Strictly Business

Monday, Jul 29 2013 05:30 PM

Bakersfield company hopes to revive oil drilling in Hermosa Beach


HERMOSA BEACH -- Residents are debating whether to get back into the oil business, 80 years after this wealthy coastal town first banned drilling.

Depending which way things go, it could mean a lot to Bakersfield-based oil producer E&B Natural Resources.

An environmental review has begun on a project to drill as many as 30 wells, and an election on the matter could be held next spring, the Los Angeles Times reported.

The city's 1932 oil drilling ban was overturned more than 50 years later after Santa Monica-based Macpherson Oil proposed a project that could have filled city coffers. In 1995, however, voters changed their minds and the city halted the project, declaring it unsafe.

The company filed a $750 million breach of contract lawsuit that dragged on for 14 years. In March, the city announced a settlement.

Under the deal, E&B Natural Resources bought Macpherson's stake in the deal for $30 million and limited the city's liability to $17.5 million.

The settlement allowed E&B to take over the project, which could produce up to 45 million barrels of oil from wells a few blocks from the beach. The wells would slant both inland and beneath the ocean to reach oil and gas deposits.

Supporters said the city could gain as much as $500 million in oil revenues over 30 years and the school district could receive $11.7 million.

E&B President Steve Layton said the company is prepared to invest an additional $170 million in the project beyond its initial expenditure of $30 million. In return, he said the project could increase the E&B's daily output by 8,000 barrels a day at its peak -- the equivalent of about 80 percent of its current production across the country.

He emphasized that the project is entirely up to Hermosa Beach residents.

"All we want to do is give them the information so they can make an informed decision," he said.

Opponents said derricks aren't welcome in their scenic town. They fear leaks and toxic chemicals, as well as construction traffic and noise.

Mike Collins, who grew up amid the oil fields of Bakersfield, lives four blocks from the shore and 100 yards from a proposed drilling site. He and others have formed a coalition called Stop Hermosa Beach Oil.

"I know what oil smells like, I know what it looks like, what it sounds like," Collins said. "I don't want that in my backyard."

The battle already is heating up.

Wind shop co-owner Kathleen Knoll said she received a dozen angry telephone calls and emails after agreeing to let E&B hold a meet-and-greet public event there. Some customers vowed to boycott the shop and the event was moved.

"We got a glimpse of how passionate people already are and how upset they've become about even the possibility of having oil," Knoll said. "This has gone on for decades, and I think it's going to be very divisive."

-- Californian staff writer John Cox contributed to this report

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