American oil executives told Trump administration officials that the energy crisis from the Iran war is likely to get worse — that the disruption to energy flows out of the Strait of Hormuz, where 20% of the world’s oil consumption flows through on its way to markets, would continue to create volatility in global energy markets. The Trump administration has implemented a number of measures to help mitigate the price increase, including a 30-day waiver of sanctions of Russian oil, a release of emergency energy reserves, and waiving the Jones Act.
The Trump administration has also ordered Sable Offshore to resume offshore oil drilling along California’s coast at the Santa Ynez Unit and reopen the associated Santa Ynez Pipeline System. Trump administration officials also want to increase oil flows between Venezuela and the United States to help solidify fuel supply chains in the Western Hemisphere. Chevron told U.S. officials that its oil production in the country has reached record levels and that it intends to pump more.
On March 13, Energy Secretary Chris Wright invoked the Defense Production Act for Texas-based oil company Sable Offshore to restore oil operations offshore southern California. According to a Department of Energy (DOE) news release, Wright invoked the Defense Production Act to address supply disruption risks that “have left the region and U.S. military forces dependent on foreign oil.” Sable Offshore’s facility can replace nearly 1.5 million barrels of foreign-sourced oil each month by producing roughly 50,000 barrels per day, resulting in a 15% increase to California’s oil production.
California Governor Gavin Newsom criticized the Trump administration for ordering the restoration of oil drilling off the state’s coast, calling it an attempt to illegally restart a pipeline that multiple court orders have prohibited from restarting and whose operators are facing criminal charges.
According to Newsom, the Sable Offshore pipeline would only increase total oil production by 0.05% and have “no impact on lowering global oil prices.” But California now relies on imported oil for more than 60% of the oil refined in California, including oil that must pass through the Strait of Hormuz. According to the DOE, California used to supply nearly 40% of the nation’s oil production, but onerous climate legislation and regulations, as well as a general hostility to oil and natural gas, have depressed the state’s oil production and closed numerous refineries.
California regulators further escalated the dispute by directing Sable Offshore to remove a contested segment of the pipeline crossing a state park. The order came from the California Natural Resources Agency, which said the pipeline segment crossing Gaviota State Park lacks the necessary state authorization. Sable Offshore is expected to challenge the state’s removal order.
Background
According to the Desert Sun, the Sable Offshore facility includes offshore platforms, subsea pipelines, and the Las Flores Canyon processing facility near the Santa Barbara coastline. The system has been largely dormant since the 2015 oil spill, during which a corroded onshore pipeline ruptured above Refugio State Beach, releasing about 100,000 gallons of oil, of which about 21,000 gallons flowed into the Pacific Ocean. The area was restored at a cost of about $100 million. Criminal charges were filed against the pipeline’s former owner, Plains All American Pipeline. The spill shut down the entire pipeline network serving the offshore platforms, and it has remained offline for more than a decade.
Sable bought the system from ExxonMobil in 2024 and has claimed it can increase production from about 30,000 barrels of oil equivalent per day to more than 50,000 barrels of oil equivalent per day when the system restarts. The oil would be fed to refineries in Los Angeles, Bakersfield, and the Bay Area, replacing imported oil.
The Trump administration has wanted to restart the facility even before the current crisis because it would provide more domestic oil to California and to the military bases it hosts. Last month, however, a Santa Barbara County Superior Court judge ordered the pipeline to remain shut, ruling that the Trump administration’s earlier intervention was not enough to override an injunction requiring Sable to obtain state approvals before restarting.
A March 3rd legal opinion from the Justice Department, however, concluded that a federal order under the Defense Production Act of 1950 could preempt state law in the Sable case. It also said such an order could override a 2020 federal consent decree stemming from the 2015 Refugio spill that requires approval from the California State Fire Marshal before the pipeline can restart.
Analysis
California has stood in the way of energy production for far too long, and its people have suffered. As we’ve written previously regarding California’s anti-energy policies, “The consequence is not a California free of fossil fuels. It is a California that imports the fossil fuels it refuses to produce — from Iraq, Brazil, Saudi Arabia, the United Arab Emirates, and now even the Bahamas.” The high prices resulting from the closure of the Strait of Hormuz are just amplifying the issues that have long existed in California.
For inquiries, please contact wrampe@ierdc.org.
