SH City Council approves renewing oil-drilling permit

SH Petroleum to continue operating seven drill sites for one year while negotiating long-term agreement.


Courtesy City of SH

Map of Signal Hill showing numbered locations of seven oil-drill sites belonging to Signal Hill Petroleum, whose conditional-use operating permit the Signal Hill City Council agreed to renew during its June 11 meeting

During its June 11 meeting, the Signal Hill City Council conducted a public hearing before renewing Signal Hill Petroleum’s (SHP) conditional-use permit (CUP) to operate seven drill sites for a year while it negotiates a new use-and-development agreement with the city.

The council also agreed to renew and amend two service contracts and– as successor to the Signal Hill Redevelopment Agency– approved an ownership change for a Nissan dealership.

Drill sites
After conducting a public hearing and receiving no objection, the council approved extending SHP’s existing CUP to allow the production, storage, processing and transportation of oil and gas at seven drill sites from July 1, 2019, to June 30, 2020.

Colleen Doan, Signal Hill’s planning manager, said that SHP requested the one-year extension to allow uninterrupted oil production while it continues negotiating a new long-term agreement with the city.

The seven enclosed sites each contain multiple subsurface oil wells and– per the city’s 1990 comprehensive oil code – are the only places where new wells can be drilled, Doan said.

She added that the city’s code had assumed a 25-year lifespan for each oil field, estimating that they would have dried up by or before 2015.

“[The code] was envisioned as a long-range economic tool in that new properties would become available for development as oil reserves were depleted and active wells outside the drill sites were abandoned,” Doan said.

The City regulated all seven sites under a single five-year CUP in 1998. It has renewed the CUP seven times since then, including a series of short-term extensions after 2015, when the city and SHP began negotiating a mutually beneficial alternative agreement because the drill sites were not becoming available for property development as planned, Doan said.

The two entities entered an exclusive right-to-negotiate agreement in 2017, resulting in a proposed Heritage Square retail-and-residential development project at Cherry Avenue and Crescent Heights Street. So far, SHP has demolished vacant buildings on the property and begun environmental surveying and community outreach, Doan said.

Debra Russell, SHP’s vice president of community relations and real-estate development, said that in-state oil companies produce 34 percent of the gasoline California uses, regulated by state laws that don’t apply to foreign oil companies.

“We’re all on the path for other forms of energy to be used in California,” Russell said. “Until that happens– to be able to provide the energy that we all use today– local production is very important for our state. We create jobs, pay taxes and produce it with the highest safety standards and the cleanest standards.”

SHP contributes approximately $622,000 each year to the city’s general fund in the form of franchise taxes, oil-well permits and oil-barrel taxes, a portion of which offsets the city’s oil-field services and inspection costs, according to the staff report.

Though the council unanimously approved the CUP extension, Councilmember Tina Hansen asked whether an end was in sight for the drawn-out negotiation process between the city and SHP.

“I’m hopeful,” said Scott Charney, Signal Hill’s community-development director. “But I think if we don’t begin making some progress soon, we’re going to need to choose an alternative strategy.”

Service contracts
The council also approved renewing and amending two service contracts that affect municipal employees.

The first is for labor-relations services with legal firm Filarsky & Watt, LLP, which the city has contracted with since 1980.

Deputy City Manager Hannah Shin-Heydorn said that the city depends on the additional legal counsel because it only employs one full-time human-resources manager.

The council also approved a requested increase in Filarsky & Watt’s hourly-billing rate and monthly retainer, which had not been adjusted for several years, Shin-Heydorn said.

The retainer will increase from $1,000 to $1,500 in July and then to $2,000 next year. The hourly rate will increase by 10 percent, from $280 to $310, for the next two years.

Councilmember Edward Wilson said that the 50-percent retainer increase looks bad, even though the contracted amount had not been adjusted for several years. He also said that such contracts should be sent out for bid to ensure fair rates for both the firms and the city.

Shin-Heydorn said staff is putting together a database of municipal-contract expiration dates to ensure they are renewed on time and in a fair way.

Steve Filarsky, from the legal firm, said Signal Hill was his first client when he became a full-fledged attorney.

“I have enjoyed my 39 years here,” he said. “I still enjoy doing this.”

The council also agreed to extend and amend the scope of a contract with SFG Retirement Plan Consulting, LLP, an investment-advisor and fiduciary-services group, so that it manages municipal-employee investments by itself instead of with the city.

“Plan fiduciaries are responsible for overseeing the operations and investments of public-retirement plans,” she said. “Failure to perform one’s fiduciary duties may result in personal liability.”

But she said that the city will still remain involved with plan-investment decisions to ensure they are competitive.

“We’ll still be actively engaged,” she said. “[The change] really is seeking to reduce that personal liability and to recognize the professional expertise that’s needed to make these investment decisions.”
The council also agreed to alter SFG’s fee structure from a percentage basis to a flat fee of $24,000 per year.

Mark Shuster, SFG’s founder and manager, said that the firm will proportionally distribute its fee to city employees based on each contributor’s account size.

Shin-Heydorn said the fee amendment could save employees up to $10,000 over the next eight years.

Nissan ownership
As successor to the Signal Hill Redevelopment Agency, the council agreed to allow a change in ownership of the Nissan of Long Beach dealership– located in the Signal Hill Auto Center– which ceased operating on April 30.

City Manager Charlie Honeycutt said that the property owner had agreed to make site improvements in March 2011 but had not completed them.

A new ownership group, Long Beach N Properties, LLC, is interested in acquiring the dealership, Honeycutt said. The council agreed to transfer ownership contingent on the new owner making the improvements.

Honeycutt said that the city will require improvements to the front of the property within six months and the back of the property– used for auto storage– within two years.

“All the inventory is still sitting out there on the property,” Honeycutt said. “That’s a hopeful sign that we’ve got something to move forward on.”

Service recognitions
Among several presentations during the meeting, Mayor Lori Woods recognized outgoing commissioners: Carmen Brooks, who is now the city clerk; David Hopper, who is now city treasurer; Russell, who recently moved out of Signal Hill; and Jane Fallon, who served on the Planning Commission from 1996 to 2019.

During those 23 years, Fallon served as commission chairman five times, assisting with retail, auto-dealership, housing and trail-system development projects, Woods said.

“Jane has helped influence the pattern and appearance of development in Signal Hill through her contribution to numerous general-plan updates and amendments to the zoning code,” Woods said, adding that Fallon also volunteered and served on the Sustainable Cities Committee since its inception in 2008.

A tearful Fallon expressed her thanks to the city for the opportunity to serve.

“I’ve enjoyed every minute of every meeting,” she said.

Woods also presented certificates of recognition to: Lucy Salazar, principal of Alvarado Elementary School; Scott Tardibuono, principal of Signal Hill Elementary School; and members of the Signal Hill Community Emergency Response Team (CERT).

During new business, Councilmember Keir Jones said that, in attending new-councilmember training by the League of California Cities, he came to appreciate the work of Signal Hill’s staff, especially the finance department’s transparency efforts and the public-works department.

“[Public Works] is not visible to most of us because they take care of the problems before we even see them,” he said. “We have almost 800 instances of graffiti in the city, and none of us would know because it’s taken care of before we […] are able to report it.”

Woods said that someone informed her of graffiti on a Sunday morning and that it was erased by the time she returned from church services.

“We know that one of the major deterrents to continued graffiti is taking care of it immediately,” she said. “That’s a great advantage we have of being a small city– being able to move quickly and have people, programs and contractors in place to take care of those things.”

The next Signal Hill City Council meeting will take place Tuesday, June 25, at 7pm in the council chamber at 2175 Cherry Ave.