Exxon Cites State Regulatory Environment in $2.5 Billion California Asset Impairment
ExxonMobil announced that it will record an impairment charge of $2.4 billion to $2.6 billion in its fourth-quarter earnings primarily from its Santa Ynez facilities on the coast of California. The company stated that “[c]ontinuing challenges in the state regulatory environment have impeded progress in restoring operations” at the facilities.
Exxon wrote in a Securities and Exchange Commission (SEC) filing on January 4, 2024 that the impairment charges to its upstream business “primarily reflect idle Upstream Santa Ynez Unit assets and associated facilities in California.” The company said it has been making efforts to restart production, but “continuing challenges in the state regulatory environment have impeded progress in restoring operations.”
Exxon’s Santa Ynez Unit consists of the three offshore platforms located in federal waters approximately 12 miles offshore from Goleta and an onshore oil processing plant located in Las Flores Canyon, near Goleta, and related pipeline infrastructure. Exxon sold the Santa Ynez Unit to Sable Offshore in November 2022 for $643 million, a loss of approximately $2 billion. Exxon financed almost all of the purchase through a five-year loan.
In 2015, Exxon temporarily suspended production from the Santa Ynez Unit after a pipelined owned by Plains All American Pipeline, LLC ruptured and spilled 142,000 gallons of oil into the ocean near Refugio State Beach. In 2016, Santa Barbara County granted Exxon an emergency permit to truck crude oil to processing facilities.
In September 2017, Exxon applied to the County for an interim permit to truck approximately 11,000 barrels of crude oil a day from the Las Flores Canyon processing plant to either the Phillips 66 Santa Maria Pump Station or to the Pentland Terminal in Kern County. The Santa Barbara County Board of Supervisors denied the request in 2022. In September 2023, a U.S. judge denied ExxonMobil’s request to reverse the decision, preventing a restart of the Santa Ynez Unit. (Exxon Denied Summary Judgement in Santa Barbara Trucking Permit Case.) Exxon sued the Santa Barbara County Planning Commission and Board of Supervisors for their denial of permit applications to install 16 safety valves on the pipeline system. (Exxon Sues Santa Barbara County over Denial of Pipeline Safety Valve.)
Exxon is the second major oil company to cite California’s regulatory environment in a significant write down of company assets. Chevron also announced that it will record an impairment charge for a portion of its U.S. upstream assets, primarily in California, due to “continuing regulatory challenges” in the state. (see Chevron Cites “Regulatory Challenges” in California Asset Impairment.)