City of Hermosa Beach E&B Oil Drilling and Production Project, Measure O (March 2015)

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An oil drilling and production project measure was on the ballot for Hermosa Beach city voters in Los Angeles County, California, on March 3, 2015. It was defeated.

Measure O would have authorized an oil drilling and production project agreement between the city and E&B Natural Resources Management Corporation, providing for an exemption to the city's ban on oil and gas drilling. The project, which would have included 30 production wells and four injection wells, was designed to be located at 555 Sixth Street.

The estimated environmental, social and health impacts of the proposed project, as well as the estimated financial benefits to the city, are outlined in full in the "Reports and analyses" section below.

This measure was the result of a settlement made between the city, Macpherson Oil Co. and E&B Natural Resources Management Corporation. After a project proposed by Macpherson was first approved and then denied, a lengthy court case followed. While the city won the right to stop the Macpherson project, it became increasingly likely that Macpherson would win a huge settlement payout. E&B Natural Resources stepped in with a project of its own and paid most of the settlement for the city. Measure O was a part of the deal made with E&B.

If Measure O had been approved the city would have reimbursed E&B for only $3.5 million of the settlement loan, and the oil company would have gone forward with its proposed directional drilling project. Since voters rejected Measure O, the agreement required the city to repay E&B in the amount of $17.5 million.

Supporters said the project's fiscal benefits to the city as a whole, city residents and city property owners would have outweighed the project's risks and negative impacts on the environment and quality of life.

Opponents argued that the city was doing fine economically under its current prohibition of oil drilling activities and should avoid the risk of oil spills, damage to air and water quality, unpleasant odors, aesthetically damaging equipment, noise nuisances and property use restrictions by rejecting no to E&B's proposed project.

The committee registered in support of Measure O worked on its campaign with funds equal to about $800,000, which amounted to over $100 per vote cast. The campaigns opposing Measure O spent under $100,000.

Election results

Hermosa Beach, Measure O
Result		Votes	Percentage
d No		5,968	79.5%
Yes		1,538	20.49%

Election results from Hermosa Beach Elections Office

Voter turnout

The city enjoyed an unusually large voter turnout for this election, which was thought to be motivated by the contentious Measure O ballot measure. City Clerk Elaine Doerfling said, “It’s the busiest day I’ve ever seen. And I’ve been here since 1989.” According to LA Weekly, a typical city council election brings out about 4,500 of the 13,800 registered city voters, but for this election 7,515 votes were cast.

Text of measure

Ballot question

The question on the ballot:

“

Shall E&B Corporation’s 34 well oil and gas drilling/production project at the City’s 555 Sixth Street maintenance yard be approved by 1) amending the General Plan and Municipal Code to exempt the project from the City’s oil drilling ban and repeal the restriction on City’s use of project royalties, 2) awarding a pipeline franchise to transport oil/gas underground, 3) approving a 34 year development agreement, and 4) determining that project financial benefits outweigh its unavoidable environmental impacts?

”

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Impartial analysis

The following impartial analysis of Measure O was prepared by the office of the city attorney:

