Big Digital Energy

0:00 Welcome everybody. We are doing a special edition of BDE on a topic that is endlessly fascinating to me. I think we'll call this the podcast video version of BDE sidetrack. That is my longtime

0:16 nickname for various, various reasons. But I think given the subject matter today, it's probably even more appropriate. But we've, we're thrilled to have Mike Umbro, who I've been wanting to

0:28 talk to on the podcast for a long time. And

0:33 despite the fact that he needs no introduction, we're gonna, we're gonna kick it off with, you know, Mike, tell us, just give us a brief thumbnail on your history and the things that you're

0:44 involved with in California across energy in the oil and gas sector. So I'm born and raised in San Diego, California. I have no

0:54 familial ties to the industry, which is, it's like, how did I get into this oil and gas industry? And that happened through finance. So I was a bi-side MA deal

1:07 guy looking for deals back in 2006 and 2007, when Master Limited Partnerships were the rage and were running out of oil.

1:16 Then I broke off and started a, just a little consulting firm, just me, Field View Capital back in 2008 in the Great Recession. Took a few years, but put the home run ball together with a deal in

1:28 the Eagleford, with a private equity shop and a management team and an asset and bundled that together and thought, Okay, well I know how to put a deal together. Now I'd rather be a developer.

1:41 That was, I guess, the best worst financial decision of my life because in 2017 we started this oil project and we still haven't drilled. We still haven't received the permits. That has led me to

1:55 start a nonprofit called Californians for Energy and Science in November of 2022, where we've in just a few short years, we've been lecturing at Berkeley, at Harvard, at USC,

2:10 talking to folks at UCSB, Santa Barbara, which will come up today and really with the focus of bringing science into the discussion. So we've got the nonprofit Californians for Energy and Science

2:23 and then in 2022, we also, as an operator, going back to my day job, we transitioned our oil field project to geologic thermal energy storage. And we have three national labs we're partnered with,

2:38 we received a6 million award under President Biden's DOE. And

2:45 we're one of, I think, five that have since been approved under President Trump. So pretty rare. pretty rare company, so we're excited about that to demonstrate Geotest in this oil field. So

2:57 that's my quick, who am I in a few minutes? Was that first DOE, was that

3:05 out of the loan program office or was that a grant? That's a grant out of the Inflation Reduction Act. I can't stand the name of that. But yeah, it was a grant through the Solar Energy

3:17 Technologies Office of the DOE And so we just like everybody were paused before we even received our final award letter, which was a little nerve-wracking, but I wrote our application and we had no

3:33 dollars allocated to DEI and we had no giveaways to

3:40 the NGOs and we're oil production and geothermal production, which this administration wants more of, so I think we just aligned across common sense and, you know, energy that makes money instead

3:54 of energy that needs constant subsidy. I guess your position, you said you spend a lot of time. I would characterize it in the lion's den of opposition or the opposite side of the whole issue,

4:10 making trips to Berkeley, Harvard, UCSB, et cetera. Give us kind of a current situational profile of what the state of oil and gas in particular are in California, and then we'll get to the

4:28 lightning rod issue that has really fascinated me for a number of

4:32 reasons. Yeah, we've definitely been under attack as an industry for 30 plus years, so that the environmental movement is nothing new. It actually started in 1969 in Santa Barbara from the spill

4:46 there, and so what's happened six years as Governor Newsom has come into power is a full shutdown. So where we've gone from tracking emissions, reducing emissions, low carbon fuel standard cap and

5:02 trade, all of these big environmental programs, the Global Warming Solutions Act of 2006,

5:10 those frameworks have just been fortified and fortified and strengthened and made it the hurdles higher and higher for anybody operating in this state. And then enter Governor Newsom and it's just

5:22 been, I think, 20 some odd wells were actually drilled last year in the state of California. So a

5:33 state of the industry that most in the industry couldn't even believe, even given our California climate agenda So it's, that's where we're at. And on the college campus scene, I think there's a

5:49 lot of confusion from and a lot of misinformation or poorly presented information from much of the faculty that are leading these students. And so you've got Berkeley, Stanford, USC, all had

6:06 prolific petroleum engineering programs back in the day. And they've since been rebranded to be energy programs to kind of bring the whole - The whole renewable industries under the tent, so to

6:23 speak. But they've basically abandoned

6:27 petroleum engineering, reservoir engineering, subsurface work. And that kind of leads into this issue in Santa Barbara that's bubbling up, so to speak. Well, it's - and we talked about it on big

