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Questions & Answers about the Hermosa Beach Oil Recovery Project
Q. I have heard that E&B only has $1 million of liability insurance. Is this true?
A. No, it is not true that E&B is only insured for $1 million. Per the terms of the oil and gas lease with the city, which was inherited by E&B and its affiliates, the lessee (E&B) must carry insurance "in an amount not less than five million dollars for each occurrence." The lease also states that prior to commencing operations, E&B must provide to the city certificates from its insurer which state the specific insurance limits the company carries. E&B and its affiliated entities, including Hermosa Acquisition, LLC, procure and carry collectively a significant amount of liability and property coverage of various types and amounts of insurance, well in excess of the minimum requirements of the lease. Currently, E&B carries a $25 million liability umbrella policy covering property damage, bodily injury and pollution beyond its general business and auto liability coverage. Further, E&B has a Control of Well Policy (primarily related to drilling operations) with $40 million coverage for wells in the Los Angeles Basin.
-- Q&A Posted January 2013 --
Q: What is the Hermosa Beach Oil Recovery Project that has been proposed by E&B Natural Resources?
The Hermosa Beach Oil Recovery Project is a proposal to access known offshore and onshore oil reserves within the jurisdiction of Hermosa Beach from a single, onshore location by utilizing the latest technology and operational advancements in oil recovery, including environmentally safe directional drilling.
Q: What is the current status of this proposed project?
E&B Natural Resources has filed a project application which was the next step in a settlement agreement between the City of Hermosa Beach and E&B. This application will enable the City to begin its public review process, which will include the preparation of an Environmental Impact Report (EIR) that addresses numerous issues including air and water quality, geology, hazards, aesthetics, noise, traffic, and parking. The approval process includes review by various local, regional, and state agencies, as well as local voter approval.
Q: What is the benefit of this project to Hermosa Beach?
By accessing offshore oil reserves from an onshore location, utilizing the latest recovery technology, the Oil Recovery Project can protect the sensitive ocean and coastal environments, while delivering significant new annual revenues to the Hermosa Beach community. Royalty revenues from both recovered onshore and offshore oil resources, as well as new tax revenues, have the potential to generate several hundred million dollars over the life of the project.
Q: Is recovering more offshore oil the right policy direction for Hermosa Beach or California?
The Hermosa Beach Oil Recovery Project is consistent with the Obama Administration’s energy policy of maximizing resource recovery from existing lands and leases. The project will efficiently and safely produce new domestic oil resources from a known and well-characterized reservoir, under an existing lease, and deliver these needed new supplies into the currently supply-constrained California marketplace. Importantly, the Hermosa Beach Oil Recovery Project will be a California-oriented project – a wholly in-state oil production, transportation and distribution energy supply project.
Q: What about fracking? Isn’t this going to be dangerous?
There will be NO use of any controversial shale “hydraulic fracking” technology for resource recovery from this project! The portion of the previously developed Torrance Oil Field that is being accessed by directional drilling is well characterized and known to be comprised of naturally fractured thin sands and shales, and thus it already provides the reservoir characteristics necessary for oil production, so fracking is not necessary.
Q: Where will this proposed project be located?
The project is proposed for a single, already developed 1.3-acre site -- not multiple locations often associated with other oil development projects. The project location is within the City’s light manufacturing area, and adjacent to a City-designated truck route. The project site was historically used as the City’s landfill and housed earlier oil recovery operations. It currently is utilized as the City’s maintenance yard.
Q: Will this project be safe?
Yes. Construction and operations of the proposed facility will utilize today’s latest, proven technology to address environmental issues, meet and exceed regulatory requirements, and safeguard workers and the surrounding community. Technologies developed for the sensitive offshore environment will be incorporated into this onshore project to ensure maximum safety and protection of the environment. All recovery and processing operations will be completely contained and utilize a closed loop design with the latest in automated safety redundancy systems, which will protect the surrounding community from the risk of spills or accidents.
Q: Will there be significant impacts from this project?
The City will prepare an EIR which will assess potential environmental impacts, including those related to air and water quality, geology, hazards, aesthetics, noise, traffic, and parking. Like most projects, we know the construction phase will involve increased activity around the project site, and the project will implement mitigation measures to minimize identified impacts during construction, including a 32-foot sound attenuation wall to protect neighbors. But normal production operations will be quietly maintained behind a 16-foot block wall, with a 10 foot landscaped setback along the adjacent roadways. The proposed project will provide offsite intersection improvements and the undergrounding of utility lines. Normal operations also will result in less traffic than the current use.
Construction work at the site will be allowed only on weekdays from 8:00 am to 6:00 pm and on Saturdays from 9:00 am to 5:00 pm. (no construction will occur on Sunday or federal holidays.) Under normal conditions, the facility will be operated and manned 24 hours per day, 7 days a week, allowing for deliveries only between 9:00am and 3:00pm.
