Stop Oil Drilling in Hermosa Beach: March 2012

Saturday, March 10, 2012

Settlement Agreement Comments

Below is a draft of our settlement agreement comments we are compiling from residents. We welcome your comments so please email us with your comment structured similar to below. If you want to read the full 45 page agreement you can download it on the HermosaBCH.org or at Google Docs.

Recitals, Page 1, A

Macpherson also obtained all of the necessary Permits to Construct for the Oil Project from the South Coast Air Quality Management District In November 1995 the residents of the City passed City Measure E an initiative measure that banned oil drilling in the City.
Comment- South Coast Air Quality Permit ran out or cancelled March 30, 2000.

Recitals, Page 1, A
In early 1998 and notwithstanding the passage of Measure E the California Coastal Commission authorized issuance of Coastal Development Permit No 29E86 to Macpherson far the Oil Project subject to conditions
Comment - Coastal Developmental Permit No. 29E86 never issued.

Recitals, Page 2, D
Substantial revenue stream to be generated for City and the Hermosa Beach School District as a result of the payment to City and School District of royalties in association with the production of oil and gas reserves by E&B
Comment - How can School benefit from tidelands trust?

Definitions, Page 3, 2.10
School Lease means the lease between Macpherson and the Hermosa Beach School District
Comment - No lease on School property found. Where is this?

The Closing, Page 4, 3.2
Confidentiality Agreement previously signed on behalf of each of the Parties on February 17 2012
Comment - Where is a copy of this?

Macpherson's Obligations At Closing: Page 5, 4.1

1031 exchange as provided in Article X hereof all of Macpherson the School Lease and any other leases releases set forth in paragraph VI
Comments - Like-kind exchange, what's Macpherson doing here? What other leases are involved in this agreement?

E&B's Obligations At Closing: Page 5, 4.3a
Said assignment reserves to Macpherson from E B and its successors and assigns an overriding royalty of 1.5% of one hundred 100% of gross hydrocarbon production but otherwise
Comment - Macpherson keeps part of this going here.

E&B's Obligations At Closing: Page 6, 4.3c

constitutes the E&B Loan of $17,500,000

Comment - Note this loan and how it's to be repaid by the city.

E&B's Obligations At Closing: Page 6, 4.4b
Upon issuance of the drilling permit or in the event the City cannot issue the drilling permit as the sole result of action or inaction undertaken by and under the control of E&B (including without limitation) the failure of the California Coast Commission to issue a coast development permit. immediately

thereafter forgive $14,000,000 of the E&B Loan

Comment - Failure to meet conditions and most of loan is forgiven? Where does the fact we are giving E&B a $15M property factor into the cost? Total costs is more like $18.5M and more cheaper to vote no.

City's Obligations Following Closing: Page 7, 4.6a

Place on the ballot at a special municipal election in a manner that comports with all applicable law within six 6 months of a request to do so by E&B
Comment - Within 6 months call election!!!! "....notwithstanding inconsistent change in City's Municipal Code." ????

City's Obligations Following Closing: Page 7, 4.6b

Vacate and make the City maintenance yard available for the construction of the Project as when and in the manner and subject to the conditions provided for in the Lease and repay Three Million Five Hundred Thousand Dollars of the E&B Loan through a deduction of royalties equal to 1.5% of gross proceeds.
Comment - Vacate and make the City maintenance yard available? And where in the world is the city going to put it. Steve Burrell could never find another location for it, here or in Redondo Beach. Let's get real. this is an important issue. This property is worth $15M and we are paying them $3M on top? Total deal looks like $18.5M to vote yes.

City's Obligations Following Closing: Page 8, 4.6d

Grant as reasonably required by E&B all necessary rights of way
easements franchises and other rights as necessary for subsurface pipelines < and other facilities and appurtenances in order for E&B to drill for produce market transport and sell all oil and gas produced from the subject lease
Comment - Whoa Ho! Check out this demand. Dig up the streets or the greenbelt? And where will it terminate in Redondo Beach or AES?

City's Obligations Following Closing: Page 9, 5.4

The parties recognize that Macpherson is materially changing its legal position and rights and property holdings in reliance upon the final and binding effect of this Agreement and any rescission of this Agreement would be a wholly inadequate remedy for Macpherson because rescission cannot possibly return to Macpherson the legal position and rights it held prior to the consummation of this Agreement
Comment - We need an attorney to explain this paragraph. It's legalese is convoluted.