6:42 digital energy a couple of weeks ago. I wrote a piece about it on collide, just my take And my personal interest is just nostalgically, I've started my career with Exxon and Thousand Oaks in the

6:54 Western Division. Although I was a Prudhoe Bay Reservoir Engineer, that's where that organization was located. But there was this SYU. thing, Sani and ENE. 's unit, Harmony Heritage and Hondo,

7:09 kind of the glimmer of the Lost Flories pipeline system and

7:14 onshore storage and trading facility, et cetera And it was something that looking out off the coast of California and seeing what effectively looked like an

7:29 FPSO was just a bit shocking to see. I'd grown up, grown up in Texas, spent some time drilling walls in the Gulf of Mexico. But here's this pristine West Coast environment and you look out there

7:45 and you can see this FPSO.

7:49 fast forward through a transition from that to getting the lost florries system up and running removal of the OSNT. You produced from I think 81 to 94 with the OSNT and then you switch to the

8:08 pipeline and processing system and then 2015 comes along and there's another incident. Right. Right. Refuse state beach. Yeah. Mm-hmm. Yeah. And so since that time

8:27 the asset has essentially been shut in. Mm-hmm. Yes. Ten years. Yeah. Ten years plus. And was bought by Sable Offshore, which is a company run by Jim florries who has significant legacy

8:41 experience in California, most notably with running planes exploration and production. Both. onshore, and I believe they had some stuff offshore as well, and so kind of re-engaging the fight here,

8:57 maybe give us kind of a primer on what's unfolded here in the growing dispute in the dilemma for Sable and restarting production and what really what it means for California. Yeah, I think that's an

9:11 important point of what it means for California to start there as we've seen the California Energy Commission, CalGEM, which is effectively our railroad commission that's permitting the oil and gas

9:23 industry, and then California Air Resources Board. Over the past six or eight months, they've held a number of hearings because we've had multiple refineries announce closure. We've gone from, I

9:37 want to say, 42-ish, I think it's 42 refineries in the 80s down to nine and now we've got two more announced closed Philip 66 and Torrance in the Los Angeles area, and then Valeros, Benesha

9:53 refinery to the

9:55 north, and then we'll be down to I think seven, and a couple of those are just asphalt refineries and really not making much gasoline or diesel or jet So we know that Philip 66 and Torrance received

10:12 its last shipment of tankard product, crude oil, September 30. So I don't know how long that takes them to work off what's in existing tanks and work through that product. But my understanding is

10:25 by the end of the year, they're not processing anything. So that's 9 of the remaining refining capacity And then you've got another 9 with Valero, who just said, For sure, we're not reopening,

10:39 orWe're not reopening. We're not sticking around. That's the one in torrents, right? The Valeras in Benetia. So Torrance is basically, they took their last shipment, they're done. And

10:52 Benisha in the North is Valero and

10:58 Sacramento had fined this Valero facility, I think it was80 million just last year. And then that's when they said, Okay, we're not making money here, you're finding us, we're just gonna close

11:05 up shop. And that's what really triggered Sacramento to be scrambling, 'cause that's another 9 of refining capacity gone So we're losing 20 of the refining capacity. And we've got, I think I

11:20 checked yesterday, the price per gallon is about458 here in California.

11:26 So you've got the highest gasoline price in the country, and that's before these two refineries shut down. I paid249 at a Valero a couple of days ago, so. It's great, right? I mean, to be

11:37 anywhere but California, There is a happier middle between that level and where California is, I'll just say that as an industry interested leveraged individual. Exactly, exactly. So these

11:52 hearings that they're having, they're saying how do we stabilize in-state production? What are we gonna do as a group or body that's now under ultimately the California Energy Commission? They've

12:07 said we need 350, 000 barrels a day of in-state production to stabilize what's happening. And I think today we're around 220, 000 barrels a day. So they're actually calling for an increase of 130,

12:21 000 barrels a day of in-state production that

12:25 was effectively lost under Governor Newsom. I think we've lost about 200, 000 barrels a day just in his past six years because of this permit shutdown So now they're trying to totally reverse course

12:38 and quote-unquote, stabilize California production. So that's kind of the big state happenings right now. Whatever stabilize means. Right, what exactly? Kind of reminds me of the old when I was

12:53 in equity research, the term normalized prices. Yeah, yeah. It's like, what does stabilize mean to you? It's somewhere, for them, it's maybe we're getting off of zero in state production I

13:06 think I guess we finally moved them off of that death march. And now they want to stabilize. And yeah, what does that mean? So far, it's meant Sacramento has said current county, which produces

13:22 about 70 of the state's oil. Current county, you can have 2, 000 permits a year, up to 2, 000 permits a year, which won't be enough. It won't be enough to even increase production, let alone

13:36 stabilize production. So give us.

