sr-011067-6bCITX OF SANTA MONICA
DATE: December 12, 19bb
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~' TO: The Honorable City Council
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FROM: City Manager
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~' '' SUBJECT: Oil Problem
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The following survey questionnaire has been forwarded to and returned by the
Cities of Beverly Hills (yellow), Los Angeles (green), Redondo Beach (blue),
and Huntington Beach (pink}.
tUir. Brock, Oil Properties Department, City of Long Beach, has indicated
that a response to the questionnaire is being prepared and we will receive it
shortly. As soon as the Long Beach response is received, it will be £orwarded
to members of the Council for their information and files.
The following questions were asked:
"Recent industry news as reported in the metropolitan press has indicated
rather intensive oil exploration or extraction activity adjacent to Santa Monica.
Sepcifically:
A. Mobil Oil Company has a new operation in Venice immediately
south of Santa Di~onica.
B. Occidental Oil Company has a new operation in the City of Los
Angeles immediately to the east of Santa iVionica.
C, Occidental Oil Company has a new operation in Santa Monica
Canyon immediately to the north of Santa lv~onica.
It is possible that any one or all of these operations are, or will be, producing
oil from oil pools underlying the tidelands or uplands of Santa Monica. vVe do
not have qualified staff members who can express an informed opinion on the
possibility or probability of such results by these operations.
Accordingly, we are seeking the best advice we can obtain without the necessity
of relying upon the statements or claims of the involved oil companies. we
believe that your city must have been exposed to this problem in the past, and
we are interested in whether your city employed a consulting geologist prior to
local disposition of the matter. Specifically: ~ ,-°°~
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To: The Honorable City Council
From: City Manager
Subject: Oil Problem
December 12, 1966
1. Has there been a condition affecting your city under which out-of-city
oil drilling or exploration would potentially drain oil from oil pools
underlying the city's uplands or tidelands?
2. If so, what action was taken by your city to protect or preserve the
rights, if any, of your city and its individual property owners?
3, During the consideration of this subject, did the city employ con-
sulting geologists?
n. If consulting geologists were employed:
a. What services did they perform?
b. Were their services considered beneficial?
c, What was the cost of such services to the city?
The Santa 1Vionica City Council is currently discussing this subject and would
be most appreciative of a summary of your experience at your earliest con-
venience."
) `' -
PERRY SCOTT, City Manager
PS/js
attachments
cc: City Clerk
City littorney
Director of Finance
Director of Planning
an cquNCa
J. M. STUONEN
MAYOR
MAJ. GEN. LEROY N. WATSON
FRANK CLAPP
A. FREDRIC LEOPOLD
GEORGESLAFP
CiALIFORNIA, 90210
CRestview 66181
November 28, 1966
Mr. Perry Scott, City Manager
City of Santa Monica
Santa Monica City Hall
Santa Monica, California
Dear Mr. Scott:
DANILY BELL
CITY TREASURER
LYMAN H. COZAD
ADMINISTRATIVE OFFICER
RICHARD B. PIATT
FINANCE DIRECTOR
CITY CLERK
With reference to your letter of November 8th, addressed to George Patterson,
Acting City Administrator, I will endeavor to answer some of the questions
raised in your letter. Councilman George Slaff and mysel€ have constituted
a committee of the Beverly Hills City Council to study the possibility of
slant drilling into the subsurface of Beverly Hills. We found that we
needed some expert advice on this subject since we had no previous experi-
ence in the petroleum leasing field. We engaged a petroleum geologist,
Mr. Peter Gardett, and also an oil consultant, Mr. Paul Carver, of Rey-
nolds & Carver, located in Beverly Hi11s.
