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Berman Capital Group LLC's avatar

On June 10th, 2025, Sable's objection to the Coastal Commission's preliminary injunction was rejected by the court. The preliminary injunction stands. The trial date has been set for October 2025.

While the share price sold off 5% on the news, this has not materially changed anything. We continue to believe that this does not prevent Sable from pumping oil through the pipeline, but it does add some legal complexity to certain pipeline maintenance required by the Consent Decree. While there is a stipulation in the Consent Decree for emergency repair work, allowing for unpermitted repair work to be carried out in the event of an emergency that is probably not the best option for Sable. We believe that Sable will likely appeal this ruling to the California Appellate Court. 

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Berman Capital Group LLC's avatar

Legal Updates: 

On June 3, 2025, the Environmental Defense Center (EDC) was granted a temporary restraining order (TRO) against the Office of the State Fire Marshal (OSFM), preventing it from issuing Sable its certificate of operation for the Las Flores pipeline. 

This TRO is the last-ditch effort by environmentalists to have the pipeline shut down. This case against the OSFM is simply a reiteration of old arguments. If it has to go to trial, we believe the OSFM and Sable will prevail; however, this would likely result in further delays in restarting the pipeline. We believe it is unlikely that Sable will wait until the next hearing date on July 18th to address this matter. 

The granting of the TRO against the OSFM, though, creates a jurisdictional problem, which is that the TRO would force the OSFM to violate the Consent Decree (federal law). This would violate the supremacy clause of the US Constitution, which states  "...shall be the Supreme law of the land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding."

Sable will likely appeal this TRO to the California Appellate Court, hoping for a fast conclusion to either have the TRO overturned or have the Appellate Court rule that the CA Superior Court is not the correct venue for this issue given that fact that the Consent Decree governing the OSFM's actions in this matter is federal. The OSFM has been granted regulatory authority over the Las Flores pipeline by the Pipeline and Hazardous Materials Safety Administration, a division of the federal Department of Transportation, and, therefore, is operating under federal law. 

On June 5th, 2025, Sable filed an objection to the preliminary injunction granted to the CCC, preventing Sable from carrying out any more 'development" on the pipeline. 

It argues that the Court reached its decision without considering Sable's supplemental material, which, among other things, included the existing Coastal Development Permit (CDP). The CDP had not previously been entered into evidence at the request of the judge during the hearing on the CCC TRO. Sable argues that without considering all of Sable's supplemental material, a decision on the preliminary injunction can not be made. Similarly to the other ongoing case between the EDC and the OSFM, Sable argues that the preliminary injunction is too broad and does not limit itself to the issues in the CCC cease and desist order. in its current form, it would force Sable to violate the federal Consent Decree "because it seeks to enjoin Plaintiffs from complying with pipeline safety repair and maintenance activities required by federal law." per the Consent Decree.

Because of these recent legal setbacks, Sable announced in its recent 8-K that it is now expecting its first oil sales to start on August 1st. While this is disappointing, Sable has plenty of cash left to hold it over during this delay, especially after what now looks like an exceptionally well-timed equity sale. Ultimately, we believe Sable will prevail in these cases; these are not the most challenging legal arguments that Sable has had to deal with in this long saga. The recent sell-off, following the news has now brought the share price back to its level before the pipeline repair work was completed, presenting an excellent buying opportunity. While the timeline for first oil sales has been pushed back, and the outlook is a little less clear, we think the market is overpricing the current risk associated with these last legal issues. 

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