Last week’s move by Culver City to extend a moratorium on oil drilling was the latest step in an escalating battle with a Houston-based company over new wells and the expansion of its existing operations.
The City Council extended the moratorium at its meeting Oct. 5. The unanimous vote followed a lawsuit by Plains Exploration and Production Co. over the initial moratorium, which was passed in August and set to expire this week.
An attorney for Plains Exploration, known as PXP, said the company was planning at press time to file for an injunction to lift the moratorium and its extension.
PXP claims the moratorium illegally interferes with the oil company’s rights to operate its holdings. If the moratorium stands, one of the company’s leases will expire and the company will have to renegotiate terms with the private landowners.
“PXP is very disappointed that Culver City has taken action to extend its factually and legally baseless drilling moratorium for an additional 10 months,” said Jeffrey Dintzer, a partner with Gibson Dunn & Crutcher LLP, which is representing Plains Exploration.
“PXP advised the city that efforts to interfere with its legitimate business operations within the Inglewood Oil Field would be challenged and that PXP would defend its economic interests as well as those holdings mineral and royalty rights,” Dintzer said.
The battle centers on the plans by PXP to drill four new wells in Culver City under state permits and expand the reach of some of its 25 existing wells in the city with slant drilling.
The company has an ambitious plan to pull more oil out of its 1,000-acre Inglewood field, which stretches from Culver City on the west across the Baldwin Hills. Most of the field is in unincorporated county land; only a small portion is in Culver City.
The Los Angeles County Board of Supervisors signed off on hundreds of new wells on county land late last year. Culver City, the National Resources Defense Council and others then filed suit, alleging the project’s environmental impact studies weren’t adequate.
Culver City officials learned that PXP applied for state permits for the new wells in their city early in summer. They enacted the 45-day moratorium as a result. The moratorium was designed to give them time to craft an ordinance regulating the drilling of oil wells. With that process still ongoing, the City Council on Oct. 5 voted 5-0 to extend the moratorium 10 months, to August 2010.
City officials said the moratorium is not intended to put a permanent stop to PXP’s drilling.
“This is absolutely not an attempt to stop all drilling in the city,” Culver City Mayor Andrew Weissman said. “Rather, this is an attempt to make sure that the drilling is done in a way that preserves the health and safety of the citizens of Culver City.”
Ordinance update
Culver City wants an ordinance with standards that will prevent the recurrence of oil field vapor leaks like the one that swept through part of the city in early 2006, prompting hundreds of complaints from residents about odor, and possible health and safety hazards.
Weissman said PXP’s decision to proceed with applications to the state Division of Oil, Gas and Geothermal Resources caught his city by surprise.
“That’s why we sought the moratorium, to give us time to complete our ordinance,” he said.
But in the Sept. 22 lawsuit challenging the moratorium, PXP alleges that the moratorium harms company’s property rights. The lawsuit states that PXP holds leases on the oil field that are set to expire in the next few months unless the company begins to develop them.
“The moratorium on drilling has the effect of harming PXP’s property rights because once the leases expire, PXP’s ability to drill new wells within the area governed by these leases extinguishes,” the lawsuit states.
The Inglewood field is one of the oldest oil fields in the county, with operations dating to 1923. PXP acquired leases on the oil field from Chevron Corp. in 1991. With oil prices low, PXP didn’t take action to further develop the field during the 1990s.
It wasn’t until 2006 that prices rose enough to justify the capital investment for PXP to use slant drilling to pull more oil out of existing wells and drill new ones. At that point, the company began notifying the concerned government bodies that it planned to increase oil production at the field.
