Almost two years to the day voters in Hermosa Beach shot down oil drilling by an 80-20 percent margin, the more than three-decade issue has officially come to an end.
Hermosa Beach Mayor Hany Fangary announced Tuesday the city and E&B Natural Resources Management Corp. reached an agreement that settles all outstanding claims. The $1.5 million settlement, which comes out of the city's general fund, eliminates any potential for oil drilling by E&B.
“The certainty about not having to worry about oil drilling, I think, will be very comforting to our community … I think for the 80 percent who voted (against) Measure O, it gives them a comfort level with this kind of settlement that they achieved what they voted for in 2015,” Fangary said.
Not only does the settlement permanently eliminate E&B's drilling and mineral rights in the city, it relinquishes all permits and approvals for oil drilling, including road agreements, city and school lot leases, and state approvals, and E&B cannot make any future monetary claims against the city pertaining to the oil project.
“This settlement, achieved through compromise over conflict, reflects the hard work and goodwill of everyone involved,” said E&B President Steve Layton, in a statement. “As a resident of the community, I am happy that the city and E&B were able to resolve our remaining differences, allowing each side to accomplish their basic objectives.”
City Attorney Michael Jenkins and interim City Manager John Jalili agreed that the settlement was the best case scenario for the city.
“I've been here four or five months and the council has been consumed almost on a weekly basis ... on this issue,” Jalili.
Monetarily it was best decision, according to Marc E. Rohatiner, an attorney with Wolf, Rifkin, Shapiro, Schulman and Rabkin.
“We're familiar with the cost of litigation and how much time it takes,” Rohatiner said. “But I think the thing that should also be emphasized ... that even if we had gone to litigation and were 100 percent successful, there are aspects that the city obtained here such as E&B relinquishment of its claims of sub-surface mineral rights … that would not even have been achieved even if we were 100 percent successful in litigation. The settlement was pretty far reaching in that context.”
The prospect of oil drilling in Hermosa Beach has had a long and rocky road since 1984, when voters approved the removal of a ban in the city. When E&B wanted to drill in the city's maintenance yard, residents came out in force and voted 80-20 percent against Measure O in March 2015, which would have allowed E&B to drill.
Because Measure O was shot down, the city had to pay E&B $17.5 million, plus interest. That number came from a settlement with Macpherson Oil in 2012, where that company agreed to drop litigation against the city by granting E&B its drilling rights.
After the Measure O defeat, E&B planned to file a lawsuit against Hermosa Beach for interest that accrued after the company lost the vote to drill. According to their attorney, the city would have paid $3.5 million if voters had approved the project. Jenkins said at the time the city had paid $6 million to E&B in April 2015 and $11.5 million in August. The city also paid $247,151 in interest accrued from March 24 to Aug. 13.
“The claims on the interest alone that E&B advanced was more than double the amount of settlement we paid,” Fangary said. “Their claim was in excess of $3.5 million just for the interest alone."
The City Council voted unanimously to approve the settlement at a closed session meeting on February 28.