Exxon Corp. will comply, under protest, with a U.S. government order to halt California tanker trips effective May 1.
The company had been using its RS Baytown tanker to transport its Santa Ynez Unit (SYU) crude oil production from San Francisco to Los Angeles.
The circuitous transportation route-north to San Francisco via pipeline from the Santa Barbara Channel, then south via tanker to Los Angeles area refineries-is the result of a predicted shortage of pipeline capacity to Los Angeles area refineries (OGJ, July 18,1994, Newsletter; May 23, 1994, p. 34).
Competition for the limited pipeline capacity comes from Santa Barbara Channel producers, mainly Exxon SYU and Chevron Corp. Point Arguello, with peak flow of about 90,000 b/d each, and San Joaquin Valley (SJV) oil producers with about 750,000 b/d.
TANKER RESTRICTIONS
California has strictly limited shipments by tankers as a way to encourage construction of more pipeline capacity and thus presumably limit the chance of offshore oil spills.
Although at least two projects are in the offing to increase area crude oil pipeline capacity, that capacity instead has declined recently. That's because the January 1994 Los Angeles area earthquake damaged a key 50,000 b/d pipeline that is still out of commission.
Exxon agreed to cease tanker shipments after a summit meeting last month with federal, state, and local officials, but an Exxon official said, "We intend to pursue our rights to transport by ship."
The official didn't offer details, but options include either a court challenge or simply applying for a tanker permit.
Exxon dropped its plans for a tanker permit in 1993, promising to move all its SYU crude through the 300,000 b/d All-American Pipeline (AAPL). The line runs from the Santa Barbara County coast to Texas with links to other pipelines to refineries in the San Francisco Bay and Los Angeles areas.
Santa Barbara environmentalists hailed Exxon's decision then, but when its indirect tanker exports from the county became known to the public last month, they blasted the activity.
The Sierra Club, saying, "We've been betrayed," called for Exxon to be hit hard with fines of as much as $25,000/day if tanker shipments continue.
Exxon started making the tanker trips in October, saying it complied with state rules by moving SYU crude via pipeline out of Santa Barbara County and it had informed the U.S. Minerals Management Service. When the California Coastal Commission (CCC) was informed, its staff took months to conclude that Exxon "is failing substantially to comply with its permit."
At the CCC's urging, MMS ordered Exxon to halt tanker shipments.
CCC also disclosed that a small amount of Chevron's oil was sold to Exxon and shipped aboard the Baytown tanker.
Chevron explained it had no control over that because its Point Arguello crude is blended with other crudes in AAPL. However, selling Chevron's crude for tanker transportation is a violation of the company's permit, and it is alerting buyers to that fact.
Chevron had a tanker permit in 1993, but the state suspended it a year ago on grounds that the company wasn't showing enough progress in backing a new pipeline project.
BOTTLENECK ORIGINS
The crude oil transportation bottleneck began to show up in late 1993, even before Exxon's production was rising to its current peak.
Loss of Chevron's tanker permit was aggravated by the January 1994 earthquake, which ruptured ARCO Pipeline Co.'s Line No. 1, shut down indefinitely except for one portion that operates as a feeder line.
Another key Los Angeles area pipeline connection, ARCO's 85,000 b/d Line No. 63, has been prorating capacity nominations by about 25%. The line is being upgraded to handle 110,000 b/d by midsummer.
"These tanker issues will go away" if and when a major new pipeline to Los Angeles is laid, said Tom Dunaway, MMS regional supervisor of development and operations.
He referred to the Pacific Pipeline proposal, a 130,000 b/d pipeline to move crude from AAPL at Emidio, Kern County, to Los Angeles area refineries.
Its draft environmental impact report came out only last month, so permit hearings are months away Further, because of intense opposition from jurisdictions in the Los Angeles area, there is no guarantee it will be built.
Without the ability to ship oil by tanker, California Outer Continental Shelf and SJV producers have enlisted a large fleet of trucks to take up the slack. It is a method that promises to increase now that Exxon no longer will use tankers.
Copyright 1995 Oil & Gas Journal. All Rights Reserved.