In a conference call with reporters about two minutes after signing the agrement with oil comapny president Don Macpherson Jr., Mayor Howard Fishman said the settlement ends “the crippling litigation” that has loomed over the city.
Under terms of the settlement, signed on Friday, city officials will give Hermosa voters the opportunity to repeal a ban on oil drilling that was imposed by a ballot measure in 1995.
If the ban is lifted, a separate oil company, which bought drilling rights from Macpherson, would be allowed to slant-drill oil from under the Pacific Ocean, using a rig on city-owned land several blocks inland, as Macpherson planned to do under a lease contract it signed with the city in 1986.
If the ban is not lifted, the city would pay $17.5 million to the new player in the game, Bakersfield-based E&B Natural Resources Management Corp.
An April 4 trial had been set to decide the lawsuit, which had wound its way up and down the court system for a decade and-a-half, as Macpherson tried to prove that a Hermosa City Council acted illegally when it unilaterally barred the drilling project as unsafe in 1998.
Macpherson officials said they were seeking as much as $750 million from the city of 19,000 people, which has a $26 million annual budget.
The most recent significant ruling in the lawsuit came in early 2010, when a state appeals court told the city it could argue one more time that Macpherson’s oil project was so unsafe that canceling the drilling contract was legal. But, the court said, if the city failed to convince a jury on that point, the trial set for April would determine how much of that $750 million claim the city would have to pay Macpherson.
Fishman credited Councilmen Michael DiVirgilio and Kit Bobko with negotiating the settlement.
“During the past 14 years, the city has attempted several times to reach a resolution of this case. Today, we have finally succeeded. Recently, Hermosa Beach Councilmember Kit Bobko, Councilmember Michael DiVirgilio and Macpherson Oil Co began a dialogue about an innovative new settlement” with E & B Natural Resources as a third partner.
“After extensive negotiations, the city successfully reached an agreement that limits the city’s liability to $17.5 million and provides for an alternative that would reduce the amount to $3.5 million.
“If the voters approve the ballot measure and E & B Natural Resources secures all the necessary permits to drill, the city would owe E & B Natural Resources substantially less — $3.5 million,” Fishman said. “This amount could be paid from oil revenues from the project.”
“Should that oil production occur, the city and the Hermosa Beach City School District would receive oil revenues from the project,” he said.
“The voters of the City of Hermosa Beach will decide…whether the oil drilling project will go forward,” Fishman said. “Whichever course the voters choose, they can know that through this settlement, we have removed the cloud of crippling litigation that has been hanging over the city for the past 14 years.”
Officials said a ballot measure could be placed before voters within about a year. They said they did not yet know the amount of moeny the city or the Hermosa Beach City School District could make from potential oil royalties.
E&B Natural Resources spent $30 million to buy the potential drilling rights from Macpherson.
