For Stacey Armato, the oil debate began in January of 2013 when the Hermosa Beach City Council held a joint meeting with the school board to discuss the potential drilling by E & B Natural Resources.
“I was afraid the school board was going to talk about the money schools would get from the oil project,” Armato said. “It turns out they just wanted to give the community an update.”
The meeting created a sense of urgency regarding the oil issue, and Armato began meeting with a group of similarly concerned residents. Mike Collins, George Schmeltzer and a few others had already been meeting. They soon voted Armato as committee chairperson and the group grew to about 25. The group felt they shared an understanding of city’s character and a vision for its future. They believe oil has no place in their beloved beach city.
Thus Stop Hermosa Beach Oil was born, with its omnipresent slogan, “Keep Hermosa Hermosa.”
“I think we are finding that the average resident here knows that this project is not good for Hermosa,” said Armato. “Between our lifestyle and the density of our city, oil drilling is just incompatible with our way of life. It’s just not Hermosa.”
Hermosa Beach voters will decide whether or not to lift the oil drilling ban at a special election on March 3. If the ban is lifted, E & B Natural Resources will embark on a 35 year drilling project at the maintenance yard on Valley Drive. The election was originally scheduled for last November but the oil company asked for it to be reschedule.
“We knew going into November we were winning,” Armato said. “They knew that and that’s why they postponed. But it’s only hurt their argument because of the price of oil reducing so drastically.”
Oil prices have dropped sharply in the last six months. From 2010 until mid-2014, world oil prices were largely stable, at around $110 a barrel. But since June prices have more than halved. US crude is now down to $48 a barrel. Armato says this drop slashes E & B’s revenue claims.
The Cost Benefit Analysis supplemental report presented at the last city council meeting added revenue numbers at $40/barrel alongside previous estimates made at $105/barrel.
“This is a far cry from E&B’s $500 million (or $14.7 million a year) illusory promise of money that E&B continues to tout at $105 a barrel and volume rates that are both in excess of what the independent CBA has reported over and over,” said Armato.
“The cost to the city if it lifts the ban has also been updated to $20 million– that’s more than if we maintain the ban,” she said. “The city will also need to look into passing a bond to fund that.”
Armato and Stop Hermosa Beach Oil also argue that whatever revenue oil drilling would potentially produce would be greatly restricted by the locally-administered but state-owned Tidelands Fund.
“In addition to the health, safety and environmental risks, state law prohibits Hermosa Beach from using 75 percent of net revenues for police, fire, undergrounding utilities, street repairs or increases in salaries and benefits,” Armato said. “Couple that with the 10 percent loss in property values, which could amount to tens of millions of dollars, plummeting oil prices and the $20 million price tag that comes with lifting the ban on oil drilling, and this project doesn’t make any financial sense.”
In February, a Health Impact Assessment was released with scientific evidence that oil drilling would negatively impact the health and safety of Hermosa residents. The report concluded that air pollution, noise and increased traffic from the project would subject neighboring residents to numerous physical and mental problems.
In April, the city withdrew the more critical preliminary report at the request of the consulting group Intrinsik Inc., who compiled the report. In a letter to City Manager Tom Bakaly, Intrinsik consultant Mary McDaniel requested that the city withdraw the HIA because multiple sections needed revision after public comments were taken in February and March. A revised report was released in July.
“Dr Lisa Santora [Chief Medical Officer of Beach Cities Health District] helped us review the new HIA,” Armato said. “She was able to confirm to us that the science didn’t change. It was just the conclusion.”
The original HIA included conclusions like, “The odors anticipated from the presence of an oil production facility near homes will disrupt the outdoor beach lifestyle in the areas significantly impacted by odors,” and “Further, the compromise of independence associated with the outdoor lifestyle may give way to feelings of depression for some people.”
“The new HIA just softened the language of the conclusion but it didn’t change the meat or the integrity of the science,” Armato said.
The revised HIA concluded, “Based on the Final EIR mitigation measures and additional recommendations provided in the HIA, on balance we do not believe that the Project will have a substantial effect on community health in Hermosa Beach.”
Armato believes McDaniel and Intrinsik revised the report in order to boost clientele. She said the Canadian company is looking to expand its business in the United States and that means being friendly to the oil companies.
“They gave this unscientific conclusion of insignificant impact,” she said. “But asthma, cancer, these are just the effects in the daily operations, let alone if a spill or explosion occurs. And it will affect our children and elderly the most.”