13:40 For those unfamiliar with Kern County, typical well profile, there's a lot of heavy oil, there's a lot of thermal, there's just a lot of production assist that's required. And why 2000 is nowhere

13:56 close to the number? Yeah, it's a great point. For those that don't know about of the Kern County production, probably close to 80 or more of it is thermally enhanced So we're taking natural gas

14:08 to fire steam generators to put steam down hole to enhance the oil recovery. Our project, which is, which is a first of a kind, will take parabolic solar troughs to heat a working fluid to 700

14:21 Fahrenheit. That'll go to a heat exchange. We'll bring up the reservoir. We'll sell the oil. We'll heat the brackish water from the reservoir to 500 degrees and then we'll put it down hole, which

14:31 is effectively a hot water flood But the focus of our project is not the oil recovery. We will co-produce. lowest carbon-intense oil in the world as a as a byproduct, but we're really trying to

14:44 heat and thermally thermal energy storage in the reservoir trying to heat the whole reservoir to 500 degrees to make clean power. But that's that's our project. Most of what's happening in the

14:57 central valley in Kern County, you've you're taking natural gases of feedstock and you're you're burning it in a steam generator. If you just drill a well without I guess I should step back for for

15:12 continued EOR and more more production to hit the market you're going to have to process aquifer exemptions and underground injection control applications which give us the ability to inject the steam

15:25 or inject the wastewater back into the reservoir. Something that in Texas you're probably talking a couple of weeks at the railroad commission in California they've they've just stopped permitting

15:36 UICs.

15:38 And so you really, if you decouple the injection process from just permitting the oil wells, what you're gonna end up with is oil wells that make three barrels of oil a day because they're heavy oil

15:52 wells that require enhanced oil recovery. No such thing as the flush production phase. No, and particularly

16:04 in California where we've effectively banned well bore stimulation treatments, which hydraulic fracturing, but it's a different type of hydraulic fracturing in California and Governor Newsom has

16:18 signed an executive order that effectively has shut down permitting since 2022 on any well stimulation treatment. So now you're saying you want to stabilize an increased production, but you cannot

16:30 deploy the technologies required to increase production So it's just gonna do nothing. the physics and the dynamics of the of the Kern County stabilization effort just don't work given the magnitude

16:46 of what's going to be required over the time period that they're targeting and like you said and we talked about it a little bit yesterday in the pregame 2000 permits probably needs to be with that

16:58 profile probably needs to be double or triple that right right and is there is there a couch is there a calcium or a bedding line established yet on 26 is yeah how many will actually get issued right

17:10 in the under exactly and I think it might even be a flat opening for operators trying to apply for permits because they're they've been so burnt the the mode of thought is well we can apply but they

17:22 still won't issue them or if they issue them we're so we're so beat up from the shutdown that we don't have much cash to drill so I think you'll see you'll see California Resources Corporation which

17:35 is now the largest operator in the state um, bell drill, uh, Chevron as an entity is down to six geologists and like a handful of engineers. It's like a skeleton crew, whereas before Kern County

17:50 and the, the Kern River oil field was their hub for thermal EOR development and technology applications where the best of the best engineers were, were at that, um, at that location at this

18:04 business unit, JV, and, and doing, you know, technology research for their global operations. And now it's the opposite. It's like the skeleton crews in Kern County and everybody's in Houston

18:16 and, um, and they're just managing abandonment work. And so again, the, the chevron is not going to save the day in this scenario. Yeah. Including Mike Worth. Right. Those relook relocated.

18:30 Yes. I believe, I believe part of that is to keep a closer eye on Darren Woods I probably digress.

18:39 So I think that brings us to why offshore is important in this battle that has been unfolding really since last year, about this time, I think, where my comment and the piece I wrote was the

18:58 Coastal Commission in California is arguably the most powerful state regulatory agency anywhere to be found in the US And so maybe kind of walk us through the key events and the milestones that have

19:13 unfolded. Sable bought this SYU asset from Exxon for like643 million back in 2023

19:22 and it kind of take us from there and just level set for us why this has become such a lightning rod issue. Yeah, and it's something that I've really started following more on X with. with Phil

19:36 Mickelson getting involved in the chat and which is great because he's got close to a million followers and he's now obsessed with California energy policy. Can I say stroke? Sorry. That was

19:50 terrible.

