Sable Shows Exxon the Money

After experiencing the most tumultuous week of its still very short existence, Sable Offshore oil company managed to raise the $225 million it needed to keep the embattled Houston-based oil company afloat and in the game for another year. Had the company not been able to raise those funds, ExxonMobil would have called Sable’s loan — just shy of $700 million — early next year.

The infusion of these privately raised funds forestalls that date by one year, though in the deal Sable struck with Exxon, Sable will now be paying higher interest rates — 15 percent instead of 10 — on its outstanding debt.

When Exxon sold out its Santa Barbara operation — three offshore platforms, an onshore natural gas plant, and its onshore oil pipeline — in February 2024, it loaned the company the bulk of the funds needed to make the transaction possible with the condition that the new company would have Exxon’s old plant and pipeline — shut down since the Refugio oil spill of 2015 — back up and operating. Based on the political turbulence Sable has encountered and generated in the past few weeks, it would take an act of divine intervention for the oil company to secure the state permits needed to reactivate the 120-mile pipeline by the deadline imposed by Exxon in the sale of the plant. It’s not clear the company could achieve that end even with the additional time.

In late October, Sable was notified by the State Fire Marshal — the last word when it comes to reactivating what was once a seriously corroded pipeline — that much of the pipeline repair work Sable did, without benefit of the necessary state permits required, had been inadequate. Without additional work being done, Sable was told, the Fire Marshal would not process its application to restart the pipeline.

But the week before that, a Santa Barbara judge ruled that Sable needed to secure a Coastal Development Permit from the California Coastal Commission before any more repair work could be performed. Given that the Coastal Commission has imposed an $18 million fine on Sable and that Sable has responded by seeking $347 million in damages from the Coastal Commission, that’s an impasse not likely to be navigated quickly or easily.

At last week’s county supervisor’s hearing, Santa Barbara Supervisor Steve Lavagnino castigated Sable’s aggressive indifference to the state’s multiple regulatory requirements, blaming the company for setting back the reputation of the oil and gas industry “by 20 years.” Lavagnino — one of the most pro-oil supervisors in the past 20 years — said Sable’s behavior reeked of desperation and that desperation, he elaborated later, stemmed from the unrealistically narrow time window Exxon allowed the company in the first place. Lavagnino’s impatience with Sable had worn so thin that last week, he refused to vote for what is ordinarily a boiler-plate transfer of permits from Exxon to Sable. Lavagnino’s opposition brought the vote against Sable to 4-1.

On December 16, the supervisors are scheduled to articulate a set of findings needed to justify the vote. Already Exxon has threatened to sue the supervisors over the vote, arguing that the county’s ordinance empowering it to deny permit transfers to companies deemed insufficiently experienced and capitalized to operate safely and cleanly is unconstitutional. The county law in question — known as 25B — has never been challenged since it was first adopted in the early 1990s. Given that it’s the only such law on the books anywhere in the country, many supervisors have their doubts as to how well it could withstand such challenges.

In the meantime, the Washington Post broke a story that leaked documents indicate the Trump administration is now proposing to put new tracts of sub-sea land off the coast of California up for lease for oil companies. If true, this would be the first time since 1984 that any land off the coast of California had been leased for oil development.

“Ronald Reagan was the president back then,” noted Maggie Hall, an attorney with the Environmental Defense Center.

The offshore land Sable controls, she added, was leased many decades ago and would not be directly affected. But if new leases were to be approved and developed, she said, it would open the door to new oil development off the coast at a time when the push should be for newer and greener sources of energy supplies. That said, Hall added, a state law authored by former state senator Hannah-Beth Jackson bars the permitting of new oil infrastructure in state waters necessary for new oil exploration and development in federal waters.

All this, she acknowledged, could conceivably increase the industry’s interest in offshore tankers and storage vessels that would be moored in federal waters located more than three miles off the coast. Sable has been making loud noises about pursuing that very route, notifying the Office of the State Fire Marshal of its intentions. Initially Sable estimated the cost of that at $1.7 billion, but a big chunk of that was to pay off the company’s loan with Exxon. With the new infusion of $225 million, that now will not be so necessary, so the total amount to pursue the offshore option would be significantly less.