Chevron will write down between $3. 5 billion and $4 billion in assets due to restrictive government policies in California and environmental liabilities in the Gulf of Mexico.
The allegations “arise primarily” from California regulations that “resulted in a decrease in expected long-term investment levels,” the company said in a filing Tuesday. Chevron’s production in the state has fallen 15% since the Covid-19 pandemic and now accounts for 3% of its global output.
Despite the writedowns, Chevron said it plans to continue operating the oil fields and related assets for years to come.
Chevron’s relationship with its home state has been increasingly contentious in recent years as its Democratic officials seek to phase out fossil fuels. California already has the strictest blank fuel criteria in the country and is contemplating limiting refining profits. Last year, the state sued Chevron and other primary oil corporations for alleged mendacity about climate change.
Chevron rejected California’s climate update claims and reduced its investment in refineries, posing a “challenging” business climate. The company is key in supplying jet fuel to airports in San Francisco and Los Angeles.
Chevron will also incur costs in the fourth quarter in the Gulf of Mexico similar to the costs of cleanup facilities that are decades old and have reached the end of their productive life. Although the company sold some of those assets, under U. S. law, the past owner will have to pay cleanup fees if the current owner files for bankruptcy.
A portion of the environmental costs of previously sold operations are “likely” to fall on Chevron, the company said in the filing, without naming the assets involved.
“We plan to adopt decommissioning activities for those assets over the next decade,” according to the document.
Chevron rose 0. 8% to $150. 39 at 11:40 a. m. in New York.