19:57 I liked it. So I think they did that through a SPAC special purpose acquisition company in 23 and got the deal done with Exxon and then did the work to repair the planes pipeline that had ruptured in

20:11 2015 which is I think important that it wasn't in fact a spill offshore. It was the pipeline operator planes that had an issue and I think there were issues around the alarm system and getting

20:26 feedback back to headquarters in Texas and shutting the line down fast enough. But nonetheless the spill happened,

20:36 And in all fairness, it did motivate some good things. Like I worked the Valdez project with Exxon, back in my tenure there. And a lot of good things came out of that in terms of responsiveness

20:50 and readiness and safeguards. Nobody likes pollution. Right. Least of all on a pristine beach and coastal area. Right. So that is just an objective fact And one of the things that I think came

21:06 out of that is that California now has primacy on intrastate pipeline systems for things like automatic shut off capability. If I'm not completely in error there. I think that sounds right. Yeah,

21:20 yeah. And so they did a bunch of work. I don't know how many millions they spent sable on repairing that pipeline, which again, going back to the state issues, California is suffering from.

21:33 pipeline crisis as well, because we have so little crude flowing from the Central Valley north, specifically the northern route, I think right now. We don't have enough crude in the pipelines.

21:46 And so we literally need this sable product, which will come into the pipeline in the Santa Barbara area, but then it feeds the main line that goes north and south to the where the refineries are

21:60 located. And so they do all this work to get the pipeline rebuilt and repaired and all the hydrostatic testing ready to go, even to the point where they fill some tanks in that lost floor as

22:14 facility because they were able to turn on the first platform and they were hit with flush production. And it had been shut in for 10 years. I think they were making like 6, 000 barrels a day out

22:26 of at a six wells or seven wells or something like that.

22:31 That production that came from Harmony, which I think started again in May, something like six or 8, 000 barrels, moved through the subsea gathering system and is now in storage onshore at Los

22:46 Flores. From what I, yeah, that's what, from what I understand. Yeah, and so the pipeline's, it's fixed, it's repaired. And now you have the Coastal Commission saying, oh, well, you didn't

22:57 do the repairs properly or we're gonna find, they're trying to find them and they filed the lawsuit against them to find them for

23:06 not doing the work properly, although I don't know how that's possible. I mean, you can't do anything in California without the permits and the go-ahead. So it's just, it's monkey business by the

23:19 agencies to keep this oil offline. And Sable did the work under the sanction of the something, related to a federal consent decree. I don't recall exactly what the title of that is. And my

23:36 understanding is that that basically

23:40 says that the legacy permits and authorizations related to SYU were valid, and therefore they could do that maintenance and repair work. This is not new development or construction. I don't think

23:53 anybody can practically argue that It just seems like we're trying to retroactively drag in, and maybe we can talk a little bit about SB 237 and everything that's kind of mushroomed out of that. But

24:09 is that essentially correct? For my understanding, yeah, it's so complicated that I'm breathing the same things you're eating and scratching my head about how can you go and how can you call this

24:19 anything but an existing facility? And you know, you got a lot of armchair lawyers on X Talking about CEQA, we have the California Environmental Quality Act. signed under then Governor Reagan in

24:34 the '70s. And so that's our NEPA. So that's a big, that's a big environmental act that they've had to meet every step of the way. But it's interesting because when you read something like CEQA,

24:48 and I did a whole year long course at multiple courses from UC San Diego this past year to get a certificate in CEQA, but when you read CEQA and you read the exemptions, existing facilities are

25:02 exempt, you don't need CEQA again to turn a facility like this on. But of course, there's always an environmental lawyer that will find a way to file a CEQA lawsuit, or in this case, file

25:17 multiple lawsuits to try to hang them up. We're kind of waiting on the jurisdiction most in the headlines lately, which was, you know, the effort or the hearings to resolve the status of the

25:36 Coastal Commission, cease and desist, tentative decision went unfavorably toward Sable. Yet there is not a final decision. And I think that

25:50 that's Santa Barbara County Superior Court. Right, yes That judge has said December 3rd was the last I saw, but it seems to be, if you had to

26:03 handicap it, it's unlikely that there will be a reversal of that tentative decision that is adverse to Sable. Yeah, unless something changes behind the scenes, hopefully, but I know you have

26:15 President Trump and the DOE saying we're gonna open up the waters out here. So maybe there's some negotiation going on We're turn the pipeline on, otherwise we're going to - We're going to drill out