Our problem was to create an ordinance which would properly control the
drilling into the subsurface of Beverly Hi11s from points outside of Beverly
Hills, and to protect the safety and health of our citizens. Since the
petroleum regulating field is something entirely different than the ordinary
administration of municipal affairs, we engaged Mr. Mark Allen, the City
Attorney of Ynglewood, to help us prepare the ordinance. Our consulting
fees wittl Mr. Allen were on the basis of $50 an hour, and I believe that
about $3,000 was spent with him. Our total expenditure for consulting
and geological information was in the neighborhood of $5,000. However,'
we feel that this amount was well spent, since we have drawn up an ordin-
ance regulating the drilling into our subsurface, which appears to be ac-
ceptable to the oil companies. I am arranging to have a copy of this or-
dinance sent to you, with the hope that you may find it helpful in preparing
something along this line for Santa Monica. In addition to .the regulatory
ordinance, which includes a description of the procedure for forming an
exploratory area, also the method of applying for an oil well permit and the
CITY OF BEVEP~LY HILLS
Mr. Perry Scott Page 2
November 28, 1966
cost of the application and the permit. We had a separate ordinance which
included a business regulation tax on the production of oil from the sub-
surface of Beverly Hills. We fixed the tax at a total of 3C per barrel,
giving a credit of 1zC to the oil company for oil that is produced outside
of Beverly Hills. This leaves the City of Beverly Hills 1?C net. Since
all of the oil will be produced from sites outside of Beverly Hills, the
regulatory tax is really only 1zC to us, but by giving credit on the total
of 3C, because of the fact that the oil is produced from drill sites out-
side of our City, we felt that the per barrel tax was more: nearly justifiable.
I would feel that there are plenty of sites adjacent to Santa Monica, which
would be feasible to use to drill into the subsurface of your City. As long
as there is oil under the City, there will of course be great pressures to
find a way of producing it. Please convey my regards to Mr. Rex Mintor.
Cordially,
- - _~ '~
FRANK CLAPP ~ `~ ~~
Councilman
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Enclosures
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Sec. 6-1.214.1. License tax: 011 production.
On and after January 1, 1967, every person who engages
in the business of extracting oil from a well where the well,
or any portion of the well, is located in, passes through, or
is bottomed under, real property in the City, shall pay a
license tax based on production as follows:
Per well - X540.00 per year for the first 18,000
or less barrels, payable on or before February 1, of
the year for which the license tax is due.
Per well in excess of 18,000 barrels per year -
Three cents {x.03) Per barrel, payable within sixty
(60) days after the close of each license year.
Provided, however, that in the evEnt portions of a
well are located in one or more other cities or in
the unincorporated territory of Los Angeles County,
the business license tax shall be the sum of Two
Hundred and Seventy .Dollars 0270.00} per well per
year for the first 18,000 or less barrels and
One and one-half cents 0.015) per .year for each
barrel in excess of the first 18,000 barrels from
Each well.
C. ERWIN PIPER
CITY ADMINISTRATIVE OFFICER
Mr. Perry Scott
City Manager
City of Santa Monica
1685 Main Street
Santa Monica, California
Dear Mr. Scott:
.LOS ANGELES
CALIFORNIA
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A0 'YDED 1K0,
SAM YORTY
MAYOR
November 15, 1966
CARL F. PAHL
ROBERT O. INGMAN
ARTHUR O. SPAULpING
FRANK W. WINFIELD
ASST, CITY ADMINISTRATIVE OFFICERS
In reply to your letter of November 8, 1966, relative to oil exploration
and production in the vicinity of the City of Santa Monica, may I answer your
questions as you have posed them.
You have asked if there has been a condition affecting the City of Los
Angeles similar to that which is currently facing the City of Santa Monica.
Indeed the City of Los Angeles in the development of the Wilmington oil field
coped with precisely the same situation, The Wilmington oil field has been
developed within a number of separate jurisdictions including the City of Long
Beach, the City of Los Angeles, the County of Los Angeles, and other adjoin-
ing areas. In order that those owning property within the City of Los Angeles
and within the producing limits of the Wilmington oil field might benefit from
ttae occurrence of oil beneath their property, the City of Los Angeles adopted,
shortly after World War Li, a series of procedures which allow for oil field
development operations. Utilizing these procedures, both property owners
and the lessees of property were permitted to capitalize upon oil and gas re-
serves found within the City limits of Los Angeles. Without these procedures
such hydrocarbon reserves would have been drained from beneath lands lying
within the City of Los Angeles by wells producing in adjoining jurisdictions.
With respect to your query concerning the employment of consulting
geologists to assist the City of Los Angeles in drafting appropriate oil drilling
ordinances, I am sure that such consultation was afforded the City although I
do not have detailed information concerning those who may have been employed.
In this connection, the City of Beverly Hills is currently concerned with almost
identically the same problem which you allude to in your Letter and, in fact,
has retained not only a consulting geologist but a consulting oil and gas attorney
and a man experienced in dealing with lands which are oil and gas productive.