Mutual Releases: Page 9, 6.1

Effective upon the successful completion of the Closing in accordance with the conditions described in paragraph 3
Comment - What are these conditions in 3.3

Mutual Releases: Page 10, 6.1

the City hereby fully and finally waives releases and permanently discharges Macpherson and its respective partners officers employees agents representatives and attorneys the Releases from any claims arising under the Lease any continuation extension amendment restatement or replacement of the Lease
Comment - Whoa Ho! What's this? What about compensation due the city for the past Environmental reports, attorneys fees due the city, etc?

Mutual Releases: Page 10, 6.4

Except as may be provided in this Agreement each of the Parties waives any and all claims for the recovery of any costs expenses or fees including attorney fees associated with the matters and claims released in this Agreement
Comment - Attorneys fees from earlier court cases? Have they been paid?

Defense of Litigation: Page 11, VII
In the event that one or more lawsuits are filed challenging this Agreement and/or the actions implementing or contemplated by this Agreement the Parties to the extent named as parties defendant in the lawsuit will cooperate in good faith in the defense of the litigation and shall initially bear their respective attorneys fees and costs With the exception of a lawsuit challenging the approval of this Agreement itself should the Ballot Measure described in paragraph 46a pass E&B shall indemnify the City for all attorneys fees and costs incurred by City in the defense of litigation encompassed by this paragraph and also for any attorney fees and costs awarded to a plaintiff against City if any in such litigation
Comment - Does this mean the city can collect attorney fees if sued for this agreement?

Representations & Warranties: Page 11, 8.1c
They acknowledge that the Stinnett Well has been plugged and abandoned and agree that Csity inability to convey the Stinnett Well to E B shall not constitute a breach of this Agreement or the Lease.
Comment - Dave Lucero, what was the result of your looking into this well on the City's Yard?

Representations &Warranties: Page 12, 8.2c

The force majeure provisions in paragraph 30 of the Lease apply and have applied during the pendency of the Action and the CUP remains valid.

Comment - CUP is for a "Conditional" Use Permit. The Use Permit itself was never issued, or was it? Wasn't the Fire Code in doubt? In the CUP it states, "All CUP required studies and reports must be submitted to the City and approved before permit issuance."

Representations &Warranties By All Parties Page 12, 8.3a
The Parties have received all corporate and other approvals necessary to enter into this Agreement on their behalf and that the persons signing this Agreement on their behalf are fully authorized to commit and bind the Parties to each and all of the commitments terms and conditions hereof and to release the claims described herein and that all documents and instruments relating thereto are or upon execution and delivery will be valid and binding obligations enforceable
Comment - Not so! The California Coastal Commission issued "approval with a long list of conditions" but never issued a "Permit" for Macpherson to drill in Hermosa Beach. So how does this affect this Settlement Agreement? Is Macpherson claiming to have abided by all the requirements of 15 b. of Lease No. 2 (it has with the City), i.e. "The Lessee shall also apply for and obtain all necessary permits from the City of Hermosa Beach...The Lessee shall also be responsible, at its sole expense, for alI necessary permits and approvals to be obtained from the California Coastal Commission...."
Representations &Warranties By All Parties Page 12, 8.3d
The Parties have prior to the execution of this Agreement obtained the advice of independent legal counsel of their own selection regarding the substance of this Agreement and the claims released herein
Comment - Was the advice "independent"?
Representations &Warranties By All Parties Page 13, 9.2
This Agreement and the Confidentiality Agreement discussed in Paragraphs 32 and 3 are an integrated contract and sets forth the entire agreement between the Parties hereto with respect to the subject matter contained herein

Comment - If the Confidentiality Agreement is part of this, please, let's have a look at it.

Representations &Warranties By All Parties Page 13, 9.5
This Agreement shall be binding upon and inure to the benefit of each of the Parties and their respective representatives partners officers employees agents heirs devisees successors and assigns
Comment - How about to the benefit of the people of Hermosa Beach?

(stay tuned more to come)

Recovery of Damages in Lawsuit

The previous page on Macpherson Lawsuit Issues raises 2 important questions/issues: Over the past 15+ years . . .