26:27 here. I don't know. So again, against the backdrop of that, I think you said the stabilization goal was to add an incremental 135, 000 barrels a day, state wide, from a

26:42 project impact standpoint, kind of calibrate what is the potential of SYU restart and what does it mean? I've read as high as I think 60 or 70, 000 barrels a day that they could bring online If

26:56 they can open up all three of those platforms and produce again. But then I've also seen guidance around 40, 000 barrels a day, which may be somewhere in between that, but either way, one of the

27:08 points I make to our state senators that we work with and trying to feed this information to the Energy Commission is there's a few things. Number one, our pipelines, there's no other operator in

27:20 the state of California that can put this much crude into the pipeline in a matter of months. turning those three platforms back on. It just doesn't exist. They don't have to drill the wells. All

27:31 they have to do is turn the wells on. And so the ability to stabilize in state production it really hinges in a lot of ways on this, you know, S-Y-U unit being back online. And then the other

27:48 component that I share with our senators that wanna see more current County production is, you know, you've really got to express to the energy commission that by not opening up these three

27:60 platforms it chills the investment community to anything in the state because all of, it's great to have the Sable folks be in Houston, which is obviously the headquarters for all things capital and

28:12 energy development in the country and arguably the world. And so you've got this Houston operator that wants to turn on this valuable asset and is embedded in, main financial hub for our industry

28:26 and you're telling them no. And so where that leads into, where do you think the money's going to

28:31 come from to drill Kern County? We've been bled dry over this permit shutdown for six years, so we don't have any capital. We have to raise that capital. And so by shutting down 40 to 60, 000

28:47 barrels a day of flush production,

28:51 what does that say to anybody that wants to put money into Kern County? You can't compartmentalize it, particularly when you have kind of multi-state, multi-region operators who are looking to

29:03 allocate capital. And if you keep throwing up higher and higher disincentives or barriers along your total portfolio allocation decision tree, I'm going to go where I have a clearer opportunity in

29:21 terms of timeline and not to kind of have the whole apple cart upset by some, you know, attempt to change the rules or retroactively apply things that

29:36 came after the original asset and certainly the transaction. I mean, planes did buy planes, Freudian slip there. Sable did buy this asset for643 million. And so now I think I think part of their

29:50 countersuit is this is a violation of property rights. Yep. So let's let's there's one there's been one interesting thread and Lefty has has made it part of his his Twitter advocacy. But I didn't

30:09 really ever appreciate it. I never worked California reservoirs per se. But this whole notion of depletion of of the reservoirs being beneficial. from an environmental standpoint, particularly a

30:23 coastal environmental standpoint. Maybe talk us through some of that. I know you've been coming rapidly up the curve there. And from a reservoir engineer's kind of first reaction was, wait, we're

30:33 talking about the surface here. Right, right. And stuff is, I don't know what the depth of the reservoirs are, I forget. But

30:42 connect all those scientific dots for us. Yeah, so I started doing more research on this lately. And actually one of the groups that's one of the Berkeley groups that's in our Californians for

30:53 Energy and Science effort. A student and professor have written a paper recently about the natural seeps and what's gonna happen when you shut in this production and reservoir pressure returns. And

31:06 so I think it's important. I made a public comment in Santa Barbara last week and I did a little research, and I knew a lot of this, but historically when you look back, the first discovery was

31:20 the Chumash, which are indigenous to this coastal area, and so thousands of years ago, they were coating their

31:29 canoes or boats with tar. They were coating their roofs with tar to waterproof, and they were coating their pots and clays and everything with it.

31:40 And it's also believed it was so prevalent in the marine ecosystem that now that they're ingesting fish and food from their surroundings that is laced with hydrocarbons. And then they're breathing it

31:55 in the air. So all of these factors combined, you can research this National Geographic has said, well, their heads started to shrink over time. Like, that's how much hydrocarbon is in the

32:06 atmosphere. So I kind of didn't spend that much time in my public comment, but I kind of introed with that. You know, this is where we started from thousands of years ago, and then you can go up

32:17 the timeline to the 1700s when the Spanish explorers were sailing their ships in this area, and it's called coal oil point, because in the 1700s, they're like, what is all this black tar all over

32:32 the surface and everywhere we go, it was everywhere. And so it's important, I think, for folks to realize, I think it's hard for a lot of people outside of the industry to put themselves back in

32:42 time and to think, okay, before this was produced, it was literally seeping out everywhere, which is how it was discovered, which is the same way geothermal's discovered, 'cause you've got hot

32:54 springs at surface and you've got communication with surface. And so

32:60 fast forward to the period of 1990 to 2010, and this professor is still a professor emeritus at Santa Barbara's school. He's not at the Bren School of the Environment, His name's James Bowles.

