E&B Natural Resources Management Corporation v. County of Alameda

Background

E&B Natural Resources Management Corporation, Laurie Volm, Sharyl G. Bloom and Richard S. Bloom as co-trustees of The Lynn Bloom Trust, James C. Roth, Dolores D. Michaelson, and Michael Karpé sued and filed a petition against the County of Alameda and the Alameda County Board of Supervisors. They sought to overturn the Board’s July 24, 2018 decision denying renewal of two conditional use permits needed for E&B’s continued oil extraction and production operations on the GIG and Nissen parcels at the Livermore Oil Field. The permit for the Schenone parcel was not at issue.

E&B’s predecessor obtained permits for oil exploration and production beginning in the 1960s. The County renewed the permits in later years, including for 10-year and 20-year terms. Between 2006 and 2009, E&B purchased the rights to operate and produce oil from the field for $2.5 million. From 2015 to 2018, E&B invested approximately $1 million in improvements and also purchased fee title to the Nissen parcel for $1.4 million. E&B applied to renew the GIG and Nissen permits in 2017. After public hearings and a recommendation for conditional approval by the Board of Zoning Adjustments, the Center for Biological Diversity appealed. The Board granted that appeal and denied the permit-renewal applications.

Motion and legal standard

The plaintiffs moved for partial summary judgment under Federal Rule of Civil Procedure 56 on their fourth cause of action for declaratory relief. They asked the court to rule that they had a fundamental vested right in continued oil production at the Livermore Oil Field and that the defendants were estopped from extinguishing that right through the permit-renewal process. They also asked the court to determine that it would independently review the evidence concerning their fifth cause of action for a writ of administrative mandamus.

Summary judgment is appropriate when there is no genuine dispute about a material fact and the moving party is entitled to judgment as a matter of law. Under the California law discussed by the court, review of an administrative decision uses the substantial-evidence test unless the decision substantially affects a fundamental vested right. If a fundamental vested right is affected, the court independently weighs the evidence and determines whether the agency abused its discretion.

A fundamental vested right to continue an existing land use may arise when a party performs substantial work and incurs substantial liabilities in good-faith reliance on a government-issued permit. The court emphasized, however, that whether such a right exists is decided case by case and that courts are less likely to treat purely economic interests as fundamental.

Court’s analysis

The plaintiffs argued that the County’s approvals since 1966 and E&B’s and its predecessors’ investments established a fundamental vested right. The court distinguished the California appellate decision in Goat Hill Tavern v. City of Costa Mesa. In that case, the business had operated for more than 35 years as a legal nonconforming use, the city had a practice of allowing businesses to continue after permits expired, and some of the owner’s investment had been made at the city’s request. Here, all of the oil and gas operations were conducted under limited-term permits, there was no other legal nonconforming use, the permit-renewal process appeared to have been consistently enforced, and the County had not required or suggested that E&B make the investments at issue.

The court also relied on decisions involving limited-term permits for billboards and cell towers. Those decisions treated the permit holders’ interests as subject to the permit terms and viewed the losses from permit denials as economic rather than fundamental. The court noted that every conditional use permit issued by the County since 1967 had an express time limit. The 10-year and 20-year terms allowed long-term use but did not guarantee permanent use. The permits required oil operations to cease on the designated land when the permit term ended, and prior renewals did not guarantee renewal forever.

The court further found that the renewal process was not automatic or merely routine. It involved review by the County’s Planning Department, Environmental Health Department, and Board of Zoning Adjustments. Because the permits involved environmental, public-welfare, and public-need issues, the court was reluctant to restrict the County’s discretion based solely on past renewals.

Finally, the court found that the plaintiffs had not provided enough evidence to show that denial of renewal would do more than cause a purely economic loss. Although the plaintiffs stated that they had invested nearly $5 million in acquiring and operating the field and estimated that approximately $11 million in profit remained to be recovered, they did not show that the denial would destroy or significantly affect their overall business. They also did not show that the investment was significant in the context of the capital-intensive oil and gas industry or compared with returns already earned during the permit periods.

Disposition

The court held that the plaintiffs had not shown a fundamental vested right in continued oil operations at the Livermore Oil Field. It therefore denied the plaintiffs’ motion for partial summary judgment. The court did not reach whether the County was estopped from denying the plaintiffs’ asserted right or whether independent judgment was required for review. It stated that, because no fundamental vested right existed, the substantial-evidence test rather than the independent-judgment test applies.

The court granted the Center for Biological Diversity’s motion for leave to file an amicus curiae brief, while noting that the brief had limited value concerning this motion. The order terminated Docket Numbers 59 and 66 and directed that a case management conference be set.