“	Measure O proposes adoption of an ordinance that would grant City approval to E&B Natural Resources Management Corporation's oil and gas drilling and production project at the City's maintenance yard at 555 Sixth Street. E&B proposes a four-phase direction drilling project over the course of 34 years consisting of 30 production wells, 4 water injection wells and appurtenant equipment on the 1.3 acre maintenance yard. The maintenance yard would be relocated to City-owned property adjacent to City Hall. Under current law, oil drilling is prohibited in Hermosa Beach. Only the voters may change the law to allow any oil and gas drilling and production. Permits from state agencies are also required for E&B's project. The ordinance proposes five actions constituting City approval of E&B's project: 1.) Amend the Coastal Land Plan (part of the Hermoasa Beach General Plan) to change the project site's land use designation and adopt energy policies consistent the E&B's Project; 2.) Amend the Municipal Code to exempt E&B's project from the citywide ban on oil drilling, allow a 35-foot high perimeter wall and repeal the requirement that the City's share of project royalties be used only for open space acquisition; 3.) Approve a development agreement with E&B that confers to E&B a vested right to proceed with its project in exchange for financial benefits to be provided by E&B and imposes conditions of approval and required mitigation measures for the project; 4.) Approve a pipeline franchise allowing E&B to construct and operate subterranean pipes for transmission of oil and gas under Valley Drive from the project site southerly into Redondo Beach;and 5.) Adopt a statement that the project's potential financial benefits outweigh its identified unavoidable environmental impacts. A City consultant prepared an environmental impact report for the project that includes a detailed project description and identifies the project's significant unavoidable impacts after mitigation. City consultants also prepared a Cost/Benefit Analysis and a Health Impact Assessment. All three reports are available for review at hermosabch.org. If the measure passes and E&B proceeds with its project, the City is entitles to receive royalties (a portion of which woudl be restricted to activities/improvements benefitting tidelands) and certain other financial benefits listed in Exhibit C to the development agreement; the Hermosa Beach School District and Education Foundation would also be entitled to certain financial benefits. Under the terms of a lawsuit settlement over the 1992 Lease of the maintenance yard between the City and Macpherson Oil Company, if City or state approvals are not obtained the City will be obligated to pay E&B $17.5 million. A summary of the project's nine unavoidable environmental impacts and ten financial benefits can be found in Section 12 of the proposed ordinance. This measure was placed on the ballot by the City Council as required for consideration of E&B's project application. A "yes" vote favors adopting the ordinance that approves E&B's project. A "no" vote opposes adopting the ordinance. A majority of "yes" votes is required for the measure to pass. (quote)	”
—Michael Jenkins, Hermosa Beach City Attorney

Full text

The full text of Measure O, including environmental and health impacts and financial benefits, is available here.

Background

Voters enacted a ban on all oil and gas operations in the city in 1932. Five decades later, Macpherson proposed an oil drilling project and voters approved two initiatives allowing the project. In 1995, voters reinstated the ban and the city found certain risks associated with the proposed Macpherson project. A lengthy court case followed. While the city won the right to stop the Macpherson project if it proved too risky, it became increasingly likely that Macpherson would win a huge settlement payout. The company sought up to $750 million in settlement money. Ultimately, a compromise was reached. E&B Natural Resources stepped in with a project of its own and paid $30 million to Macpherson as a settlement on behalf of the city in return for an opportunity to present its project to the voters. Measure O was part of the deal made with E&B. If Measure O had been approved, the city would have had to only give $3.5 million back to E&B. Since it was defeated, the city owed E&B a reimbursement in the amount of $17.5 million. As part of the deal, E&B was required to pay up to $50,000 to cover the cost of the Measure O election.

Timeline

The following chronology of the events leading up to Measure O was provided by the city:

“

In 1998, Macpherson Oil Co. sued the City of Hermosa Beach over the termination of its proposed project to drill for oil from the city’s maintenance yard. After 14 years of litigation, the Hermosa Beach City Council on March 2, 2012, entered into a settlement agreement to end the lawsuit, safeguard the city’s services and give the voters a choice on the course taken for resolving this long-running lawsuit. Here’s a summary of important dates in the case: 1932 Hermosa Beach voters enact a ban on all oil and gas operations in city limits. 1976 Macpherson proposes an oil-drilling project in Hermosa Beach’s tidelands and then withdraws it. 1984 Hermosa Beach voters approve two initiatives – propositions P and Q – supported by Macpherson. The initiatives change the city’s longstanding ban on oil drilling to permit drilling at two sites. 1986 Motivated by the promise of royalty payments to shore up sagging revenues for the city and the school district, the City Council approves an initial lease to allow Macpherson to drill for oil. 1992 The City Council approves an operative lease allowing Macpherson to “slant drill” at an angle from an onshore site so it can tap into underwater oil reserves off Hermosa Beach’s shores. The project calls for up to 30 oil wells and production facilities on 1.3 acres at the city’s maintenance yard at 6th Street and Valley Drive, next to the Greenbelt, businesses and residences. 1995 Hermosa Beach voters approve Proposition E to restore the oil-drilling ban in the city. The City Council moves ahead with the Macpherson project because it had an agreement with the oil company prior to the Proposition E vote. The city retains the right to make future safety-related determinations before issuing the project’s final permits. 1998 A new report presented at a California Coastal Commission hearing raises additional safety concerns regarding the Macpherson Oil project. In response, an independent expert hired by the city conducts an integrated risk analysis and finds risks to the city from the project. The council votes to halt the project, and Macpherson Oil Company sues the city. 1999-2009 The complex case evolves through a series of appeals, including three to the Second District Court of Appeal. The city attempts, without success, to negotiate an amicable and reasonable resolution of the case. 2010 The Court of Appeal rules in Hermosa Beach’s favor by finding the council had the right, under the lease provisions, to halt the project, if it found the project posed health or safety risks to the community. The court returns the case to a jury to decide if the project was so risky that the council would have denied the drilling permit on that basis. 2012 With a jury trial set for April, a unanimous City Council votes to approve an agreement that ends the lawsuit, safeguards the city’s services, limits the city’s liability to $17.5 million and submits to the voters a proposal to allow an oil drilling project that could ultimately result in no expenditure of the city’s tax revenues [Measure O].

