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To drill or not to drill…the latest news.

Hermosa Beach council delays discussion on how to pay settlement if oil-drilling proposal is rejected

The first decision Hermosa Beach City Council members made at their Monday night meeting was to indefinitely table an agenda item aimed at figuring out how the city might pay off a $17.5 million settlement it will owe if an oil-drilling proposal is turned down by voters this spring.

The agenda item, introduced by City Manager Tom Bakaly, was pulled from the meeting in a 3-2 vote, with Mayor Michael DiVirgilio and Councilwoman Carolyn Petty trying to keep it on the table.

Councilwoman Nanette Barragan made the motion to remove it, and was supported by Councilmen Hany Fangary and Pete Tucker. Residents who oppose E&B Natural Resources Management Corp. cheered the decision to delay discussing unpopular tax increases because the project’s promised windfall profits are its biggest selling point.

Stacey Armato, committee chairwoman for Stop Hermosa Beach Oil, said this isn’t the time to discuss future taxes.

“To introduce a new tax to people now is confusing,” Armato said. “We want to make sure it’s as clear as possible what people are voting on, and if you add the tax question on the same ballot, I don’t think it helps the voter decide whether or not it’s healthy or safe to bring oil drilling to Hermosa Beach.”

Armato said she supports a special-use tax to fund things like remodeling City Hall.

But project supporters said the city is making a big oversight in not finding a financial solution for this sooner rather than later.

“I’m really disappointed that the discussion of taxes was tabled,” said Jim Sullivan, a resident who is part of a group campaigning in favor of the project, which will be decided in a March 3 vote. “The city needs to do contingency planning in case the project is defeated. It’s a tiny, mostly residential town and there aren’t a lot of options. How is the city going to pay $17.5 million?”

Hermosa Beach has already saved $6 million toward the payment since the settlement agreement was made in 2012. The agreement came after a lengthy lawsuit with another oil company was brought because the city revoked its oil-drilling rights before it began construction. E&B Natural Resources bought out that company’s drilling rights and lease, in return for a chance to let voters decide whether to allow the project.

City officials have floated some ideas for paying off the $11.5 million bill, if drilling is denied, including seeking outside loans to make annual $850,000 payments, or increasing property or parcel taxes.

Environmental and health concerns with the project have dominated the discussion for the past year, with a large group of residents protesting the long-shot potential for a disastrous oil leak or explosion, along with the various smaller-impact health concerns it will generate like additional smog during construction.

But, for a city that anticipates collecting $33.7 million in revenue this fiscal year, the project’s promised hundreds of millions of dollars in revenue over its 35-year life is enticing some residents to speak out.

“Nobody on the council has said a word about where that $100 million is coming from and, in my opinion, it’s because they don’t have any idea,” Sullivan said. “You go through the city’s options, and there are very very few places to make money. The answer lies beneath the homes, streets, schools and feet of residents of Hermosa Beach.”

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