Giving Up the Ship : Chevron’s Local Tanker Business Halted by a Missed Deadline

Chevron Corp., which fought a decade-long battle to ship oil by tanker through the Santa Barbara Channel, will cease shipping operations today after failing to secure a deal with a pipeline company to move oil after its shipping permit expires in 1996, according to public and company officials.

Under its California Coastal Commission permit, Chevron had until today to line up a permanent pipeline to move the crude being pumped from its massive Point Arguello offshore fields to refineries in Los Angeles.

Without such an agreement in place, the company must cease shipping operations immediately, state and local officials said.

Meanwhile, Chevron has applied for an emergency permit to continue using tankers because the Jan. 17 earthquake damaged a portion of a pipeline used to transport about half of the crude produced at the company’s Point Arguello fields.

The oil company normally moves about 40,000 barrels of oil a day on that Four Corners pipeline, which runs from northern Santa Barbara County to Bakersfield and then on to Los Angeles refineries. With the damage, Chevron has been forced to reroute the oil, slow production and place excess crude oil in storage tanks, company officials said.

Chevron’s failure to sign a pipeline agreement also threatens its right to use the marine terminal at Gaviota for loading tankers.

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State Lands Commission officials said Monday that its lease agreement with Chevron for use of the offshore terminal was also contingent upon the company finalizing a pipeline agreement by today.

“After midnight tonight, Chevron must stop tankering,” Jim Trout, assistant executive officer of the State Lands Commission, said Monday. “So far, we have not officially heard from the company. And at this point, it would be very hard for this agency to justify this situation as an emergency.”

Chevron spokesman G. Michael Marcy said the company was unsuccessful in its efforts to reach a deal with Huntington Beach-based Cajon Pipeline Co., which will soon start construction of a pipeline from the Barstow area to Los Angeles. Negotiations with the company broke off in late December.

Marcy said Chevron backed out of the deal because the two companies could not agree to terms and the oil company did not like the route of the proposed pipeline. Chevron officials instead have opted to pursue development of the Pacific Pipeline, an oil conduit that is proposed to run directly south from Kern County to the company’s Los Angeles-area refineries.

“The Cajon pipeline is not as commercially viable as we would like,” Marcy said. “We had high hopes that we would reach a deal, but in the end could not agree. That’s business. We’re not going to be pushed into a deal just because (Cajon officials) may have their construction permits in hand.”

Early Monday morning, the Chevron tanker Oregon eased away from its moorings at Gaviota loaded with an estimated 250,000 barrels of oil and headed south toward Los Angeles. It could be the company’s last tanker load unless Santa Barbara County officials approve the company’s request for an emergency shipping permit.

Monday’s voyage was Chevron’s 17th since getting the permit in January, 1993, from the Coastal Commission following a bruising 10-year battle with county and state regulators and local environmentalists. Chevron and its partners have sunk an estimated $2.6 billion into the Point Arguello project. The offshore field contains an estimated 300 million to 600 million barrels of oil.

“We have to accept our bitter medicine on this one,” Marcy said. “Obviously, we are not going to meet our deadline and tankering operations will cease effective Feb. 1.”

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Bill Douros, deputy director of the energy division for Santa Barbara County, said county officials are considering Chevron’s emergency shipping request. He said a decision may be reached as early as Wednesday. Chevron asked the county to allow it to use tankers to ship up to 40,000 barrels of oil a day until the Four Corners pipeline is repaired.

“We are looking over their request and considering whether or not an emergency truly exists,” Douros said. “We want to determine the exact extent of the damages to the line and find out when it is expected to be back on line.”

Officials are also investigating Chevron and its corporate partners’ ability to store oil until the Four Corners pipeline resumes operation. The companies involved in the Point Arguello project now can store about 800,000 barrels of crude. About 80,000 barrels a day is produced from the facility.

But Linda Krop, an attorney with the Santa Barbara-based Environmental Defense Center, said Chevron’s request for an emergency shipping permit and the company’s inability to secure a deal with a pipeline company were examples of its intent to continue to rely upon tanker shipping instead of pipelines.

“It’s our belief that Chevron never intended to use the Cajon line and in fact hoped to use a failed deal with them as a reason for the Coastal Commission to grant an extension on their tankering permit,” Krop said. “We hope that when officials examine the situation, Chevron’s plans will backfire.”

Krop discounted Chevron’s suggestion that the Four Corners pipeline system was so seriously damaged as to prevent Chevron’s use. Even if the pipeline is inoperative, Chevron’s own oil storage units and the temporary use of other pipelines could be substituted until repairs on the Four Corners lines are completed, she said.