California and Big Oil part ways after a century-long relationship.

Newsearay Exclusive: California Severs Ties with Big Oil as State Fights Climate Change

In a groundbreaking move to combat climate change, California, the most populous state in the U.S., is bidding farewell to Big Oil, marking the end of an era. Once the fourth-largest crude producer in the country, California’s abundant oil resources gave rise to a thriving industry that shaped the state’s iconic car culture, complete with highways, drive-in theaters, banks, and restaurants that endure to this day.

However, on Friday, this long-standing marriage will be officially dissolved. Exxon Mobil and Chevron, the two largest oil producers in the United States, will publicly announce a combined $5 billion writedown of their California assets when they release their fourth-quarter results.

Exxon Mobil severed its onshore production ties in the state last year, concluding a 25-year partnership with Shell PLC as they sold their joint-venture properties. The company cited the state’s regulatory environment as a hindrance to restarting offshore production, which ultimately led to their exit strategy, including financing a Texas-based company’s acquisition of their offshore properties.

The leading U.S. oil producer’s asset writedown amounts to approximately $2.5 billion, effectively marking the end of five decades of oil production off the coast of Southern California. Chevron, on the other hand, will also incur charges of around $2.5 billion related to its California assets. While they remain in the state, the company is fiercely contesting state regulations concerning its oil-producing and refining operations. Born as Pacific Coast Oil Co. 145 years ago, Chevron claims that California’s energy policies have made it increasingly challenging to invest in the region, even in renewable fuels. Consequently, the company has significantly reduced its spending in the state by hundreds of millions of dollars since 2022.

During the 1970s and 1980s, California implemented stringent restrictions on drilling near residential and commercial areas, as well as regulations on air pollution, which have been widely replicated throughout the U.S. In 1996, the state introduced reformulated gasoline to combat smog, leading to the development of the country’s most rigorous and cost-intensive environmental standards.

While oil’s economic contributions have been overshadowed by this mixed legacy, California’s high-tech industry has long replaced oil as a major employer. Governor Gavin Newsom has even called for a ban on the sale of new gasoline-powered vehicles by 2035. Last September, his administration initiated a lawsuit against the oil industry, accusing it of “lying to consumers for more than 50 years” about climate change. Additionally, Newsom signed a bill into law aiming to hold Chevron and other refiners accountable for allegedly overcharging consumers.

The American Petroleum Institute, the industry’s trade association, has criticized climate lawsuits, arguing that they harm “a foundational American industry and its workers” and represent a significant waste of California taxpayers’ resources.

Currently, the contentious relationship between California and the oil industry resembles a tragic tale. Oil production in the state has steadily declined for nearly four decades, with crude output, including the historic Kern County fields in Southern California, decreasing by a third since its peak of 1.1 million barrels per day in 1985. The state has not witnessed new oil development projects, and its legacy fields producing heavy oil have failed to meet the state’s requirements for high-quality gasoline.

Professor Kammen from UC Berkeley aptly summarizes the situation, stating, “California can’t have both. That means there is no room for oil and gas after that.”

This Newsearay exclusive report was compiled by Sabrina Valle, edited by Gary McWilliams and Marguerita Choy.

Copyright 2024 Thomson Reuters.

California, the most populous state in the US, is officially divorcing itself from fossil fuels in its fight against climate change. This marks the end of an era for Big Oil in California, which was once the fourth-largest crude producer in the country and home to major oil drillers. Exxon Mobil and Chevron, the two largest US oil producers, will disclose a combined $5 billion writedown of their California assets. Exxon Mobil exited onshore production in the state last year and Chevron is contesting state regulations. California’s energy policies have made it difficult for oil companies to invest, even in renewable fuels. The state has a long history of setting curbs on drilling and implementing strict environmental standards. The decline in oil production has been ongoing for almost four decades, and the state lacks new oil development projects. Governor Gavin Newsom has called for a ban on new gasoline-powered vehicles by 2035 and has targeted the oil industry with lawsuits related to climate change. The acrimony between the state and oil industry paints a tragic picture.

Disclaimer: Only the headline and content of this report may have been reworked by Newsearay, staff; the rest of the content is auto-generated from a syndicated feed. The Article was originally published on Source link

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