Santa Barbara County Votes Against Combative Oil Company

The first county supervisor to speak after a marathon public hearing this Tuesday about Sable Offshore Oil Company, was the 5th District supervisor representing the Santa Maria area, Steve Lavagnino.

The chambers were packed with red-shirted environmentalists worried about climate change and with once and future Sable workers worried about their jobs; 95 people had signed up to speak. Mercifully, not all did. Those who did speak were passionate and moving.

Then it was the supervisors’ turn to speak.

“I’ll be Ohtani today,” Lavagnino said, referring, of course, to Shohei Ohtani, the Dodgers’ freakishly gifted pitcher and hitter. But it soon became clear that Lavagnino was not in a mood to crack wise. Instead, he proved that nobody’s as scary as a funny guy in a serious mood. Without raising his voice, Lavagnino lowered the boom on Sable. And when he finished, the only sound in the room was that of the company’s stock value plummeting — even further than it already had.

Lavagnino began by talking about a conversation he had with his wife 16 years ago when he was considering whether to enter his first political race, running for a seat on the Board of Supervisors. His wife, he noted, hated politics. She hated the long nights he’d be gone away from home; she hated the intrusions it would bring into their private lives. But she was 100 percent behind him, she said, if he promised to always vote his conscience.

This Tuesday, he voted his conscience.

Two years ago, Sable Offshore had purchased the Exxon oil processing plant up the Gaviota Coast. This Tuesday, Sable — a Houston-based company boasting a bounty of recycled executives who cut their professional teeth in the Santa Barbara oil patch — was seeking board approval for Exxon’s final development permit to be legally transferred to Sable.

Santa Barbara County is the only California county that requires board approval for such transfers. Why? Back in the 1990s, the county staff and supervisors were seriously worried that some big oil company would sell to a fly-by-night company that did not have the expertise or the financial ability to clean up an oil spill, should one happen. And one did. In May 2015, a pipeline ruptured up by Refugio Beach, causing a major oil spill. That cleanup cost the pipeline operator back then — Plains All American Pipeline Company — $870 million.

Stories like that have everything to do with why the county supes passed the only such transfer ordinance on the planet. Now Sable is trying to reactivate that pipeline so it can reactivate Exxon’s processing plant, which, like all offshore oil operations in Santa Barbara, has been shut down since that 2015 spill.

All that’s why Sable is being put through its paces. Was Sable, the supervisors wanted to determine, a responsible and competent operator? Did it have the skill and experience to run so dangerous an industrial operation? And did it have the resources to clean up any mess that might result? County energy planners told the Planning Commission that Sable did. The County Planning Commission then voted 3-1 last October to approve Sable’s request for a permit transfer, which were appealed. Early this February, the county supervisors heard the matter and deadlocked 2-2, with one supervisor abstaining under the advice of County Counsel.

At that February meeting, Lavagnino had voted to approve the permit transfer. That was not surprising. Steve Lavagnino’s voting record shows he is about as pro-oil a politician as can be found anywhere in Santa Barbara County. It’s the only industry that creates so many high-paying jobs, he said. It’s an industry that generates millions of bucks a year in property taxes that can pay for parks and roads and mental health services. Last week, Lavagnino was definitely pro-oil when he objected strongly to a proposal to phase out all existing onshore oil development in Santa Barbara County. “It’s un-American,” he declared. And loudly.

Back in February when the supervisors were deadlocked over Sable, Sable sued the county, arguing that the tie went to the runner. The county and environmentalists sued back. A federal judge in Los Angeles, Dolly Gee, ruled in favor of the county and the environmentalists and against Sable. A 2-2 vote was not an action, and the supervisors, she said, had to act. Accordingly, she ordered the supervisors to re-hear the matter. If they tied again, Gee ruled, the supervisors would have to keep trying every 45 days until they resolved the matter one way or the other.

This Tuesday was that day. Everyone had reason to believe Lavagnino would vote in Sable’s favor again. But, he explained, a whole lot has changed since February. For starters, he said, Santa Barbara’s district attorney has filed 21 criminal charges against Sable for violating environmental laws designed to protect creeks and streams in the coastal zone from being contaminated. Five of those charges were felonies. The other 16 were misdemeanors.

Lavagnino could have mentioned — but didn’t — that earlier Tuesday morning, attorneys for Sable showed up in front of Judge Thomas Adams’s court, in Department Eight, located in the basement of the Figueroa Street courthouse for an arraignment proceeding on those 21 charges. None of Sable’s executives had to be there; they hired longtime criminal defense attorney Robert Sanger to appear in their stead. It was all over in 30 seconds. The hearing was postponed until a later day. Still, it was not a propitious way for Sable to start the day.

For Lavagnino, that was just the start. The Attorney General of the State of California had also filed a similar action against Sable for clearing the land, digging up the pipeline, and making more than 120 repairs on the pipeline without first seeking and getting permits — a pipeline that, after the oil spill 10 years ago, was discovered to be seriously corroded. The Attorney General accused Sable of seeking to “bamboozle” government officials with a host of dodges and subterfuges that were both cynical and in bad faith.

