Oil group aims to reverse LA well drilling settlement over new costs

A settlement between environmental groups and the city of Los Angeles was touted as fixing oil drilling disparities in impoverished parts of the city by requiring adherence to environmental regulations. But oil producers who say they were left out of the deal after being granted intervenor status are fighting its implementation on the grounds that it raises drillers' costs without due process.

The California Independent Petroleum Association (CIPA), which represents oil and natural gas producers, filed a cross-complaint Sept. 26 seeking injunctions prohibiting the enforcement of regulations the city had adopted as part of the settlement, which was signed in September.

CIPA said that as a result of the settlement, fees for drilling applications would go up by $90,000 to $157,000.

According to the cross-complaint, the plaintiffs and the city's defense attorneys had ignored discovery requests from CIPA despite Los Angeles County Superior Court Judge Terry Green granting CIPA intervenor status on July 20 and ultimately staying litigation into November in order for all parties to have a mandatory settlement conference.

"I'd be very uncomfortable to the extent I have to decide what it means to follow CEQA, to do so without the input from all affected parties, and I do think they are affected," Green said of the oil companies on July 20. "They have a property interest in this. ... And their interests are not being represented, and their voices are not being heard. And I think that that's important that we do."

Subsequently, CIPA said, it was informed of a series of closed sessions in September involving the city council, the budget and finance committee and the planning and land use management committee which CIPA believes resulted in the settlement, according to its complaint.

No mandatory settlement conference involving CIPA took place.

"As is common practice, the plaintiffs' and city's settlement agreement was [an] out of court settlement which did not require court approval because the parties did not seek an enforceable consent decree," Gladys Limón, staff attorney at Communities for a Better Environment, which represents one of the plaintiffs, Youth for Environmental Justice, wrote in an email to the Daily Journal.

"A party to a suit, whether an original party or intervenor, cannot preclude other parties from settling their own disputes and dismissing their claims," she wrote, citing S. California Edison Co. v. Lynch, 307 F.3d, 806-07 (9th Cir.) modified, 307 F.3d 943 (9th Cir. 2002).

"After the oil lobby group was allowed in the case, plaintiffs expressed their availability to engage in settlement communications with it but the lobby group declined," Limón wrote.

Jeffrey Dintzer, a partner at Gibson, Dunn & Crutcher LLP, who represents CIPA, called the settlement "a ruse."

"What is clear now is that [plaintiffs] and the city intended all along to use the stay to prohibit CIPA from taking discovery, while secretly coming to some settlement without even advising CIPA that an agreement had been reached; or that it would be presented to the city council on a fast track approval," the cross-complaint states. Youth for Environmental Justice et al v. City of Los Angeles 2:16-cv-7381 (C.D., Cal., filed Sept. 26, 2016).

According to the court transcript, at the end of the Sept. 26 hearing, Judge Green asked Limón, "Just one question. Did you guys settle the case with the city?

Limón answered, "The case is not settled, your honor."

Three days earlier, plaintiff Youth for Environmental Justice had signed the agreement. On the day of the hearing, plaintiff South Central Youth Leadership signed. The next day, plaintiffs Center for Biological Diversity and South Central Youth Leadership Coalition signed. And two days after the court hearing the city attorney's office signed.

Asked whether her statement to the court had been misleading about the status of the settlement, Limón wrote in an email:

"Until a settlement is final, meaning that all parties have agreed, there usually remains some degree of uncertainty as to whether a settlement agreement will be finally reached. On September 26th there was a fair amount of uncertainty as to whether the settlement would continue to progress and be fully executed by the city, and the plaintiffs were therefore fully prepared to continue to litigate against the city. As you see, while [some] plaintiffs had by that date signed the proposed settlement agreement, the city had not, and the parties had therefore not reached agreement and the case had not settled. It was possible that the city would not have heard the matter on September 28th or that it would have declined to settle based on the proposed terms. The parties relayed to the court their intention to engage in settlement discussions as early as March, and thereafter consistently communicated through filings regarding ongoing settlement efforts."

Asked to comment on Judge Green's order and whether CIPA had been included in subsequent settlement talks, Los Angeles city attorney spokesman Rob Wilcox said, "Their complaint is without merit. We don't discuss settlement negotiations."

The plaintiffs sued the city last year over accusations that it rubber-stamped oil projects in low-income neighborhoods, which exposed minorities to health and safety risks.

Applications to drill or modify wells have been green-lighted in parts of southern Los Angeles with little transparency, skirting the California Environmental Quality Act, or CEQA, according to the underlying lawsuit.

Wells are found all over the city, but drilling sites were allowed to be significantly closer to schools and playgrounds in impoverished areas, according to the lawsuit. Youth For Environmental Justice v. City of Los Angeles, BC600378 (L.A. Super Ct., filed Nov. 6, 2015).

The settlement recognizes a new set of policies and procedures instituted by the city's zoning administration, including requiring public notice for projects seeking CEQA exemption, said attorneys from both sides.

All property owners and occupants within a 1,500-foot radius of a project must be notified and provided with a 35-day comment period prior to approval, they said. The procedures also mandate compliance with CEQA.

"We believe they ensure compliance with state civil rights laws, with transparency, ensure requirements, and avoid and minimize environmental harm," said Limón.

While the overall fee structure remains unchanged, the removal of categorical exemptions in the adopted zoning memorandum triggered different, higher fees, said Nathaniel P. Johnson, a Gibson Dunn attorney.

An "EAF-O" form is now required, which costs $2,280, and "an application to drill, re-drill, deepen or convert a well is not eligible for a categorical exemption and shall require an Initial Study or an EIR," which costs $11,520, Johnson said. He said permits for CIPA's members previously cost no more than about $3,000, but now require a filing fee of $7,650 for any oil production approval, $67,915 for any change to an oil drilling district, and $134,608 for an establishment of an oil drilling district.

Dintzer said, "They went up dramatically. It was part of the settlement."

Limón, however, maintained that the settlement itself did not increase the fees. "There is nothing in the settlement agreement that says anything about fees," she said.

"The city's new drilling procedures seek to implement existing state environmental review requirements, which impose varying costs on permitting agencies and project applicants," Limón wrote in an email. "Logically, enforcement of CEQA and other environmental protections may result in higher compliance costs for both an applicant and a reviewing agency, depending on the specific project, as opposed to little or no cost if the reviewing agency ignores CEQA and violates environmental mandates."

"We're pleased to have worked with the community and planning department to advance environmental justice by better protecting the health of our residents near oil facilities," said Los Angeles City Attorney Mike Feuer in a statement.

The environmental groups filed a remand motion on Oct. 3 to move the case — CIPA's cross-complaint and injunction request — to federal court, where a hearing is set for Nov. 14.

justin_kloczko@dailyjournal.com