33:17 But he's an earth science professor and he started writing papers in the 80s and 90s and 2010s. And so from a period of 1990 to 2010, they were studying the emissions reductions that were taking

33:33 place as a result of this Sanínez unit

33:38 and the production of the reservoir so as to reduce the reservoir pressure And what they found was that in that 20-year period, the emissions reductions by producing the oil responsibly

33:57 saved more emissions than all the cumulative production combined from all the permitted platforms. I mean, that's a lot. And just producing the reservoir offset all of the cumulative production

34:12 emissions or emissions associated with producing the oil. So a net benefit produce in the oil. And so now as we've shut things in, now we're back to this phase where the surfing community, I grew

34:26 up going to Miramar Beach in Santa Barbara as a family. The tar on the beach I've gone back is way more now. But then also what you see is the sheen on the water. I mean, it's the light ends of

34:38 the hydrocarbon floating on the water And, you know, I looked at my wife. I'm like, our kids probably should not be swimming in that, but they are. But you can, it's, it's, it's noticeable

34:50 the increase in the, the seeps, not only from the tar on the beach, the sheen on the water, but then the smell in the air. You're smelling the VOCs in the air. It's, it's unmistakable. Yeah.

35:01 And the vast majority of that, if not all of it is from natural seepage. Right There is no, there is no kind of bad actor, you know, having spills or producing things or emitting VOCs that are.

35:16 causing this kind of regional problem. And it sounds fairly prevalent. And I just didn't appreciate that artificial depletion, if you

35:29 will, would be measurably beneficial to slowing the rate of seepage and keeping the VOCs from kind of liberating. What has, as you pointed out anecdotally, you see a lot more than you saw back

35:44 when you were a kid. Right, right. So I think that's kind of a moral dilemma maybe.

35:57 And one thing that has, I think, created a bit of an obstacle for coastal versus Kern County, if we can characterize it or categorize it as that,

36:12 is that you have.

36:17 You just have this notion that

36:22 and a lot of it has to do with kind of the major catastrophic events that are in people's memories from Santa Barbara to

36:30 Rufuio Beach more recently. But the fact that you can measure this and determine causation I think is a big deal. So the dilemma is we ought to be doing more of this In fact, I think Sable has said

36:46 in its investor deck that there's up to a hundred development locations related to SYU. So new drilling on top of restoring existing production. Right, absolutely, we absolutely should. And I

36:60 think it warrants continued measurement. I think that's what when you see the faces of the activists in the public comment I gave, of course they know exactly where to sit. So they're in the camera

37:11 view, the whole hearing So you see there and what they're doing. to phase out the industry is they're taking an economics professor from UCSB and he's running the, you know, accelerated depletion

37:26 models and oh, we'll just, we'll just pencil out, you know, what the, what the, what the abandonment liability is, if you've got any value left, we'll write a check to the operator to just

37:36 close up shop and it's like, you don't realize what you're doing because if you shut down this industry that hard, you're going to ruin your tourism business. No one, why would anybody want to go

37:47 spend thousands of dollars to go to the beach in Santa Barbara when it's fouled with oil, when you could go to La Jolla here in San Diego, you know, Del Mar, which interestingly, they discovered

37:57 a Del Mar gas seep in 2015, but we should be doing more of this research and the agencies involved were serious agencies. You've got NOAA that was involved in this, the National Oceanic,

38:13 Atmospheric. Administration, I think, is the full name. You've got NASA, they were incorporating satellite imagery of the sheens on the water and what was taking place. And then you've got the

38:25 UCSB school, the maritime school studying the marine ecosystem. And despite all that, what seems to be taking center stage is these young students at the Bren school of the environment at UCSB are

38:42 coming on and their talking points are more of a global, we need to stop producing fossil fuels, we need to stop consuming fossil fuels because we need to save the global atmosphere from CO2 levels

38:56 and global heating, which is again, ridiculous. I mean, look at your local environment. I like to tell people now, we live in California because it's the best climate in the world. That's

39:08 actually why we live here. So what's your point on the global climate? You're destroying your beaches and we're getting out now

39:17 with our nonprofit with air monitoring devices because we wanna be collecting this future data of what is in the air. What are people in Santa Barbara breathing if they're not measuring it or if the