”

Support

Yes on O campaign logo

Supporters

A campaign called Yes on O - Hermosa was started to urge voters to approve Measure O. This campaign, which was funded by E&B Natural Resources, managed contributions and expenditures through a committee called Hermosa Beach Residents for a Better Tomorrow.

The following individuals signed the official arguments in favor of Measure O:

• Kathleen P. Harren
• Karl Kurz
• Dan Inskeep
• Tiffany M. Rudek
• Cindy Lee Smet

The Hermosa Beach Police Officers' Association (POA) also announced its endorsement of Measure O.

Arguments in favor

POA President Jaime Ramirez said, “We believe that voting Yes on Measure O is in the best interest of the citizens of Hermosa Beach and the city’s financial future. The independent studies approved by the city have shown that this project is safe and reliable. Measure O offers financial stability and a source of revenue that can help Hermosa Beach and its residents."

Official arguments

The following was submitted as the official arguments in favor of Measure O:

Opposition

Opponents

"No on Measure O" logo

A campaign called Stop Hermosa Beach Oil was started to urge voters to reject Measure O.

The following individuals signed the official arguments in opposition to Measure O:

• Greg Savelli
• Stacey Armato
• Dr. Mary K. Campbell
• Dr. Lisa Santora
• George Schmeltzer

Arguments against

Keep the Ban, "Hermosa Beach Health Impact Analysis Discussion of Oil Blowouts," July 20, 2014

The following was submitted as the official arguments in opposition to Measure O:

“	Vote NO on O to keep oil drilling out of Hermosa Beach. Vote NO on O to preserve our health, safety and quality of life. Oil drilling will be unsafe, unhealthy, and a bad deal for Hermosa Beach. If permitted, it could mean years of construction and operation of 30 oil and gas wells, 4 injection wells, large storage tanks, and miles of dangerous underground pipelines that will threaten our quality of life and our health. The project will involve a drilling rig nearly nine stories high and thousands of miles of air-polluting heavy-truck traffic through neighborhood streets, along the Green Belt and the city-recommended safe route to school. For 30 years, the project will regularly employ a 110-foot-tall workover rig in operations that will bring unhealthy odors, flares, noise and light pollution, and the ever-present risks of gas, oil, and chemical spills, fires, and explosions. The official Environmental Impact Report identifies nine "significant unavoidable impacts" including increased air pollution that will exceed air quality thresholds. The air pollutants and dozens of toxic chemicals used during the project’s construction and operation have been linked to increased heart attacks, asthma, and cancer. These health impacts will fall heaviest on children and the elderly. We cannot trust this oil company to protect us. They have a history of oil spills and have recently been fined for illegally dumping contaminated wastewater. They currently face a lawsuit that claims they polluted groundwater causing crops to fail. A major accident, such as the uncontrolled release of crude oil or natural gas, called a blowout, could result in loss of life, extensive property damage, evacuations, long-term health impacts, and degradation of our beach environment. We cannot afford to take these risks.	”
—Greg Savelli, Stacey Armato, Dr. Mary K. Campbell, Dr. Lisa Santora and George Schmeltzer

Editorials

• The Los Angeles News Group, which controls nine daily newspapers in the Los Angeles County area, released an editorial urging voters to reject Measure O. An excerpt of the article is below:

“	Hermosa Beach residents are facing a tough choice: Approve oil drilling on a small city yard and reap untold millions, or reject it and be forced to pay out $17.5 million but retain the city’s seaside character. Picking the latter would put a financial strain on the city that it doesn’t need, but turning over the land to the Bakersfield-based E&B Natural Resources Management Corporation will allow for so-called slant drilling a few blocks from the beach. It is not worth it. Residents should vote no on Measure O — the culmination of a decades-long battle that will finally be put to rest.	”
—Los Angeles News Group editorial board

Campaign finance

Total campaign cash as of DATE, YEAR
Support:	$790,753.13
Opposition:	$48,768

According to campaign finance filings for the committees participating in the Measure O ballot battle, the contributions and expenditures of the ballot issue groups revealed the expected: a support campaign with funds many times greater than the war chest enjoyed by the opposition.

