Repost from the San Francisco Chronicle
[Editor – This report signals a highly significant shift in the discussions surrounding climate change and the oil industry: cut demand … or cut supply?   A must read!  – RS]

Gov. Brown wants to keep oil in the ground. But whose oil?

By David R. Baker, July 26, 2015 8:16pm

Even the greenest, most eco-friendly politicians rarely utter the words Gov. Jerry Brown spoke at the Vatican’s climate change symposium last week.

To prevent the worst effects of global warming, one-third of the world’s known oil reserves must remain in the ground, Brown told the gathering of government officials from around the world. The same goes for 50 percent of natural gas reserves and 90 percent of coal.

“Now that is a revolution,” Brown said. “That is going to take a call to arms.”

It’s an idea widely embraced among environmentalists and climate scientists. Burn all the world’s known fossil fuel supplies — the ones already discovered by energy companies — and the atmosphere would warm to truly catastrophic levels. Never mind hunting for more oil.

But it’s a concept few politicians will touch. That’s because it raises a question no one wants to answer: Whose oil has to stay put?

“They’ve all got their own oil,” said environmental activist and author Bill McKibben, who first popularized the issue with a widely read 2012 article in Rolling Stone. “Recognizing that you’ve got to leave your own oil — and not somebody else’s — in the ground is the next step.”

Take California.

No state has done more to fight global warming. By 2020, under state law, one-third of California’s electricity must come from the sun, the wind and other renewable sources. Brown wants 50 percent renewable power by 2030 and has called for slashing the state’s oil use in half by the same year.

But he has shown no interest in cutting the state’s oil production. He has touted the economic potential of California’s vast Monterey Shale formation, whose oil reserves drillers are still trying to tap. And he has steadfastly refused calls from within his own party to ban fracking.

“If we reduce our oil drilling in California by a few percent, which a ban on fracking would do, we’ll import more oil by train or by boat,” Brown told “Meet the Press.” “That doesn’t make a lot of sense.”

California remains America’s third-largest oil producing state, behind Texas and North Dakota. The industry directly employs 184,100 Californians, helps support an estimated 271,840 other jobs and yields $21.2 billion in state and local taxes each year, according to the Los Angeles County Economic Development Corporation.

‘Phasing out oil drilling’

Any governor, no matter how environmentally minded, would have a hard time turning that down. Even if many environmentalists wish Brown would.

“Just like we have a plan for increasing renewables, we need a plan for phasing out oil drilling in California,” said Dan Jacobson, state director for Environment California.

It’s difficult for politicians to even talk about something as stark as putting limits on pumping oil, he said.

“Solar and wind and electric cars are really hopeful things, whereas keeping oil in the ground sounds more like doomsday,” Jacobson said.

And yet, Jacobson, McKibben and now apparently Brown are convinced that most fossil fuel reserves must never be used.

The percentages Brown cited come from a study published this year in the scientific journal Nature. The researchers calculated that in order to keep average global temperatures from rising more than 2 degrees Celsius — 3.6 degrees Fahrenheit — above preindustrial levels, the world’s economy can pump no more than 1,100 gigatons of carbon dioxide into the atmosphere between 2011 and 2050. Burning the world’s known fossil fuel reserves would produce roughly three times that amount, they wrote.

Most governments pursing climate-change policies have agreed to aim for a 2-degree Celsius warming limit, although many scientists consider that dangerously high. So far, global temperatures have warmed 0.8 degrees Celsius from preindustrial times.

“The unabated use of all current fossil fuel reserves is incompatible with a warming limit of 2 degrees Celsius,” the study concludes.

Nonetheless, states, countries and companies with fossil fuel reserves all have an obvious and powerful incentive to keep drilling.

The market value of oil companies, for example, is based in part on the size of their reserves and their ability to find more. Activist investors warning of a “carbon bubble” in their valuations have pushed the companies to assess how many of those reserves could become stranded assets if they can’t be burned. The companies have resisted.

President Obama, meanwhile, has made fighting climate change a key focus of his presidency, raising fuel efficiency standards for cars, pumping public financing into renewable power and pushing for cuts in greenhouse gas emissions from power plants.

Cut demand or cut supply

But Obama has also boasted about America’s surging oil and natural gas production — and tried to claim credit for it. Last week, his administration gave Royal Dutch Shell the green light to hunt for oil in the Arctic Ocean. Keeping oil in the ground does not quite square with his “all of the above” energy policy, observers note. At least, not American oil.

“The same government that is working very hard to get a Clean Power Plan is allowing Shell to go exploring for hydrocarbons in the middle of nowhere, oil that may never be producible,” said climate activist and former hedge fund executive Tom Steyer, with audible exasperation.

He notes that Obama, Brown and other politicians intent on fighting climate change have focused their efforts on cutting the demand for fossil fuels, rather than the supply. Most of the policies that climate activists want to see enacted nationwide — such as placing a price on emissions of carbon dioxide and other greenhouse gases — would do the same, ratcheting down demand rather than placing hard limits on fossil fuel production.

“The political thinking is the market itself will take care of figuring out which fossil fuels have to stay in the ground,” Steyer said.

Some climate fights, however, have focused on supply. And again, the issue of whose fossil fuels have to stay put has played a part.

Opponents of the Keystone XL pipeline extension, for example, see blocking the project — which would run from Canada to America’s Gulf Coast — as a way to stop or at least slow development of Alberta’s enormous oil sands. James Hansen, the former head of NASA’s Goddard Institute for Space Studies, famously declared that fully developing the sands would be “game over for the climate.”

Obama has delayed a decision on the pipeline for years. Given America’s own rising oil production, rejecting a project that could be a boon for the Canadian economy would be difficult, analysts say.

“The message would be, ‘We’re not going to help you develop your resources — we’ll essentially raise the cost,’” said UC Berkeley energy economist Severin Borenstein. He is convinced that Canada will develop the tar sands, regardless.

“It’s become such a huge symbol that it’s impossible for Obama to make a decision on it,” Borenstein said. “I think he’s just going to run out the clock.”