By Angelina Vollucci
Assistant Business manager
The lawsuit filed by Macpherson Oil Company against the city of Hermosa Beach is firvolous and the city should not be found responsible for Macpherson’s theoretical profit losses.
Hermosa Beach allegedly breached a 1992 contract by preventing the company from drilling. Macpherson is seeking $700 million in estimated profits with little evidence to back this large, theoretical figure.
A lease agreement allowed Macpherson to drill for oil at a city maintenance yard at the corner of 6th street and Valley Drive. In 1995, however, before the company started the project, Hermosa Beach voters passed Proposition E, which banned oil and gas drilling in Hermosa. Macpherson sued the city in 1998 for breach of contract.
Macpherson claims to have lost $700 million in profit as a result of the ban. This assumption is unfounded as the project never broke ground. The $700 million in profit was completely theoretical and does not represent actual profit lost. Macpherson has a right to claim lost profit, but a figure that large is unrealistic.
Macpherson Oil Company proposed drilling up to 30 oil wells and placing permanent tanks and production facilities on a scant 1.3 acres in Hermosa Beach next to the city’s popular greenbelt. This location, within blocks of residential and park areas, was ill-planned to begin with.
The damages Macpherson is seeking are more than 22 times the amount of Hermosa’s annual budget. According to city council member Michael DiVirgilio, the oil company’s claim could jeopardize the city’s future by forcing it to cut vital services, including police and fire departments, and declare bankruptcy.
Because of these potential consequences, Macpherson’s intentions are essentially punitive. With Proposition E., the city of Hermosa Beach fought to safeguard its services and its right to make decisions to protect the community’s health and safety.
In February 2010, the California Second District Court of Appeals ruled in Hermosa Beach’s favor by finding the council had the right, under the lease provisions, to halt the project, only if there was substantial evidence of health and safety risks.
The city of Hermosa Beach should be required to pay back any money received up front for the lease plus interest accrued, as their alleged breach of contract would have caused these losses. In other words, it is the tangible, definite damage that should be repaid. The proposed damages are nothing more than speculative and are difficult to quantify.
This legal dispute is frivolous and Hermosa beach should not be held responsible for alleged losses. Regardless of the outcome, this case serves as a great civic message that a community must be mindful of strengthening a more transparent relationship with city council members over significant matters.
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