LONG BEACH — Until recently, Betty and Floyd Kalessa never thought much about the oil that lies in the sandy soil far beneath their modest, two-bedroom home.
The Kalessas were content to receive a monthly royalty check of about $180 from the oil company that leases the mineral rights to their Belmont Shore property. The money helped the Kalessas make ends meet for two decades, especially after Floyd suffered a stroke in 1973.
A few months ago, however, the couple realized that the payments were beginning to dwindle. Their royalty had fallen to $9 by May.
The Kalessas and more than 8,000 other Long Beach leaseholders are getting less money because a complex reevaluation by state geologists has found that the oil beneath their land is poorer, both in quantity and quality, than previously believed.
At the same time, the state found that oil under its own land nearby was more plentiful and of richer quality. That increased profits for the state, which reaps about $300 million a year from crude pumped from under a state-controlled stretch of ocean adjacent to Long Beach.
"We feel like we're being robbed," said Betty Kalessa, 58. "We were depending on those checks for income. If it keeps going this way, I don't know what we'll do."
Leaseholders Fight Back
The oil leaseholders in Long Beach are fighting back. About 300 residents have united to form the Long Beach Oil Royalty Owners Inc., a nonprofit corporation to battle state officials over the decisions that have eroded their monthly royalties.
Leaders of the group plan to lobby for legislation to restore the larger payments. In addition, a lawsuit has been discussed.
For the leaseholders, the stakes are great. They stand to lose a substantial portion of the more than $5 million they have received in royalties each year.
The royalty cuts have affected nearly all the leaseholders, a group of east Long Beach property owners that includes retirees living on Social Security and major landlords such as the city and the Long Beach Unified School District.
What the leaseholders have in common is owning property over a deposit of oil dubbed the Town Lot. They have already made some headway in their fight.
Assemblyman Dave Elder (D-Long Beach) told a recent gathering of the group that he would push for legislation restoring higher royalty payments to the leaseholders, who are known as the Town Lotters.
As many of the leaseholders see it, the state has manipulated intricate geological data that goes into the formula used to determine how profits should be divided.
"The state is playing with the numbers to make it appear that the best oil, and more of it, is under their land," said Mel Wright, former chief geologist for the city who is aiding the leaseholders. "They're picking out the numbers that help them and hurt the Town Lotters."
State Denies Accusation
State officials say they have judged the geological factors correctly and maintain that the reductions in royalties are just part of the process.
"There's been no concerted effort on the part of the state to hurt anyone," said Rick Ludlow, staff counsel to the state Lands Commission, which controls the offshore oil sites. "We think we're dealing fairly with the Town Lotters."
That view obviously is not shared by the Town Lotters.
"I feel like someone has come into my house and picked up a purse full of money," said Rose Buchholz, a silver-haired widow who is founder and president of the leaseholder group. "It's a fine line, but the state has stayed within the law. Still, there's been nothing fair about what they've done."
The roots of the dispute date back to 1936, when oil was discovered in nearby Wilmington. During the months that followed, additional drilling revealed that the Wilmington Oil Field stretched more than 11 miles, from Redondo Beach in the north to the ocean off Seal Beach on the south.
While oil operations were launched in the harbor area, the crude beneath the eastern part of Long Beach was left untapped because of concern that derricks would spoil the residential ambiance. City officials also worried that removal of oil would cause land in the neighborhoods to sink, a phenomenon called subsidence that had already occurred in the harbor area.
During the 1950s, however, the subsidence problem was solved. Oil operators found that water could be injected into the ground to replace the oil and keep the land from sinking. The procedure opened the door for development of the southern flank of the Wilmington Oil Field.
After three years of negotiations, the Long Beach Unit oil operation was formed in 1965 by the state, the city and oil companies that had bought up mineral rights from the owners of Town Lot property.