At this point, it’s no secret that North America is in the middle of an energy renaissance. Advanced drilling techniques have uncovered a plethora of oil and natural resources across the country, and as such, prolific fields like the Barnett and Eagle Ford are now part of the energy lexicon.

However, while these shale fields are still surging in drilling and production activity, their stories are well-known at this point. Thus, finding shale’s “next big thing” is vital to reaping outsized returns in upcoming years.

That next big thing might just be another state that’s ready to give Texas a run for its oily money.

Billions of Barrels

While many people think of California as the hotbed of solar panels, renewable energy and green technologies, its latest contribution to the energy world could be a bit more “traditional.”

I’m talking about ol’ fashioned hydrocarbons — to the tune of billions of barrels’ worth of energy equivalent.

Running from Los Angeles to San Francisco, California’s Monterey Shale could contain more oil than North Dakota’s Bakken or Texas’s Eagle Ford and nearly half of all the conventional oil in all of Saudi Arabia. According to IHS CERA, the Monterey holds more than 400 billion barrels of oil — enough to meet the United States’ complete energy needs for the next 57 years.

That potential stems from the state’s unique geology. Thanks to the San Andreas Fault, California’s shale has been pushed and folded similar to an accordion, creating more shale “layers” than other prolific fields such as the Marcellus in Pennsylvania. These layers have provided California with plenty of conventional energy production — the state is third in the nation — as several folds have cracked to form big pockets. Companies have been extracting conventional oil from the Monterey shale since late 1800s.

However, applying horizontal drilling and hydraulic fracturing techniques could breathe new life into the Monterey. Using today’s unconventional drilling methods, producers could recover an extra estimated 15.4 billion barrels’ worth of energy from its geology. Again, that number far exceeds current estimates for the Bakken and is about half the amount held in Alaska’s North Slope before it was tapped.

Meanwhile, as the oil and gas industry continues to improve upon these methods, tapping the remaining billions of barrels worth of equivalent could be within reach. Potential shareholder activism target Occidental Petroleum (NYSE:OXY) has developed a new fracking method called deep acid injection — this involves injecting hydrofluoric or other acids deep underground, where they eat away at the shale rock and allow the oil to flow. It’s cheaper than current fracking methods, and while it sounds menacing, it might be less environmentally hazardous.

Which — believe it or not — might not even matter.

Despite the state’s history of environmentalism, California has no regulations particular to fracking, according to the Sierra Club. While I doubt companies will be able to dump spent fracking liquids into Lake Tahoe, the state does offer a surprisingly lax atmosphere for energy production.

Considering the state’s budget issues and the potential revenue windfall that drilling the Monterey could bring, I expect it to stay that way.

Playing the Potential

The Monterey Shale’s unconventional future is just getting started, so investors might want to get involved before it becomes a real gusher. Back in December, the Bureau of Land Management held a lease sale to drill in the Monterey on federal lands. Only 18,000 acres was offered, but all of it was quickly snapped up by producers.

Occidental — which is based in California — owns the most acreage in the region by a wide margin. It owns roughly 1.2 million acres in the Monterey, with about 900,000 net acres containing shale formations. This significant acreage provides substantial potential for development within the Monterey and could drive future profits/share gains at the struggling integrated giant.

Although Occidental is the major presence in the region based on acreage, the company’s stake is relatively small compared to its total production values — that is, unless it sells off its international holdings and becomes a purely U.S.-focused E&P firm.

As such, some of the smaller operators who have stakes in the region could be better plays. These include recent buyout targets Plains Exploration & Production (NYSE:PXP) and Berry Petroleum (NYSE:BRY) as well as energy conglomerate National Fuel Gas (NYSE:NFG).

Both PXP and BRY will contribute heavily to the reserves of their purchasers — Freeport-McMoRan Copper & Gold (NYSE:FCX) and Linn Energy (NASDAQ:LINE)/LinnCo (NASDAQ:LNCO). That includes the two energy producers’ hefty acreage in the Monetary Shale.

Ultimately, those holdings could be a great source of future revenues for their buyers.

As of this writing, Aaron Levitt was long LNCO.