Last week the LA Times ran a story saying that the U.S. Energy Information Administration (EIA) is about to reduce “its” estimate of the amount of shale oil that can be recovered from the Monterey Shale under California by 96 percent. This reduction cuts the estimate of producible shale oil in the U.S. by 60 percent.

This development, of course, came as no surprise to those of us who have been watching the Monterey Shale situation closely. To begin with, anyone with the most rudimentary knowledge of geology knows that California is where great tectonic plates have been banging together for millions of years turning the earth below the surface into an incredible jumble. To produce shale oil one needs nice flat strata of oil bearing rock that run on for miles.

Then of course we have the issue of Chevron, which has been drilling in California since 1879. If one believes there really are 15 billion barrels of shale oil under the state, then why isn’t Chevron pumping it out by the tanker load?

Thus the interesting parts of this story are: who said there were 15.4 billion barrels of shale oil under California in the first place?; and how did the Department of Energy come to accept such an obviously flawed estimate, and trumpet the story far and wide so that many investors and policy makers in California and Washington fell for it?; and then why did it come to such a screeching halt leaving the country’s prospects for “energy independence” a dubious proposition?

Moreover, the government’s retraction of its estimate of shale oil prospects in California raises issues about just how good are its forecasts that North Dakota and Texas will continue producing large amounts of shale oil into the next decade.

The great Monterey Shale oil myth got its start back in July 2011 when the EIA stapled a cover on a contractor-produced “study” that it paid for entitled Review of Emerging Resources: U.S. Shale Gas and Oil Plays. In the fine print of the cover pages, however, the EIA did note that the “views in this report should not be construed as representing those of the Department of Energy.”

The underlying study, which was prepared by a small consulting company, INTEK, Inc., in Arlington, Virginia, purports to have been based on a wide range of sources and methods. However when it came to California the report’s author, Hitesh Mohan, said the California portion was primarily based on technical reports and presentations from oil companies. Presentations from oil companies are prepared to raise money from investors and can be expected to lay out the most optimistic view possible.

The methodology that produced the mythical estimate seems to have been something like this: take the 1,700 square miles of the Monterey Shale, drill 28,000 wells in it at the rate of 16 wells per square mile, wait until each well produces 550,000 barrels of oil, and you have your 15.4 billion barrels. Later research showed that only a handful of California oil wells ever produced 550,000 barrels of oil or anything close.

The California story only gets worse. The California oil industry funded a joint study by the University of California and the industry which concluded that exploiting the supposed 15 billion barrels of shale oil would result in from 512,000 to 2.8 million new jobs in the state; would increase per capita GDP by $11,000 and boost government revenue by up to $24.6 billion per year. All the politicians had to do was get out of the way, stop all this environmental nonsense over fracking and more regulations, and the state would be rich.

The writing on the wall came last year when thorough and independent studies by the Post Carbon Institute pointed out first that very little oil was coming out of California due to fracking of shale deposits as compared to those in North Dakota and Texas. In December of last year, a second and more detailed well-by-well study of what was actually happening in California blew the ridiculous INTEK/EIA conclusion out of the water. Although the Post Carbon Institute studies got little nationwide attention, several California newspapers and TV stations, which are much closer to the state’s well-being, did in-depth stories concluding that the 15 billion number and the ensuing riches were unlikely eventualities.

It is obvious that the new studies brought pressure on the Department on Energy to take a second look at what they were saying about shale oil in California. When it became obvious that were endorsing nothing but industry hype, they did an about face and lowered the estimate to 600 million barrels, which in itself may be high.

The EIA’s reaction to questions about one of the biggest blunders in its history is interesting. EIA Director Adam Sieminski told the Wall Street Journal that the oil bearing rocks are still under California, but the technology to extract the oil has not yet been developed. Industry spokesmen are more upbeat, saying that hundreds of smart engineers are working on the problem of producing California’s shale oil and that someday, if not sooner, they will be successful.

The California shale story raises once again questions about just where America’s shale oil and gas production is going and along with it the future of industrial society. Naturally, none of us want to hear that hard times, lower economic growth, and fewer jobs lie ahead. The Department of Energy clearly is trying to draw a fine line between the gross over-optimism exhibited in the Monterey shale incident and an energy apocalypse. But, do we really have to wait until the evidence of over-optimism is so overwhelming that it has to be admitted? There are several other “Monterey Shales” out there well-understood in the peak oil community where the Department of Energy continues to make overly optimistic estimates which will one day rebound to the detriment of us all.

Originally posted at Falls Church News Press.