Oil Company Lawsuit May Set Dangerous Precedent For Local Government

Oil companies are anxious to mine resources anywhere they find them, and if they cannot, they sue for lost revenues.

San Luis Obispo County's Huasna Valley is one of the most beautiful open space areas along the California coast. As a native Californian who has passed through it many times, I can recall times where the landscape was awash in California poppies and winters where it was green and lush, dotted with winter-barren trees. It's home to hawks and deer, with patches of coastal vineyards criss-crossing the landscape.

It's also home to oil reserves that offshore companies are anxious to tap. About two years ago, a company by the name of Excelaron filed for the right to drill for that oil in the hills surrounding the valley. Excelaron, Canadian-owned exploration company, mounted a large-scale public relations campaign to convince area residents that it was just fine to drill for oil in the unmarred hills surrounding their homes, ranches, and vineyards.

Last August, San Luis Obispo County denied their permit to drill, which effectively ended their public relations tour and began a legal battle over property rights.

Excelaron claims the permit denial amounts to a "regulatory taking of property" by government. Further, because the permit was denied, the company says it is entitled to damages equal to the value of the oil it could have recovered had the permit been approved."

Santa Maria Times:

The 720-acre oil field, Excelaron asserts, sits atop 208,000,000 barrels of oil. At $100 per barrel, the gross value of the oil in the reservoir is $20.8 billion. Of that, 30 percent is recoverable, or $6.24 billion worth.

County Supervisor Adam Hill said the amount being sought makes this one of the largest, if not the largest lawsuit in San Luis Obispo County's history.

This week the court tentatively tossed out the lawsuit on procedural grounds without addressing the substance of the suit. Even if the procedural denial holds, it does not address the danger a lawsuit like this poses to municipalities who are tasked with the responsibility of deciding whether or not approval of applications to drill are liable for lost revenues if they deny the permit.

Excelaron owns the acreage and mineral rights they propose to explore. It's likely fracking would be part of their recovery process if you read the carefully-parsed language in their lawsuit. They claim SLO County has effectively "taken" their property, and along with it, their profits.

Imagine the precedent this would set. Why bother having a permit process at all if denial would mean multi-billion dollar payouts to the parties denied? Whether it has merit or not, having to deal with a lawsuit like this drains county resources away from other services, and creates an environment where oil companies can simply bully their way into communities with the mere threat of a lawsuit, should they be denied.

More importantly, it suggests that any business which wants to conduct business in any area has the right to their profit, whether or not they actually are able to undertake the enterprise which would generate the profit.

Of course, the right wingers are all over this issue, and it wouldn't surprise me at all to discover that there's some Koch money driving the lawsuit process somewhere. This op-ed from area conservative writer Alex Alexiev written shortly after the denial laid the foundation for what would eventually become Excelaron's lawsuit:

To begin with, it seems not to have bothered the supervisors that what they did was deny the ranch owners the right to exercise their lawful property rights as owners of the minerals under their property. Whether this amounts to government “takings” per the 5th Amendment is for constitutional lawyers and the courts to decide, but this kind of thing is what they do in totalitarian countries, not in the land of Washington, Jefferson and Lincoln.

Second, and just as disconcerting, is the seeming hypocrisy of the supervisors in defending this clear-cut assault on property rights. Supervisor Teixeira, in whose district Huasna is, is reported saying that “an oil field is incompatible with the rural and isolated valley.” If an oil rig is incompatible with that remote location, where few would have ever seen it, Mr. Teixeira, what exactly is it compatible with – downtown San Luis Obispo?

He was just getting warmed up. Note who he quotes in the following paragraphs:

Last year’s Fraser Institute “Global Petroleum Survey” found California the most hostile to drilling state in the United States and 91st worst in the world. The results are there for everyone to see. Since the war on oil and gas began in the aftermath of the 1969 Santa Barbara oil spill, California has become increasingly dependent for its energy on imports. Thirty percent of our electricity, much of it coal-fired, is now imported, even as nearly half of our growing oil imports come from such pro-American paragons of democracy as Saudi Arabia, Russia, Venezuela and Ecuador.

The impact of energy dependence, aggravated by high taxes, renewable handouts and asinine regulations, such as the global warming scam called AB32, on the state’s economy is staggering. California electricity rates are nearly 50 percent higher than those in the the rest of the country, making our industries uncompetitive.

According to a Milken Institute survey, California businesses pay 23 percent more to operate than those in other states, resulting, in the past ten years alone, in the loss of 34 percent of our manufacturing base. Just go ask Apple, Intel and Google, the leaders of high-tech California, where they have been building factories lately. The answer is anywhere but California. And it is getting worse. Last year 254 companies left California for other states, 26 percent more than in 2010.

The Fraser Institute is a Canadian think tank funded heavily by Charles Koch. Alex Chafuen is on the board of directors. Chafuen was the president and CEO of the Atlas Foundation for 18 years before branching out into other ventures related to the goals and aims of his libertarian friends like Koch.

The Milken Institute is less obvious about its goals, but no less corporate. David Koch has been a featured speaker at their conferences, and they receive some hefty grants from the Gates Foundation. It's hard to imagine them being particularly concerned about anything other than corporate best interests.

If this company succeeds in getting their lawsuit reinstated, it spells a real danger for every single county, city and state who wants to exercise their right to govern. Corporatocracy will rule.

About karoli

karoli's picture
Card-carrying member of we, the people.

Comments

We welcome relevant, respectful comments. Please refer to our Terms of Service for information on our posting policy.