39:29 data's being hidden by these agencies that don't wanna talk about it at the state level. I mean, it is a profound irony. It is to suggest that the way to save the air quality and the coastal

39:44 pollution or to mitigate that is to actually do more of what they absolutely hate. Exactly. And it's not just Santa Barbara, this Professor Jamie Rector at Berkeley, he's also interested in

39:57 studying the Inglewood fault. And of course, you've got the Inglewood oil field right there in Los Angeles, both from an air emissions standpoint, this seepage, but also from an earthquake risk

40:09 standpoint as you shut in production. and pressures increase, are you gonna see in, you know, seismic increase seismic activity? It's kind of a fair point with what we see in the Permian and

40:21 Oklahoma on injection and causing induced seismicity. Are you gonna induce seismicity by shutting in the Inglewood oil field? Seems like a worthy mission to

40:34 do whatever pressure relief valve we can do on one of the most tectonically active areas. Right. In the world, certainly in the country. Exactly Let's talk about, let's kind of bring things to a

40:48 nifty close here and talk about just what's the economic impact in reality if we continue down this path of inertia where nothing is really getting done, problems are getting worse. You know, I

41:06 read some statistics on the 2015 spill and the numbers. over a relatively short period of time post the spill in terms of local, state revenue impacts, employment, those

41:24 numbers were larger than I thought they were and that was 10 years ago. Yeah, yeah, the hospitality and travel, the leisure industry is the third largest in Santa Barbara. Number one is

41:35 government employees and number two is education, probably UCSB and Westmont and some of the colleges there. But tourism is right there. And so, yeah, I think they're gonna see a huge hit to

41:47 their tourism as these beaches become less and less enjoyable. And then you've got the job component for in this public hearing I was at last week, you had a room full of workers, largely Hispanic

42:01 workers that they're testifying and giving comments saying, look, this is the only industry where I can go from high school to120, 000 a year. And it's my livelihood, and most of them live in the

42:16 northern part of the county, Santa Maria, where a lot of onshore oil production is taking place. So the working community, a couple thousand jobs, direct jobs, are going to be impacted. And

42:30 then, of course, we know the multiplier on that, whether it's the restaurants, they spoke a lot about the little leagues and the softball leagues All the services in these small towns are

42:44 generally sponsored by the oil operators, because they're the ones that care about these communities. So you have this split, and Santa Barbara's always been the haves and the have-nots. It's

42:56 always been Montecito and then the working community. But I think that's just going to get worse And none of that really addresses the gasoline crisis that's going to come where we've got10 gasoline

43:10 in a year or two. So it's pretty bleak. I don't wanna, I don't wanna visit if I pick up my rental car and then I have to refill it to go visit Foul Beach's at 10 bucks a gallon. Exactly, it's

43:23 absurd.

43:26 And it's coming to a head. I think it's coming to a head faster than Sacramento thought. I think Governor Newsom thought he would be onto the presidency before he shut down the industry I think he

43:40 was more effective than he figured. Maybe a little bit of a granular thing. I had somebody respond to the piece that I wrote and

43:49 it's lecturing me on crude as a global market. Well, okay, I get it. There are a couple of things. California and West Coast refineries systems were built for to be advantage relative to yields

44:06 in the economics of refining for California crews. in Alaskan or Slope, does this

44:15 SYU crude displace something that's otherwise imported? California gets a lot of its imports from Iraq and Ecuador because it has directionally the same

44:28 physical properties profile and having spent some time in LA Basin refineries as a consultant, I know how ruthless those guys are, are ruthless in a good way in terms of generating the best

44:42 economics and returns they can, which are inherently razor thin. So is there a place for this production from SYU from a purely economic standpoint, to splice and also take

44:60 ships off the water that are otherwise not needed that have been displaced by this flush production coming back online? Yeah, there's absolutely a place, and I like to tell people would you rather

45:10 store. oil in the reservoir and produce it, or would you rather store it on the water in all these tankers? If you look at marine traffic, you see the red dots and there's tankers everywhere off

45:20 the coast of California. And of course, it is a global market, but why would you want more tankers in your coastal waters, which the California Air Resources Board projects, will have two to five

45:32 times more tankers delivering finished product, jet fuel diesel gasoline, as we shut down these refineries in 2040. So that's just like one line in a scoping plan versus, you know, what are we

45:46 telling these communities as we shut down the platforms or as we shut down their refineries, you're not just going to have a beautiful park where that refinery was. You're just going to have a tank