Support

The committee Hermosa Beach Residents for a Better Tomorrow, which backed the support campaign, reported $790,753.13 in total contributions, with expenditures of about $80,000 more. Much of the funding was provided by E&B Natural Resources.

E&B spokesperson Eric Rose said the company’s campaign was simply looking for transparency and informed voters on election day. Rose said, “We are proud of our campaign and of the investment we are making to educate Hermosa residents about the facts about measure O." Without making specific allegations, Rose also said, “E&B has always fully disclosed our spending on this campaign, unlike the opponents of O, who seem to not be able to send a mailer or post a sign with a proper disclaimer."

Opposition

Measure O opposition logo

Stop Hermosa Beach Oil, Surfrider Foundation - No on Measure O and Committee Against Hermosa Beach Oil Drilling, No on Measure O, the committees that stood in opposition to Measure O, declared $48,768 in total contributions, with about $24,000 in addition reported as expenditures.

Stop Hermosa Beach Oil treasurer George Schmeltzer said, “We’ve been gratified by the way people have responded. We’ve received contributions from across the city, from the north end to the south end, east and west of the highway and from young people and retired people.” But he added, “Since Moses’ time, I don’t think there has ever been a political campaign that thought it had raised enough money.”

Reports and analyses

"Hermosa Beach Residents Meet for Proposed Oil-Drilling Project," July 28, 2013

Environmental Impact Report

The full text of the legislation that would have been enacted by Measure O included the findings of an Environmental Impact Report and the city's Cost Benefit Analysis. The measure included a statement saying that the benefits outweighed the negative impacts on the environment and quality of life. This statement would have been approved by voters with a "yes" vote and was rejected with a "no" vote. In other words, voters would have been saying they thought the benefits outweighed the costs and risks if they had approved Measure O, while they said the benefits did not outweigh the costs and risks by rejecting Measure O. Below are the findings of each report.

Environmental & health impacts

In the body of the project ordinance that would have been enacted by the approval of Measure O, the city published the following findings regarding the environmental and health impacts of the proposed oil drilling project:

“	Impacts 1 & 2: Aesthetics and Visual Resources An 87-foot electric drill rig with three-sided acoustical shield would be installed at the Project Site at the beginning of Phase 2 for about 4 months, then during Phase 4 for 30 months, then periodically thereafter for re-drills for up to an maximum average of 30 days per year or a maximum of 150 days once every 5 years. The rig would introduce, primarily into the foreground and middleground environments, a visually dominant vertical feature which is distinct in form, mass, height, material and character from structures in the viewshed of locations which are considered to have high sensitivity. The effects of light, shade and shadow would produce contrasting geometric vertical planes and would project into a typically uniform (or otherwise naturally varied) sky backdrop. Night views of the open (illuminated) side of the drill rig, with the pattern and scale of this illuminated feature, would be out of character with existing nighttime views. Similar to day time impacts, this vertical feature would project above the horizontal plane of the existing illuminated environment and would become a focal element. The duration of exposure, number of sensitive viewers, and nature of the visual change would result in impacts that would be significant. During periods of Phase 4, a 110-foot workover rig could be present on site for up to 90 days per year. The open truss structure of the workover drill rig introduces a focal element of industrial character into viewsheds of primarily residential and light industrial character. The workover rig would not operate at night (after 6 pm). The mitigation measures provided in the Final EIR reduce these impacts to the extent feasible. However, these impacts (with the drill rig or workover rig on the Project Site) would remain significant adverse impacts after mitigation. The Mitigation measures include: the selection of colors and materials for the drill rig acoustical cover that are of a neutral sky color and fully opaque; the installation of a permanent 35-foot wall at the end of Phase 3 to provide for the stability of views and opportunities for positive visual elements (i.e., articulations of the façade) for the duration of Phase 4; landscape plantings installed at the end of Phase 3 that respond to the design of the walls; and the selection of colors and finishes and lighting to minimize glare and reflectivity. The impacts when the drill rig or workover rig are not present on the project site would be less than significant with mitigation. Impact 3: Air Quality and Odors Due to the close proximity of the Project site to neighbors, businesses and the public (within 100 feet of businesses, 160 feet of residences, 55 feet of the Greenbelt and 20 feet of the public sidewalks), certain scenarios could cause odors offsite. These could include various maintenance activities such as line, tank or vessel openings; workovers removing well hole equipment (pumps or tubing), thereby exposing the well equipment to the atmosphere; minor accident scenarios; and drilling activities including muds handling that could cause short-duration, intermittent odors, or pump leaks. Because odor thresholds for certain compounds found in the oil and gas industry are very low, in the parts per billion range, release of these compounds can cause odor impacts off-site. Therefore, due to the close proximity of neighbors, odor impacts could impact surrounding areas and would be a significant impact. The Mitigation measures provided in the Final EIR reduce the potential impacts related to odors to the extent feasible. However, the impacts related to odors would remain significant adverse impacts after mitigation. The mitigation measures proposed that would reduce the frequency of odor events include: the implementation of systems that direct odor-causing releases to flare-type systems; the implementation of a compressor seal vent collection system; implementation of an Odor Minimization Plan and an Air Monitoring Plan that include buffer areas, signage, monitoring, and alarms when certain levels of H2S and hydrocarbons are reached as well as notification protocol and remedies if releases occur; the use of an odor suppressant system; and increased vigilance associated with South Coast Air Quality Management District (SCAQMD) Rule 1173 (related to controlling "leaker" components) to further reduce emissions from fugitive components that could cause odors. The air quality impacts related to construction and long-term operational emissions, health risk, and greenhouse gas (GHG) emissions would be less than significant with mitigation. Impact 4: Biological Resources Oil spills and ruptures from the installed off-site oil pipelines could result due to geologic hazards, mechanical failure, structural failure, corrosion, or human error during operations. During a storm event, a spill of crude oil from the pipeline near the corner of Herondo Street and Valley Drive could be directed into the storm drain system, which from that point drains about 1,500 feet through storm drain piping onto the beach, near the high tide line. The amount of oil that would enter the ocean would depend on how much sand was on the beach at that particular time. This would have the potential to result in impacts to the numerous sensitive habitats and species present in the Pacific Ocean. Oil spills and cleanup activities could potentially result in impacts to biological resources. Direct impacts on wildlife from oil spills include physical contact with the oil, ingestion of oil, and loss of food and critical nesting and foraging habitats. The mitigation measures provided in the Final EIR reduce the potential impacts to biological resources to the extent feasible. However, these impacts have the potential to remain significant adverse impacts after mitigation. The mitigation measures include development of an Emergency Response Plan in compliance with the California State Oil Spill Contingency Pan. The plan shall include provisions for containment and cleanup measures and responsibilities. In addition, the Final EIR provides for mitigation measures for potential impacts to Hydrology and Water Quality discussed below, including implementing infrastructure preventative maintenance, conducting structural integrity tests, and routine inspections, would reduce the likelihood and severity of potential oil spills and exposure impacts to sensitive biological resources; but, impacts would remain significant and unavoidable. The fully enclosed drain systems proposed by E&B for the Project site would retain any spills on-site. Therefore, potential spills at the Project Site would not result in a significant impact to biological resources. Impact 5: Hydrology and Water Quality As described for Biological Resources above and in the Final EIR, during a storm event, a release from the off-site pipeline near the corner of Herondo Street and Valley Drive could produce a worst-case oil spill of 16,000 gallons that