CITY ®F
380 CITY HALL. LOS ANGELES. CALIF. 90072 TEL. 624-$2f 1
Mr. Perry Scott - 2
In answer to your fourth question, a consulting geologist may possess
valuable information which can be utilized by a City such as yours in terms
of developing better understanding of the problems attending development of
oil and gas reserves. Should the City of Santa Monica consider allowing
exploitation of oil and gas reserves located beneath the City, I should most
heartily recommend that the City retain the services of a consulting geologist,
preferably a man with substantial experience in drilling for oil in the urban
environments. The cost of such services would be not less than $100 per day
on a day-to-day basis and should not exceed $200 a day under any circumstances.
I very much appreciate your inquiry concerning our experience in the
City of Los Angeles in developing urbanized oil and gas reserves and I stand
ready at any time in the future to assist you with problems which the City of
Santa Monica may have in this connection.
Very truly yours,
_ .y ,
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Arthur O. Spauldi Assis nt~
City Administrative Officer
Petroleum Administration
AOS:am
OffICE OF ' "
THE CITY MANAGER
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November 21, 1966
Mr. Perry Scott, City Manager
City of Santa Monica
City Hall
Santa Monica, California
Dear Mr. Scott;
Your letter; November 8, 1966
The City of Redondo Beach employed a consulting petroleum
engineer and a geologist, not during the initial phases of the negotiations
for the contracts, but as soon as the drilling and production were under-
taken. We have been continually advised until the past year, when the sit-
uation became stablilized to a point where only an occasional special con-
sultation on a per diem basis is necessary.
Answering your specific questions:
1. Yes, there were and still are situations where the
draining of town lots could occur; however, we be-
lieve we have effectively precluded any possible drainage
of the tidelands by our drilling pattern.
2, To protect the City~s rights on the tide and submerged
lands from drainage, the tidelands were drilled and pro-
duced, which is the only effective method of preventing
drainage according to the best advice we received. Some
Town lots, not all, were protected by off-set drilling on
a community lease, on aslant-drilling basis from selected
drill sites, where drilling had taken place in the past.
Due to the geological formation, depth of sand, physical
location of some lots as to residential or other zoning, it
was impossible to protect every parcel from possible
drainage. However, this is not a serious economic problem,
because of the low production, low quality oil underlying
most of the possible town-lot production. It would not amount
to very much money to the individual lot owner.
Mr. Perry Scott - 2 - November 18, 1966
3. Yes, the Gity did employ consulting geologists and
petroleum engineers.
4, a.. Advised on procedure for granting permits, leasing,
re-leasing or re-negotiation of contracts, examined
production and geological records and drilling reports
for all activities within the City's jurisdiction; advised
on drilling-control ordinances, estimated potential and
limits of field underlying the City's Townsite Tract and
tidelands, provided geological maps and interpreted
maps and other specialized information.
b. Yes, it would be like building a street or storm drain
without the benefit of Civil Engineering advice. Competent
geological and petroleum engineering advice is fundamental
to any realistic decision.
c. Three engineers and a geologist were employed over
several years; 7. R. Pemberton--monthly production
reports, general specialized advice on well location,
offsets, etc., and special report and reservoir estimate,
negotiation with oil contractors, $300 per month;
James McNeill, same as above, $300 per month; and $30
per hour for any specialized projects;
Stanley and Stolz--special oil reservoir report and estimate
of income to the City, review and updating of above report
and review of City's contract and recommendation for re-
negotiation of agreements--lump sums.
I hope this is the information you wanted. If anything further is
needed, please let me know.
Yo rs ver uly,
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COUNCILMEN
JAKE R..STEWART. MAYOR
TED W. BARTL ETT _
ALVIN M.. COEN
E RNESTH. GIS LER
N. JO MN-. V.V. GREEN
DR. HE dRV 5 KAUFMAN
OR. DONALD D. SHIPLEY
November 21, 1966
Mr. Perry Scott, City Manager
City. Hall
Santa Monica, California
CALIFORNIA 92648
Re: Your November 8 Request for Information on
Oil Operations - City of Huntington Beach
Dear Mr. Scott:
K. DALE DUSH
CIiY ATipRNET
PAUL C. JONES
CITY CLERF
BETTY OIEKOFF
TREASURER
DO YLE MILLER
AOMINISTR ATIVE
OFFICER
BRANDER D. CASTLE
ASST Si ANT
AOMINIST RATOq
In answer to your above mentioned inquiry we have enclosed a
copy of a letter from our Assistant City Attorney discussing
some of our experience in the production of oil from tide
and submerged lands. We hope this will be helpful and welcome
your further inquiry at any time.
