Sable Offshore: More Kangaroo Court Drama
The More Things Change, The More They Stay The Same
No matter how all of this plays out, I’m looking forward to a time where things calm down, and I don’t have to write constant updates on Sable Offshore SOC 0.00%↑. We’re not at that point yet, and I have to give my two cents on what happened yesterday. Last week, the CCC got an injunction for repairs that were already complete (and pipelines that already been hydrotested), which wouldn’t impact the Fire Marshal signing off.
Yesterday, two nonprofit organizations, the Environmental Defense Center (EDC) and the Center for Biological Diversity (CBD), managed to get a Temporary Restraining Order (TRO) in the Santa Barbara County Court in their case against Sable and the Office of the State Fire Marshal (OSFM). We also got an 8-K this morning, which announced that the company is exploring all possible avenues to address the TRO, and they are now targeting August 1, 2025 for first sales.
On June 3, 2025, a Santa Barbara County Superior Court Judge granted ex parte requests from plaintiffs in Center for Biological Diversity, et al. v. California Department of Forestry and Fire Protection, et al. (25CV02244) and Environmental Defense Center, et al. v. California Department of Forestry and Fire Protection, et al. (25CV02247) for temporary restraining orders prohibiting Sable Offshore Corp. (“Sable”) from restarting transportation of oil through the Las Flores Pipeline System pending the hearing on an order to show cause regarding a preliminary injunction scheduled for July 18, 2025. Sable is exploring all possible avenues available to address these preliminary rulings. Sable is now targeting August 1, 2025 for first sales due to this delay.
Temporary Insanity
It’s hard not to do a complete brain dump of everything I have been reading over the last 24 hours, but I will try to keep this post focused on the most important pieces. I’m curious to see what the end result of “all possible avenues” is, but my guess is that we end up in a Federal Courtroom. It will most likely be in the United States District Court, Central District of California, the same court that produced the Consent Decree in 2020.
I have been talking about the Consent Decree nonstop, but the TRO that restricts the OSFM from fulfilling their part of the Consent Decree is why we are probably headed to the federal level. There are other things that Sable could potentially point to, including the Outer Continental Shelf Lands Act (OCSLA, 43 U.S. Code § 1349 (b) (1)), that make it crystal clear how this case could end up in a District Court.
To issue a TRO over waivers from six months ago (12/17/2024), five and a half months later, when there is clearly no imminent harm, just because the company is ready to pump oil through the pipelines is ridiculous. To use the same TRO to restrict the OSFM from issuing any further authorizations AND prevent Sable from restarting pipeline operations is absurd. To do all of that without a bond is ludicrous. I’m starting to run out of adjectives here, but you get my point. Attorney General Rob Bonta, arguing on behalf of the OSFM, said it plainly in his opposition to the TRO.
“Petitioners have not carried their burden to justify issuance of a temporary restraining order.”
I would also recommend that readers check out some of Jason Strom’s most recent tweets on the case ( #1, #2, #3, #4), but the massive overreach by the Court, on behalf of two nonprofits that have no jurisdiction or regulatory authority, has quickly turned this into a Federal issue. By issuing a TRO, the County Court is ordering the OSFM to neglect their duty as the sole regulatory oversight at the State and Federal level on this project, something that is laid out clearly in the (federally mandated) Consent Decree, as well as California State Law. I will remind readers is that their duties under the Consent Decree are not discretionary, and they are detailed in very specific terms. The TRO clearly contradicts what is in the Consent Decree. The fancy term for this is Judicial Estoppel (I swiped that from Jason as well), meaning that the OSFM can’t take contradicting positions in different courts.
51010. It is the intent of the Legislature, in enacting this chapter, that the State Fire Marshal shall exercise exclusive safety regulatory and enforcement authority over intrastate hazardous liquid pipelines and, to the extent authorized by agreement between the State Fire Marshal and the United States Secretary of Transportation, may act as agent for the United States Secretary of Transportation to implement the federal Hazardous Liquid Pipeline Safety Act of 1979 (49 U.S.C. Sec. 60101 et seq.) and federal pipeline safety regulations as to those portions of interstate pipelines located within this state, as necessary to obtain annual federal certification.
The Supremacy Clause
One of the other reasons that I expect a favorable outcome for Sable and the OSFM is the Supremacy Clause. In short, it explains why federal law takes precedence over any conflicting state law. In this case, the Consent Decree and other relevant federal laws are superior to a TRO issued by the Santa Barbara County Court with two plaintiffs that are nonprofit organizations with no regulatory oversight or authority.
