WHITTIER >> Faced with a court-ordered ban on its hillside oil-drilling project, the City Council on Tuesday will discuss appealing to the California Supreme Court, or tearing up the lease with its oil and gas partners.

A final order from the 2nd District Court of Appeal released Tuesday codifies previous lower court rulings against the city, saying the 7-year-old lease between Whittier and Matrix Oil Corp. was illegal because the city did not obtain permission from the Los Angeles County Regional Park and Open Space District. The ruling goes further, wiping out the statute of limitations set to expire June 30, saying the ban on the lease would continue forever.

“The questions would be: Do we appeal it? Or do we do a new lease agreement?” said Councilman Bob Henderson, one of the most ardent supporters of the oil and gas drilling project which was projected to add $150 million a year for 10 years — $1.5 billion — to city coffers.

City Manager Jeff Collier said the City Council and its attorneys will discuss the loss of the case and the appellate court ruling in closed session at Tuesday’s regular meeting.

“There are some options the City Council will likely weigh,” he said Thursday.

Because most of the attorney fees are paid for by Matrix Oil Corp., a decision to take it to the state Supreme Court may be easier to make. Collier confirmed the city does not pay for attorney fees in the five-year legal battle over the oil-drilling project.

“With Matrix, they do pay the cost of the litigation. There is a small amount the city pays on some of the questions but the vast majority is all covered by the Matrix folks,” Collier said.

Henderson would not say the proposed oil and gas extraction project was dead.

“We’ll see,” he said. “Obviously, it is a tough order. We will have to address it. But there are still some options but it is narrow.”

If the council votes for another appeal, the state Supreme Court must decide whether or not to accept the case for review. As to starting over with a new lease, that road also may be fraught with legal and logistical dead-ends.

Attorneys for the county said any new lease for oil drilling on the nature preserve purchased with county taxpayer dollars requires the county’s consent. The Board of Supervisors in October 2013 said it would not grant approval.

“If Whittier wanted to enter into a new lease, it would be governed by Proposition A and require them to get permission from the district,” said Scott Kuhn, principal deputy county counsel.

Proposition A was a 1992 county parks and open space ballot measure approved by voters and used to acquire nature preserves and improve recreation opportunities.

In an order written by Presiding Justice Frances Rothschild, the appeals court said the city erred when it signed a lease for oil and gas exploration in a 7-acre portion of a 1,260-acre nature preserve it purchased using $9.3 million from Prop. A tax assessments. The city failed to secure approval from the county’s open space district, formed to oversee land acquisitions and park improvements funded by the property-tax measure.

Rothschild, along with associate justices Victoria Gerrard Chaney and Jeffrey W. Johnson, ruled the city’s lease could not move ahead unless the county gave approval because the project is for “certain proposed uses or development of the land for anything other than open space or recreational use,” citing the project’s own Environmental Impact Report.

Opponents said the appellate court ruling is a victory for the environment. They say more fossil fuel projects will add to greenhouse gases, which accelerate global climate change.

“It is a finger in the eye for big oil and it is a great victory for the people of California,” said Nick Donovan, vice president of Whittier Hills Oil Watch, a neighborhood group opposed to the project.

According to the court ruling, Whittier said it would comply with “all legal requirements under Prop. A” but on Nov. 28, 2011, the city certified the EIR and approved the Conditional Use Permit without the county’s consent.

Then, on May 8, 2012, the city of Whittier amended its oil lease “to omit the requirement that Whittier obtain a ‘release’ from the District,” according to the court ruling.

The requirement for county approval does not expire — as city and oil lawyers argued — when Prop. A reaches the end of its funding mechanism on June 30. Instead, the court left a “permanent injunction restraining and enjoining Whittier and Matrix.”

Donovan called the council’s actions “arrogant” and demanded that all should resign.

He said he is worried that Matrix may sue the city and ask for damages for breach of contract, putting the burden on city taxpayers. A similar situation happened in Hermosa Beach when E&B Natural Resources Management Corp. sued the city over a drilling project gone bad, requiring a $17.5 million payment.

Nonetheless, Hermosa Beach residents voted against Measure O in March, which would have allowed local oil drilling.

In La Habra Heights, next door to Whittier, residents defeated a ballot measure in March that would have banned new oil wells and fracking, a technique using pressurized water to free up oil reserves. Many residents said they were afraid the city would get sued by the oil companies.

“This court victory protects and preserves open space and upholds the will of the voters and taxpayers who funded the acquisition of the land through Proposition A,” Kuhn wrote in an email.

The county and a new plaintiff, the preservation group Trust for Public Land, have filed a lawsuit against the project that comes to trial in Superior Court on Aug. 6.