The air pollutants and dozens of toxic chemicals used during the project construction and operation have been linked to increased heart attacks, asthma and cancer, according to the HIA. The EIR indicates that the project and the chemicals to be used in construction would yield an increased cancer risk, although it is less than the 10 cancers per million threshold necessary to qualify as “significant and unavoidable” under the California Environmental Quality Act guidelines. The health impact assessment also allows that projected odor exposure could produce headaches, nasal congestion, eye, nose and throat irritation, and other respiratory illness-like symptoms.
Armato said a major accident, such as the uncontrolled release of crude oil or natural gas, called a blowout, could result in loss of life, extensive property damage, evacuations, long-term health impacts, and degradation of our beach environment that could potentially affect the entire Santa Monica Bay.
“E & B has a history of oil spills and have recently been fined for illegally dumping contaminated wastewater,” said Armato. “They currently face a lawsuit that claims they polluted groundwater causing crops to fail. The president of the oil company had a spill larger than the size of Hermosa Beach in 1998 under his operations as Equinox Oil. Instead of cleaning up the spill, they claimed bankruptcy and opened E & B oil.”
Armato is a mother of two and is six months pregnant with her third. Her home on the north side of Hermosa is a half mile from the maintenance yard.
“Every single person surrounding the potential drilling site is looking to move,” she said. “A friend of mine spent his life’s savings on his house and it’s 90 feet from the site. His daughter’s bedroom faces the city yard. He is heartbroken and already looking to sell his house.”
In its contract, E & B included a Property Protection program for the 1,000 residences surrounding the oil drilling site. Armato is skeptical of the company’s ability to make up for the property value losses.
“The fund for the property protection is only $25 million,” she said. “That’s not going to cover it, not going to make people whole. The values of the homes are too high.”
Advocates for the oil project claim that the only way to repay the $17.5 million the city will owe E&B if Measure O fails is to increase taxes on residents. Armato disagrees.
“They like talking about taxes being raised,” she said. “We have nine and a half million in the insurance fund. We have good credit, a ton of assets, no debt. We are a perfect community to loan to.”
Hermosa Beach has a surplus of more than $6.8 million, she noted, arguing that the city could also move $2.5 million currently sitting in another unused fund into the insurance fund to increase the balance to $8.5 million This would leave Hermosa Beach in need of $9 million to pay off its oil debt should the city keep its ban on oil drilling, a sum easily financed, Armato argued.
She also believes that incoming hotel projects will relieve even more pressure by adding tax money to the general fund.
“We have a high amount of sales tax and the three hotels that are slated to come in so the TOT tax, that could be another huge amount of revenue for the city.” Transient Occupancy Tax (TOT) is charged to every hotel guest.
As the March 3 election approaches, tensions have risen. In December, Hermosa Beach resident Raymond Dussault filed a Writ of Mandate lawsuit against Hermosa Beach City Clerk Elaine Doerfling and five members of Stop Hermosa Beach Oil, including Schmeltzer and Armato, contesting the language of the argument against Measure O appearing on the March 3 ballot.
Though Dussault was the face of the suit, E & B made clear through press releases and financial support that it was involved. According to E & B’s financial disclosure statements, $52,250 was paid to Reed Davidson LLP, the firm Dussault used for the lawsuit. At the hearing on December 19, there were two attorneys present for the proponent: Stuart Leviton, attorney for Dussault, and Nikki Carlson, attorney for E & B.
The lawsuit was denied, but Armato said it still negatively impacted the anti-oil coalition. The group spent nearly $20,000 in legal fees.
“They drained almost half the money we had on that,” Armato said.
“And they’ve threatened lawsuits against certain residents. They have no conscience. No morals there. That’s really hard to respect.”
“I fully expect them to minimize the risks of their project and to keep upping the benefits,” she said. “But the backside threats and lawsuits is so not Hermosa.”
Armato feels confident going into election day and is ready for the campaign to be over. But she is also trying to prepare for herself for the worst.
“I would be so so disappointed if it passes,” she said. “I don’t even want to think about it. The reason I am doing this is because I love where I live and I have developed so much respect and close relationships here. So it’s worth fighting even harder to protect that.”
E & B has fought hard to minimize the impacts oil drilling would have on the city, emphasizing the extremely low thresholds the EIR uses when evaluating noise, smell and oil spill risk. Armato said nothing E & B argues can mask the reality of what the project would bring — oil drilling in a small beach town.
“I think the average voter has to step back and remember– this will be heavy industry construction for up to five years, and 30 more years of heavy industry oil and gas drilling operations in a very densely populated community,” she said. “It is no surprise that the oil company continues to downplay those nuisances, but the facts speak for themselves.”