could drain directly into subsurface soils and/or to the ocean through storm drains. The probability for this impact to occur during a 0.50 inch rain event near the corner of Herondo Street and Valley Drive would be reduced from 0.40% to 0.087% over the Project life time after applying the mitigation measures described below. The probability that there would be any sized spill along any point of the pipeline, over the 35 year life of the Project would be reduced from 34% to 12%, after applying the mitigation measures described below. The mitigation measures provided in the Final EIR related to Biological Resources and Hydrology and Water Quality would reduce the potential impact to water quality to the extent feasible. However, this impact to water quality has the potential to remain a significant adverse impact after mitigation. The mitigation measures, in addition to the measures listed above for Biological Resources, include implementing infrastructure preventative maintenance (i.e., smart-pigging) and routine visual inspections, the installation of a leak detection system and check valve into the crude oil pipeline at Herondo Street, the installation of an oil separator in storm drain systems of Herondo Street, and the use of pipeline design measures , which include the use of impact resistant coating, the installation of a slurry above the pipe to the base of the pavement or ground surface, and the laying of strips of warning tape over the top of the pipeline to prevent third-party damage. These mitigation measures would reduce the frequency or severity of an oil spill reaching the ocean; but, impacts would remain significant and unavoidable. Impact 6: Land Use The drilling, construction, and potential future operations would be in close proximity to land uses zoned as open space (parks, baseball fields and the Greenbelt) and residential. Project activities during all phases may generate significant noise, odor, and visual impacts that have the potential to be incompatible with these adjacent land uses. The mitigation measures provided for Noise and Vibration below would reduce the potential noise impacts during the concurrent drilling and production, as well as production only, in Phases 2 and 4 to a less than significant level. The mitigation measures in the Final EIR provided above for odors and aesthetics and below for noise during demolition and construction would reduce the land use compatibility impacts to the extent feasible. However, the land use impacts would remain significant adverse impacts after mitigation. Impact 7: Noise and Vibration The predicted noise impact during demolition and construction activities in Phase 1 and 3 of the Project has the potential to be significant at the homes to the northwest and west of the Project Site where Project-related noise could result in an increase in daytime noise levels over existing noise levels. The mitigation measures provided in the Final EIR reduce the potential noise impacts to the extent feasible. However, these impacts during demolition and construction would remain significant adverse impacts after mitigation. The mitigation measures include the provision of 24-foot high noise barriers along the project perimeter and gates at the access points to the project site with all acoustical barriers required to meet the specified performance standards. Predicted noise impacts during the concurrent drilling and production in Phase 2 and Phase 4 drilling stages and during Phase 4 re-drills would be reduced to less than significant with mitigation. Noise levels when drilling is not occurring during Phase 4 would be less than significant. During re-drills, noise levels would be the same as those during drilling and, therefore, less than significant after mitigation. Predicted noise levels due to increases in traffic would be less than significant. Predicted vibration impacts would be less than significant after mitigation. Impact 8: Recreation As discussed for Biological Resources and Hydrology and Water Quality above, during a rain event, a potential oil spill from the oil pipeline near the corner of Valley Drive and Herondo Street could drain directly into the storm drains and flow to the ocean. An oil spill along the coastline could affect beach areas, leading to beach closures and boating restrictions in contaminated areas during and potentially after cleanup. Public perception of the recreational quality of the areas beaches (Hermosa, Manhattan, Redondo, etc.) could also be affected, causing a reduction in beach recreational activities for a substantial period of time. The mitigation measures provided for Biological Resources and Hydrology and Water Quality would reduce the frequency and severity of an oil spill reaching the ocean to the extent feasible. However, the impacts have the potential to remain significant adverse impacts after mitigation. Impact 9: Safety, Risk of Upset, and Hazards The potential for a blowout to result from drilling activities could produce offsite risks, including serious injuries and fatalities, if they encounter pressurized areas of the reservoir. Although it is not known at this time which reservoir areas, if any, are pressurized to the extent that pressures could produce a blowout, historical data from drilling in Redondo Beach indicates that such potential does exist. Pressurization once the wells are placed into production (after drilling) would last for only a short period of time (estimated at 30 days based on the Redondo Beach wells), but could still result in a blowout during drilling. E&B indicated in the Planning Application that wells would be pressurized for a short period after drilling. The mitigation measures provided in the Final EIR reduce the potential impacts related to a well blowout during drilling to the extent feasible. However, these impacts during drilling have the potential to remain significant adverse impacts after mitigation. E&B proposed design features, including the use of an off-shore equivalent-style blow out preventer equipment (BOPE), venting to a flare, and non-cascading shutdown systems 12 that would be incorporated into the design of the Project to address this potential impact. In addition, the mitigation measures provided in the Final EIR would include: preparation of an independent third-party audit with all audit items implemented immediately and the audit updated annually; and the design of crude oil spill containment areas as Class Division I areas according to NFPA and NEC or the isolation of spark producing equipment from the containment area. The potential for risks from a pipeline rupture would be less than significant with mitigation. The potential for impacts from risks associated with sparkproducing equipment resulting in the chances of igniting a crude oil spill would be reduced to less than significant with mitigation. In addition, the potential for risks during operations without drilling would be a less than significant impact.	”
—Environmental Impact Report