Michael Jenkins of RWG Law Firm's Impartial Analysis of Proposition E

1) Why hasn’t MacPherson (or his attorneys) at any time raised these election issues (the basis of the lawsuit) and at least requested (if not insisted) that the election be held again, this time with the requisite information/warning to the voters of the significant detrimental financial impact on the City.

2) Why hasn't City Management, City Attorney, or the various law firms representing the Hermosa Beach raised this issue and least requested (if not insisted) that the City Council rule that the election should be held again? This time with the requisite information/warning to the voters of the significant detrimental financial impact on the City.

3) Could damages even have been awarded TO MACPHERSON by a jury (under directions provided by the presiding judge) due to failure of Macpherson Oil to make reasonable efforts to mitigate damages over the past 15+ years, as required under California law, by NOTIFYING CITY OFFICIALS THAT THE ELECTION WAS FLAWED AND insisting on a new vote with a new proper City Attorney Impartial Analysis?

Macpherson Lawsuit Issues

The Macpherson Lawsuit is probably the most serious and important detrimental issue facing Hermosa Beach. While investigating this issue, Hermosa Residents and attorneys have examined various documents, and discovered what they believe is a serious flaw in the 1995 election PROPOSITION E, the “STOP OIL DRILLING” voter initiative.

The most significant part of the claim for damages by MacPherson in his lawsuit is his claim for “lost profits” in the hundred of Millions of dollars. This claim is based on a fundamental tenet/principal of law that damages for “Breach of Contract” entitles the injured party to claim lost profits.

However, in the Voter pamplet/booklet provided to the voter for this election, the “Impartial Analysis of Proposition E” prepared the City Attorney Michael Jenkins RWG Law Firm made no mention whatsoever of this potential, if not highly probable, consequential detrimental impact on the City should this measure be passed (read below). Had this consequence of the passage of this measure been presented to the voters, there could have been a substantial difference in the number of registered voters voting, as well as the election results.

“Beginning in April 1994 the Hermosa Beach Stop Oil Coalition began a campaign to qualify a ballot initiative to end the Macpherson project and to reinstate the comprehensive prohibition on oil drilling in the City by deleting from the Municipal Code the two exceptions from the ban that had been approved in 1984. (Hermosa Beach Mun.Code, § 21-10, subds. (a) & (b).) The measure, Proposition E, appeared on the November 1995 ballot.” (Stop Oil I, supra, 86 Cal.App.4th at pp. 543-544.)

“The ‘Impartial Analysis of Proposition E’ by the Hermosa Beach City Attorney circulated to all voters explained, ‘The effect of this measure, if adopted, would be to amend the Municipal Code to prohibit oil and gas exploration, drilling and production on these two sites [the two sites then excepted from the citywide prohibition], and eliminate from the Code the authority to use these sites as a potential source of oil and gas revenue for the restricted purposes stated in the Code. [¶] The City has leased the City maintenance yard site to a private entity for oil and gas exploration and production activities which have not yet commenced. All permits necessary for this project have not been issued and have been delayed by pending litigation. If Proposition E is adopted, the law is not clear exactly how the measure would affect the project proposed by the lease.’ The ballot arguments in favor of and against Proposition E focused on the potential environmental risks and economic benefits of the Macpherson project on the City Yard Site."

Proposition E passed by a narrow margin of only 565 votes.

1) Why hasn’t MacPherson (or his attorneys) at any time raised these election issues (the basis of the lawsuit) and at least requested (if not insisted) that the election be held again, this time with the requisite information/warning to the voters of the significant detrimental financial impact on the City.

2) Why hasn't City Management, City Attorney, or the various law firms representing the Hermosa Beach raised this issue and least requested (if not insisted) that the City Council rule that the election should be held again? This time with the requisite information/warning to the voters of the significant detrimental financial impact on the City.

3) Could damages even have been awarded TO MACPHERSON by a jury (under directions provided by the presiding judge) due to failure of Macpherson Oil to make reasonable efforts to mitigate damages over the past 15+ years, as required under California law, by NOTIFYING CITY OFFICIALS THAT THE ELECTION WAS FLAWED AND insisting on a new vote with a new proper City Attorney Impartial Analysis?

