A Texas oil firm is fighting an uphill battle with the state of California to restart crude oil production and sales from three platforms in federal waters offshore Santa Barbara.
Houston-based Sable Offshore Corp, led by industry veteran James Flores, is embroiled in contentious legal battles with California’s agencies and attorney general over a project to restore and re-launch a pipeline from the offshore fields to the coast. Faced with California’s opposition and lawsuits, Sable is proposing an alternative plan to ship oil via shuttle tankers with operations in federal waters only, which would bypass California’s state agencies.
Despite the support of the Trump Administration for federal oil-producing projects, Sable is fielding a growing number of lawsuits from California, and analysts say the firm could run out of funds and default on a loan before clearing hurdles in the most inhospitable U.S. state for the oil industry.
Sable Offshore bought in 2021 three platforms from ExxonMobil in federal waters offshore Santa Barbara County by financing part of the deal with a $625-million loan from the U.S. supermajor.
The platforms were shut down in 2015 following an oil spill due to a corroded pipeline that released about 3,000 barrels of oil on the nearby beaches and killed wildlife.
Related: Germany Seeks Looser EU Rules of Gasoline Cars Phase-out by 2035
Exxon could end up owning the platforms again if Sable doesn’t restart them by a certain point.
Sable is trying, but California is not budging. Lawsuits are pouring in against Sable for alleged environmental damages and disregard for California’s safety regulations and wildlife preservation.
Sable, for its part, is struggling with a plunging stock price – down by 68% over the past month, following allegations that Flores had shared insider information with a select group of investors.
The company is also looking to bypass California authorizations and seeks federal approvals for production and offtake that would take place in federal waters only. Sable in September unveiled an alternative offtake strategy after being sued by the Santa Barbara County District Attorney for environmental violations.
This alternative strategy, a so-called Offshore Storage and Treating Vessel (OS&T) strategy, would entail seeking federal clearance to transport the oil from the offshore platforms via shuttle tankers.
Sable says that the onshore pipeline, which California refuses to authorize, would provide “immediate economic relief to California residents and will play a large role in stabilizing local refineries.”
In the option to seek federal nod for using shuttle tankers to ship the oil, the company “would have the freedom to market its production outside of the State of California,” adding that it plans “to aggressively pursue all legal remedies” in the litigation in California.
Since the shuttle tanker offtake plan was unveiled, California has heaped additional lawsuits against Sable, including a lawsuit by Attorney General Rob Bonta over repeated violations of California water laws while repairing the pipeline.
AG Bonta said in the complaint that “Rushing to meet a July 1, 2025, deadline imposed by the California Office of State Fire Marshal for restarting its onshore crude oil pipeline network, Sable intentionally ignored its obligations under California Water Code.”
“By avoiding the imposition of waste discharge requirements and associated regulatory oversight of its activities until after the work was completed, Sable placed profits over environmental protection in its rush to get oil on the market,” the lawsuit alleges.
Sable’s management “was at best misinformed, incompetent and incorrect. At worst, Sable was simply bamboozling the Regional Water Board to meet a critical deadline,” Bonta said in the complaint.
Sable is also embroiled in litigation with the California Coastal Commission, which earlier this year fined Sable $18 million for defying state orders to stop work on the pipeline.
The company, for its part, is suing the California Coastal Commission seeking damages in excess of $347 million, to compensate Sable “for the unlawful delay of, and damages to, the restart of the Las Flores Pipeline System.”
Meanwhile, the company said that “Sable is very concerned about the state’s crumbling energy complex. California’s economy will face dire consequences if refineries continue to close due to the lack of domestic production, which should be a major concern for the bondholders of the State of California.”
Sable’s persistence to restart oil production offshore California is somewhat puzzling for industry executives, many of whom have dropped operations in the state, including Chevron last year, moving its headquarters out of San Ramon to Houston.
“Offshore oil in California is a nightmare. The regulatory and reputational risks are off the charts,” Robert Collier, chief executive at offshore decommissioning firm BlueLift, told The Wall Street Journal.
Experts on litigation and regulatory norms told the Journal that Sable may have to field lawsuits and challenges from California’s agencies and regulators for years.
“It’s pretty bleak, honestly, in terms of going forward to actual production,” Elmer Danenberger, an independent expert who worked for decades in the Interior Department’s offshore oil and gas program, told the Journal.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com
Oilprice Intelligence brings you the signals before they become front-page news. This is the same expert analysis read by veteran traders and political advisors. Get it free, twice a week, and you’ll always know why the market is moving before everyone else.
You get the geopolitical intelligence, the hidden inventory data, and the market whispers that move billions – and we’ll send you $389 in premium energy intelligence, on us, just for subscribing. Join 400,000+ readers today. Get access immediately by clicking here.
Leave a Comment
Your email address will not be published. Required fields are marked *