Appeals court hears debate over Excelaron's $6.24 billion lawsuit

Excelaron proposed oil drilling at sites on the second ridge behind the Mankins Ranch in the Huasna Valley east of Arroyo Grande.
Excelaron proposed oil drilling at sites on the second ridge behind the Mankins Ranch in the Huasna Valley east of Arroyo Grande. dmiddlecamp@thetribunenews.com

The issue before a panel of three appellate justices is simple, San Luis Obispo Deputy County Counsel Whitney McDonald said Friday: Oil exploration company Excelaron didn’t file and serve a $6.24 billion lawsuit against the county within the required 90 days per the state government code.

“The statute is very clear and very strict,” McDonald said during oral arguments before the state’s 2nd District Court of Appeal, which met in the San Luis Obispo County Board of Supervisors chambers.

But an attorney for the oil company argued that the issue wasn’t so clear-cut. Excelaron sued after county supervisors denied its proposal to drill up to 12 wells on a property in the remote Huasna Valley east of Arroyo Grande.

A county ordinance — adopted in 1989 — provides additional time to file and serve a lawsuit and cannot be ignored simply because the county prefers the more restrictive limitations of the state statute, land-use attorney Sophie Treder said.

“The local ordinance says our ordinance controls” filing and serving procedures, Treder said Friday during oral arguments.

To that, presiding Justice Arthur Gilbert said, “The thing that saves your bacon, in your view, is this is a local ordinance.”

“Yes,” Treder replied. “This was enacted by the county.”

McDonald said the state’s short statute of limitations are in place to provide a quicker resolution of land-use cases for local governments.

A second issue before the court, Treder said, is the oil company’s claim that denying Excelaron’s project stripped it of its property rights.

County supervisors weren’t willing to consider alternative projects at the site, instead telling the company to start over, Treder said.

But after already spending several years and hundreds of thousands of dollars, that wasn’t something investors and mineral rights owners were willing to consider.

“There was a clear indication they don’t intend to allow oil projects in Huasna Valley,” Treder said.

McDonald later noted that county supervisors made it clear to Excelaron that any of the mineral rights owners (there are about 28, including the oil company) could file the same application or a new one whenever they wanted.

A project proposing one well would have a smaller impact, she said, and would require a different level of review than Excelaron’s plan, she told the court.

Excelaron submitted an application to the county in July 2009 to drill up to 12 wells on the Mankins Ranch in Huasna Valley, east of Arroyo Grande.

In August 2012, the county Board of Supervisors unanimously denied the proposal, saying that an oil field was incompatible with the rural and isolated valley.

Excelaron sued, claiming the county’s actions rendered its mineral rights valueless. The company sought $6.24 billion in damages based on the value of the oil it said it could have recovered if the project had been approved.

San Luis Obispo Superior Court Judge Martin Tangeman dismissed the lawsuit in March 2013, ruling the company did not file and serve the suit within a 90-day deadline. The appeal was served 39 days after that deadline.

The Court of Appeal can either uphold the lower court decision and dismiss the case or overturn it and return it to the local court. A decision is expected within 90 days.