Business / Economy

Supes, Citadel trade shots over debt to Center for Biological Diversity

Supervisors say Citadel owes taxpayers $262,500; but oil company said it is appealing California court's decision, claiming that the debt issue should be decided in court

In the fallout of a superior court's decision in favor of the Center for Biological Diversity, San Benito County supervisors Tuesday approved a total payment of $262,500 for a legal charge, which the local government dubbed a debt of Citadel Exploration Inc. Hours later, the California oil company offered its perspective to BenitoLink.

The Board of Supervisors charged at a public meeting Feb. 3 that as a result of indemnification, Citadel owes the debt.

“Citadel really owes the people of San Benito County this money,” said Supervisor Anthony Botelho during the board’s meeting. “They're not stepping up and fulfilling obligations. This has everything to do with Citadel and its violations of a use permit.”

But the local government's alleged bill to Citadel potentially could face an obstacle on its quest for reimbursement: Citadel CEO Armen Nahabedian claimed that that decision should be made in a courthouse.

“As far as money owed and to whom and why, that is for the courts to decide,” said Nahabedian in an emailed statement Tuesday evening to BenitoLink. “If the County of San Benito thinks that the indemnification agreement (that we were forced to sign to get approval) gives them the authority to deny us due process, then I disagree. Citadel Exploration Inc. is appealing the decision of the Court in Monterey County; accordingly we do not think the County of San Benito should have settled with the CBD.”

In July 2014, California Superior Court Judge Thomas W. Wills decided that the county had not sufficiently done an environmental review of Project Indian, a pilot program in the Bitterwater area. Before a court-ordered shutdown, a test well there last year reportedly produced the first oil on the site in more than 100 years.

The Center for Biological Diversity had filed the complaint that triggered that case. Judge Wills directed the county to set aside its approval of Citadel's permit.

Last November, after the passage of Measure J by the overwhelming majority of San Benito County's voters, Citadel claimed $1.2 billion in damages made by what the company called a "regulatory taking," a rule under the Fifth Amendment.

Last week, BenitoLink confirmed that several claims against the county that had allegedly derived from the voter-approved Measure J had exposed the local government to risks linked to the United States Constitution.

At the board’s meeting earlier Tuesday, Supervisor Robert Rivas addressed several statements on the record, based on minutes of previous sessions.

“Citadel wanted to bring jobs to this community,” said Rivas. “They wanted to bring increased revenues that would have supported our public library and helped fund our schools. This is what they told me. In June 2013, this board voted 5-0 to offer them the opportunity to do just that. Unfortunately, they did not act in good faith."

Though the board made the decision about Citadel's conditional use permit, the company had an agreement with the county that included indemnification, Rivas said during the board's meeting. Also, he had doubt over Citadel's handling of waste water.

“As a board, we asked about waste water. After the court's ruling against them, they produced a ton of waste water. They had said, 'We're flexible about handling this waste water: We're going to ship it off site or, if we're going to put this waste water back into the well, we've got to get it tested by the EPA.' They did not get the water tested by the EPA. They did not ship it off site. They dumped it in the ground."

Tuesday evening, Nahabedian responded to the Board of Supervisors' allegations.

“Citadel Exploration Inc. has always and will forever operate in line with standard good oilfield practice,” said Nahabedian. “The fact that the county supervisors have no idea what they are talking about with regards to our operations is reflective of the fact that they have no idea about oil and gas operations in general. For this reason, as well as many others they should not try to manage the operations of oil companies. Instead that task should be left to the capable hands of engineers and geologists working for the Department of Oil Gas and Geothermal Resources, a branch of the California Department of Conservation.”

“It is my opinion that the County Supervisors have been played by the CBD and folks at San Benito Rising,” said Nahabedian. “Instead of standing up for the decisions they made and supporting Citadel Exploration Inc., a small local business that could have flourished with the discovery at Project Indian, they folded like lawn chairs,” said Nahabedian. “Our fields development could have brought wealth and prosperity to a county that is very much in need.”

Supervisor Margie Barrios, who opposed Measure J, also shared her perspective. 

"The only thing that I can add to it is to thank staff for being able to save the county some money,” said Barrios, the chair of the board, during the meeting Tuesday. “We could have been out $441,000. I'm glad that we're not. It's a shame that we're out any money at all."

Jason McCormick

Jason McCormick is a journalist taking a break from news and now running mcormc corporation, a data driven digital marketing agency in Redding, Calif.