Q: Will there be offsite activities from this project, as well?
There are limited offsite project-related activities which will include installation of the utility infrastructure (electricity and water) needed to operate the facility, construction of the pipelines needed to deliver the resources to market, and the use of City-designated truck routes during the construction and the testing phases of the project.
Q: What about truck traffic and noise levels?
Construction truck traffic will be minimal. The project is limited to a maximum of 18 heavy truck trips per day. 18 trucks trips per day will only be utilized during very brief periods during the construction and drilling portion of the project. The 18 truck trips per day account for less than 5 percent of the days during this 65 month period. These truck trips will utilize existing designated truck routes, and will be spaced throughout the day. These truck trips are limited between the hours of 9:00am to 3:00pm, Monday through Friday excluding holidays. Once construction and drilling are complete, normal operations will result in less regular vehicle traffic than the current use.
There will be no significant noise impacts on surrounding residential areas from the drilling and testing processes, and during normal operations. The noise associated with the drilling and testing phases will be reduced to less than significant levelsby the erection of a 32 foot sound attenuation wall, as well as utilizing sound attenuation materials for the drilling rig and other equipment. The ongoing operation of the proposed project will not result in a perceptible increase from the existing noise levels in the surrounding residential areas.
Q: Who is behind this project?
The Hermosa Beach Oil Recovery Project is a project of E&B Natural Resources Management Corp., a California-based oil and natural gas development company, with experience operating within urban oil fields, including here in the Los Angeles area. E&B is guided by a strong commitment to environmental responsibility. Please visit our offices at 205 Pier Avenue or call us at: (424) 903-7222 for more information. Or visit us on the web at: http://ebnr-hermosa.com.
-- Questions and Answers as of September 2012 --
Q: Will there be any oil production at the City’s maintenance yard?
That decision will ultimately rest where it should, with Hermosa Beach voters. Voters will have an opportunity in 2013 or 2014 to cast their vote on a specific proposal to convert the City’s maintenance yard (an industrial space at Valley Drive and 6th Street) into an oil production facility.
Q: Would it generate substantial revenues for city services or local schools?
Yes. Both the Hermosa Beach City School District and the City of Hermosa Beach would benefit from the City’s valuable oil resources. Some of the new revenues generated by this project would go into the City’s Tidelands Trust, which can be used for operational costs and capital improvements to enhance the public’s recreational use of our coastline and to increase economic activity for the community. New revenues would also go directly into the general funds of the City and the school district. In addition to direct royalty payments, the City and the school district would also benefit from the increased property tax revenues that would be paid by E&B Natural Resources. We are in the process of researching and estimating those financial benefits and will make all of that information available to the public.
Q: Who is E&B Natural Resources?
We are a California-based independent oil and gas company. We understand that oil production, especially in an urban environment, requires an unwavering commitment to conducting our business in a safe and environmentally responsible manner. We’re extremely proud of our commitment to health, safety, and environmental excellence, and the employment of state-of-the-art technology to support the protection of the environment and ensure the health and safety of our employees and the communities in which we operate.
Q: How did E&B help settle the recent lawsuit against the City?
For more than a decade, the City of Hermosa Beach and Macpherson Energy were embroiled in a contract dispute. E&B was brought in as a third party to help the City and Macpherson settle the case and avoid a potential court judgment in the hundreds of millions of dollars, which could have bankrupted the City. As part of the settlement agreement, we loaned the City the funds it needed to settle the lawsuit with Macpherson in exchange for an opportunity to demonstrate to voters our company’s ability to produce oil in a safe and environmentally sound way.
Q: What is the process moving forward? What kind of safety and environmental review will the proposal undergo?
Before Hermosa Beach voters take up the issue on a future ballot, there will be a comprehensive Environmental Impact Report (EIR) undertaken to evaluate any potential hazards or impacts and set forth mitigation measures to prevent them. The type of review will be determined by the CEQA lead agency, in this case the City of Hermosa Beach, sometime after an application is submitted. We expect this project will require an Environmental Impact Report (EIR). Assuming this is correct, the EIR will be conducted in the coming months and will become public information. The City will oversee the entire process and hire experts of its own choosing. E&B will fund the cost of the report.
Q: What can residents expect the environmental review of the proposed project to include?
The City will review the project under the California Environmental Quality Act (CEQA) EIR requirements. The specific goals of CEQA are the same for all subject projects; they are to identify any significant impacts and measures to address them. The areas to be reviewed under CEQA include: aesthetics, property values, noise, biological resources, recreation, hazards/ hazardous materials, air quality, mineral resources, geology/soils, public services, land use/planning, utilities/service systems, population/housing, agricultural resources, transportation/traffic, cultural resources, and hydrology, and water quality. In most cases the EIR is certified and the project approved by the City Council. However this project is unique in that the voters of Hermosa Beach will have the final word on whether or not this project may move forward.
