Companies, Coastal Commission in dispute over Banning Ranch oil wells

A local developer and two oil companies operating at Banning Ranch are asking an Orange County Superior Court judge to weigh in on a dispute with the California Coastal Commission after commission staff alleged that the companies endangered native plants and animal species in violation of the Coastal Act.

Problems arose between the Coastal Commission and Horizontal Development LLC, Armstrong Petroleum Corp. and West Newport Oil Co. after the administrative body accused the companies of removing vegetation and operating new oil wells without permission. The debate hinges on the interpretation of a document, approved by the South Coast Conservation Commission in 1973, that allowed oil companies to drill a certain number of wells without a permit.


The Coastal Commission staff alleges in court documents that the companies endangered dozens of species of plants and animals that have made a home on the 401-acre Banning Ranch, an expanse of scrub- and grass-covered bluffs and wetlands overlooking the ocean near Pacific Coast Highway and the mouth of the Santa Ana River.

"The Coastal Act empowers the commission to remedy such violations through cease and desist and restoration orders," the court documents state.


However, the oil companies believe they have operated within the scope of the 1973 agreement, which allowed them 340 wells in operation or development without applying for permits. Mobil, the oil company that owned the land at the time, sought the agreement after the California Coastal Zone Conservation Act — the predecessor to the 1976 Coastal Act — made permits a required step for coastal drilling.

Banning Ranch has been the site of drilling in some form since 1943, and the companies believed that gave them a "vested right" to continue their business, according to court documents.

The Coastal Commission believes the agreement says the companies can operate only the 340 wells that were in use at the time the document was approved. The agreement states that "future exploratory drilling within [the area] is not exempted" from Coastal Commission approval.

The oil companies point to a line in the document that says "340 wells may be in production at any one time." Attorneys for the companies argue that the Coastal Commission does not have the authority to redefine the vested rights and have asked the court to decide.


The commission argues that the companies' action is simply a way for the landowners to circumvent an enforcement hearing and possible restoration orders.

"In an apparent attempt to beat the commission to the punch, plaintiffs filed this action before commission staff initiated formal enforcement proceedings," the staff stated in court documents.

Tim Paone, an attorney for the oil companies and developer, said an enforcement hearing has tentatively been set for January. He hopes a court ruling will provide some muscle for his defense to the Coastal Commission.

In May 2012, the commission notified West Newport Oil Co. that vegetation removal related to its operations had been occurring in violation of the Coastal Act. In January this year, commission staff sent a letter to the companies asking them to stop unpermitted oil well drilling, operation of new wells, construction of roads and pipelines, vegetation removal, grading, placement and discharge of solid material, mining and placement of structures in or near the wetlands, as well as any change in the intensity of the land use.

"It is not likely that the commission would have approved all of the unpermitted additional wells and structures referenced above if West Newport Oil … had applied to the commission for authorization, because of the inconsistency of the development with the resource protection policies of the Coastal Act," the January letter states.

The companies allege that Coastal Commission staff is trying to block development in the works at Banning Ranch.

Newport Banning Ranch LLC plans to build 1,375 homes, commercial space and a 75-room hotel on part of the ranch property. The Newport Beach City Council approved the development plan in 2012, but the Banning Ranch Conservancy, a preservation group, challenged it with a lawsuit that is currently in appeals court.

The project is expected to go before the 12-member Coastal Commission next year.


"It doesn't seem like a coincidence that all of a sudden these charges are being made by the commission staff," Paone said.

Coastal Commission representatives could not be reached for comment.