Town Lot Bill Goes to Governor : Assembly OKs Slowdown in L.B. Oil Royalty Cuts

A bill that would limit reductions in oil royalty checks for thousands of Long Beach property owners was passed by the Assembly on a 78-0 vote Thursday and sent to the governor.

The affected leaseholders own property in the Town Lot tract in east Long Beach and have been receiving monthly royalty payments since oil companies began drilling there in 1965. The payments were substantially reduced beginning late last year after the state Lands Commission recalculated the amount of oil being produced from the tract and determined that the leaseholders had been overpaid.

In extreme cases, some owners stopped receiving checks, and many leaseholders’ checks were slashed by half, according to Leonard Putnam, an attorney representing some of the property owners.

The measure, sponsored by Assemblyman Dave Elder (D-Long Beach), would slow the rate of repayment by limiting the reduction in royalty checks to 15%. The assemblyman estimated that, without the bill, the more severe royalty reductions would last for a year and a half to two years.

“My concern is that there is no reason for such a precipitous reduction,” Elder said in an interview. “Individuals aren’t like oil companies.”

Owners range from the Long Beach Unified School District and the city itself, to churches and businesses and to individuals, including the elderly whose only other source of income is Social Security.

About 1,000 property owners, protesting that the cuts were too severe, formed the nonprofit Long Beach Oil Royalty Owners Inc. to recoup their lost revenue. Hundreds of landowners are no longer receiving any checks at all, said Rose Buchholz, the group’s president. The losses to individuals range from several thousand dollars a month to as little as $30, she said.

Supporters of the bill said the abrupt drop in payments was a complete surprise to residents and has especially hurt the elderly. Some senior citizens have had to move in with relatives because they depended upon their monthly checks to pay for their expenses, Buchholz said.

“We opened up our envelopes and saw it was much smaller than they had ever been before. It was a real shocker,” Buchholz said.

The school district, which supported Elder’s bill, also was hit hard. The district expects to lose $400,000 this year, or about half the amount it received in previous years, said Leon Taylor, the district’s business manager. No education programs were cut as a result this year, he said, because the district anticipated the revenue loss before the budget was drawn.

The lands commission has adopted a neutral stance on the bill, but it questions whether the measure’s provisions could be implemented, said Bill Morrison, the agency’s legislative liaison. Placing a cap on royalty check reductions would be complicated by the numerous contractural agreements among the state, oil companies, property owners and others, he said.

The Town Lot oil pool is part of the Long Beach Unit, an oil field which is located under portions of the city and adjacent state tidelands.