Financial benefits

In the body of the project ordinance that would have been enacted by the approval of Measure O, the city published the following findings regarding the financial benefits and impact mitigation factors of the proposed oil drilling project:

“	The proposed project would provide public benefits, pursuant to the commitments in the Lease, the Settlement Agreement and the Development Agreement, as described below. 1. Gross Revenues to the City E&B will pay royalties to the City, as set forth in Section 3 of the Lease. E&B and the City’s consultant prepared separate royalty payment estimates for the project as depicted in Figure 1 of the City’s Cost Benefit Analysis 2. Accelerated Unrestricted Royalty Payments of $1,000,000 Annually Commencing with Issuance of City Drilling Permit for First Well With the issuance of the City’s drilling permit for the first well (one of the three test wells), E&B shall pay to the City an accelerated unrestricted royalty payment of $1,000,000 annually as an advance on future unrestricted royalties until the Minimum Royalty of $500,000 commences (estimated to continue for five years for a total of $5,000,000). The City is not required to repay these accelerated royalty payments if the unrestricted royalties are not sufficient to cover these payments. The Drilling Permit Advances are not restricted and may be used in accordance with applicable City laws 3. Bonus Payments to Minimum Royalty During Years 4-13 of the Lease to Ensure $1,000,000 to City In addition to the $500,000 Minimum Royalty in the Lease during years 4-13, E&B shall pay an additional bonus equal to the difference between the Minimum Royalty and $1,000,000 to ensure that City receives at least $1,000,000 during those years. 4. Remediation of City Maintenance Yard E & B will pay for and implement the Remedial Action Plan for the Project to remediate soil contamination at the City Maintenance Yard if the Project proceeds to Phase 3, full production. If the Project does not proceed to Phase 3, E & B will conduct remediation activities at the City Maintenance Yard to allow the site to be used for industrial and commercial purposes. 5. Relocation of City Maintenance Yard Upon the issuance by the City of the drilling permit for the first well, the City will not be required to repay $3,500,000, plus interest, to E&B as required in the Settlement Agreement. These funds could be used for projects at the discretion of the City, including a temporary or permanent relocation of the City Maintenance Yard. E&B will also advance $6,500,000 to the City for the permanent relocation of the City Maintenance Yard if the Project proceeds to Phase 3, full production. 6. Hermosa Beach Residential Property Fund E & B will establish an independent Fund to provide assurance to residential property owners within 600 feet of the Project site that they will incur no loss, as a result of the Project, to their property’s fair market value in the event of a sale of the property. The Fund will pay the difference between an eligible property’s actual negotiated sale price and the appraised market value of the property as if the Project had not been built. There is no cost to the property owners to receive the benefits of the Fund. The Fund will commence upon issuance by the City of the drilling permit for the first well, and will continue for at least six years or one year after completion of the final well (whichever is later), or until the Fund has been fully disbursed to participants. Residential property owners within 600 feet of the Project are eligible to participate, with a $25,000,000 cap on the total amount of benefits to be paid out. The Fund will have a minimum balance of $1,000,000, with additional funding of a maximum of $4,000,000 based on 1.5% of gross project revenues. At the expiration of the Fund term, the remaining balance, of at least $1,000,000 up to a maximum of $5,000,000, will be distributed to the residential property owners within 300 feet of the Project site. 7. Additional Property Tax Revenue The City will receive additional property tax revenue levied on the value of the oil reservoir, as identified in the Cost Benefit Analysis. 8. City’s Obligation to Pay $14 Million Released Pursuant to the terms of the Settlement Agreement, the City will be relieved of its obligation to pay E&B $14 Million. 9. 1% Overriding Royalty Interest to Hermosa Beach Education Foundation Pursuant to E&B’s commitment in the Settlement Agreement to establish a revenue stream to the Hermosa Beach School District, E&B has assigned to the Hermosa Beach Education Foundation a 1% overriding royalty interest in oil and gas produced from the Project site, with a $1,000,000 advance payment of royalty to the Foundation upon issuance by the City of the drilling permit for the first well. The Education Foundation’s mission is “to promote investment in Hermosa Beach Public Schools and provide educational grants.” 10. Payment to City to Fund Community Improvements E&B shall provide 1% of 100% of gross revenues to City for community improvements, where such improvements shall be determined by the City in its sole discretion. This would be funded by E&B as a percentage of gross project revenues, with an initial amount of One Million Dollars ($1,000,000) to be contributed by E&B to the program upon the issuance by the City of the drilling permit for the first well.	”
—Environmental Impact Report

