(Bloomberg) – Sable Offshore Corp. is seeking the Trump administration’s help to jumpstart a California oil project stalled by red tape.
The Houston-based company’s effort to tap hundred of millions of barrels of crude off the coast of Santa Barbara have been stymied by state regulators’ opposition to reopening pipelines that funnel the crude to refineries.
If state approval isn’t forthcoming soon, Sable is prepared to go all-in on a plan to use tanker ships to haul the crude away to other markets, said Chief Executive Officer Jim Flores.
It’s “absolutely on Trump’s agenda,” Flores said in an interview. He urged state leaders to consider the potential impact on consumers and the state’s fuel supplies if that oil goes overseas instead of to local refineries. “California has an opportunity to make sure California consumers come first.”
Trump’s National Energy Dominance Council led by Interior Secretary Doug Burgum and Energy Secretary Chris Wright has been apprised of Sable’s dilemma and is engaged in discussions with the company.
Newsom’s office declined to comment aside from referencing a Sept. 12 summary of regulatory measures involving Sable’s pipelines.
The Santa Ynez Unit, as the cluster of offshore oil fields is known, was in a state of suspended animation after a Plains All American pipeline burst in 2015, staining beaches and alarming regulators and environmentalists. Sable acquired the assets from ExxonMobil last year, and restarted oil production on the 10-year anniversary of the spill in May. But the onshore pipe network that feeds crude to refineries hasn’t yet been permitted to reopen.
The Interior Department declined to comment beyond referring to a July statement lauding the temporary restart.
Environmental groups have decried Sable’s proposed pipeline restart and a broader push by Newsom to spur more oil drilling in the state.
“Sable should spend less time looking for help from the Trump administration and more time respecting California laws,” said Julie Teel Simmonds, senior counsel for the Center for Biological Diversity. The proposal to use ships to haul away crude seems “like a deliberate attempt to evade state oversight.”
Sable’s efforts to obtain state permission to proceed have been viewed skeptically at times by some investors. Short interest as a share of free-floating shares was as high as 21% as recently early May before dropping to roughly 4% in June, according to S&P Global data. As of Wednesday, that figure had climbed to almost 15%.
The tanker alternative that Sable is considering would hurt California because of lost jobs and tax revenue as those barrels are shipped to other markets, said Porter Collins, co-founder of of Seawolf Capital and holder of a long position in Sable.
“It’s my view that the oil is coming out of the ground one way or another,” he added. “The federal government wants lower gas prices and will be happy to make money on the royalties” that companies are required to pay for oil pumped on government-owned sites.
“The pipeline is the obvious answer,” he said.
