Exxon Mobil halts drilling after spill crippled pipeline

The shutdown of a pipeline that spilled up to 101,000 gallons of crude on the Santa Barbara coast forced Exxon Mobil Corp. to halt operations at three offshore platforms because it couldn’t deliver oil to refineries, the company said Tuesday.

The company temporarily ceased operations last week after Santa Barbara County, Calif., rejected its emergency application to truck oil to refineries, spokesman Richard Keil said.

A Santa Barbara County official said the company’s problem did not constitute an emergency and it could go through the normal procedure requiring extensive environmental review to get a permit to truck the oil.

The shutdown is not expected to have an impact on oil prices, but it does harm Exxon Mobil’s bottom line even though production from the platforms is small compared to the company’s overall output, said Tom Kloza, global head of energy at the Oil Price Information Service.

Crude was selling last week for $60-$64 a barrel and could fetch more than $91 when refined for automobile gas, he said. That provided a lot of incentive for Exxon Mobil to get that oil to a refinery.

“I’m sure it’s a royal pain for them,” Kloza said. “Given the profit margins for gasoline, whether you have to (deliver) it by wheelbarrow or rickshaw, you’re very motivated.”

Exxon Mobil had cut production by two-thirds from the rigs after the Plains All American Pipeline spilled crude on the coast May 19 and was shut down.

Federal regulators investigating the cause of the spill have revealed the 2-foot-wide pipe was severely corroded where it ruptured but have not issued any findings or penalties.

The pipeline carried oil to refineries from an Exxon Mobil facility in Las Flores Canyon that separates crude, water and natural gas about 15 miles west of Santa Barbara, Calif.

Before the shutdown, daily production from the Hondo, Harmony and Heritage rigs that sit in waters five to eight miles offshore had been cut from 30,000 barrels to 10,000 barrels. There are 42 gallons in a barrel.

While the plant was capable of storing up to 540,000 barrels of crude, the company said it expected to reach capacity less than a month after it filed its June 4 emergency application.

Plains has not provided an estimate of when it might be able to restart the pipeline.

In the meantime, Exxon Mobil is weighing options about what it will do, Keil said.

No immediate layoffs are anticipated because the platforms need to be maintained while dormant, Keil said.

The company’s bigger problem in California, Kloza said, is getting its Torrance refinery restarted after a fire earlier this year.

The biggest impact locally of a prolonged shut down will be on Santa Barbara County property taxes, said Mark Schniepp, director of the California Economic Forecast.

Exxon Mobil said in its emergency application that the county stands to lose up to $4 million in school funding if the Las Flores Canyon facility is shut down.

“When the county says, ‘No, we’re not going to give you that permit,' they’re just shooting themselves in the foot,” Schniepp said.

In rejecting the permit, Dianne Black, assistant planning director for the county, said schools could file a claim against Plains if it loses that funding through tax revenue.