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Exxon Denied Summary Judgement in Santa Barbara Trucking Permit Case
Exxon alleged that Santa Barbara County Board turned consideration of trucking proposal into a referendum on the production, transportation, and use of oil in and off the Santa Barbara coast.
On September 28, 2023, a U.S. judge denied ExxonMobil’s request to reverse a decision by the Santa Barbara County Board of Supervisors to deny the company an interim permit to truck crude oil produced from its offshore platforms to a refinery in Kern County until a pipeline becomes available. The denial of the trucking permit has prevented a restart of Exxon’s offshore production, processing, and transportation in the company’s Santa Ynez Unit.
Exxon challenged the Board’s decision, alleging that it abused its discretion by making a decision that was not supported by evidence. Exxon argued that, “[r]ather than focus on the merits of the project,” the Board “improperly treated the consideration of the project as a referendum on offshore production as well as the transportation and use of crude oil in the County of Santa Barbara.”
In denying Exxon’s request for summary judgment, Judge Dolly Gee ruled in the first phase of litigation that the Board’s decision was supported by substantial evidence that transporting crude oil by truck would present safety issues that could not be mitigated.
Exxon’s Operations and 2015 Pipeline Rupture
Exxon’s Santa Ynez Unit, which was formed in 1970, consists of the Hondo, Heritage, and Harmony platforms located in federal waters approximately 12 miles offshore from Goleta. The unit also includes an onshore oil processing plant located in Las Flores Canyon, near Goleta, and related transportation infrastructure. Since 1970, Exxon has acquired and maintained 16 federal leases for the 114 offshore wells in connection with the three platforms. Production of crude oil and natural gas began on the Hondo platform in 1981, and the Harmony and Heritage platforms began operations in 1993. The processing plant, which Exxon built to address local concerns regarding transportation of oil and gas by tanker ship, also began operations in 1993. The Santa Ynez Unit produced more than 663 million oil equivalent barrels of oil and gas between 1981 and 2014, according to Exxon.
Santa Barbara County approved Exxon’s Santa Ynez Unit in 1987 with the requirement that oil was transported by pipeline unless another mode of transportation was permitted in accordance with the county’s coastal zoning ordinance. Exxon used two pipelines owned by Plains All American Pipeline, LLC to transport oil from three offshore drilling platforms out of the county. In May 2015, one of the pipelines ruptured and spilled 142,000 gallons of oil into the ocean near Refugio State Beach. The spill led to the immediate closure of the two pipelines. Exxon also shut down production from the Santa Ynez Unit, as these pipelines were the only means to transport oil from the unit.
In February 2016, Santa Barbara County granted Exxon an emergency permit to truck its inventory of 400,000 barrels of crude oil to processing facilities. In August 2017, Plains submitted an application to the County to replace the pipelines. The construction of the new pipeline was estimated to take four to seven years.
Exxon’s Trucking Plan
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 trucking would occur seven days per week, 24-hours per day, with no more than 70 trucks leaving the facility each day. The plan would be in effect for seven years, or until a pipeline was operational. The plan would allow for the phased restart of the Santa Ynez Unit and its Las Flores Canyon processing facility.
In February 2018, the County determined that the plan was subject to environmental review under the California Environmental Quality Act (CEQA). The County issued a Draft Subsequent Environmental Impact Report (SEIR) in April 2019 and held a public comment period and public meeting on the Draft SEIR was held on May 6, 2019. In July 2020, the County released a Proposed Final SEIR, and a staff report that recommended approval of a modified proposal that would require Exxon to truck oil only to the Santa Maria facility. However, in August 2020, Phillips 66 announced that it would be shutting down the Santa Maria facility.
The County determined that a Revised Final SEIR should be prepared that addressed the shutdown of the Santa Maria facility, as the shutdown was likely to occur during the lifetime of the interim trucking plan. In August 2021, the County issued its Revised Final SEIR, which identified a “significant unavoidable adverse impact” from “an offsite accidental spill of crude oil from a truck accident that has the potential to impact sensitive resources including biological, cultural, and water resources.”
In September 2021, County staff issued a Staff Report to the Planning Commission, recommending approval of a modified version of the interim trucking plan under which there would be no trucking during heavy rain and the crude oil would be trucked to the Santa Maria Pump Station until it closed and then to Pentland Terminal. The County had previously determined that trucking the oil to Santa Maria only would alleviate the risk of a severe oil spill entering a waterway.
The Staff Report found that the proposal fully complied with CEQA. The report found that the plan mitigates the risk of oil spills to the maximum extent feasible; mitigates the significant impacts of air quality, increases in greenhouse gas emissions, and traffic; and that alternatives to the plan are not feasible.
Significantly, the Staff Report found that the environmental and economic benefits of the project outweighed the risk of oil spills, which, according to the report, occurred about every 17 years. The project’s benefits included returning locally produced, low-carbon-intensity oil to California markets; reducing GHG emissions by using newer model trucks that are more fuel efficient and produce lower emissions than older trucks; contributing more than $200,000 to the Coastal Resources Mitigation Fund; providing the County with more than $1 million in additional tax revenues each year; restoring the jobs that were lost as a result of the shutdown; and increasing spending at local business.
