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Venoco, an independent energy company, had been managing the oil well site on school grounds since 1995. But, as the company filed for bankruptcy in April 2017 and the lease ended at the end of last year, our district is faced with yet another challenge: who will clean up the site and what does this mean for our schools?
Footing the bill:
The Beverly Hills City Council voted in 2011 to ban all oil drilling within the city limits by Dec. 31, 2016, ending a longstanding legacy of oil production in the city. This ordinance targeted the city’s last remaining oil drill site, on the high school campus, going into effect the same day Venoco’s contract to operate the well expired.
“The ordinance was passed in response to councilmembers’ and other residents’ concerns that oil and gas drilling and production were not compatible with other land uses in the city, especially when in such close proximity to a school site” City Manager Mahdi Aluzri said.
The lease that allowed Venoco to operate on the oil drill site on school grounds had expired on Dec. 31, 2016, and at that time, Venoco had said it would evacuate and clear the site by May 31, 2017.
“[The] filing is the result of unfortunate circumstances impacting the company’s financial strength…,” a press release from the company read. “We have pursued a number of market-based and regulatory solutions to address these challenges during the last year. Despite these considerable efforts, our financial position now compels us [to file for bankruptcy].”
Currently, the responsibility of maintaining and monitoring the derrick rests on the district, who is paying a contractor, who is contractually unavailable for comment, $17,700 a week for round-the-clock monitoring.
With the news of Venoco seeking bankruptcy protection, the clean-up deadline was not met.
“When we said to them, ‘We’re finished at the end of your lease, your lease says this is how you’re going to leave. You’re going to clean it up; you’re going to decommission; you’re going to cap the plug; and you’re going to remediate the land,’” Bregy said. “There was no way; they were already doing poorly financially. So, they don’t want to be held responsible so they’re like, ‘bankruptcy.’ Then that way, they protect themselves.”
To try to get the best deal possible for the district, Bregy, along with Larry Weiner, the city attorney, traveled to Delaware to be physically present during the bankruptcy negotiations. The district received $760,000 from the court, a far cry from Venoco’s contractual obligation, but pleasantly surprising when the district initially expected less than a third of that going into the proceedings.
“So, the $760,000 was the amount that we negotiated; this was the amount when I went to Delaware, and this was considered to be very, very good because what they tried to do was they tried to work out a deal because they have a long list of creditors, including us,” Bregy said.
Bregy attributes this favorable outcome to the fact that the well is situated on a public high school campus, especially since it is in a district with a stiff budget shortfall, as well as putting a personal presence, and face, to the district’s plight.
“We were able to convince them that we were preferred or priority creditors because of the location,” Bregy said. “And that we were also a school district that was struggling financially and that this is going to cause a hardship for students and staff.”
City steps in
A contract between the city and the district, agreed to by the Board of Education at the Nov. 28 meeting, splits the responsibilities of the clean-up process between the two entities. This agreement was finalized by the City Council on Dec. 5.
“We are very pleased that the city and the school district will be working together to secure the former oil well site and ensure the safety of high school students, the staff and the neighborhood,” Aluzri said.
According to the contract, the “paramount concern is to maintain the safety, environmental integrity and the legality of the drill site for the students, faculty and staff of Beverly Hills High School, and for the Beverly Hills community.”
To this end, the city will front up to $8 million, citing the district’s lack of available cash reserves, of which 50 percent will eventually will be paid back to the city.
Once the capping and plugging is complete, the district will pick up the tab for the project’s ongoing costs. According to Aluzri, “as the property owner, the school district will evaluate long-term plans for the site and potential funding options.”
However, in the short term, the city will handle the project.
The city would take on project management responsibilities for site monitoring and plugging work until the state regulatory authority, the Division of Oil, Gas and Geothermal Resources, confirms the wells have been properly plugged,” Alzari said. “The Public Works Department has extensive experience in project management, and will oversee consultants and contractors hired to monitor the site and perform plugging work.”
After tense negotiations, the two entities have also recently finalized the Joint Powers Agreement, which leases out the district’s facilities to city-run programs. Aluzri believes that collaboration between the city and district will continue beyond these two agreements.
“The city and the school district have always enjoyed a close relationship and continually cooperate on many matters beyond the JPA or the Venoco clean-up,” Aluzri said.