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Chevron on Tuesday said a deepening rift with lawmakers over energy policy in the state of California would dent its earnings in the fourth quarter and further reduce its investment plans for its home state.
“Continuing regulatory challenges” in California will contribute to a non-cash charge of $3.5bn to $4bn, the oil company said, reflecting a write down in the value of its US upstream oil and gas assets, primarily in the state.
The charge will also include a loss related to decommissioning obligations linked to assets it previously owned in the Gulf of Mexico.
The disclosures follow moves by California regulators to implement a bill signed into law last year by the state’s Democratic governor, Gavin Newsom, which aims to penalise oil companies for allegedly “price gouging” consumers. The so-called margin penalty law seeks to limit the profits local refiners can make in the state, where motorists pay among the highest petrol prices in the US.
Chevron, which is headquartered in San Ramon, California, is lobbying furiously against the new law. In a filing to California regulators the company said it was part of an “increasingly harsh regulatory environment” in the state that has resulted in higher petrol prices for consumers, reduced production and decreasing investment.
“Setting a margin penalty would absolutely discourage investments here,” Andy Walz, president of Americas products at Chevron, wrote in a letter to the California Energy Commission dated December 12.
“Further, these arbitrary attacks on a disfavoured industry do more than this — they signal to every industry, entrepreneur, manufacturer, and employer that California is closed for business,” he wrote.
Chevron said it had slashed investment in California by hundreds of millions of dollars since 2022 and rejected capital projects because the state’s energy policies have “made it a difficult place to invest”. The state’s local crude oil production has declined 28 per cent to 305,000 barrels per day over the past four years, according to EIA data.
Chevron has clashed repeatedly with the administration of Newsom, who has introduced some of the nation’s toughest climate policies, including plans to phase out sales of petrol cars by 2035.
In September the state sued several of the world’s biggest oil companies, including Chevron, alleging they deceived the public for decades about how the burning of fossil fuels is destroying the planet.
Mike Wirth, Chevron’s chief executive, rejected the lawsuit’s claims in an interview with the Financial Times, saying: “We have never deceived anybody”.
Last month Wall Street analysts revised lower their estimates for Chevron’s fourth-quarter earnings, citing operational setbacks in Kazakhstan and other locations. Shares in Chevron have fallen 13 per cent over the past 12 months.