FACT SHEET
CITY OF HERMOSA BEACH SETTLEMENT WITH E&B NATURAL RESOURCES MANAGEMENT CORP
The City of Hermosa Beach and E&B Natural Resources Management Corp. has resolved several ongoing disputes between them, putting to rest the issue of oil drilling that began with a 1984 vote to allow oil drilling in the city. Following are the specific terms of the settlement announced on March 7, 2017:
- E&B relinquishes all drilling rights in any oil project in Hermosa Beach, including the lease issued by the city in 1992 that gave Macpherson Oil Company (and later E&B, by assignment under the 2012 settlement between Macpherson, E&B, and the City) the right to drill in the city.
- E&B relinquishes all mineral and other rights in any oil project in or under Hermosa Beach, including the private leases and School District lease that E&B acquired from Macpherson.
- E&B relinquishes all other permits and approvals for oil drilling in or under Hermosa Beach, including all road agreements, state approvals and other permits and approvals E&B acquired from Macpherson.
- E&B relinquishes all future claims against the city over the oil project, including claims for interest or any other monetary compensation resulting from the 2012 settlement and the 2015 special election regarding its oil-drilling proposal, the Measure O election.
- In exchange for giving up its oil drilling rights and all current and future claims, E&B will receive $1.5 million from the city’s existing funds.
- Both sides agree not to disparage one another in their comments about the settlement. This is a common provision in settlement agreements.
BACKGROUND
Since 1984, when voters lifted a longstanding ban on oil drilling in Hermosa Beach, the city has lived with the threat of oil drilling. In 2015, Hermosa Beach voters rejected Measure O, a proposal by E&B to drill for oil at the city’s maintenance yard. The vote triggered a requirement that the city pay E&B $17.5 million-plus interest. After the vote, E&B claimed the city owed E&B interest and had violated the 2012 settlement during the Measure O election.
E&B also claimed that if the city ever overturned its ban on oil drilling, E&B would forever have the right to drill for oil in Hermosa Beach under various leases, permits and approvals E&B continued to hold. It based this claim on its assertion that the voters’ rejection of Measure O in 2015 triggered a force majeure clause in the original lease.
Such clauses refer to occurrences, such as an act of government, that are beyond the control of the parties. A force majeure clause can be used to suspend the contract for the period of time during which those occurrences prevent the parties fulfilling their obligations under the contract.
This settlement resolves these issues by providing that E&B relinquishes every lease, permit and approval it holds in Hermosa Beach. The settlement restores the city to the position it was in before Hermosa Beach ever encountered Macpherson or E&B. It also eliminates all future litigation with E&B over its oil-drilling proposal.
