Oil giant Chevron Corp is set to incur a write-down of asset value ranging from $3.5 billion to $4 billion, citing restrictive government policies in California and environmental liabilities in the Gulf of Mexico.
The charges “primarily” stem from California regulations that “have resulted in lower anticipated future investment levels,” the company said in a filing on Tuesday.
Chevron’s production in the state has witnessed a 15% decline since the onset of the COVID-19 pandemic, now constituting just 3% of its global output.
Despite these write-downs, Chevron affirms its commitment to continuing operations in the oil fields and associated assets for the foreseeable future.
In recent years, Chevron’s connection with its home state has become more confrontational, driven by the efforts of Democratic officials to gradually eliminate reliance on fossil fuels.
California currently boasts the nation’s most stringent clean-fuel standards and is contemplating the imposition of limits on refining profits.
In a legal move last year, the state initiated a lawsuit against Chevron and other major oil companies, accusing them of deceptive practices regarding climate change.
Chevron has dismissed the climate-change accusations from California and scaled back investments in refineries, citing a challenging business environment.
The company, a crucial supplier of jet fuel to San Francisco and Los Angeles airports, faces additional charges in the Gulf of Mexico for the fourth quarter.
These charges pertain to the expenses associated with decommissioning decades-old installations that have reached the end of their operational lifespan.
Despite selling some of these assets, Chevron remains responsible for cleanup costs under US law if the current owner declares bankruptcy.
The filing stated that it is “probable” that Chevron will bear a share of the environmental costs associated with operations that were previously divested, although the specific assets were not disclosed.
“We expect to undertake the decommissioning activities on these assets over the next decade,” according to the filing.