Q: Are there additional safety or environmental permits required before the project could receive final authorization?
Yes, the project must also have the approval of the South Coast Air Quality Management District, the State Lands Commission, the California Division of Oil, Gas and Geothermal Resources (under the State Department of Conservation) and the California Coastal Commission. The agreement also requires that the Hermosa Beach City Fire Department be the lead agency on safety inspections.
Q: How many wells will be there and what will they look like?
The proposed project is governed by the terms of the Conditional Use Permit issued by the City of Hermosa Beach and that limit the number of wells to no more than 30 oil wells and 4 water injection wells.
All of the wells will be drilled to a vertical depth of approximately 1,500 to 3,000 feet below the surface (about a . mile down). Because wells will be drilled utilizing directional drilling the total well length could be approximately 3,000 to 8,000 feet. At NO time during the life of the project will there be any visible well pumping units such as rod pumps commonly referred to as “pumpjack” or “see-saw” pumps. The oil wellheads (where the oil actually enters the production facility from the well) will be entirely housed on the site within a below-ground concrete cellar.
Q: How tall is the temporary drilling rig that will be used?
The drilling rig will be 87 feet tall and will be temporarily on site for four months before it is removed. During that four month period three exploratory wells and one water injection well will be drilled. This will allow us to analyze the quality, along with the rate and flow, and other important factors of the produced oil, gas and water. This analysis could take an additional eight months. After our analysis has been completed we would begin construction of a permanent facility and pipelines. Once the permanent facility and pipelines are constructed, the drilling rig will return to the site to drill the remaining 27 oil wells and three water injection wells. The remainder of drilling operations is limited to a total of 30 months and then the rig will be removed.
Q: Will a rig always be on the site?
No. During ongoing normal production operations, there will be no drilling rig on-site. For maintenance purposes, a workover rig will be utilized. The mast of the workover rig will not exceed 102 feet in height, and the workover rig is retractable so it can be lowered when not in use. The Conditional Use Permit limits the maximum numbers of days the workover rig that is to be used onsite to no more than 90 days per year, if needed, and shall be operated only during the hours of 8:00am to 6:00pm on weekdays only, excluding holidays.
Q: Will there be any off-shore oil rigs?
No. All production facilities, operations and drilling rig will be restricted to the City’s maintenance yard.
Q: How will E&B produce offshore oil from the onshore city yard property?
E&B will drill all the wells from the current City of Hermosa Beach maintenance yard. We will use a technique known as directional drilling to strategically place each and every wellbore throughout the reservoir. Directional drilling allows more wellheads to be grouped together on one surface location, allows fewer rig moves and less surface area disturbance. As stated before these wellheads will be hidden in a cellar and located within walls, however, their well bores will be located thousands of feet below the surface and unnoticed to the surrounding community. Some of the wellbores could reach over one mile laterally from the drilling site.
Directional drilling has been around for years and numerous advances in technology have been developed. Drilling now utilizes global positioning satellites (GPS) and real time data to steer the drilling to the desired location. These advances have proven to make directional drilling one of the safest and most accurate forms of drilling today. This accuracy, the ability to drill horizontally through a reservoir, and advances in well completion techniques have made it possible to recover a much greater percentage of the oil available in underground reservoirs than at any time in the past.
Q: Are there limits to the hours of operation, including construction and truck deliveries?
Yes. The Conditional Use Permit restricts several activities such as: excavation and other heavy construction activities are limited to between 8:00am and 6:00pm; Deliveries of material and equipment are limited to between 9:00am and 3:00pm Monday through Friday; and the workover rigs shall be operated only during the hours of 8:00am to 6:00pm on weekdays only, excluding holidays.
Q: How will this project be different than what was proposed decades ago?
We’ll improve on the previously proposed project by utilizing significant technological and engineering advancements that have occurred over the last few decades. This progress in engineering not only makes this project safer, it also enables us to design a facility that is quieter, more energy efficient and more visually discrete.
State-of-the art computer monitoring systems now help ensure safer operations. Infrared camera technology can now precisely monitor on-site equipment. A new generation of equipment simply generates less noise. Sound-dampening materials have been designed to eliminate sound waves, rather than reflecting the waves. These are just a few of the advancements that we’ve seen over the past few decades.
In addition, the California State Department of Conservation requires much more rigorous training, equipment testing and regulatory oversight of equipment standards and operations than were in place 20 years ago.
Q: Would the oil that could be produced at the maintenance yard be of high enough quality to yield substantial financial benefits for Hermosa Beach?
Yes. The source of the oil produced from the proposed facility is the Torrance Field where the existence and quality of the oil is well-documented, as it is currently being extracted from operations in the area. This oil sells at a premium over the benchmark price of crude.
Q: How can I be kept apprised of this proposed project?
Please visit www.EBNR-Hermosa.com to stay on top of the proposal review process and to sign up for updates.
I'd like to hear more about this project.