City of Beverly Hills v. Venoco, LLC (In re Venoco, LLC)

572 B.R. 105, 2017 Bankr. LEXIS 1457
CourtUnited States Bankruptcy Court, D. Delaware
DecidedMay 31, 2017
DocketCase No. 17-10828 (KG); Adv. Pro. No. 17-50483 (KG)
StatusPublished

This text of 572 B.R. 105 (City of Beverly Hills v. Venoco, LLC (In re Venoco, LLC)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, D. Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
City of Beverly Hills v. Venoco, LLC (In re Venoco, LLC), 572 B.R. 105, 2017 Bankr. LEXIS 1457 (Del. 2017).

Opinion

OPINION ON MOTION FOR PRELIMINARY INJUNCTION

KEVIN GROSS, U.S.B.J.

The City of Beveply Hills, California and the Beverly Hills Unified School District (the “School District”) (collectively, the “Plaintiffs”)1 have moved for a preliminary injunction (the “Motion”) against Venoco, LLC (“Venoco”) Dpbtor-in-possession and Defendant. The precise relief the Plaintiffs seek is an Order:

(1) Directing Venoco to remain on, monitor, and maintain tjie site (discussed within) until the earliest of the following: (a) Venoco has satisfactorily complied with the Plug and Abandon Order issued by DOGGR and the Compliance Order issued by the City of Beverly Hills; (b) to the extent that Venoco has any disputes with regard to the Plug and Abandon Order and/or the Compliance Order, those disputes have been resolved and Venoco has complied with the respective orders consistent with any such resolution; or (c) further order of this Court, upon a finding that Venoco’s continued presence at the Site is no longer necessary or appropriate; and

(2) Directing Venoco to create a reserve of an appropriate amount of funds to enable it to comply with the Plug and Abandon Order and the Compliance Order.

The Complaint for Injunctive and Equitable Relief (D.I. 1) demands that “this Court enter an order to maintain the status quo by directing the Debtor to reserve an appropriate amount of funds ... to comply with the Plug and Abandon Order and the Compliance Order .” Complaint, “Wherefore” clause.

The circumstances which the Motion presents is troubling. Venoco, a debtor before the Court, is looking to forego contractual obligations. It will take time and money for Venoco to meet its obligations and Venoco does not have enough of either. The Court takes no solace in the fact that what is taking place is in another community, far across the country. We are one country. Venoco’s financial situation places it before the Court but without relief there will be financial harm to the City of Beverly Hills, the School District and perhaps the State of California. The essence of the Motion, however, is in reality the harm the Motion seeks to alleviate is financial harm. The Court is a bankruptcy court and financial harm is something the Court deals with every day. Where a problem, even a serious one as here, can be addressed through the claims process, the Court will not enjoin a debtor’s actions. Therefore, for the reasons which follow the Court will deny the Motion.

JURISDICTION

The Court has jurisdiction pursuant to 28 U.S.C. §§ 1334 and 157. Venue is proper pursuant to 28 U.S.C. § 1409, and this [108]*108is a core matter pursuant to 28 U.S.C. § 157(b)(2)(A), (I), (J) and (0).

FACTS2

The Drill Site

Venoco is or was the operator of an oil and gas-producing well site and facility located on a 0.73 acre segment of a 7.8 acre property within the City of Beverly Hills, California, which is owned by the Beverly Hills Unified School District (the “Site”). The property also serves as the site of the Beverly Hills High School, the School District’s only high school.3 Venoco acquired the rights to the oil and gas facility, including the mineral rights to the oil and gas, in 1995 by transfer from a predecessor entity. The transfer included a transfer and assumption of an Oil and Gas Lease (the “Lease”), originally dated 1959 and as amended thereafter in 1960, 1961, 1976, 1977 1978, 1983 and 1996, between and among the School District, the City of Beverly Hills, and the oil production company lessee (the “Lessee”).

The Site is' situated on a portion of the Beverly Hills High School property, where young adults of high school age living in Beverly Hills attend school. The Site is directly adjacent on two sides to the Beverly Hills High School recreational facilities, which are used not only by the school for athletic activities, but also by the public at large. The recreational facilities include a track field, football field and baseball diamond. The site is approximately 80 feet from the nearest residence, and less than 250 feet from a hospital.

The Site contains a derrick, buildings, oil tanks, and other equipment. Below the Site’s concrete surface are 19 oil and gas wells. PX 5 & 6.

The Site was constructed between 1979 and the mid-1980s. It is in a “sensitive area,” as that term is defined by California statute, to mean an area containing a building intended ■ for human occupancy, such as a residence, school, hospital or business that is located within 300 feet of an active gas pipeline. Cal, Public Resource Code (“PRC”) § 3270.5(b)(2). The regulations provide a similar definition of the term “environmentally sensitive.” Cal. Code Regs., tit. 14, § 1760(e).

The Site is also within an “urban area,” as that term is defined in the regulations, as “a cohesive area of at least twenty-five business establishments, residences, or combination thereof, the perimeter of which is 300 feet beyond the outer limits of the outermost structure.” Cal. Code Regs., tit. 14, § 1760(p). The wells at the Site are “critical wells” within the meaning of that term in the applicable regulations, as the wells are within 300 feet of the buildings identified by example in PRC § 3270(b)(2), and/or within 100 feet of any public street or highway in general use, or any public recreational facility. Cal. Code Regs., tit. 14, § 1720(a). The pipeline at the Site is an “urban pipeline,” as defined. Cal. Code Regs., tit. 14, § 1760(q).

Construction of the Site

In or about 1977, a proposal was made to construct the urban oil and gas drill site in a new location on the Beverly Hills High School property where the Venoco facility came to be built. In conjunction with that proposal, and the prospective construction of a new oil and gas production facility on the property, the Lease that Venoco later [109]*109acquired and assumed was amended, in July 1977 and again in November 1978, in several respects. As a result, the Lease provides that the Lessee’s right to extract oil and gas from the site was to terminate automatically on December 31, 2016.

The Lease as amended also provides that, within the ensuing 90 days after the date of termination, the Lessee was to “completely abandon all oil and gas operations on the New Drillsite in accordance with all applicable laws, regulations and agreements” and “restore the New Drill-site to its original condition.”

An Environmental Impact Report was prepared and-completed in May 1978 (the “1978 EIR”), in compliance with the California Environmental Quality Act (“CEQA”). The 1978 EIR, with its Appendix and Addendum, is a substantial, detailed document, roughly 480 pages in length. The 1978 EIR expressly noted that, under the proposal being assessed, “abandonment” of the drill site would occur at the end of 2016, “at which time the site would be fully restored to its original condition.” 1978 EIR, p, 4.

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Cite This Page — Counsel Stack

Bluebook (online)
572 B.R. 105, 2017 Bankr. LEXIS 1457, Counsel Stack Legal Research, https://law.counselstack.com/opinion/city-of-beverly-hills-v-venoco-llc-in-re-venoco-llc-deb-2017.