Oil and gas production in the Santa Barbara Channel’s state waters came to an end last week with Venoco Inc.’s announcement that it had filed for Chapter 11 bankruptcy and quitclaimed its South Ellwood Field leases back to the State of California.
As Venoco winds down its operations after 25 years in business, its infrastructure — Platform Holly, from which it drilled for oil and gas off the coast of Goleta, and the Ellwood Onshore Facility, which processed the products — now must be decommissioned or sold off.
Platform Holly has been idle since the May 2015 rupture of a pipeline near Refugio State Beach on the Gaviota coast. The breach spilled more than 123,000 gallons of crude oil along the coastline and into the ocean.
Shutting down the pipeline has curtailed more than 50 percent of Venoco’s production, according to the Denver-based company, whose principal assets are oil facilities located offshore and onshore in Southern California.
“Today’s filing is the result of unfortunate circumstances impacting the company’s financial strength, including the ongoing closure of Plains All American Pipeline’s Line 901,” Mike Wracher, Venoco’s chief operating officer, said last week in announcing the bankruptcy.
“We have pursued a number of market-based and regulatory solutions to address these challenges during the last year. Despite these considerable efforts, our financial position now compels us to take this action.”
Venoco estimated that the bankruptcy process would take six months to a year, and that operations would continue as normal until its conclusion. All 110 employees, most based in Carpinteria, are expected to be laid off.
Just before initiating the bankruptcy process, Venoco quitclaimed its leases in the channel back to the State Lands Commission, along with Platform Holly and its infrastructure of piers off the shores of Goleta.
Under the quitclaim deed process, Venoco has terminated, or “quit,” any right or claim to its property and transferred ownership to the state.
California law prevents the State Lands Commission from offering new offshore oil and gas leases, which “effectively ends commercial oil and gas production in state waters at this location in the Santa Barbara Channel,” the commission announced in Sacramento after the transfer.
The move was cheered by local environmental groups.
“We are pleased that Venoco’s aging oil facilities will be removed, and the area restored to its natural condition,” said Linda Krop, chief counsel for the Santa Barbara-based Environmental Defense Center.
“Venoco’s operations have threatened our coast with risks of oil spills, greenhouse gas emissions and dangerous hydrogen sulfide leaks. This action is long overdue and a huge victory for our community.”
It now falls on the state to decommission Platform Holly, which will take an estimated three years, depending on funding and the environmental-review process.
Aside from plugging the oil platform’s 32 wells, exactly what taking Holly offline entails has not yet been determined, said Sheri Pemberton, a State Lands Commission spokeswoman.
The environmental review process will play a major role in how the state approaches the task, she told Noozhawk. Platform Holly sits in a state marine sanctuary.
“Protecting public health and safety and the marine environment is paramount,” the commission said in a statement.
According to the commission, the end of oil and gas operations also means that 85 million barrels of recoverable oil will remain underground and untapped into perpetuity.
What the state does not have jurisdiction over, however, is the Ellwood Onshore Facility near Haskell’s Beach west of Sandpiper Golf Club.
Venoco said that during the bankruptcy process, it will be working with regulators and stakeholders like the City of Goleta as it sells or shuts down the facility.
Goleta has declared the EOF a legal-nonconforming use of land that is zoned for recreation. The City Council and many Goleta residents have been eager to decommission it.
“The city’s objective is to restore the Ellwood Onshore Facility to an active recreation use, consistent with the General Plan land-use designation,” Goleta spokeswoman Valerie Kushnerov told Noozhawk in an email.
“Venoco continues to operate the Ellwood Onshore Facility consistent with permit requirements. The city is working with Venoco, the state, the county and other resource agencies to develop a plan for the lease quitclaim and bankruptcy process.
“The city is gathering information on how the quitclaiming process and decommissioning of the other assets will affect the disposition of the EOF,” she added.
Since Venoco took over its leases from ExxonMobil 20 years ago, the company has provided the state with $160 million in revenues through rent and royalties, and appeared ready to remit more.
Only seven months ago, Venoco proposed to the State Lands Commission that it would shut down Platform Holly and the Ellwood facility 15 years early if the agency approved another proposal to modify its lease boundary in the channel.
Venoco’s original lease line adjustment request anticipated holding on to those leases for 40 more years — when the company expected oil production to no longer be economical.
As part of the proposed adjustment, Venoco would have returned 3,800 acres of its lease — including all of the near-shore area off Goleta — to the state in exchange for 3,400 new acres east of its current boundary, which would have allowed the company to extract 40 million more barrels than it otherwise could have.
The deal-sweetener, however, did not appear to make an ounce of difference with the State Lands Commission, with two of the three commissioners declaring the idea dead before the agency had even scheduled a hearing.
State Controller Betty Yee, one of the commissioners, said in February that “oil drilling must not be expanded,” and Lt. Gov. Gavin Newsom, a second commissioner, stated at a February meeting that “that project’s dead.”
Venoco’s bankruptcy filing is its second in the last year.
In 2016, the company filed for bankruptcy protection so it could shed $1 billion of debt and restructure itself while it dealt with what it had called the “serious problems” of low gas prices and Plains’ pipeline being taken offline.
Later that year, Venoco sued Plains for more than $12 million in lost revenue.
— Noozhawk staff writer Sam Goldman can be reached at sgoldman@noozhawk.com. Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.