The Supremacy Clause refers to the foundational principle that, in general, federal law takes precedence over any conflicting state law. Established under Article VI , Paragraph 2 of the U.S. Constitution, the Supremacy Clause enables the federal government to enforce treaties, create a central bank, and enact legislation without interference from the states. It does not, however, allow the federal government to review or veto state laws before they take effect.
The Supremacy Clause underpins the broader doctrine of preemption, where if laws are in conflict, the law of a higher authority can preempt the law of a lower authority if the superiority of the former is stated expressly or implied. Traditionally, when it is not indicated, federal law does not preempt state law in areas traditionally regulated by states, unless Congress’s intent to preempt is clear. In areas where the federal government has historically significant regulatory involvement, preemption is less likely to apply. Today, disputes usually involve statutory interpretation rather than its scope of application.
Trust The Process
To move the case from the Santa Barbara County Court to the District Court, Sable could file a Notice of Removal (28 U.S. Code § 1446). Once a Notice of Removal is filed, it halts all of the court proceedings at the State level. There are several different ways Sable could pursue a Notice of Removal, from the Pipeline Safety Act (49 CFR § 1.96), OCSLA (43 U.S. Code § 1349), or federal officer jurisdiction (28 U.S. Code § 1442). The OSFM would have to consent to the Notice of Removal (28 U.S. Code § 1446), unless Sable goes with the federal officer jurisdiction route. The OSFM would not have to consent to the Notice of Removal if Sable argued that they were just following the directives of the Fire Marshal and implementing the plan laid out for repairs in the Consent Decree.
I don’t think this would be necessary given what the Attorney General said about the TRO above, but it does mean that Sable is in the driver’s seat as far as getting in front of a District Court judge. If the OSFM doesn’t consent, they could be protected by sovereign immunity and the 11th Amendment. In plain English, the government (in this case, the OSFM, which is an extension of the government) cannot be sued without its consent. This creates a 4D chess scenario with multiple potential outcomes, but that’s a bridge to be crossed if we go down that path. I don’t think the OSFM will have a problem with consenting to moving the case to the District Court because the facts of the case are very straightforward, and should lead quickly to a favorable outcome for both Sable and the OSFM.
What Happens To The TRO In District Court?
The TRO will remain in place until Sable and/or the OSFM file a motion to change or remove the TRO. I don’t think it would be difficult to argue that the TRO issued by the County Court was a significant overreach. They could probably pull sections of the document from the Attorney General’s opposition to the TRO, but they would also likely argue that the EDC and CBD don’t have the jurisdiction for a TRO, and that federal law preempts a TRO in this situation.
To obtain a TRO, the moving party must satisfy the requirements for a preliminary injunction and the additional requirement of an affirmative factual showing not only of interim harm (between the date of the motion and the trial) but of irreparable harm, immediate injury, or a statutory basis for immediate relief.
I wouldn’t be surprised if Sable requested an immediate hearing seeking an ex parte ruling to lift the TRO. It was harder to argue damages over last week’s injunction because an injunction on repairs and hydrotesting that were already complete didn’t have a material impact on Sable. For the TRO, which prevents Sable from obtaining the final puzzle piece required for a fully operational Santa Ynez Unit (the Certificate of Operations), it would be much easier to argue for significant damages.
Specifically, Real Parties will be forced to lose net margin of $2.5 million per day, totaling $75 million per month. As explained above, Sable will have the capacity to produce approximately 50,000 barrels per day at $50 net per barrel. This means that a TRO or injunction will immediately cause Real Parties to lose at least $17.5 million in net margin per week, totaling $75 million for just one month.
How Long Will It Take?
This is probably the hardest question to answer. I wouldn’t be surprised if the process is expedited. If you’re Sable, you can make a pretty strong case to a judge that this situation requires an accelerated timeline.
We spent hundreds of millions of dollars to do everything that was required of us by the Consent Decree. Everything down to the last hydrotest is done, and the Santa Ynez Unit is ready for full operations as soon as we get the green light from the OSFM.
Delays will be extremely costly (i.e. irreparable harm), and will cost the company millions of dollars a day.
The EDC and CBD are two nonprofit organizations with no jurisdiction or regulatory authority.
The TRO is in direct conflict with the federally mandated Consent Decree, and it effectively prevents the OSFM (the sole regulatory oversight) from fulfilling their part of the Consent Decree.