Sincerely,
Doy Miller
City Administrator
DM:bwo
enc.
JAMES R. WHEELER
DIq ECTOq OF PURLIC WOgXS
FRANK B. ARGUE LLO
FINANCE pI REC TOR
KENNETH A. REYNOLDS
PL AN HIND OIREC TOR
VINCENT G MOOR HOUSE
LIFEGU Aqp CXIEF
DELBERT G HIGGINS
FIgE CHIEF
JOHN SELTZER NORM WORTHY
RwREAnDN a - OLLIN C CLEVELAND
POLICE CXIEF Pq qqS DI RE CTOP BVILDIN4 DIRECTOR
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TED W. 9ARTL ETT
AL VIN M.-COEN
EPNEST N GIS LER
N. !0 NN V V. GREEN
DR. NENRV S KA UPMgN
UR. DO NALO 0 Sin PLEY
City ~~ untin~ta cac~
P.O. BOX 790
November 9, 19b6
CALIFORNIA 92648
Mr. Doyle Miller,
City Administrator,
City.
Dear Mr. Miller:
X. Oe~E EbSH
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PAIL C. JC~ES
BET v Vss E~!OFF
C U ER
UO VLE MILLER
•OMIwIGTg1TIV[
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BRA NOER O. CASTLE
•J919iANT
AOMIN19TgATOq
Zn regard to the inquiry by the City of Santa Monica as
to the problems accompanying the drilling for minerals in tide-
lands, it should be first stated that under the State Public
Resources Code, the State has control and. jurisdiction over
the tide and submerged lands. Only the City of Long Beach, to
my lozowledge, has the mineral rights to the tidelands.
Under Section 6829 of the Public Resources Code, the
State has set out the terms, coi:ditions and provisions which
must be included within any lease by the State to any lessee.
This section was involved in a law suit which involved Standard
011 and the City of Seal Beach. The City of Seal Beach attempted
to regulate the location and manner in which Standard 011 was
to drill Sn the off-shore tide lands withi2l the territorial
limits of the City of Seal Beach.
The case was appealed to the upper court and the court
held that the State had pre-empted the field because of this
aeetlon which Z have referred to and that the City of Seal
Beach could not regulate the manner in which these platforms
were built and operated.
Therefore, it is my legal opinion that the Citq of Sants
Monica would be without any legal power to control the drilling
in their tide lands.
® asks:
JAMES R. WNEEL ER
DIq[<LDq o[.u[uc Wo RRL
FRANK 8. ARGUELLO
IIY ARCC oI R[LtOR
JONN SELTZER
pout[ cxly
As to the specific questions which the City Manager
The gnawer to question #1 would be 'No0 as there la no
KENNETN A. REVNOLOB
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OLLIX C CLEVELAND
Gu1LO1NG Dlq[c roe
1.
Doyle Miller
City Administrator
November 9. 196b
slant drilling from outside the-city limits into the city limits.
In answer to
to atop such drilling or
ars draining oil from the
get their 1,~ of the State
doubt have records of the
the tide lands.
No. 2s Yf so, the city could take steps
ietermine ea to what extent these lands
city tide land so that the city could
tide land revenue. The State would no
production from any wells drilled into
Since the City of Huntington Beach does not oxa the
Lido lands and receive a substantial revenue from the same, the
effect of the tide land drilling is to have Texas Toxers ~utting
out on our sky line'xhich destroys the aesthetics of our beaches.
Ft is suggosted that the City of Santa Monica make
sure they contact the State bands Commission to see that all of
the texas, conditions and provisions of a tide land lease, under
Section 6829, are adhered to by the Lessee.
Yf the city does not take this action regarding thoir
tide lands and adopt the position of a watch dog, then they may regret
® what happens but x111 be unable to ezert any influence on the ait-
uatioa as it x111 be too late.
It would be well for the City of Santa Monica to oon-
teot the City of Long Beach on this matter as they are .better aa-
quainted with oil problems than we ere.
DSth
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/Very truly ,our ,
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`lasoB~s~(IBATA,
fast. City Attorney
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-SANTA MONICA, CIVIC ACTION COMMITTEE
Box 1162
1114 - 23rd Street
Santa Monica, California
Telephone GL. 1-2803
Jec® ?, 1966
REQUEST TIi9y'' TG SP:EAI~ BE~iORS CCUITCIL O:T DEC. 13, 1966
TO
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