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).

Ethics

  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.

The Truth about Property Taxes

Attention homeowners and renters, IF the city decides to add a supplemental property tax to pay off E&B when the voters no on oil drilling in Hermosa Beach, it will be a very small amount of money, according to the Final Cost Benefit Analysis @ $150 per year per $1M of assessed property value.  It also states that Hermosa Beach can handle the pay off without raising property taxes.

The city manager has also said that the city can pay off E&B without raising property taxes as well.

Supplemental Property Tax "What If" Scenario from Final Cost Benefit Analysis

Supplemental Property Tax “What If” Scenario from Final Cost Benefit Analysis

— Busting the “rents and taxes will sky rocket” myth…

Understand the Oil Drilling Project in Less Than 15 Minutes!

Click on each image to learn more about the proposed oil drilling and production project in Hermosa Beach. Residents vote on whether to lift the current ban on oil drilling 3-3-15.

Hermosa Beach Residents Fight to Keep Oil Drilling Ban - NBC

NBC News Explains the Project – 2 minutes

Oil Drilling in Hermosa Beach is a Bad Idea (Click image for larger view)

Environmental Impact Report Impacts & Project Description

Hermosa  Beach Oil Drilling Site Significant Impacts by Distance

Project Location – The reason why this project is not safe

Hands raised in the air

Register to Vote & Get Involved

We Get Letters: Beginning July 3 – The Beach Reporter: Letters To The Editor

Editor Definition in English Dictionary.

There are 2 more excellent letters on this link. One about the dangers and one about the revenue:

We Get Letters: Beginning July 3 – The Beach Reporter: Letters To The Editor.

Posted: Thursday, July 3, 2014 12:31 pm

 

Three alarms

At the recent public meeting regarding the Hermosa Beach oil project, three alarms arose:

E&B’s lead council pleaded for more time to add further mitigations to improve the project, including odor management. E&B’s production manager flinched on committing to explosion barriers or radiant heat screens without knowing feasibility. The refrigeration system was defined to be nonpropane following input from the draft EIR. Now is not the time to be redesigning refrigeration systems or guessing on structural explosion mitigation feasibility. The opportunity and obligation to submit design details with mitigation was on the applicant prior to project submittal.

The project equipment layout does not meet state fire code and industry standards for equipment separation and setbacks from the boundary. The EIR project manager declared the proposed project nullifies the requirements. He has it backwards; not meeting standards nullifies the viability of the proposed project not that the project nullifies the standards.

Both the proposal and the EIR have lengthy discussions about the potential explosion risk from leaks and vapor clouds. When pressed for exact specifics, the EIR lead engineer responded that there was no increase in risk since the maintenance yard already has a 500 gallon propane tank on site. Suggesting that the risk magnitude of this project poses an equivalent risk to a 500 gallon propane tank sitting at ambient temperature is ludicrous.

Hermosa Beach may contain oil that could be exploited for the benefit of the city, schools, state, mineral rights’ lease holders and even the project owners. However, this project applicant with this proposed project has not illustrated the competency to earn our positive vote to develop oil.

Jeff Krag

via We Get Letters: Beginning July 3 – The Beach Reporter: Letters To The Editor. There are 2 more excellent letters on this link.