SANTA BARBARA COUNTY, Calif. – The California State Lands Commission sent a letter on May 23 of this year to Sable Offshore warning the Houston-based energy company that its claims to have restarted commercial oil production and lack of communication during the process may have breached language in the Commission's leases.
The letter, addressed to Sable Offshore's Vice President of Environmental and Governmental Affairs Steve Rusch, cites a press release sent to staff at the State Lands Commission earlier this month announcing the restart of oil production for parts of the Santa Ynez Unit, the company's intention to scale up production at more wells, and for that oil to hit the market by July of this year.
According to Sable Offshore's announcements on May 19, oil from six wells on Platform Harmony was already flowing to the Los Flores Pipeline System at a rate of 6,000 barrels of oil per day.
Your News Channel broke the news the same day that the announcement was made.
"The [May 19] press release appears to mischaracterize the nature of recent activities, causing significant public confusion and raising questions regarding Sable’s intentions," read the State Lands Commission's letter issued days after the announcement. "[State Lands] Commission staff has informed me [Lt. Governor of California and Chair of the California State Lands Commission Eleni Kounalakis] that the limited volume oil flows are the result of well-testing procedures required by the Bureau of Safety and Environmental Enforcement prior to restart. These activities do not constitute a resumption of commercial production or a full restart of the SYU [Santa Ynez Unit]. Characterizing testing activities as a restart of operations is not only misleading but also highly inappropriate – particularly given that Sable has not obtained the necessary regulatory approvals to fully resume operations at SYU."
ExxonMobil sold existing infrastructure to produce oil in Santa Barbara County which included 114 total wells, three offshore platforms, and an onshore oil and gas processing facility at Las Flores Canyon collectively called the Santa Ynez Unit to Sable Offshore in February of 2024.
The image below is an informational slide from an investor presentation by Sable Offshore and provided to the U.S. Securities and Exchange Commission (SEC) which shows the oil production infrastructure that makes up the Santa Ynez Unit.
In the May 19 announcement, Sable Offshore detailed that it expected to fill the approximately 540,000 barrels of crude oil storage available at the Las Flores Canyon facility by June and intended to initiate production from an additional 44 wells on Platform Heritage by July of 2025 and 26 wells on Platform Hondo by August of 2025.
Those plans and the results of hydrotesting mentioned by Sable Offshore were not relayed to the State Lands Commission, a requirement within leases 7163 and 4977 and something the state regulator warned Sable Offshore about in a letter on May 9 of this year, days before Sable's announcement about restarting oil production.
"Sable was required to communicate with Commission staff before initiating any oil flow through theoffshore pipeline, even in this limited capacity," noted the May 23 letter. "Any attempt to restart commercial operations at the SYU without final regulatory approvals may place the company in violation of its lease terms and jeopardize the status of Sable’s holdover lease."
Portions of the leases amended in December of 2023 provide explicit steps required before restarting oil production, specific tests necessary, and routine reporting requirements and the May 23 letter did not specify which steps if any had been followed.
"Before resuming oil pipeline operations, Lessee shall conduct oil emulsion pipeline inspections and adhere to reporting requirements, as described below," stated Amended State Lands Commission Lease number 7163. "All inspections must strictly comply with the regulatory and industry best practices in place at the time of inspection, to facilitate a reliable assessment of the structural integrity of the pipeline and ensure compliance with prevailing environmental safety standards. Fulfilling each requirement is a mandatory prerequisite for restarting operations, as is Lessor's receipt and approval of all testing results."
"Each of the inspection methods described below shall bе performed no earlier than twelve months prior to the restart of pipeline production operations. This applies regardless of whether Lessee is in compliance with inspection intervals provided for by regulation," added Amended State Lands Commission Lease number 1763.
Lt. Governor Kounalakis concluded the May 23 letter warning, "The willful disregard for the directives of regulatory agencies does not engender trust or confidence in Sable’s willingness to serve as a responsible partner, and could weigh significantly into considerations on the future assignment of the SYU leases from Exxon to Sable...no new offshore oil and gas pipeline leases will be considered, including leases 7163 and 4997, which will expire on January 31, 2029 and December 31, 2028, respectively."
Your News Channel has reached out to Sable Offshore about the State Lands Commission letter and their response will be added to this article when it is received.
State Regulator warns Sable Offshore that claims that oil production is underway may have violated lease terms News Channel 3-12.
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