Hermosa Beach voters are being asked to greenlight new oil drilling or pay a penalty to settle a legal fight stretching decades long, a cautionary tale about the high stakes for land use in California cities, particularly when oil companies get involved.
A yes vote on the only measure on Tuesday's ballot would approve a plan brought forward by a company called E&B Natural Resources to erect an 87-foot oil rig on what is now the city’s maintenance yard, about 6 blocks from the beach, and pump as much as 8,000 barrels a day from dozens of wells. If voters turn back Measure O, Hermosa Beach is on the hook for $17.5 million dollars, payable to E&B.
To understand how the city got here, let’s start with a little history.
Oil companies have eyed Hermosa as an access point since oil was first discovered there almost a century ago. But the town first banned drilling in 1932, and for most of its history, city leaders said no thanks.
But when the city was too broke to buy a greenway property in 1984, voters reconsidered a pitch from McPherson oil to stick a straw into an oil reservoir just offshore.
“Hermosa had, during a very short period of time, made oil drilling legal. And during the window when the activity was allowed, signed a contract McPherson oil,” says Kit Bobko, a lawyer, resident and former city councilman.
In 1996, residents galvanized by environmental activists voted to overturn the deal.
McPherson sued, and after a decade-plus of court cases bouncing up to the appellate level and back, the city with an annual budget of $30 million or less was on the hook for $250 million in damages, maybe more, Bobko says now.
“It was jarring. We thought this was really, really, really bad,” Bobko said. “For me, being a lawyer, who could see that we were basically being handed a blank check to sign potentially, it was my perception that this was potentially ruinous.”
Bobko and another city councilman, Michael DiVirgilio, led negotiations for a settlement with McPherson and a second oil company, E&B Natural Resources. Under the deal hammered out, E&B would essentially step into McPherson’s shoes, paying that company $30 million in exchange for its drilling interest.
Now, all these years later, E&B may get the approval it has long sought in the form of Measure O, the only item on Tuesday’s ballot.
E&B’s Amy Roth says the project will adhere to strict safety standards. And she points out that Hermosa Beach could reap a windfall in royalties.
“The economic benefits could be $600 million for the city of Hermosa Beach,” Roth says. “The city of Hermosa Beach has an annual budget of $35 million. So that’s very substantial.”
The local police union is arguing for a yes vote. And other voters, including former councilman Bobko, who has not taken a public position on the measure, have floated the idea of royalty checks paid directly to residents if drilling is allowed.
Interested residents question E&B’s numbers, particularly since the price of oil has fallen by half since last year. Revised estimates recently circulated by city consultants look at a range of per-barrel prices.
Hermosa Beach has saved up $6 million toward its legal obligations, in the event of a payout; city manager Tom Bakaly says the city would borrow the rest.
Bakaly says sometimes he gets asked whether Hermosa Beach can afford the settlement. “Short term, it's in the budget,” he says. “Longer term, we have some infrastructure needs like many cities and employees haven’t received raises in eight years. And so, longer term, there are going to be some decisions to make. “
Hermosa Beach voters will weigh these financial questions when they go to the polls, in addition to the usual questions of environmental and health risk that surround oil drilling, particularly at the coast.
“Oil knows no boundaries. If there should be a spill, it’s going to affect the bay, our neighbors, and more,” says Dency Nelson, a longtime South Bay activist and Hermosa Beach voter. “You know, is it of interest to Redondo Beach, our neighbor to the south? Is it of interest to Manhattan Beach, our neighbor to the north? Yes. “
Environmental activists have rallied around the No on O campaign
Scrutiny about oil extraction in California has reached new heights as environmental groups place fracking under a microscope.
In the 1950s, Hermosa Beach got famous for Sunday jams at the Lighthouse club. They attracted West Coast jazz fans and celebrity sit-ins.
Bakaly say that’s just one way this beach town is special. “I heard someone describe that we’re different from other beach cities because we’re more in the sand,” he says. “And that I thought was a good description.”
To him, that means feeling close to the coast: In a town of 1.3 square miles, nobody’s too far away from the surf and sun.
That’s what brought Robert Sonchik here. “I’m retired. Every day is Saturday.”
The cheery former postman often spends mornings on his porch, directly across from E&B’s offices. Sipping out of a Solo cup, Sonchik wonders about the risk of a blowout if the rig malfunctions.
“There’s no way they can predict what could happen,” he says. “I could be sound asleep in my bed right here, and they could be a blowout, and I would never know because I would be dead.”
Sonchick also says he’s also more worried about his property values than the city’s financial health.
While all the current council members have voiced opposition to the measure, the city itself is officially neutral on the issue. City manager Bakaly says he still sometimes gets questions from confused voters on how Hermosa Beach got into this dilemma in the first place.
“People want to know, who did this? Where can I find the person that made that decision to bring oil back?” he says, recalling public meetings. “And I try to gently say. You did.”