ExxonMobil is selling its Santa Ynez Unit offshore oil platforms, onshore processing facility and former Plains-owned pipeline to a newly created company, and it’s unclear what the future holds for production.
The Santa Ynez Unit includes platform Hondo, Harmony and Heritage, and the Las Flores Canyon processing facility on the Gaviota Coast.
Production stopped in 2015 when the crude-oil transportation pipeline ruptured and caused the Refugio oil spill.
Santa Barbara County rejected ExxonMobil’s proposal to restart platform production and temporarily truck the oil to refineries. Other oil platforms that relied on the ruptured pipeline are being decommissioned.
Sable and Flame Acquisition Corp., a Texas-based special purpose acquisition corporation, will merge in a $883 million deal to create Sable Offshore Corp., the new owner of the Santa Ynez Unit and transportation pipeline.
“The sale is expected to close in the first quarter of 2023, pending regulatory and other approvals,” ExxonMobil spokeswoman Meghan Macdonald told Noozhawk. “The sale advances ExxonMobil’s focused investment strategy, and highlights our willingness to divest assets to those who can derive greater value.”
Fewer people are working at the Santa Ynez Unit now, since it’s not operating, but there are still employees doing maintenance and other work for the facilities.
“Employees will transfer to positions at Sable,” Macdonald said.
Sable Offshore Corp.’s management team is led by Jim Flores, who previously worked at FreePort-McMoRan and Plains Exploration & Production Co., according to the company’s filings with the Securities and Exchange Commission.
Most of the $643 million purchase price is being financed by a $623 million loan from ExxonMobil, according to an investor presentation filed with the SEC.
Risks listed in the deal documents include the possibility of not meeting all of the permit requirements and restarting production in a timely manner. The new owner is targeting oil and gas production in January 2024.
“We may be unable to restart production by January 1, 2026, which would permit ExxonMobil to exercise a reassignment option and take ownership of SYU without any compensation or reimbursement,” according to the documents filed with the SEC.
ExxonMobil’s Santa Ynez Unit paid more than $45 million in taxes to Santa Barbara County in the 10 years before the oil spill and pipeline shutdown, according to the company. It has also been involved with the local chambers of commerce and sponsored local community events.
Reuters reported that ExxonMobil is taking up to a $2 billion loss on the sale.
ExxonMobil and Shell recently sold about 43,000 oil wells in California, leaving questions about future liability for expensive environmental cleanup and decommissioning facilities.
“Some industry experts, lawmakers and environmentalists are concerned about the recent deals, noting that the sales shift environmental liability from corporate powerhouses to less-capitalized firms, increasing the risk that aging wells will be left orphaned, unplugged and leaking oil, brine and climate-warming methane,” the Los Angeles Times reported in a news article about the ExxonMobil and Shell wells sale.
The state and its taxpayers are on the hook for decommissioning wells when no other financially responsible party can be found. Companies can be held responsible for previously owned assets, such as ExxonMobil footing the bill to decommission Venoco’s Platform Holly offshore of Goleta.
ExxonMobil’s Santa Ynez Unit platforms are in federal waters.
Pipeline Plans Pending
The news of the Santa Ynez Unit sale comes shortly after ExxonMobil purchased Plains All American’s oil transportation pipelines that run through Santa Barbara, San Luis Obispo and Kern counties.
“A team from ExxonMobil Pipeline Co. will conduct a thorough inspection of the pipelines to determine how to safely and responsibly return them to service,” ExxonMobil spokeswoman Julie King said at the time.
Plains, which was found criminally and civilly responsible for the Refugio oil spill, has pending applications to replace the pipeline and to install valves in the existing pipelines.
Line 901 runs from Las Flores Canyon to the Gaviota pump station in southern Santa Barbara County, and Line 903 connects that line to the Sisquoc pump station in northern Santa Barbara County, and then Pentland station in Kern County.
In 2019, Plains announced plans to build a 123.4-mile replacement pipeline, and the project has been in the environmental review process for several years.
Last year, Plains filed an application to install 16 shutoff valves in the existing pipelines. Eleven of the valves would be motor-operated and five would be check valves, which automatically close when liquid pushes back on them.
The project was proposed to fulfill the obligations of Assembly Bill 864, according to Plains. That legislation, passed in response to the Refugio oil spill, requires pipeline operators in coastal zones to use the “best available technologies to reduce the amount of oil released in an oil spill to protect state waters and wildlife.”
The valve installation project would fulfill that obligation, according to Steve Greig, director of government affairs for Plains.
“The California Office of State Fire Marshal (OSFM), the agency overseeing the implementation of AB 864, has found the plan and schedule submitted by Plains to install these safety valves meets the requirements of AB 864,” Greig wrote in an August letter to the county answering questions from a July review hearing on the project.
“Although the pipelines are currently drained of oil and Plains has applied to replace them, the lines are considered active and remain subject to regulation by OSFM, including the requirements of AB 864. Approvals have already been issued by the OSFM, Kern County and San Luis Obispo County,” Greig wrote.
The county’s zoning administrator approved the valves installation project on Aug. 22, and it was appealed by three parties. An appeal hearing hasn’t been scheduled yet, according to the Planning and Development Department.
The pipeline replacement project and the valves installation project “are moving through the county permitting process separately,” according to Errin Briggs, permitting supervisor for the Energy, Minerals and Compliance Division of the county Planning and Development Department.
The new pipeline owner will need to apply for a change of owner/operator from the county, Briggs said.
“With regard to the existing applications for the valve additions and the proposed replacement line, the change in ownership will not affect the permitting process for these projects,” Briggs said.
— Noozhawk managing editor Giana Magnoli can be reached at gmagnoli@noozhawk.com. Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.