With regard to issue 1:
“A party cannot recover for loss which he could have avoided or mitigated through his reasonable efforts.” Clearly, MacPherson will likely have a difficult time explaining he should be entitled to any damages due the fact that Macpherson made no effort to call for a new election this time with the proper impartial analysis containing warnings of potentially disastrous ramifications for the City.

With regard to issue 2:
This raises the distinct possibility that the City may well be entitled to damages from the law firms representing the City to recoup its legal costs which have soared in to the Millions of dollars which could have likely been avoided had this issue been raised.

As a general rule, the objective of contract damages is to insure that the aggrieved or injured party should receive what he or she expected from the bargain. To the extent that an award of money can do so, the aggrieved party should be placed in the same position as though the contract had been fully performed. This is what is known as protecting the expectation interest of the parties. (Rest.2d §344(a))

Loss of Profits
Loss of profits, present or future, as an element of special or consequential damages, may be recovered for a breach of contract if; 1) The loss is the direct and natural consequence of the breach, 2) It is reasonably probable that the profits would have been earned except for the breach, and 3) The amount of loss can be shown with reasonable certainty.

An injured party may recover for a breach of contract the amount which will compensate the party "for all the detriment proximately caused by the breach, or which, in the ordinary course of things, would be likely to result from the breach." (Cal.Civ.Code §3300.)

Limitations on Damages
There are several limitations on awarding damages to make the non breaching party whole: A party cannot recover for loss which he could have avoided or mitigated through his reasonable efforts. (Rockingham Cty. v. Luten Bridge Co. 35 F.2d 301 (4th Cir. 1929); Rest.2d §350)
Read more about recovery of damages in lawsuit.

Friday, March 9, 2012

Hermosa Beach Slant Oil Drilling Maps

These maps are speculative drawings based in information we have gathered from the Macpherson proposals. E&B oil has not submitted their drilling proposal yet.

Map of the proposed Hermosa Beach slant oil drilling site will reach out into the ocean. What is slant oil drilling? The drilling will also go underground into Redondo Beach likely. The California Coastal Commission has full authority of this drilling and has thus tidelands restrictions on where money from oil can be spent. The oil site will also be less than 100 feet from homes when Colorado requires a 350 foot setback and California recommend 300 feet.

Do we really know what is underground nor want to disturb the environment with oil drilling pipes possibly poking through the ocean floor? Do want want to risk the dangers of the ocean floor and our beaches sinking (subsiding)?

The proposed drilling site effects more than 50% of residents of Hermosa Beach. Noise, air pollution, explosions or dangerous gases are all a potential consequence. Not to mention the drilling site will be within a few hundred yards of your kids playing in the park. If you run on the greenbelt in Manhattan Beach or Hermosa Beach there could be an oil pipeline to under it to Chevron Refinery in Torrance and/or a natural gas pipeline AES Power Plant in Redondo Beach.

Lets not forget about the fault line that runs across the Santa Monica Bay and the South Bay. We have had several earthquakes offshore in Hermosa Beach and Santa Moncia bay in the past few years.

27 oil wells and 3 water injection wells for Fracking and Natural Gas

Horrible Air Quality

I am told by oil experts in the business that the odor from gases and drilling will be "awful" around the site. There is no way to contain the odor or poisonous gases that come up our of the ground. This map depicts 3 different wind scenarios we get in the area. An onshore, offshore and no wind where the smell and gases get trapped in the valley.

Emissions generated during the drilling/development phase include vehicle emissions; diesel emissions from large construction equipment and generators, storage/dispensing of fuels, and, if installed at this stage, flare stacks; small amounts of carbon monoxide, nitrogen oxides, and particulates from blasting activities; and dust from many sources, such as disturbing and moving soils (clearing, grading, excavating, trenching, backfilling, dumping, and truck and equipment traffic), mixing concrete, and drilling. During windless conditions (especially in areas of thermal inversion), project-related odors may be detectable at more than a mile from the source. Excess increases in dust could decrease forage palatability for wildlife and livestock and increase the potential for dust pneumonia. See source.

250 Yard Heavy Impact Zone from Noise, Odor, Dangerous Gases and Explosions. There are two parks, hundreds of homes and a jogging trail in the vicinity which I think is disgraceful. There are probably 10+ kids under the age of 10 years old that live in the red boxed area. Its just sad that no one thought through the ramifications.