Path to the ballot

See also: Laws governing local ballot measures in California

Hermosa Beach City voters enacted a law forbiding oil drilling within the city limits in 1932. Later, they approved two initiatives – propositions P and Q – allowing the Macpherson Oil Company to run an oil and gas operation. The city approved a lease agreement with Macpherson, but then the voters reinstated the ban on oil and gas operations and concerns about the project proposed by Macpherson were brought up. The city tried to pull out of the deal. After a lengthy court battle, a settlement was made with the help of the E&B oil company. Measure O and its outcome are a part of this agreement. Voter approval was the only legal way to authorize the project proposed by E&B in the place of the Macpherson project.

Fracking in California

See also: Fracking in California

Map of oil and gas wells near the City of Hermosa Beach

The process of fracking was under heavy scrutiny in California during the 2014 election cycle. The 2014 California Democratic Party Platform called for an immediate moratorium on fracking, a position not supported by California's Democratic Governor Jerry Brown. Fracking has been occurring in California for more than 30 years.

Native Americans are the first recorded group to have collected oil in California. The first oil company began mining and distilling oil in 1856, and, in 1950, California produced 331 million barrels of oil. Several large natural gas fields were found throughout the 1970s and 1980s. The Monterey Shale formation in California was expected to hold 15.4 billion barrels of oil, or 65 percent of the technically recoverable shale oil in the lower 48 states, according to a 2012 report by the U.S. Energy Information Administration. In May 2014, however, they adjusted their estimate. Due to "the industry's difficulty in producing from the region," the estimate was revised down to 600 million barrels of recoverable oil. To the right is a map of some of the oil and gas wells in City of Hermosa Beach as of February 19, 2015. A black star denotes a notice or permit, a black circle represents a productive well and an orange circle marks the location of an injection well. Not all wells can be shown due to the size of the viewing window. To see where wells are in more specific areas of California, click here. A legend explaining the other symbols is in the upper left corner of the map. A majority of the wells around the city are plugged.

The Department of Conservation's Division of Oil, Gas and Geothermal Resources (DOGGR) oversees oil and gas development in California. Water resources are regulated by the Regional Water Quality Control Boards (RWQCB) and the State Water Resources Control Board (SWRCB). According to the DOGGR, most of the oil and gas production in California uses vertical wells that are drilled into traditional oil and natural gas reservoirs. The DOGGR regulates well casings, cements, and the other aspects of protecting underground and surface water resources. Under current law, the DOGGR does not need to be notified when a well is fractured. In 2013, the California State Legislature passed Senate Bill 4, regulating well stimulation, which includes fracking and other activities. Senate Bill 4 called for interim well regulations that went into effect immediately, separate regulations that went into effect in 2015, the adoption of environmental impact reports in 2015 and the use of well stimulation permits. These permits are publicly available on the DOGGR's website.
Note: This information was last updated in June 2014. See "Fracking in California" for updated information.

See also

• Local zoning, land use and development on the ballot
• Los Angeles County, California ballot measures
• March 3, 2015 ballot measures in California

External links

Suggest a link

• Hermosa Beach City Government website
• Los Angeles County Elections Office website

Support

• Yes on O - Hermosa website & Facebook page

Opposition

• Stop Hermosa Beach Oil website

Additional reading

• Alaska Dispatch News, "California Beach Community Prepares for High-Stakes Vote on Oil Drilling," March 2, 2015
• The Beach Reporter, "E&B says oil to bring millions, critics say numbers unreliable," March 5, 2015
• La Weekly, "OIL DRILLING IN HERMOSA BEACH PITS NEIGHBOR AGAINST NEIGHBOR," February 20, 2015
• La Weekly, "LOS ANGELES CITY AND COUNTY VOTER GUIDE FOR MARCH 3, 2015," February 23, 2015