UPDATED: E&B Inflates Revenue Over 1,000%; Property Values will Take a Huge Hit!

Oil Drilling in Hermosa Beach is a Bad Deal (click image for full view)

The $500M-$600M that E&B says Hermosa Beach will make from oil drilling is as real as a Unicorn and here’s why…

Royalty payments are based on the amount of crude oil produced multiplied by the price of that oil at the time of sale.  According to the Cost Benefit Analysis (CBA), done by an independent 3rd party (Kosmont), the “most likely” amount of oil to be produced is no where close to the amount that E&B is advertising. Also, E&B’s estimate uses a price of oil that is more than double today’s (2/2/15) price of oil and an amount of oil that the CBA refutes. Kosmont has revised their summary estimates for lower prices of oil given declining price of oil and to reflect the Development Agreement.

Oil Production

The CBA lists various oil production scenarios: low, expected, high, and applicant (E&B). According to the CBA, the “low” oil production scenario is actually the “most likely” to occur with a 90% confidence level. “Expected” only has a 50% confidence level.  The “high” level is at a 10% confidence level, and the applicant (E&B) estimate is so high, that the CBA doesn’t even have a confidence level for it. Therefore, we voters need to look at numbers that are realistic and not wishful thinking, which is the “low” or “mostly likely” amount.

Price of Oil 

Goldman Sachs annotated chart of the history of crude oil prices

Figure 2: Goldman Sachs annotated chart of the history of crude oil prices. Click image for larger view and article.

The CBA has various scenarios based on California Midway-Sunset (CMS) oil prices. E&B uses $105 in their estimates. The price of CMS has been in the low 40’s the past few months; therefore, the above graphic uses the $40 ppb scenario. There is a worldwide oil glut driving the price down. Some are saying that we are in a oil price bubble.  Some projections even go as low as $20-$40. The price of oil has fluctuated wildly throughout history. Saudi Oil Minister announces that they will not cut production, and a Saudi prince says that oil will never be $100 again.  Also, demand for oil is slowing and continues to slow, according to Bloomberg.

As some point, the price of oil could become so low, that this project would not be viable for E&B. Kern county, home of E&B, is very concerned about dropping oil prices.

Real Losses to Hermosa Beach Residents, Businesses and the City

As soon as the construction starts, Hermosa property owners will lose equity. Those closest to the site could lose a significant amount of money.  Collectively, homeowners could lose more money than the city of Hermosa Beach would gain.  There are business within 100 feet of the site, who are at risk to losing revenue due to noise, smell and truck traffic. This project could negatively impact tourism and the dollars that tourism brings to all business and the city. The city has also received over $600k in grants for green and sustainability initiatives in the last 2 years. There’s real money to be gained in  green and sustainability projects. It’s hard to be green with 30 oil wells and 4 wastewater injection wells a few blocks from city hall.

Direct Costs to the City

The above graphic (Figure 1) is showing the NET revenue to the city AFTER direct costs are paid by the city. These particular direct costs that come out of the unrestricted, general fund amount to more than $2M than what it will cost to just pay off E&B.

The only winner, if oil drilling is allowed in Hermosa Beach, is E&B.

After the direct costs are paid, this is only an increase of about 1% to the general fund based on today’s budget numbers. There will be unknown additional expenses too (e.g. emergency response). The city may not even make any money, and could even lose money.

And if the price of oil stays where it is or declines further, even E&B may not be a winner.

A comment on those restricted tidelands fund… No money for schools, city hall, fire department, undergrounding power lines, police officers, community center or theater improvements, and sewer funding would be restricted to parts that could impact tidelands areas.

For a much more detailed analysis on financial impacts, go to http://www.hboilfacts.com/.





E&B’s Ethics and Track Record

E&B’s ads are pure fiction.   Click here for 1-page FACT sheet (updated 2-12-15).