Projected Ripple Affect of Real Estate Losses

This is a Scenario of What Could Happen

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Why Did HB City Hide Settlement Agreement?

See For Yourself on HermosaBCH.com

I downloaded the full settlement agreement from the Hermosa Beach web site on Sunday night on my iPad. Yesterday, I started receiving emails from people asking "where is the full legal agreement on the Hermosabch.org web site?" I responded its on the web site where I downloaded it Sunday night. To my surprise it was removed at that is a FACT. If someone tells you that they didn't remove it, kindly ask them why they buried it? Why would you remove it from where all the Macpherson settlement documents are stored?

I would like to think this is just a mistake but it just doesn't smell right and I question whether they are making changes to the agreement. Here are some tough questions to ask Hermosa Beach City Officials after reading the agreement. Once again more disclosure and transparency is needed by our elected officials since there hasn't been a public forum on this topic for almost a decade.

Why would the city take the agreement down and bury it here where no one can find it? We have taken the liberty of posting the document here on Macpherson Settlement agreement on our web site. Please note the date of this post, just in case the city replaces the document. This screen shot above was taken on Friday, March 9 at 8AM.

Did Our Elected Officials Violate The Brown Act?

The Ralph M. Brown Act, was an act of the California State Legislature, authored by Assembly member Ralph M. Brown and passed in 1953, that guaranteed the public’s right to attend and participate in meetings of local legislative bodies. How many open forum meetings did the Hermosa Beach City Council have on this issue in the last 10 years? Zero. In fact, all negotiations and discussions were in a closed session and nothing was disclosed to the public until the deal was done. Not only that but if you read the Hermosa Beach Macpherson settlement agreement it appears our officials are under a non-disclosure agreement and confidential information is being withheld.

Throughout California’s history, local legislative bodies have played a vital role in bringing participatory democracy to the citizens of the state. Local legislative bodies - such as boards, councils and commissions - are created in recognition of the fact that several minds are better than one, and that through debate and discussion, the best ideas will emerge. The law which guarantees the public’s right to attend and participate in meetings of local legislative bodies is the Ralph M. Brown Act.

While local legislative bodies generally are required to hold meetings in open forum, the Brown Act recognizes the need, under limited circumstances, for these bodies to meet in private in order to carry out their responsibilities in the best interests of the public. For example, the law contains a personnel exception based on notions of personal privacy, and a pending litigation exception based upon the precept that government agencies should not be disadvantaged in planning litigation strategy. Although the principle of open meetings initially seems simple, application of the law to real life situations can prove to be quite complex.

Thursday, March 8, 2012

A Blessing From The Heavens?

Read These 3 Daily Breeze Article Quotes With A Barf Bag in Hand

Mayor Howard Fishman said. "We stopped the bleeding. It's the greatest accomplishment this council has done since I've been on it."

Gary Brutsch was a councilman in 1984, when voters approved two Macpherson-backed initiatives allowing drilling. And it was a chance encounter in December with Don Macpherson, his former neighbor, on a flight to Hawaii that paved the way for settlement negotiations to rekindle. Brutsch, a South Bay Realtor, said of the settlement. "At the very least, it has limited the city's liability. I think it was absolutely a blessing from the heavens."

"When you look at technology, and ask, "Is it dangerous?' The answer is not really," Ershaghi said. "People may worry because they are not sure of what the consequences are. The technology is there to make the project safe, it's just a matter of making sure rules and regulations are followed."

Just to be crystal clear, I am NOT questioning Doug Morino the Reporter who did a great job on the article. Kudos to him for doing a lot of homework. More to come I am sure. Read this entire story from the Daily Breeze.

Macpherson Settlement Agreement

Don Macpherson Picture from SF Gate

Macpherson Oil Settlement Agreement (Google Docs)

Is it rather suspicious that the city of Hermosa Beach posted the full 45 page agreement over the weekend and suddenly takes it down this week? Many people are looking for it and its ridiculous that the city would take it down. Is it because they need to amend the agreement or are they becoming embarrassed. Again, more transparency is needed. We have a lot of smart people in this town and its very important that every dissects every aspect of this agreement. If you want to know why the agreement may not be legal or want to hear comments from residents on the Macpherson see the previous two links.

