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(Bloomberg) — Chevron Corp. will write down the value of $3.5 billion to $4 billion in assets due to restrictive government policies in California and environmental liabilities in the Gulf of Mexico.
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The fees “derive 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 just 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 domestic state has been increasingly contentious in recent years, as its Democratic officials seek to phase out fossil fuels. California already has the strictest criteria in the country for white fuels and is contemplating limiting refining profits. Last year, the state sued Chevron and other major oil companies for allegedly lying about climate change.
Read more: Chevron scales investment in California due to ‘contradictory’ policies
Chevron rejected California’s climate replacement claims and slashed its investments in refineries, posing a “challenging” business climate. The company is key in supplying jet fuel to airports in San Francisco and Los Angeles.
Chevron also will incur fourth-quarter charges in the Gulf of Mexico related to the costs of cleaning up decades-old installations that have reached the end of their productive life. Although the company sold some of those assets, under US law the previous owner is on the hook for clean-up costs if the current owner declares 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.
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