Ownership 



327 



royalty bids with minimums of one-eighth 

 from 1938 to 1942 and one-sixth from 1942 

 to 1955. Actual royalties averaged about 

 35 per cent. In 1955 several leases were 

 awarded on the basis of cash bonus pay- 

 ments plus royalty, whereas others were 

 based on royalty bids. The four parcels at 

 Huntington Beach and Summerland put up 

 on a bonus basis received total successful 

 bids of $5.25 million, or $1440/acre. The 

 act also permitted the construction of off- 

 shore islands such as Monterey Oil Com- 

 pany's island off Seal Beach; municipal re- 

 strictions were overruled by provisions of the 

 State Lands Act. 



As a result of increased municipal opposi- 

 tion to construction of drilling islands, the 

 Cunningham-Shell Act of 1955 restricted 

 offshore leasing to areas of known potential 

 and to areas subject to drainage by wells on 

 adjacent land. The question of known po- 

 tential required for granting leases, however, 

 could be solved only through costly explora- 

 tion by the State Lands Commission or by 

 requiring the operators to submit copies of 

 all exploration results. The latter alterna- 

 tive was chosen. Royalties were set in un- 

 proven areas at a fiat rate of one-eighth and 

 in proven areas at a sliding scale beginning 

 at one-sixth. Bids were to be granted on 

 the basis of the highest cash bonus in addi- 

 tion to royalty and rental requirements of 

 $l/acre. Because of the great difference in 

 royalty between wildcat and proven sub- 



merged lands and the natural reluctance of 

 operators to part with costly information, 

 leasing was soon suspended. Only one lease 

 was awarded, one for 5500 acres off Summer- 

 land for $7.75 million, or $1410/acre. 



The question of relative revenue of wild- 

 cat and proven leases formed the basis for 

 the Amendment of 1957. By this amend- 

 ment royalty was set at a sliding scale begin- 

 ning at one-sixth for all tideland and sub- 

 merged land. The State Land Commission 

 was also empowered to choose between 

 royalty and bonus as the bid determinant, 

 with the probable choice of royalty for 

 proven lands and bonus for wildcat land. 

 In July 1958 cash bonus bids totaling $54 

 million were accepted for four offshore par- 

 cels near Gaviota. The high royalty for 

 wildcat land plus the 1958 excess of oil pro- 

 duction and importation over consumption 

 and the consequent 50-cent decrease in price 

 of crude oil in October 1958 have subse- 

 quently decreased interest in offshore ex- 

 ploration on the part of operators. Doubt- 

 lessly, this is only temporary. 



Altogether the offshore production of pe- 

 troleum has added revenue to the State from 

 bonus and royalty amounting to nearly $200 

 million up to 1958 and additional milUons to 

 cities such as Long Beach. Eventually, addi- 

 tional fields farther from shore should add 

 additional revenues to the State and prob- 

 ably also to the United States Treasuries. 