See Also:
Macpherson Lawsuit Issues

Wednesday, March 7, 2012

Earthquakes From Drilling?

Ohio Earthquakes Linked to Natural Gas Drilling

Read the LA Times Article

Enjoy this recent CBS News Story

One of the environmental impacts that we feel has not, was not adequately addressed initially and certainly now needs to be re-addressed, is the issue of earthquake hazards. And we have a declaration from Dr. David Jackson who's on the National Academy of Sciences. Dr. David Jackson who's on the National Academy of Sciences. He is a respected geophysicist, was a professor at UCLA. He is on the California Earthquake Prediction Evaluation Council. And he said that the reinjection of water into the Hermosa Beach site, well the reinjection of water into any site will increase the likelihood of risk of earthquakes based upon an L.A. Times article and other studies that have come out recently about the fact that. Northridge has increased the risk of earthquakes in our basin. Read the State Lands Commission testimony transcript which he predicted in 1994 and its coming true in place like Ohio.

We are very concerned about the impact upon the oil and a as sanctuary in the Santa Monica Bay. Pipelines will go into the bay but could rupture in case of an earthquake. We're saving on the earthquake issue it wasn't properly considered by the by the city and now there's new information. New studies indicate water re-injection increases the likelihood of earthquakes.

Huntington Beach Residents Want Oil Facility Shut Down

The Angus Petroleum production facility on Delaware St. in Huntington Beach from which odors and noise have been emanating. Huntington Beach residents say fumes, noise from Angus Petroleum are unbearable. Officials say the company is following regulations. This Huntington Beach oil facility has also been connected with oil spills in the area which cost the city $1.5M to clean up.

Residents in the neighborhood near Springfield Avenue and Delaware Street continue to complain to the city and the Southern California Air Quality Management District but say they have yet to see results. City officials and the AQMD say they have been fielding complaints on the facility but so far Angus has been cooperative and complied with regulations. Last summer residents appealed to the city for help, saying the fumes were causing health issues including headaches and burning eyes. The Fire Department sent a violation notice to Angus Petroleum and said company officials were responsive to residents' concerns.

The Angus Petroleum facility on California Street had been inactive for nearly 11 years but started work again last summer. Oil production began on the site in 1992 but was shut down in 1998.

Oiled Seabirds Rescued in San Pedro

The oil-crusted seabird was swaddled in a sweatshirt inside a gym bag, carried by a woman looking for help at the International Bird Rescue center in San Pedro. Nearly 100 Murres, a diving bird that spends most of its life at sea, have been brought to the International Bird Rescue center in San Pedro to have oil removed from their feathers. The oil came from natural seeps in the Santa Barbara Channel and gets stirred-up by winter weather and currents. See Daily Breeze article.

Redondo AES Power Plant Rebuild is Related

E&B Oil drilling is related to AES plans to rebuild Redondo's Power Plant. E&B will be required to build a pipeline underneath the Hermosa Beach greenbelt down to Redondo Beach for trucks to transport and/or service the low grade oil. Do you want big oil trucks driving into the community or a PowerPlant that could use the oil to run operations? Who knows AES might have plans to process the oil on site. We don't know but the timing of the the AES Redondo Power Plant remodel could be related!

The oil pipeline and the power plant are separate but do share the same nuisance factors. The oil will be piped down the greenbelt to a SCE tunnel (tube) that houses other piplines and utility type uses including fiber optics that land on our beach. Some is above ground (wires) with otherstuff below ground. The power plant AES used to run on oil and had several pipelines installed over the years. SCE controls this access under utility agreements.

We need to fight this one and see the big picture of what is going on. Big business energy is attacking a community and its our job to protect our livelihood. Join the fight on Facebook to Tear Down Redondo's Power Plant. Also, read the the blog similar to ours AES Power Plant Must Go.

Tuesday, March 6, 2012

$1B+ Destruction of Real Estate Wealth

This picture above precisely why homes are so much cheaper in Huntington Beach, CA. A $1,000,000 home in Hermosa Beach would likely be 25% less if it were based in Huntington Beach. Most speculate its because of the widespread drilling amongst the homes. Do you want our in Hermosa Beach to drop by 25%?