45:57 farm because we're going to have to bring in all of this finished product and store it in tanks. And we're going to have to store a lot more of it in these tanks. So How are you going to build all

46:06 that tankage with sequel and the environmental. protocols you've got to go through. How are you going to get the terminal capacity does not exist? We're basically maxed out as you point out in the

46:18 '80s, Alaska North Slope and California production was 95 of the mix going to these refineries. And we had 5 coming from foreign countries. Now we have 75 to 80 coming from foreign countries

46:36 Largely Iraq and now we consume, California consumes, 50 of Ecuador's oil production. And we actually had the indigenous leaders came up to Sacramento a month or two ago and asked the legislature,

46:50 please stop buying this crude because we don't want the Yussuni National Rainforest to be burned down and torn down to make crude for you people in California. That's why And the other thing is, is

47:05 that, well, I would interject here that building new storage and terminals on the West Coast for all the web of complexity and resistance that you pointed out. I mean, Oakland couldn't even build

47:20 a new ballpark at Howard Terminal. So they lost their professional baseball team. Right. So, you know, we haven't really touched on the federal pivot that Sable and others have alluded to. That

47:35 would basically just amount to re-instituting the FPSO or OST type

47:43 scenario. And you've got, yeah, there's all kinds of financing and funding that's for another time to discuss. But you then introduce ultimately more marine traffic because it gets lighted off of

47:58 the OST or the FPSO. Right. And goes elsewhere in the world, which seems absurd. We can't move it to a port in the US. Primarily, I think because of the Jones Act. I think so too, right. With

48:14 that federal OCS option, I guess that tanker number even goes up higher than that two to five times, right? So it's, I believe, if I had to handicap it now, it's going to get produced. For, we

48:31 will restart the project. It may not ultimately prevail for the optimal solution, but you do have, you do have the option, as my understanding is purely federal jurisdiction in NYU around area

48:47 lease the

48:48 , so. Right, right. And then I'm wondering if they get that, then will they expand drilling and just say, Trump will just go full bore. Let's drill this bad boy up, which he should. But we

49:01 should really do both. We should turn on the pipeline and we should drill also because that's what's best for the environment And I think. I think that's our premise, California's for energy and

49:11 science. We just need to keep getting the truth and the facts out there. And like you mentioned before, we started recording Bill Gates, you know, doing a big boomerang on his take on the

49:21 environment. I think, and back to what we talk about when we go on these college campuses, people thought we were crazy going to Berkeley. They're like, oh, they're going to hate you. They're

49:31 going to protest you. It's the opposite because what I found is the most effective to tell these students, which are all now paying100, 000 a year to get a degree, what are you going to do for

49:43 work? If you can't, you know, we, we employ as an industry, all disciplines of engineering, of geosciences, you know, you name it, whatever you want to be. The industry is your oyster.

49:54 You're going to make 120 grand a year if you're good. And they like that. They, their eyes get big and they're like, yes, I'm trying to figure out what I want to do and wow, there's resource

50:06 here and but. we're shutting it in, that's your future right there. And they get that. If you're scientifically and analytically wired, some of the most challenging problems you could ever hope

50:21 to solve. Right, right. And work on. And they get excited about that, exactly. Yeah, that's good to hear, because you get

50:33 the headline view or the conventional wisdom characterization, but I'm hopeful in terms of kind of the next generation coming in and man, really appreciate your time today. I've been wanting to do

50:45 this for a while and

50:48 kudos to you for fighting the industry's good fight as the foot soldier and general as well. Yeah, it's fun. In California, you've got to have tons of thick skin and stamina for sure, but we'll

51:06 perhaps touch base on down the road. if we get some kind of milestone decision here.

51:12 And thanks for entertaining my

51:16 desire to talk about something other than unconventional in West Texas. Yeah, no, I love it. Thanks for shining a spotlight on this issue. And with your background in this area, it's phenomenal.

51:27 So hopefully we do have a good decision coming. And then hopefully I'll be in Houston here in the new year. And I got to see the new digs there at Collide and we can record again. Yeah, maybe

51:37 we'll do the next one live in the studio. That'd be fun. Sure. Take callers. Well, Mike, thanks again.

51:44 Enjoy the rest of the week. Have a good weekend. And we'll talk to everybody soon. You know, please subscribe.

51:52 Get on Collide, register for Collide if you hadn't, share this one with your friends. And let's get everybody more educated about really, I think, an under emphasized importance of this state and

52:06 what's going on. with energy policy and politics. So thanks again, Mike. Thank you, yeah. Stoke to do it.