SANTA ANA, Calif. (CN) – A real estate development company sued a business specializing in winding down defunct oil wells, claiming the business failed to shut down the well according to state guidelines – costing the real estate enterprise the opportunity to develop the property.
Sa Athnassia LLC, a commercial real estate enterprise in Orange County, California, sued C.E. Allen Company in Orange County Superior Court on Wednesday on breach of contract claims. The court made the complaint available to the press and public on Thursday.
Sa Athnassia bought a piece of property in 2013 in Huntington Beach, California, where there had formerly been an oil operation. The company bought the property with an eye toward developing it as a multi-use residential complex, according to the complaint.
The California Department of Oil, Gas and Geothermal Resources (DOGGR) said in order for the company to develop the property, they had to go through a process called re-abandonment. The original oil well was abandoned by a previous owner 50 years ago, but in order to be in compliance with the current state regulations the developers need to go through the process set forth by state regulators.
Sa Athnassia hired C.E. Allen Company, which came highly recommended by people in the industry.
In June 2014, Sa Athnassia received its conditional permit to begin the re-abandonment process, and C.E. Allen commenced work on the project soon after.
The company was required to drill down approximately 2,900 feet, fill sections lacking concrete with a special mud-based material designed to bolster the well infrastructure, fill pipes with concrete and install at least 10 concrete plugs.
“Regrettably, Allen Co. did none of those things,” Sa Athnassia says in its complaint. Instead, the company only reached about 700 feet and then capped and completely sealed the well, according to the developer.
In January 2015, Sa Athnassia was surprised by a report from DOGGR saying the re-abandonment had failed inspection.
The failed inspection means the company cannot move forward with its development plans and has essentially wasted approximately $600,000 into the project, including the nearly $150,000 it paid C.E. Allen for re-abandonment services, according to the complaint.
Sa Athnassia seeks $1 million in damages.
The company is represented by Robert Wilkes, based in Santa Ana, California.
Requests for comment sent to C.E. Allen were not returned as of press time.