The Supremacy Clause makes it obvious that federal law takes precedence over any conflicting state law.
I have heard multiple different timelines of how this could play out, and the short answer is that I don’t know. I’m expecting that the District Court would realize the urgency of the situation and make it a relatively quick process. If I had to guess, I think that means some time in the next couple weeks. The sooner the better for obvious reasons, but I have a hard time seeing how this process drags on for months. They aren’t going to wait around until July 18, just to see the same judge again in the Santa Barbara County Court.
Once a date is set, I think a decision from the District Court shouldn’t take long. I think it will be in Sable’s favor and the TRO will be removed, for all of the reasons I have laid out above. At that point, the OSFM green light shouldn’t be far behind. If the District Court keeps the TRO in place for some reason, then it probably gets appealed, and it keeps moving up the legal ladder to the Ninth Circuit Court.
Conclusion & Questions That Remain
It’s definitely frustrating to have days like yesterday where the stock gets killed on more Kangaroo Court shenanigans. The fact that two nonprofit organizations with no regulatory or oversight authority on the SYU managed to get a TRO is just a farce. There are still a bunch of questions on where things go from here, but I think I will be looking back in a couple months at this situation as just another short term ride on the rollercoaster that is Sable.
The main question for many is now on the timeline. Oil is flowing into the Las Flores Canyon now. How long is it going to take to get the District Court involved? How long does take for the OSFM to sign off, if the assumption is that the District Court rules in Sable’s favor? What happens if they don’t rule in Sable’s favor? Does someone in the Trump administration have to come in to push the thing over the goal line? Do we have to start asking the question of what the economics might look like if the company has to park a tanker in federal waters to get the oil to market?
All these things add to the uncertainty around Sable right now. One thing I am certain on is that the federally mandated Consent Decree, signed by the sole state and federal regulatory oversight, the OSFM, will carry more weight than a TRO from a Santa Barbara County Court on behalf of two nonprofit organizations with no jurisdiction or regulatory oversight. I think the most logical path forward from here for the legal situation is to the federal level. How that feeds into the operations side remains to be seen. The 8-K this morning gives us some idea of the updated timeline, but I’m sure we will hear more in the coming weeks.
As always, it seems like we are so close, but so far away right now with Sable. They have fulfilled their end of the Consent Decree, all the way to the last hydrotest. The last puzzle piece of the OSFM signoff, which I originally expected this week, has been kicked out again. Hopefully things calm down and the market realizes that the sky isn’t falling when it comes to Sable, but this stock has been a rollercoaster ride from the time I started buying it last fall, and I don’t think that will change soon. I’m hoping that the legal situation gets simpler from here, but it looks like we have to wait a little longer for the OSFM to give the green light. If it does, then hopefully this will be the last time I have to pull an all nighter to finish an update like this, because I’m getting too old to do it on a regular basis.
Disclaimer
I own shares and calls on Sable Offshore. You should do your own research before making any investment decisions. Different investment strategies have different risk/return profiles which should be considered before making any decisions.
Hi Kelleran, though not paid subscriber, I would like to thank you for the work you do and the amount of efforts you spend to educate others. Thanks once again!
It's obviously lawfare, this should have been filed months ago when the waivers were issued. I doubt there is a time limit but another check in the column of coordinated attempts to sabotage the Consent Decree just like the CCC Press Release. All these orgs and individuals are opening themselves up to liability and discovery at the Federal level. Not wise.
I skimmed the Consent Decree. The technical merits of the case seem dubious. The CD was supposed to be open to public comment. Hard to claim now that the pipeline is inherently unsafe; and bringing up the problems with cathodic protection again when that tech mitigation is specifically addressed by the CD.
They are going after the OSFM procedurally though. The CD specifically does not give the OSFM a pass on the rest of their responsibilities, only those specified in the CD, primarily around cathodic protection; but it is broader than that.
So the question is did the OSFM follow their legally required waiver procedures with respect to
1) Public notice & hearing or environmental review
2) Release of documentation\analysis
3) CEQA Review
If not, what's the harm and the remedy. Seems like a state issue on process not exempted by the CD.
But I think their lawyers blew it claiming the pipeline is inherently unsafe and their desire for an "alternative of not allowing the pipeline to restart'
Kick it Federal. It's a delaying tactic. They made it clear through the own words their intent is to bypass the CD and stop the pipeline, not objections to OSFM procedures.