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Hermosa Beach Settles Macpherson Oil Lawsuit

The Santa Monica-based oil company agrees to dismiss its lawsuit and assign its lease and permits to drill in Hermosa Beach to another company. The lease will be subject to approval by voters.

The future of oil drilling in Hermosa Beach will be up to voters under a settlement of a 14-year, multimillion-dollar lawsuit brought against the city by a Santa Monica-based oil-drilling company.

Macpherson Oil Co. has agreed to drop its lawsuit and assign its lease and permits for an oil project at the city maintenance yard to E & B Natural Resources Management Corp., subject to a voter-approved ballot measure, Hermosa Beach Mayor Howard Fishman announced Friday.

"Whichever course the voters choose, they can know that through this settlement, we have removed the cloud of crippling litigation that has been hanging over the city for the past 14 years," he said in a conference call with reporters.

The ballot measure will ask Hermosa Beach voters to decide whether to repeal a ban on oil drilling that began in 1995. It was that same ban that set the Macpherson Oil lawsuit in motion.

Hermosa Beach voters in 1984 approved two ballot measures to allow oil drilling in the city’s maintenance yard site, at 6th Street and Valley Drive. The city then negotiated a lease with Macpherson Oil Co. in 1992, but three years later, Hermosa voters repealed the 1984 measure and reinstated a ban on oil drilling.

A court decision found the lease between Macpherson and Hermosa Beach was "breached" under the ban—that’s when the oil company sued, seeking about $750 million.

The settlement with Macpherson Oil, which the council has unanimously approved, grew out of discussions that Hermosa Beach City Councilmen Kit Bobko and Michael DiVirgilio had with the company.

In reaching a settlement, Bobko told Patch the City Council worked together as a team "every step of the way."

The agreement caps the city’s liability to $17.5 million, and "in the process, the residents get the choice," DiVirgilio said, whether to reduce that amount to $3.5 million by allowing oil drilling and bringing in E & B Natural Resources.

"At E & B’s expense, the city will conduct an extensive environmental review of the proposed [drilling] project and will place a measure on the ballot that will ask the city’s voters if they wish to repeal the existing ban on oil drilling in the city limits and enter into a development agreement for E & B to complete what it describes as a ‘state-of-the-art’ oil drilling project at the city’s maintenance yard," Fishman said.

For rights to the oil project, E & B Natural Resources will pay Macpherson $30 million.

"We look forward to the citizens of Hermosa Beach getting better acquainted with us in the coming year and have great hope that we can earn their support for this mutually beneficial relationship," Steve Layton, E & B Natural Resources Management Corp. president said in a statement.

If voters reject the ballot measure to allow oil drilling, the city would owe E & B Natural Resources the $17.5 million, Fishman said. If the measure is approved, the company would need to obtain its necessary permits and the city would owe $3.5 million.

A date for the vote has not yet been determined.

See accompanying video under photo to hear what residents last year told Patch they thought about the long-running oil dispute between Macpherson Oil Co. and the City of Hermosa Beach.

Joe Galliani March 03, 2012 at 12:18 PM
This settlement was a long time in coming and I'm very happy for all my friends in Hermosa. Now it's time to move onto a greener future and use all that money that was going to the legal battle for renewable energy and cutting the city's carbon footprint.
Jongkon Jampahom March 03, 2012 at 09:33 PM
Settlement is great, but I'm wondering if the City does allow the drilling, what kind of future income will the City receive from the oil?
Matt Schaub March 09, 2012 at 02:56 PM
The income projected is unknown and based on % of net income. Who knows how much income would be generated for our town. The residents have to consider the loss in property values which lowers our tax revenue to our city due to having an oil rig and production facility in our neighborhood. This would be a very costly endeavor for our city to allow drilling and i haven't talked about the health concerns.
Catch A Wave March 15, 2012 at 11:54 PM
Happy? To have a Sophie's choice of paying $17.5 million or $3.5 million PLUS be subjected to oil drilling in Hermosa? Leave it to the right-wing corporate whores Kit Bobko and Michael DiVirgilio to sell the city down the river.
Sounds Good April 23, 2012 at 05:24 AM
Drilling is happening in many urban locations around Los Angeles. You just don't know it. Keep driving that car around and blaming others. Its time to drill here and now. Stop giving our money to the Arabs.

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