Is ExxonMobil Sailing Off into Santa Barbara’s Sunset?

Given the South Coast’s historic antipathy to the oil industry, one might have expected a few historic gasps in response to the news that ExxonMobil — one of the biggest oil companies on the planet — has decided to sell all its onshore and offshore assets along the Gaviota Coast to a mysterious new entity called Sable Offshore Corporation. To the extent the news, released last week, qualified as a shot heard around the world, a silencer was clearly involved. Even now, Santa Barbara County energy planners, elected officials and long-term environmental activists are scrambling to figure out what’s really afoot and what influence, if any, they can hope to exert over future developments.

One thing’s for certain: Exxon’s not taking its ball and going home. Its ball remains very much in play, no matter how shut down Exxon’s production has been in the wake of the Refugio Oil Spill caused by Plains All American Pipeline in 2015. 

Last week, ExxonMobil quietly confirmed the sale of all its assets associated with its Santa Ynez Unit — three offshore platforms, Heritage, Harmony, and Hondo, with 112 wells — its 135-acre production facility along the coast at Las Flores Canyon, and 123 miles of pipeline that ExxonMobil purchased from Plains All American Pipeline just the week before. To make the deal happen, ExxonMobil loaned the new entity 97 percent of the $643 million Sable paid Exxon, to be paid back over a five-year period at 10 percent interest. Even so, the deal will hit Exxon with a $2 billion loss. The Santa Ynez Unit is the last production node for Exxon in California.  

Precipitating the deal in the first place was the Plains pipeline rupture of 2015 that left 3,400 barrels of oil on the beaches by Refugio Canyon. That immediately and effectively shut down the pipeline upon which Exxon depended to get its oil to market. 

The company’s application to truck the oil instead was shot down by the county supervisors this March by a vote of 3-2. Efforts by Plains All American Pipeline company to secure the necessary permits to build 123 miles of new and technologically superior pipeline that runs along the existing one have, by all accounts, “languished” in the environmental review process, with Plains showing little urgency. Yet another delay has been occasioned by the need for more biological information about bird migration patterns. This information will be provided only after new field research scheduled to take place next spring. 

According to Supervisor Joan Hartmann — whose district includes Exxon’s facilities — it appears the plan is no longer to install 123 miles of new and improved oil pipelines to replace the ones found to be corroded by federal pipeline safety inspectors. Instead, she said, it appears it is to replace and repair only those portions of the pipeline that have been deemed to be defective. 

An application to reactivate the pipeline was made with the California Fire Marshal on April 1, 2021. The application was submitted pursuant to terms of a consent decree between Plains All American Pipeline Company and a multitude of federal regulatory and environmental agencies signed in March 2020 in which Plains agreed to pay $38 million in fines and penalties while admitting no guilt for their role leading up to the pipeline spill.

Hartmann said she was made aware of the application only recently. It remains uncertain, she added, what influence or oversight — if any — the county would have over the State Fire Marshal’s decision. It remains likewise uncertain what role — if any — the public might have in reviewing or commenting.  

As to the difference between the two approaches — a new pipeline or repaired one — county energy planner Errin Briggs likened the former to buying a new car and the latter to buying something used. Hartmann added, “If you have a house that’s really in bad shape, sometimes the best approach is just to knock it down and start over.” 

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Federal officials who’ve been bird-dogging the process behind the scenes caution that the Fire Marshal’s review process will not be a piece of cake no matter who the applicant is. Some of the state rules, it turns out, are considerably more stringent than federal safety requirements. But compared to the extensive public review process that would play throughout not just one but three counties under the pipeline replacement approach, the public process offered by California Fire Marshal’s office appears to be an impenetrable black box. 

In a presentation for prospective investors, Sable Offshore Corporation pledged to get the pipeline up and operating by January 1, 2024. Under the terms of the deal with Exxon, Sable has until January 1, 2026, to begin production. Failing that, the property reverts to Exxon, and the deal is over. 

Although the name Sable is new to Santa Barbara, many of the key players behind this deal are anything but — James Flores, Sable’s CEO and board chair, being a key case in point. From 2001 to 2013, Flores served as chief executive for the oil company PXP, then operating in federal waters off the coast of Pt. Arguello. Flores and his company proved politically nimble and creative, negotiating a deal with most of the key players in Santa Barbara’s sprawling environmental establishment that would have allowed PXP to expand its drilling operations — via slant drilling — into state waters in exchange for an agreement to stop drilling at an earlier date than the company would have been otherwise obligated. 

Ultimately, the deal would blow up in the faces of pretty much everyone involved — with both the State Lands Commission and state legislature rejecting the proposal — but it demonstrated that Flores and his crew were willing to try new approaches. Coming along with Flores — who later served three years as CEO for a mining and oil company until 2016 — is a supporting cast who cut their teeth with PXP.

Flores did, in fact, return calls for comment, but said he couldn’t speak until early next week.

Attorney Barry Cappello, who represents many property owners enmeshed in heated easement negotiations over the existing and proposed new pipeline, described the conditions of the pipeline as “virtual Swiss cheese, a rust bucket with over 80 serious deficiencies.” No matter how politically adroit James Flores and the new Sable team is, Cappello said, “Any project repair or replacement has to get past our federal court case.” 

“This is not necessarily good news for those of us concerned about oil,” commented Supervisor Hartmann. “For Exxon, this is just a drop in the bucket, but for these people, it’s everything. I expect them to really buckle down and try to make something happen.” 

Hartmann noted that the political winds regarding oil development have shifted significantly in recent months in response to the worldwide spike in oil prices precipitated by Russia’s war against Ukraine. Governor Gavin Newsom, she noted, relaxed emission standards at the gas pump this past summer, and President Biden, she added, has been clearing the path for more domestic production. Her focus, she said, was transitioning away from fossil fuels and toward greener energy sources. 

“It has to happen eventually,” she said, “but I’m really worried about today.”

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