SLO County hit with $6 billion property rights lawsuit

November 20, 2012

By DANIEL BLACKBURN

Excelaron, the company seeking to drill as many as 12 oil wells in the Huasna Valley near Arroyo Grande, filed a more than $6 billion lawsuit against San Luis Obispo County.

In the lawsuit filed Monday, attorney Sophia Treder said the county effected a regulatory taking of Excelaron’s property and failed to follow laws that require just compensation for that taking. The lawsuit requests that the San Luis Obispo County Board of Supervisors follow existing laws and set aside its decision denying the project, or compensate the company for its damages.

In August, the board voted to deny an appeal of a planning commission rejection of the project based on the contention that oil production is incompatible with the character of the Huasna Valley.

The suit argues that the Huasna Valley has been the site of much oil exploration and production, producing from the early 1900s through 1988. The Mankins Ranch itself has several old oil pads, access roads and at least five abandoned wells.

The Mankins Ranch is zoned for agricultural use, and under San Luis Obispo County’s Land Use Ordinance, “petroleum extraction is allowed… subject to permit.” That law established development standards for oil projects in the county.

The ranch lies over a 720-acre pool of oil estimated to contain “approximately 208 million barrels of oil,” according to the lawsuit. “At the current price of $100 a barrel, this amounts to a gross value of $20.8 billion.”

Of that supply, approximately 30 percent would be recoverable. That would amount to $6.24 billion, according to the lawsuit, which also seeks attorneys’ fees and other related expenses.

Excelaron applied for a drilling permit in 2009. The county accepted the application for processing and hired an independent consultant to prepare an environmental impact report (EIR). Ultimately, Excelaron paid the county more than $500,000 for a project review, preparation of the EIR and administrative fees.

A week before the planning commission was to hear the permit application, county staff issued a recommendation for denial — the first time Excelaron officials learned that staff was planning to reject the project.

Excelaron’s planner Carol Florence told the Board of Supervisors in August that the county planning commission’s denial of the project was based on inaccurate information that conflicted with the county’s environmental impact report. She asked the supervisors for a continuation so that project alternatives could be studied. The board rejected her request.

The lawsuit claims county officials “do not intend to approve any oil project in the Huasna area” and call that “tantamount to a complete prohibition on oil development in the area.” And that Excelaron’s proposal “complied in all respects with the county’s standards for oil projects.”

The county, the lawsuit alleges, “abused its discretion” because the supervisors’ decision “was not supported by the findings it adopted, and the findings were not supported by substantial evidence on the record.” The county “failed to proceed in the manner prescribed by its own laws and regulations.”

County officials have not commented on the lawsuit.