are also old. Some of Venoco's wells at the High School date from the early 1980s. Many of the Kern wells are even older.
The natural reservoir pressure which drove oil up the wells has long since been exhausted so operators have resorted to waterflooding (secondary recovery) and steam flooding (tertiary recovery) to maintain pressure and help the heavy oil flow.
In 2009, the state produced 230 million barrels of oil, but 164 million relied on some form of additional recovery assisted by steam (118 million barrels), waterflooding (40.5 million) or gas injection (5.5 million barrels).
In fact the biggest item flowing into and out from California's wells is not oil but water. In 2009, the state's oil producers injected 1.381 billion barrels of water, and another 368 million barrels of steam, to stimulate the oil fields ("2009 Annual Report of the State Oil and Gas Supervisor").
Much of the water flows back to the surface and must be safely disposed of or re-injected to maintain pressure. Wells in Kern River produced 250 million barrels of water alongside 29 million barrels of oil, a water-to-oil ratio of 9:1. In July 2012, well number 2A at Beverly Hills High produced 2,137 barrels of waste water and 233 barrels of oil (a ratio of 10:1).
California's Conservation Department has recently finished hosting a series of seminars to gather public input before developing regulations to govern fracturing.
Like any industrial process, there have been accidents and occasional spills at the existing conventional fields. But risks have been low.
Fracking itself is not intrinsically more dangerous than other forms of oil extraction.
Many residents will object to any form of oil and gas production in their local area. But the use of fracking does not, in itself, make the development more dangerous. Fracking should therefore be assessed on similar safety, environmental and impact criteria to other oil and gas projects.
(Editing by Catherine Evans)