California Resources Corp. (CRC) is set to acquire approximately 2,000 miles of pipeline, a move that will reopen a crucial route connecting Kern County's oil fields to refineries in the Bay Area. The pipeline has been nonoperational since December.
The $63 million deal with Denver-based CorEnergy Infrastructure Trust Inc. would allow CRC to transport an additional 400,000 barrels of crude oil daily. Reopening efforts for the pipeline are anticipated to begin as early as October 1.
The transaction is contingent on approval from the California Public Utilities Commission (CPUC), which is scheduled to hold a vote on Thursday. CRC submitted its application for approval to purchase the assets on June 16.
Francisco Leon, president and chief executive officer of CRC, expressed confidence that the acquisition will solidify the company's standing as a primary energy provider in California. "This transaction further strengthens CRC’s position as California’s leading integrated infrastructure energy platform," Leon stated. "This diversified midstream network will enhance our ability to efficiently deliver California-produced barrels directly to the highest-value markets, while increasing operating flexibility and flow assurance across our portfolio. Importantly, these strategic, difficult-to-replicate assets further strengthen our California-focused strategy and support durable long-term value creation."
The acquisition is expected to benefit oil producers in the Central Valley. Chad Hathaway, an oilman from Kern County, indicated he would closely monitor potential changes in pricing differentials following the pipeline's potential reopening. CRC stated the purchase would reduce exposure to constrained outlets and pricing discounts while supporting California jobs, royalty revenues, and the reliable delivery of locally produced energy.
This development arrives amidst a challenging environment for California's energy sector, which has faced constraints due to state policies. Consumers in California already experience some of the highest utility costs in the nation, with forecasts suggesting further increases. Pacific Gas & Electric's 16 million customers could see their monthly gas and electricity fees rise by as much as $840 by 2030, according to a projection from the CPUC's Public Advocates Office. The current average monthly cost for gas and electricity is approximately $285, representing an 84% increase since 2016.