  1. NEW 2-10-15: E&B’s “Trust the Scientists” ad ranges from highly misleading to false. Click here for the real facts.
  2. UPDATED 2-3-5: E&B’s revenue numbers are refuted by the Cost Benefit Analysis. Click here for the FACTS on the revenue. Click here for Easy Reader article on how Hermosa Beach’s city manager is contesting E & B’s revenue number.
  3. NEW 2-3-5: E&B’s ad on petroleum products is not true. Click here for the facts.
  4. NEW 1-5-15: Learn about E&B’s PR firm and their tactics on the Whittier Oil Drilling Project.
  5. NEW 12-18-14: City of Hermosa Beach now Fact Checking Political Ads
  6. NEW 12-28-14: E&B supporter LOSES lawsuit against the city and “No on O” ballot authors to force argument wording changes. Judge rules that “No on O” ballot argument statements are true and not misleading reports the Easy Reader. Read the Court decision on Petition for Writ of Mandate 12-19-14. E&B releases false statement on what the judge said. Compare for yourself.
  7. Misleading ads about funding education, police, fire, sewer improvements, etc. The majority of the royalties are projected to come from drilling under the ocean (tidelands). Royalties from the tidelands trust are restricted and can not be used for any of these services.
  8. E&B’s paid canvasser’s are lying about property taxes being raised by $1,500. Click here for the truth.
  9. E&B’s paid canvasser’s are lying about a roof or “dome” removing all odors. There is no such technology.
  10. E&B supporters have posted false information on E&B’s Huntington Beach oil drilling facility. Click here to see what the E&B Huntington Beach operation really looks like.
  11. E&B touts Nov. 2014 election for over 1 year, then surprises the city with a delay, threatens litigation unless their off-cycle election request is met.
  12. Misleading ads on active wells in LA. Manhattan Beach Mayor furious. E&B refuses to retract.
  13. At city council meetings on 4 separate occasions, E&B “surprises” the city with last minute emails/requests causing delay, disruption and ill will for the city and residents in attendance.
  14. E&B attacks resident in press release. See resident react.
  15. Hermosa Beach city manger requests that E&B retract 8/14/14 ad that was not factual/misleading. E&B refuses. See emails.

OperationsLand drilling rig

  1. 10-7-2014: E&B fined for illegally dumping produced water and crude oil in two unlined pits in the Poso Creek Oil Field.” See article.  See actual settlement agreement signed by E&B’s Mike Finch.
  2. 9-16-2014:  California farming company sues E&B (among others) for not complying with wastewater injection regulations and causing crop failure. Hermosa Beach project calls for 4 wastewater injection wells. See article.
  3. E&B fails to secure a drilling permit for a sampling operation in the Hermosa Beach Maintenance Yard in May 2013.
  4. 4-12-13: Conquistador Petroleum sues E&B and Francesco Galesi (see Worldcom connection below) for a failed drilling agreement and failing to pay.
  5. E&B Natural Resources has spilled almost 16,000 gallons of toxic fluid over six years in California!
  6. No long term track record in the Los Angeles basin. E&B acquired their Los Angeles basin entities as established operations in 2010 or later.

The Company

  1. E&B is privately held. Financials are not publicly available.
  2. Steve Layton, President of E&B, was CEO of Equinox Oil in 1988 when an oil blowout covering 2 square miles occurred. Equinox Oil later declared bankruptcy.
  3. E&B is owned by The Galesi Group. The Galesi Group’s CEO/Founder is Francesco Galesi, a former director at Worldcom, who was part of a large settlement to investors as a result of the 2002 Worldcom accounting scandal and bankruptcy. See article.

So Much Information…Who Do You Trust?

For those people who are thinking…”maybe this oil project isn’t so bad”.  Ask yourself. “Who has the most to gain from this project?” Is that door-to-door canvasser paid by the oil company or a volunteer? Is that ad paid for by the oil company, who has deep pockets, or by concerned citizens making donations? Is that oil supporter a large mineral rights owner or someone who was paid by the oil company in some way (e.g.  maybe their organization receives donations?). There has not been one open meeting by the oil company. E&B is courting mineral rights owners in closed, invite-only meetings, playing down safety concerns, inflating revenues to schools and the city, donating to local organizations and events, and placing ads that are misleading or even have false information.

E&B Thanks Supporters at Country Club (Click image for full view)

E&B Thanks Supporters with a Country Club Dinner Party (Click image for full view)

All the money E&B is spending on their campaign to win votes is just a business expense. The people and businesses supporting the ban on oil drilling are just concerned citizens volunteering time. None of these people have anything to gain monetarily from “keeping the ban” on oil.  They just want what is best for their families, friends and neighbors.

Not all journalism is unbiased. This article in the Daily Breeze is filled with misinformation, such as playing down community concerns. When you see paid advertisements supporting oil right next to an analysis of the Hermosa oil project, read with caution.

Click image for larger view)

Click image for larger view)

E&B’s Huntington Beach Operations… A Closer Look

Hermosa Beach vs Huntington Beach Oil Drilling Locations (Click on image for full view)

Hermosa Beach vs Huntington Beach Oil Drilling Locations (Click on image for full view)

E&B and their supporters compare the proposed Hermosa Beach oil drilling and production project to E&B’s Huntington Beach site.

Hermosa is NOT like Huntington.

Huntington Beach is on more land, is easier for vehicles to access, is further from schools and parks, and is much further from the beach.