The 1.3 acre City Yard lot was worth an estimated $57,000 back in 1958 according to old news articles. At this time oil was trading at $2 per barrel. This was when the last Shell oil drilling vote was being contested by long timer Hermosa resident and hero Barbara Guild. What is this City Yard lot worth now?

Most speculate it might be worth as much as $10M for commercial zoning and possibly as high as $15M if it was rezoned for residential? That is 175X the value. Oil is now $100 per barrel only 20X more. So you have to ask yourself the question which is more valuable today? Real estate or oil? Are we just giving E&B Oil a $15M piece of property for nothing? Its not factored into the proposed cost of voting for Yes oil drilling.

There are 7,000 parcels in Hermosa Beach. Every 1% decrease or increase in home prices in Hermosa represents a $57M increase or decrease in aggregate wealth. A 15% drop would flush $1B of wealth and and huge property tax base down the drain. The is assuming median home prices are $820,000. This oil drilling deal gambles with $5.7 billion in aggregate real estate wealth based on 7,000 parcels. This is a zero sum game if you if you factor in the amount of property taxes that will be lost as a result with a 15% drop in real estate values. You could also make the argument that real estate in Hermosa has been suppressed because of the ongoing oil and bankruptcy issue. Pay of the $17.5M and real estate may rise by $1 billion in the area and increase the property tax base.

The City "might" make $1M in estimated revenue if they are lucky for a 4% increase on a budget of $25M annual budget? .20 cents per barrel for the schools is going to amount to nothing. Plus they can't spend the money because of the Tidal Lands act which restricts usage of the funds generated from oil.

Property values have risen up 2X since the deal was struck with Macpherson in the 1990's. Median home prices were around $400,000. Property values are up a 100X+ since the 1950's when the last oil crises was upon us with Shell.

Ask Mayor Howard Fishman Lunch on Tuesday

Networking Lunch at Fritto Misto in Hermosa Beach on Tuesday, March 13 at 11:30 AM. Lets get some more information out to the public while we eat some tasty garlic bread and bruschetta. We attended the lunch and was struck be a number of erroneous statements the Mayor made about revenues, timing of the vote and some important legal details. It is clear that he did not understand the agreement he signed and think this is why large agreements like this should not be negotiated and signed in a backroom without public comment. Our Hermosa Beach City Council is obviously being told what to say by the oil company and a paid PR agency. Are they really working for us? Why are they under a confidentiality agreement?

Reasons Why E&B Oil is a Bad Deal

Based on my discussion I think the deal the Hermosa Beach City Council struck is a bad one for several reasons. The only good news is we have an actual $ settlement number and its not going to bankrupt the city. Here are my top 10 talking points to be used with anyone you know.

No public forum was held. Only 1 company (E&B) bid on the deal behind closed doors.
The oil site will be within 100 feet of homes and businesses. California recommends a 300 foot setback and Colorado law requires 350 feet setback.
$1B destruction of real estate values for a new police station or new storm drains on the beach?
Santa Monica Bay is a no-drill sanctuary (Hermosa drilling map).
State Lands Commission Staff recommended against this Oil Drilling project because it expected poor results.
Hb cannot use any of the money shared "net revenue" NOT gross for anything that is not on the beach or greenbelt. See Tidelands Act.
City Council “settlement” is a collective punishment for citizens daring to reject their plans for siting an industrial project next to homes.
Schools won’t benefit much if at all from drilling. The .20 cents per barrel for the school system was a horrible deal struck in 1990's. Oil was trading at $20 per barrel in 1990's and now at $110 per barrel.
Experts claim only 2M-9M barrels are possible at this location at best. That is only $400,000 to $1.8M for schools at .20 cents per barrel over the lifetime of the project. Over a 20 year period that is nothing per year for the schools, maybe $20K to $40K per year. Can't even hire one person for that $.
Once E&B is entrenched in Hermosa Beach, say good-bye to local control. E&B will call the shots, influence local elections, etc. Hermosa Beach will be forced to jump when E&B says ‘jump’.
Oil seeping from the ocean naturally will undoubtedly be disturbed by the slant drill. Do you want more oil washing up on the beach similar to Santa Barbara and Huntington Beach?
HB can pay off E&B Oil company and it will not bankrupt the city.

Sell the city storage property next to the fire station for $7.5M
Get a $10M "Judgement Bond" from the State of California at 3% and service loan which will cost the city $300,000 per year. (not much in the grand scheme of things).

Do you want to see a 75 foot drilling tower as you look out over the ocean. (See pic)
Drilling on this lot will destroy a perfectly fine $5M lot.
Drilling is noisy and you want to smell fumes of oil downwind everyday?
The oil tar sands used "if found" would be low grade oil and only used for ships and heavily machinery. It takes more energy to refine the crap than regular oil.
Lethal gases and possible explosions?
Additional ground settling and possible earthquakes.
Not a green Hermosa sustainability initiative if that is what the city wants.
Its low grade oil, used by crappy machinery and will have an unknown impact on the sea and surrounding environment.

Please share this with you friends and neighbors who might be helpful spreading the world that the oil settlement should be a no vote. It may not be on the ballot for a long time but it is never too early to start campaigning against something this stupid. Please let me know if you have any thoughts or concerns. If you have any neighbors that should be on the list please copy them and lets start building the campaign now.

Stop Oil Drilling in Hermosa Q&A

Ask Questions Here

Monday, March 5, 2012

E&B Oil Production in California

Hermosa Beach is the logical next step for E&B's oil drilling operation based on this California map of oil underground. Wilmington & Huntington Beach should be investigated heavily.

This Map was obtained on the E&B Natural Resources web site here.

See Company History

2001 Referendum Banning Oil & Gas Operations

2001 Hermosa Beach Referendum Banning Oil & Gas Operations

Proposition E (banning oil and gas) was approved with 56 percent of the vote: 2505 “yes” votes were received; 1940 “no” votes.

Sunday, March 4, 2012

E&B Natural Resources History

Company History

1971 – Company founded to exploit oil and gas opportunities in and around Bakersfield California

1983 - Mr. Steve Layton co-founded Alma Energy and Equinox Oil with his father and Mike Galesi. He served as President of Alma and Equinox from 1997 to 2000.

1998 – Steve Layton's Massive Louisiana Oil Spill as CEO of Equinox Oil.

2000 - The Galesi Group and Patina Oil & Gas form Elysium Energy, LLC a 50/50 joint venture, which acquires Alma Energy and related assets. Francesco Galesi purchased the Alma and Equinox assets out of bankruptcy after an Equinox oil spill and formed E&B Natural Resource Management Corporation. Mr. Layton was retained as President of E&B.

2003 - In 2003 Galesi Group dissolves the joint venture and receives certain oil and gas interests. Headquarters are established in Bakersfield with operations conducted under the name of E&B Natural Resources Management.

2004 – Under new ownership, E&B implements a strategy of aggressive field redevelopment augmented by an active acquisition program. E&B acquires the Cuyama field and establishes operations in Louisiana. Production surpasses 2,000 boepd.

2007 – E&B expands strategy to include exploration in and around the Gulf Coast. Production surpasses 3,000 boepd.

2012 – E&B has become one of California’s largest private oil and gas companies with gross daily production exceeding 7,000 boepd, and a proved reserve base of 49 million barrels of oil equivalent

Company Highlights

 Owns and operates 20+ oil fields in California, Louisiana, Wyoming, and Texas

 Produces approximately 6,000 barrels of oil per day, and 5,250 mcf of gas per day (gross)

 Benefits from an experienced management team

 Employs over 100 engineers, operators, field personnel, administration and staff

 Owns and operates 10 dedicated field service rigs

 Through its affiliation with Excalibur Well Services, has access to a full suite of drilling, production, workover, and service rigs along with associated cementing and well servicing equipment.

Company Operations

E&B Natural Resources owns and operates a diversified portfolio of some 20+ oil and gas fields located in four states. Characteristics of E&B’s portfolio include:

 Properties are well-diversified, long-life producers withsubstantial upside

 Proved reserves of 49.2 million barrels of oil equivalent

 Oil weighted production (approximately 94%)

 An R/P ratio of 20+ years

 Four EOR projects underway (Kern River, Salt Creek, McKittrick, Poso Creek)

 Large inventory of exploration prospects

 All-in operating cost structure (GAAP Basis) around $20/boe (lifting, workover, EOR, P&A, taxes)

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