Contact: Sheri Pemberton
916.477.0691 | Sheri.Pemberton@slc.ca.gov
Sacramento, Calif.— This week, the Bankruptcy Court for the District of Delaware released its opinion in the matter of Eugene Davis v. State of California, finding entirely in the Commission’s and the state’s favor.
The Plaintiff in this case, the trustee of the Venoco Liquidating Trust, sought $161 million from the California State Lands Commission for the alleged taking of private property without just compensation and unlawful use of trust property. The Ellwood Onshore Facility, the property at the heart of the litigation, is integrally connected to Platform Holly and is essential to monitoring, treating, and eliminating the lethal concentrations of hydrogen sulfide (H2S) gas that emanate from the platform’s wells. Platform Holly, the 421 Piers, and the Ellwood Onshore Facility were all previously operated by Venoco, LLC, (Venoco). The Commission began operating the Ellwood Onshore Facility for the sole purpose of protecting public health and safety and the marine environment. The Trustee of the Venoco estate remains the owner of the Ellwood Onshore Facility and is responsible for its ultimate remediation and disposition.
“This monumental victory, a direct result of the Commission’s commitment to fighting for what is right, could not only save lives, but will save taxpayers hundreds of millions of dollars,” said State Controller and State Lands Commission chair Betty T. Yee. “The judge’s decision confirms that the Commission’s actions to protect public health and safety were, and are, justified.”
In 2017, Venoco, a lessee of state oil and gas leases off the shore of Santa Barbara County, surrendered its leases to the state and then quickly declared bankruptcy in Delaware, without undertaking its legal obligation to plug 32 wells across the leases or to decommission Platform Holly and the associated facilities. To protect human health and safety, the Commission, acting on behalf of the State of California, began operating the Ellwood Onshore Facility to abate a public health and safety risk owing to potentially lethal concentrations of H2S gas, and to address the risk of an oil release from the deserted platform.
In 2018, the Liquidating Trustee for the Venoco Estate sued the Commission, and the state, alleging inverse condemnation for the Commission’s use of the Ellwood Onshore Facility. In the opinion released this week, the Court made clear that “The bottom line is that Venoco created an emergency when it threatened to leave unmanned a facility that required constant monitoring to ensure public safety. It cannot now claim that it is owed payment when the State responded accordingly.” Consistent with this analysis, the Court concluded entirely in favor of the Commission, stating that: “This type of action by a government entity – action taken to manage a potentially hazardous situation on private property that is not sufficiently managed by the property owner – is an exemplary illustration of its police powers.”
“This Commission has steadfastly maintained that it would not allow an oil company to profit, at taxpayer expense, from a calamity it caused,” said Lieutenant Governor and State Lands Commissioner Eleni Kounalakis. “This judgment validates that principle and is a victory for the people of California.”
The State Lands Commission would like to thank the law firms of Loeb & Loeb LLP and Troutman Pepper for their excellent representation of the Commission’s interests. The court opinion is available on the Commission’s website: https://slcprdwordpressstorage.blob.core.windows.net/wordpressdata/2022/08/Davis-Opinion_acc.pdf.