  • E&B’s Huntington location is at 1901 California St, Huntington Beach, CA 92648.  It covers 2 city blocks for a total 3.2 acres. They operate 28 oil wells.
  • The proposed Hermosa location would be on 1.3 acres and shares a city block with many businesses, homes and apartments. It would have 30 oil wells and 4 wastewater injection wells.
  • In case of an emergency, Huntington can be accessed from roads on all 4 sides on both properties.
  • In Hermosa, residents and businesses block access to the site on 2 sides; therefore, emergency access would be impaired. This also forces the additional truck/car traffic needed to support the construction and operations onto fewer streets.
  • The Hermosa location is also central to activities that bring in people from all over the city and even surrounding cities. This is due to it being sandwiched between 2 parks, the green belt, businesses and being along a walking route to Hermosa Valley school.
  • The Huntington location is over 4 times further from the beach than the Hermosa location.

History & Operations

  • E&B bought Angus Petroleum, the previous operator of the Huntington Beach location, in 2012.  Angus had declared bankruptcy. Therefore, the construction and preparation of the site and the original drilling was not done by E&B. This means the E&B has no experience constructing and drilling in a residential, beach community.
  • The Huntingtion operation produces 160 barrels of oil per day (bopd). Hermosa’s peak production could be 50 times higher at a proposed 8,000 bopd in a much smaller area.
  • Residents have complained about odors, both before and after E&B’s acquisition of this operation per AQMDAir quality/odors is one of the 9 significant and unavoidable impacts stated in the EIR.

Let’s Send Oil Packing PERMANENTLY

Back2BakersfieldThe ballot language and development agreement for the proposed Hermosa Beach Oil Drilling and Production project is now final.

E&B refused to accept the following FACTS that were requested for the ballot language:

  1. Potential Benefits” will now be “Benefits” — There is a go/no-go option for E&B after test drilling.  If E&B determines this is not a viable project for them, they can decide to not proceed with the project. This means there could be $0 and no benefits.
  2. 9 Significant Unavoidable Impacts” will now be “Unavoidable Impacts” — Even though the independent Environmental Impact report specifically states that there will be “9 Significant Unavoidable Impacts“.

E&B is only for E&B.  When 2 city council members requested that E&B increase their insurance coverage in case a blowout (explosion) occurred, E&B refused.  Risk of upset/blowout is 1 of the 9 Significant Unavoidable Impacts. An explosion at 6th & Valley would be devastating, since it’s so close to homes, businesses, parks and pedestrians.

Spread the news…

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Register to Vote!


What’s the Risk to Our Health?

POTENTIAL HEALTH OUTCOMES for the Hermosa Beach Oil Drilling Project (Click Image for Larger View)

POTENTIAL HEALTH OUTCOMES for the Hermosa Beach Oil Drilling Project (Click Image for Larger View)

According to the Final Health Impact Assessment, there are many substantial risks to our health, if the proposed Hermosa Beach oil drilling and production project proceeds.

Sadly, the summary statements, conclusions and recommendations written by Instrinsik, downplay these impacts to the point of belittling this community.  Watch Intrinsik downplay fatalities in a city council meeting.

This is not the first time Instrinsik as downplayed public health. See 2012 report on Intrinsik and toxic gas leak in Canada. And in 2014 they continue to downplay odor impacts and toxicity.

While we don’t know their motivations in “spinning” a conclusion that downplays health issues and impacts to Hermosa Beach, they do highlight the following:

  • A well blowout could have fatalities
  • Children, elderly, and individuals with pre-existing conditions are particularly vulnerable
  • Pedestrians and cyclists are at risk to physical injury due to heavy trucks
  • If there is any type of toxic breach that reaches the storm drains, beachgoers could be at risk.

Intrinsik tends to minimize the impact of negative health outcomes to Hermosa Beach by using the word “localized”.  Since Hermosa Beach is so densely populated, “localized” still covers a lot of people. More than 1,000 people could be seriously injured, and there are homes (and the greenbelt) within the “fatalities” zone. More than 2,000 people could be impacted by odors/toxins and there are many illnesses that can result from toxins from oil drilling.

Wrong Place to be Safe!

What does oil drilling have in common with real estate?  Location, Location, Location!

The reason why the Hermosa Beach oil drilling and production project is not healthy, safe, and has 9 significant unavoidable impacts is due to its location in a high residential density beach community.

Hermosa Beach Oil Drilling Site Significant Impacts (odor, safety) by Distance (click image for larger view)

Los Angeles neighborhood right next to 30 oil wells. 

Click here for article. It’s a huge problem for the residents.

Freeport McMoRan operates 30 oil and gas wells — of which 22 are active — in the Murphy drilling site in West Adams, L.A.Sarah Craig

Freeport McMoRan operates 30 oil and gas wells — of which 22 are active — in the Murphy drilling site in West Adams, L.A.Sarah Craig












Hermosa Beach Oil Drilling Setback Comparisons to other Jurisdictions (click image for full view)

Hermosa Beach Oil Drilling Setback Comparisons to other Jurisdictions (click image for full view)

Links to setback information: