SAN FRANCISCO - A long-running lawsuit filed by a spurned oil-drilling company has the potential to force a Southern California beach city into bankruptcy or take on debt to settle the case, though Hermosa Beach officials hope state lawmakers will pass a bill that could eliminate much of their liability.

The story began 16 years ago, according to a legislative staff report, when Hermosa Beach signed a lease allowing the Macpherson Oil Co. to drill for oil and gas from city-owned property.

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