The City of Hermosa Beach has petitioned the California Supreme Court to end a legal battle with an oil company that could mushroom into a $700 million dispute.

The 11-year fight with Macpherson Oil Co. took an unusual turn last month when an appeals court ruled that the City Council had discretionary power to deny a drilling permit to Macpherson if it found the project posed community health and safety risks, but that the case should be returned to a jury to decide whether this particular project posed such a risk. The court ruled that Macpherson could sue the city for $700 million in potential lost revenue.

“The oil company’s original public claim of $4 million has skyrocketed to a public claim of $700 million, or more than 20 times the size of the city’s annual budget,” Mayor Michael DiVirgilio said in a statement. “Being ordered to pay that massive a claim to an oil company would jeopardize Hermosa Beach’s future by forcing it to cut vital city services, including police and fire, and declare bankruptcy.”

The Macpherson project would include 30 wells plus tanks and production facilities on 1.3 acres. The company signed a lease agreement with the city in 1992, but a 1995 voter initiative banned oil exploration, drilling and production.

In 1998, the city council passed a resolution declaring the project unacceptably risky, setting off the current legal fight.