Hermosa Beach Drilling Plan Clears Key Legal Hurdle : Energy: State Lands Commission decides the city’s reserves are draining to a Redondo Beach oil field, creating an urgency to tap into the resource, under state law.

A controversial plan to allow oil drilling in Hermosa Beach cleared a major hurdle last week when the State Lands Commission found that the project meets the legal guidelines for coastal drilling.

The commission, which must still review an environmental report on the project, will consider giving the plan final approval at a meeting scheduled for mid-August. Before the drilling plan becomes a reality, however, it must also win permits from a variety of other government agencies.

Hermosa Beach officials approved a lease agreement with Santa Monica-based MacPherson Oil Co. last fall that authorizes the company, along with GLG Energy Inc., to dig 30 wells from a city yard at 6th Street and Valley Drive.

The wells would be dug at a slant, in some cases reaching beneath Santa Monica Bay. The approval of the Lands Commission is needed for any wells that would extend into state tidelands.

The wells are expected to produce 30 million barrels of oil over the next 25 years, generating between $24 million and $92 million for the city, and $18 million to $34 million for the state, Hermosa Beach officials said.

“It’s a very important decision and I hope it means a lot of money to the city,” said Hermosa Beach Mayor Robert Essertier. “The people of Hermosa voted for oil in 1984, and it’s understandably a difficult process to get from there to actual money. But I don’t think anyone anticipated how hard it would be.”

The project was stalled earlier this year after a disagreement arose between Hermosa Beach officials and the Lands Commission staff over whether petroleum was draining to an oil field in neighboring Redondo Beach.

The three-member Lands Commission includes state Controller Gray Davis, Lt. Gov. Leo McCarthy and Gov. Pete Wilson’s appointed director of finance, Tom Hayes.

Under state law, the commission must be persuaded that a city’s oil reserves are being drained--and that there is therefore an urgency to tap into the reserves--before it approves drilling in a tideland area.

Hermosa Beach officials argued that the city’s oil reserves were draining into Redondo Beach. Although Hermosa Beach no longer pumped oil, city officials said Redondo Beach had pumped oil for so many years that it created an underground vacuum, which was sucking up Hermosa Beach’s oil.

The commission, which first heard the issue earlier this year, initially said Hermosa Beach’s loss of oil did not qualify as drainage under state law because Redondo Beach was no longer actively pumping oil.

After hearing more testimony on the matter, however, the commission reversed its position on the drainage issue Tuesday and agreed that Hermosa Beach’s oil was in fact being drained away under the law.

“It came down to a problem of semantics,” said Hermosa Beach City Manager Rick Ferrin. “I don’t know if we’re ever going to pump oil in Hermosa . . . but at least the process can now go forward. At least we’re not hung up on the semantics anymore.”

Hermosa had several wells in the late 1920s, but complaints about noise and fumes prompted the city to ban oil drilling in 1932. The issue was revived nearly 50 years later by city officials who were looking for a way to raise money to repair the city’s crumbling sewers and streets.

Although voters approved two pro-oil initiatives in 1984, the proposal has moved forward in fits and starts amid arguments over how much revenue the city would get from drilling and how much noise and pollution would be generated.

Even if the State Lands Commission approves Hermosa Beach’s plan, it must still be approved by a number of other government bodies, including the state Coastal Commission, the Air Quality Management Districts and the Hermosa Beach City Council.