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Oil drilling controversy resurfacing in Hermosa Beach
The abrupt end to the Macpherson lawsuit, the long-running legal saga that pitted the small beach town against a Santa Monica-based oil company over drilling rights, has signaled the rise of a new debate on oil extraction.
And just more than a week after Hermosa Beach leaders signed off on a complex deal that brought an end to the potentially bankrupting lawsuit, a movement opposing a new drilling proposal already is gaining traction.
Key to the settlement was a stipulation that any type of new drilling project require voter approval. But residents are questioning the move by city leaders to settle the case rather than fight it out in court, pointing to potential health and safety hazards that could be created by a voter-approved drilling operation.
“People are enraged,” said Jeff Cohn, a 38-year-old Internet entrepreneur who lives on Sixth Street, about 100 yards from the site of the proposed drilling facility. “People are saying, `Here we go again.”‘
With the help of social networking sites, they’re banding together to oppose the latest drilling
“Everyone I know in this neighborhood is preparing to go to battle,” added Cohn, the son of newly elected City Treasurer David Cohn. “This is going to be a long fight.”
The fierce reaction among the group of residents contrasts dramatically with city leaders, who have touted the settlement with Macpherson Oil. The company sought more than $750 million in damages, alleging the City Council broke a contract that would have permitted the company to drill from 30 wells. The case was scheduled to go to a jury trial in a downtown Los Angeles courtroom in early April, and an unfavorable ruling could have sent the city spiraling into bankruptcy.
“We finally have closure on something hanging over our head for 14 years,” Mayor Howard Fishman said. “We stopped the bleeding. It’s the greatest accomplishment this council has done since I’ve been on it.”
Under terms of the settlement, E&B Natural Resources Management Corp. has bought out Macpherson Oil’s interest in Hermosa Beach, including drilling rights, for $30 million. A ballot measure that could overturn the city’s current anti-drilling law will appear before voters, likely by March 2013.
At stake would be an estimated tens of millions of dollars in royalties. The Hermosa Beach City School District, already struggling with state-mandated funding cuts, would receive 20 cents for each barrel of oil produced, and the city would receive as much as about 18 percent of the profits generated from the project.
Macpherson also would collect a small portion — about 3.3 percent — of Hermosa’s share of royalties. Hermosa Beach would be obligated to pay $3.5 million to E&B, an amount that would be paid through royalties.
If the measure is denied by voters, Hermosa will be on the hook for a $17.5 million payment to E&B, far less than the staggering amount McPherson was seeking in court.
Oil initiatives have a rocky history in California. A drilling measure in 2010 was defeated by 70 percent of Carpenteria voters, who overwhelmingly denied a proposal from Venoco Inc. to drill for oil offshore from a site on land.
Details of E&B’s plans for Hermosa Beach are still vague, and company officials have not yet submitted a firm drilling proposal. It is clear, however, that any type of drilling will be subjected to a comprehensive regulatory process and intense public scrutiny. The city will conduct an environmental review of the proposal under the California Environmental Quality Act, funded by E&B, prior to the vote.
The privately owned energy firm has oil-producing facilities in California, Wyoming, Kansas and Louisiana. In Southern California, the company has claims to oil fields in Beverly Hills and Long Beach. The company bought a stake in the large Wilmington Oil Field in 2010 through the acquisition of Four Team Oil, and currently produces 180 barrels of oil a day from the site.
Still, the company does not have an operation quite like Hermosa Beach, where the proposed drilling site is in a quiet neighborhood surrounded by parks, homes and businesses.
Drill site to be shielded
E&B President Steve Layton said company officials envision a completely safe, state-of-the-art drilling facility in Hermosa Beach. Layton said no oil derricks will be visible from homes, or offshore drilling platforms. The entire site, about an acre in size, would be enclosed by a wall to keep noise levels down.
“We have a strong commitment to safety and environmental regulatory compliance,” Layton said when asked about the company’s safety record and whether past drilling accidents have occurred. “We have a good safety record, one that we’re proud of. If there are any issues that we’ve discovered that need to be addressed, then we’ll do that.”
If the E&B proposal moves forward, the company will be drilling for crude oil sitting from 2,000 to 6,000 feet beneath the sea floor. Typically, the product found in the Torrance Oil Field, as it’s known, is of medium quality, said Dr. Iraj Ershaghi, a professor at USC and the university’s director of petroleum engineering.
Ershaghi said directional drilling is commonly done in Southern California, especially in Huntington Beach, where homes and apartments surround drilling operations enclosed by walls.
“When you look at technology, and ask, “Is it dangerous?’ The answer is not really,” Ershaghi said. “People may worry because they are not sure of what the consequences are. The technology is there to make the project safe, it’s just a matter of making sure rules and regulations are followed.”
Still, residents have expressed concerns about the potential for ground-water contamination or a larger environmental catastrophe. In 1998, when the city halted the Macpherson project, city leaders cited a report issued by the California Coastal Commission detailing specific risks that drilling posed, including the high possibility of oil leaks and ruptures.
Public relations materials posted on the city’s website related to the city’s defense of the Macpherson lawsuit on public safety grounds were quickly replaced after the settlement was signed with announcements touting the new agreement.
Some familiar with oil’s history in Hermosa Beach said the settlement puts voters in a difficult position.
“I am very surprised the city returned an unsafe project back to voters,” said Rosamond Fogg, who led the successful effort in the mid-1990s to oppose Macpherson and restore the city’s oil ban. Fogg has since moved out of Hermosa Beach.
“It’s a bad choice to pay such an extraordinarily high amount — $17.5 million. And it’s a worse choice to impose drilling.”
In search of a deal
In the years leading up to the settlement, the City Council repeatedly met with Macpherson to broker a deal, said former Councilman Michael Keegan, who last served on the council in 2009. The city offered $20 million, but the lowest Macpherson would settle for was $50 million, he said. …
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