Plus, Lavagnino continued, there was the $18 million fine imposed on Sable by the California Coastal Commission for doing exactly the same thing. Lavagnino — who had been a card-carrying Republican until Trump’s first term — has his share of criticism of the Coastal Commission. But Sable’s strategy, he said, has been to bulldoze as many government agencies as it could. In a measured tone, he told Sable, “That has not been helpful.” Whether fair or not, he said, oil companies are held to a higher standard of conduct. “Without spilling a single drop of oil, Sable has managed to push back the reputation of the oil industry 20 years,” he said. “If I was another Santa Barbara oil or gas operator, I’d be livid.”

But that was just Lavagnino’s warmup pitch. “This decision today does not lay at our feet on this dais. It lies with the misguided management of Sable …. The evidence in this case is overwhelming. There is something wrong with the strategy of Sable’s leadership.”

Lavagnino attributed the company’s bulldozer tactics to a sense of desperation. Though he didn’t go into details, Sable’s financial position was enough to make anyone desperate. When it bought out Exxon’s platforms and plant in February 2024, it borrowed nearly $700 million from Exxon. Exxon would give Sable just two years to secure all the permits the company needed and start up production. By any reckoning, that was an almost insurmountable target. According to the deal, if Sable wasn’t in production by March 2026, Sable would have to pay Exxon its money back.

What really tore it for Lavagnino was the reporting he read — and heard — over the past weekend in a business trade online news publication called Hunterbrook. A disgruntled Sable investor had leaked a tape recording of a Zoom meeting held last week by company CEO Jim Flores with a group of investors. Lavagnino said what he read qualified as some of the worst stuff he’d ever read. In the tape, Flores can be heard outlining why the company will need to spend $200 million to extend its deadline with Exxon another year. That infusion of additional investment capital — presumably from Exxon itself — would dilute the stock value of existing investors. Typically, such a discussion should not happen with just a small group of investors. Securities and Exchange Commission rules require companies to notify all their investors at the same time with information of such import. Otherwise, Flores would be subject to accusations of sharing insider information.

In another federal administration with a more traditional understanding of ethical investment boundaries, such allegations — made hot and heavy by the reporters writing the articles — might lead to some federal oversight action. But among Sable’s most outspoken supporters is former golf champion Phil Mickelson. In the tape, Flores can be heard suggesting that a date on the greens with some famous left-handed golfer — Mickelson is left-handed — might be useful in making points with the Secretary of Commerce. (The Secretary of Commerce reportedly stated he had no idea who Mickelson was.) Initially, Flores and Sable dismissed the leaked tape as an AI creation. This Monday, the company announced that it would be investigating allegations that Flores shared insider information. To date, the company has noted, there have been no allegations of actual insider trading occurring.

This Monday, Sable also confirmed that it was seeking $225 million to expand its initial window of opportunity with Exxon by an additional year. Nowhere on the tape did Flores discuss the $1.7 billion the company is reported to be pursuing as part of its Plan B strategy to bypass the oil pipeline issue altogether.

The company announced two weeks ago that it was approaching federal government officials to secure the necessary permits to locate an offshore oil storage and treatment tanker somewhere five to seven miles off the coast. Oil from Sable’s three offshore platforms could be offloaded onto the tanker where it could be stored and offloaded again to ships carrying the black gold to wherever the market for oil was strongest.

For the County of Santa Barbara, this would be a genuinely shocking development; getting Exxon into a pipeline and out of such an offshore treatment tanker was a major accomplishment. The loss of revenues and jobs would be of serious concern as well. And if there should be a spill on the waters, it would be infinitely harder to contain than one from a pipeline on land. Lastly, the air quality issues from such an operation were troubling.

In the leaked tape, Sable CEO Flores talks about seeking financing for the offshore option from the federal government; he talks about maybe putting Donald Trump’s name in big gold letters — 75 feet high — on the side of the tanker as an enticement. He wanted it big enough, he said on the leaked tape, that Oprah Winfrey could read it from her Montecito living room.

The story got traction in the business press. Sable’s stock value tanked from the high of $35 a share in May to less than $6 Tuesday morning.

Ultimately, the supervisors voted 4-1 to deny Sable the permit transfer it sought. The inclination of the other three supervisors — Joan Hartmann, Laura Capps, and Roy Lee — had never been in doubt. The big surprise was Steve Lavagnino. It was a genuine moment. And in that moment, he was Shohei Ohtani. And this Tuesday, Ohtani hit a lead-off grand slam.

The supervisors will revisit the matter December 16 when they discuss the findings that must be made to deny Sable the transfer permits it sought. Whether that’s enough to slow down Sable is another matter. Many observers had opined that Sable could operate just fine using Exxon’s permits. But Exxon showed up Tuesday to notify the supervisors that if the transfer permits were not forthcoming, they intended to sue.

Sable, always quick to file lawsuits, may not have made such a direct threat this Tuesday. Later Tuesday evening, Sable Vice President Steve Rusch issued a statement affirming its commitment to energy affordability and reliability and “recommencing oil sales in a safe and efficient manner.” Sable, he said, had met all the requirements needed for the transfer to have been granted; county planning staff said so. “Not only have we demonstrated all required operator capabilities and financial requirements, but we have gone above and beyond those requirements. Today’s decision does not impact Sable’s plans to re-commence oil sales. Sable will contend to defend our vested rights to pursue domestic energy supplies that are critically needed to make California more affordable and prevent our state’s energy infrastructure from collapse.”

To strain the baseball metaphor past the breaking point, the game is far from over.