After 10 years, drilling for oil in the Whittier Hills may be resurrected thanks to an appellate court ruling

In a stunning reversal, an appellate court has given the city of Whittier a second chance at drilling for oil and gas in the Whittier-Puente Hills nature preserve by throwing out five years of court rulings that had left the project for dead.

The 2nd District Appellate Court of Los Angeles ruled last week the city and its partner, Matrix Oil Corp., have been freed from past court rulings that had placed prohibitions on future revenues from oil and gas sales, and barred them from drilling in a nature preserve.

But the oil lease signed in 2008 by Whittier and Matrix has expired, meaning that they, along with Noble Energy, Inc. must now go back to the drawing board and negotiate a new agreement.

A new oil lease?

The City Council will be briefed on the 51-page nuanced ruling, filed Tuesday, July 17, during an upcoming August meeting in closed session, said Jeff Collier, city manager.

“It sounds like this is positive as far as the city is concerned,” he said. “We’ll have to go back and talk to the council and see what they want to do.”

“We are going to sit down with the city,” said Mike McCaskey, executive vice president for Matrix Oil Corp. “We are not going to walk away from the project.”

Under the old lease, Matrix could drill up to 60 wells, build storage tanks, add processing equipment, pipelines for oil and natural gas through the city and storage tanks with an oil truck loading facility on a 20-acre portion of the nature preserve adjacent to the Friendly Hills neighborhood, of which 7 acres would be reserved for oil wells.

The city was to receive a 30 percent royalty per barrel of oil, realizing up to $150 million a year for 10 years or $1.5 billion.

Even though the lease has expired, the Conditional Use Permit and Environmental Impact Report could remain in good standing — something that could save the city millions of dollars and expedite a new lease, according to city and oil company sources.

McCaskey said a new lease would be financially rewarding for all sides since oil prices are back up to where they were in 2008. In fact, the price of a barrel of oil was $74.54 on Wednesday, according to a report from Reuters, higher than prices in 2008.

In addition, a new White House administration favors drilling for oil on public lands, meaning the project may get support from the Trump administration.

Santa Monica-based conservation agency will get oil money

The court ruling re-instated a revenue-sharing agreement between Whittier, Matrix and the Mountains Recreation and Conservation Authority, an arm of the Santa Monica Mountains Conservancy.

Both these conservation entities originally filed lawsuits six years ago opposing oil drilling in the nature preserve on grounds that it would disrupt conservation and do damage to the endangered California gnatcatcher as well as other wildlife.

But in 2013, the MRCA reversed itself, signing an arrangement with Whittier to take $11.25 million a year or $280 million for the life of the project, dropping all actions against the project.

The surprise deal defied then-Attorney General Kamala Harris, now a U.S. senator, who had argued against the project on behalf of the state conservancy, which manages the largest national recreation area in the United States.

At the time, Joseph Edmiston, executive director of both agencies, told this newspaper that his agencies needed the money for maintenance of trails, bathrooms and visitor facilities in the Santa Monica Mountains, and he would use oil revenues from beneath protected hills on the eastern side of Los Angeles County for upkeep and expansion of westside conservation areas.

Is LA County still opposed?

The settlement agreement touched off a firestorm between Edmiston and then eastside Supervisor Gloria Molina, who had worked to restore portions of the Rio Hondo River in nearby Pico Rivera. In a 2013 interview, Molina said she was “betrayed” by Edmiston, who was entrusted with protecting open space.

She told this newspaper: “I’m troubled by the rationalization he created for himself. It is the same kind of rationalization Judas used.”

The main sticking point was the fact the 1,280-acres of land in the Whittier Hills containing dormant oil wells from decades ago was purchased by the city using taxpayer money generated by Proposition A, a 1992 county bond measure that provided $540 million in grants for the purchase and rehabilitation of open space, wildlife habitat, parks, senior facilities and anti-gang programs.

Because Whittier used $9.3 million in Prop. A monies to buy the land, the lower courts ruled it had to keep the land as is in perpetuity so as not to violate the public trust.

Also, any proceeds could not flow into the city coffers but had to be used throughout the county. Oil drilling would have to be approved by the Los Angeles County Regional Park and Open Space District.

On Oct. 29, 2013, the District’s overseers, the county Board of Supervisors, voted 5-0 to end the oil lease, refusing to give its approval, with Molina leading the charge against the project and directing the county counsel to join the cases by other groups against the project in court and fight “all the way to the California Supreme Court” if necessary.

These events, including rulings against the project by the Superior Court in 2013 and by the same appellate court in 2015, kept the project from moving forward.

Dismissing ‘public trust’

In the July 17 filing, the court ruled money could flow from future oil profits to Whittier and MRCA if a new deal was signed.

“The trial court erred in concluding that the settlement agreement violated Proposition A, the public trust doctrine and the Project Agreement, and we therefore reverse the judgment to the extent it is based upon those conclusions,” wrote the three-judge court.

The Trust for Public Land and lawyers for Los Angeles County (representing the Open Space District) argued that other preserves bought with taxpayer dollars were purchased in trust for the public, including a sea mammal and fish sanctuary in San Francisco Bay.

But the appellate court wrote the public trust doctrine “does not apply to the terra firms in the Whittier Hills … and we decline to hold that Whittier has the duties implied by that doctrine with respect to the subject property.”

MRCA claimed victory, saying any money from oil drilling and sales would be used by the conservation group for parks, recreation and adding to open space.

“This is a good result for L.A. County because if the project goes forward — and I anticipate at some point it will — the proceeds can be used to preserve open space and and animal habitat throughout the entire county,” said James Goldman, an attorney representing MRCA in the case during an interview Wednesday.

Future lawsuits possible

While the county seems to have lost, Scott Kuhn, acting assistant county counsel, said Thursday that any future oil lease would be challenged because he believes Whittier and Matrix still need the county’s permission.

“That would be a strong ground to oppose a future lease,” he said, adding that he expects any attempt at oil drilling in the Prop. A-funded nature preserve would usher in “a round three of litigation.”

When asked if he’s been told to back off the fight, Kuhn said no, despite the fact that four of the five supervisors are new and did not vote in 2013. Supervisor Janice Hahn, whose district includes Whittier, declined to comment on the ruling.

The county does not plan on appealing, Kuhn said, adding that he’s pleased with the restrictions placed by the court on how any oil money will be spent.

“Now all that money would have to go to parks … and recreational facilities in the county. That is big.”

Whittier’s special counsel, James Markman, said the city can use oil monies for building up recreation and open space in Los Angeles County. But it can also fortify its own parks department.

“Whittier could fund its whole recreation program and probably save the general fund millions of dollars a year,” Markman said during an interview on Wednesday.

“The only thing Whittier needs is a financial agreement with Matrix to go ahead with the project.”