Another round of vigorous debate over potential oil drilling in Hermosa Beach began on Tuesday, as residents expressed reactions ranging from concern and outrage to relief and gratitude in remarks before the City Council.
It was the residents’ first chance to publicly tell council members what they thought of a legal settlement that put to rest a potentially bankrupting $750 million lawsuit by Macpherson Oil Company of Santa Monica, but also revived the hotly debated possibility of oil drilling in Hermosa Beach.
Under terms of the settlement, city officials will place before voters a ballot measure to repeal at least part of a citywide ban on oil drilling, which was imposed by the voters themselves in 1995.
If voters uphold their ban, the city would pay $17.5 million. If they repeal the ban, 30 wells would be built on a city maintenance yard to slant-drill oil and gas from under the ocean a half-mile away.
If the drilling occurs, the city would receive roughly 15 percent of the oil revenue under a complex royalty formula, unless it turns out there is little or no oil to drill. In that case the city would pay as much as $3.5 million. The Hermosa Beach School District would receive some level of royalties as well, on top of 20 cents per barrel of oil.
Hermosan Scott France told the council he felt “outrage” over the settlement.
“This oil agreement is pretty much beyond my comprehension,” he said.
“We voted. We banned it,” he said, referring to the 1995 ballot measure.
France said the city was “sold out by two transient council members who don’t own homes in the city…so they don’t have any vested interest.”
Councilmen Michael DiVirgilio and Kit Bobko, who negotiated the settlement that was unanimously approved by the rest of the council, rent homes in Hermosa.
Resident Barbara Ellman said Bobko and DiVirgilio rent their homes, “have no vested interest” in Hermosa property and “can pick up and move.”
She said a Huntington Beach official told her that a slant drilling project in that area has posed noise and smell problems for neighbors.
“When I hear about drilling for oil and gas [nearby] it terrifies me,” she said, adding that she fears the possibility of an explosion in the night.
Mayor Howard Fishman defended DiVirgilo and Bobko.
“The only thing that disturbs me a little is to imply that two city council members who sat down with the other parties are transients, that they don’t have an investment in the community…It was a 5-0 [council] vote to end the litigation against the city,” Fishman said.
Resident Jeff Cohn, holding a sign reading “NoBPinHB.com,” said he was concerned about health, noise and safety issues “in a densely populated area.” He raised concern about property values near a drilling site as well.
Hermosan Jordan Bailey, 9, did not address the council, but sat in the audience with a black and orange “No Oil Drilling” sign.
Barbara Guild, a 64-year resident who addressed the council 50 years ago to help stop Shell Oil from drilling in Hermosa, said city royalties from oil in the tidelands – west of the mean high tide line – could be spent only on coastal projects such as piers or harbors. City officials have said they are studying that issue.
Guild said she looks forward to helping inform people about “the impact of oil drilling.”
She also told the council she is “grateful” that the legal settlement caps the potential financial loss to Hermosa.
Former Councilman Michael Keegan complained that the current council approved the settlement without knowing how much money the city might get in royalties, and how the money could be spent.
Keegan told the council he opposes oil drilling, “and I hope all five of you will join us.”
Hany Fangary, an attorney who ran for a City Council seat last year and has sued the city over the regulation of tattoo parlors, praised the council for settling the lawsuit, but said he was concerned about Hermosa property values and the safety of oil drilling.
City Public Works Commissioner Julian Katz praised the council for having “the courage to go from the unknown large amount of money to a smaller, known amount of money” for which the city could be liable.
“I’m taking less Ambien now that it is not going to come to $700 million or some disastrous amount,” said City Treasurer David Cohn. “I think we are on our way to controlling our own destiny.”
Before the meeting, former Councilman Sam Edgerton said the current council should have fought the lawsuit in court. He said there was “no way in hell” a jury would have found in favor of Macpherson.
In 1998 Edgerton cast one of the council votes to cancel Macpherson’s contract, which led to the lawsuit.
City officials said a year’s worth of study and public meetings would take place before the drilling project is placed before voters.
They said E&B Natural Resources Management Corp. of Bakersfield — which bought Macpherson’s drilling rights and now is partnered with the city — would have to convince Hermosa voters to allow the project.
City and oil company officials said they did not yet know precisely how much money the city could make in royalties, or how the money could be spent.
The city might be barred from spending oil revenues on any endeavors east of the beach.
In a separate drilling issue down the coast, the California Supreme Court in 1955 ruled that the City of Long Beach could spend oil revenues from its tidelands – west of the mean high tide line – only on projects of “navigation, commerce and fisheries,” including harbor building.
The ruling was based on a state grant that gave tideland oil rights to the city in trust, and state laws on how the money could be spent. The court’s majority opinion held that the city could spend tideland oil money only on coastal projects that would benefit the state as a whole.
A 1919 grant from the state gives Hermosa its tidelands in trust, to be used “solely for the establishment, improvement and conduct of a harbor and for the establishment of bulkheads or breakwaters for the protection of lands within its boundaries, or for the protection of its harbor, and for the construction, maintenance and operation thereon of wharves, docks, piers, slips, quays and other utilities, structures and appliances necessary or convenient for the promotion or accommodation of commerce and navigation, and the protection of the lands within said city.”