Denial of Plan by Planning Commission and County Board of Supervisors
On September 29, 2021, the Planning Commission held a hearing on the modified plan, and its staff recommended conditional approval. The Commission, however, declined to approve the project and voted 3-2 to continue the hearing to November 3, 2021. It directed its staff to return with draft findings to deny the modified plan on the grounds that the Commission could not make the findings supporting a CEQA Statement of Overriding Considerations and as required by the Land Use and Development Code and the Coastal Zoning Ordinance. On November 3, 2021, the Planning Commission recommended by a 3-2 vote that the Board make the findings for denial.
On March 8, 2022, the County Board of Supervisors held a hearing to consider the Planning Commission’s recommendation to deny the permit. After considering the evidence presented, the Board denied the plan by a 3-2 vote. The Board found it could not support the findings that “[s]treets and highways will be adequate and properly designed to carry the type and quantity of traffic generated by the proposed use” and the “proposed project will not be detrimental to the comfort, convenience, general welfare, health, and safety of the neighborhood and will not be incompatible with the surrounding area.” The Board cited the risks from accidents on State Route 166.
Exxon Files Lawsuit
On March 11, 2022, Exxon filed suit against the Board, challenging its decision to deny a permit for the modified plan by arguing that the Board abused its discretion. Among other arguments, Exxon contended that the Board’s decision interfered with its fundamental vested right to operate its Santa Ynez Unit facilities.
The company contended that
Rather than focus on the merits of the project, however, the Board improperly treated the consideration of the project as a referendum on offshore production as well as the transportation and use of crude oil in the County of Santa Barbara. But that was not the issue before it. The only question before the Board was whether the project complies with federal, state, and local law. It does. Ironically, while the Board purportedly made its decision in the name of environmentalism, the Project denial deprives consumers of a local, lower carbon intensive, and more heavily regulated energy source than foreign-produced oil and gas.
Exxon alleged that the Commission made this decision based on the statements of commentators at the public hearing who raised concerns about drivers on State Route 166 passing slow-moving trucks. These findings were not in the traffic analysis in the Final SEIR or in the Staff Report. “These conclusions were based on unsupported public comments and pure conjecture,” the company argued.
Additionally, Exxon noted the anti-oil politics of three supervisors. Exxon argued that Board members added their own speculations in their March 8, 2022 vote to follow the Commission’s recommendation to deny the project. Notably, Chair Joan Hartmann stated that “we need to think about this more broadly and we do have discretion about the baseline. The baseline in my view is current conditions and the current conditions are that we are in a climate crisis…”
“Not only were these and other conclusions not supported by substantial evidence, they were not properly before the Board,” Exxon argued. “Yet, they formed the basis for the Project denial. In doing so, the Board committed a prejudicial abuse of discretion and misapplied CEQA. The Board then went even further by issuing a de facto ban on trucking oil in violation of Santa Barbara County’s land use regulations.”
Exxon argued that these comments “show that the Board exceeded its authority by morphing consideration of the Project into a referendum on the production, transportation, and use of oil in and off the coast of Santa Barbara County.”
Decision on Summary Judgement
Judge Dolly Gee ruled that Exxon does not have a vested right to transport oil from the Santa Ynez Unit by truck. The judge noted that the original conditions of the permit approval do not guarantee transportation by a mode other than pipeline. The conditions also state that non-pipeline transport “may be permitted” if in accordance with the applicable local ordinances and policies.
While Exxon does have a vested right to operate the Santa Ynez Unit facilities to extract oil and transport it via pipeline, that vested right does not encompass its interim trucking plan. Exxon’s right to transport oil by truck is neither a vested right nor a “fundamental” right under California case law.
Gee noted that “it is not the denial of the Interim Trucking Plan Application that has caused Exxon to cease oil production in its [Santa Ynez Unit] facilities, but an unrelated, intervening event (the shuttering of the pipelines).” The judged noted that “Board’s decision in this case does not permanently implicate Exxon’s vested right to use its SYU facilities, but only halts its proposed ‘restart’ which itself was a temporary fix to a bigger problem: the lack of viable pipeline transport. That is a problem not caused by the Board’s decision.
Gee also concluded that “[t]here is no evidence of any Board member improperly ‘bowing to political pressures over their better judgement,’ since each one expressed rational reasons supported by the evidence to justify their exercise of discretion on this vote.”
Exxon’s additional constitutional challenges will be addressed in a court proceeding on October 27, 2023.
Future of the Santa Ynez Unit
In October 2022, Exxon purchased the 123-mile section of the two pipelines from Plains All American Pipeline. Exxon, however, sold the Santa Ynez Unit to Sable Offshore in November 2022 for $643 million, a loss of approximately $2 billion. Sable Offshore is seeking permits to restart Santa Ynez and expects to start production in 2024 and produce approximately 28,100 barrels of oil and gas per day. The company stated that field has 112 wells and the potential for more than 100 additional wells.