K. Plastics industry center-LCVP's being made of plastic, and plastic being used for deck coverings as on wood-hulled minesweepers. Whether an important factor in location of plastics industry, as much work done outside. L. Southern California one of main missile centers in United States-airframe industry concentrated in area. M. Good source of power, oil, and steel: Kaiser Steel plant at Fontana. N. One hundred and forty Navy ships and 40,000 uniformed personnel based in Long Beach. O. Support to nearby industry-machining and fabrication for Douglas Aircraft, Consolidated Western Steel, Lockheed Aircraft, due to Navy shipyard possessing equipment not available elsewhere in area. IV. Importance of naval shipyard to Long Beach economy: A. Second largest industrial payroll in area, exceeded only by Douglas Aircraft Co. B. Annual civilian payroll of $31 million, with 6,500 employees. C. Shipyard accounts for approximately one-seventh of area economy. D. California one of major areas of unemployment, and Los Angeles County harder hit than other counties in southern California. E. Decline in aircraft employment primary cause, and, with aircraft and shipyard two major employers in Long Beach, any cut in Navy activity would bring serious consequences. FACILITIES AND SERVICES PROVIDED TO NAVY BY LONG BEACH Long Beach Naval Shipyard site: 160 acres on Terminal Island deeded to Navy in 1940 by Long Beach for the sum of $1. Navy landing: Existing landing being replaced by $5.5 million landing financed by city, and designed to Navy desires. It will include a quiet-water landing 550 feet wide containing approximately 54 acres of water area, 10 landing floats, restaurant and waiting rooms, covered walkways, parking lot for 820 cars. Total floor area, 29,900 square feet. Armed services YMCA: Present building built in 1936 to be replaced by new one containing 56,800 square feet of floor area. Facilities will include social room to accommodate 350, stage, dressing rooms, dance floor, 270-bed main dormitory, coffeeshop, barbershop, canteen, and tailor shop. Cost, $890,000. Navy use of Pier E: Leased to Navy for $24,900 per year. Provides deepwater berthing for the largest ships afloat (Forrestal class), and is the only yard in southern California so equipped. Comprises berths 122, 123, and 124 with 2,020 lineal foot of improved wharf, 10.65 acres of improved area, 6,400 square feet storage building. Total investment by city, $2 million. Washington, D. C., naval representation: City budgets $15,000 per year. City fireboats (two): Provides fireboat protection to shipyard. Operational cost, $200,000 per year. Realinement of pontoon bridge: $1 million, including cost of raising and rerouting Seaside Boulevard, to provide ready access to shipyard. In addition, the operational cost of the bridge, borne by the city, is $100,000 per year. Ocean Boulevard Bridge and Ninth Street Bridge: New bridges now under construction, necessary to handle the heavy traffic largely due to the shipyard. Cost, $19 million. Freeway extension: From Ninth Street Bridge to Seaside Boulevard. Cost, $3 million. Income taxes: Paid by oil companies to Federal Government. Estimated $168 million to date. Estimate of income taxes paid on taxable production in Wilmington Field, cumulative through December 31, 1957 Long Beach Oil Development Co--. Richfield Oil Corp. (city lease). All other___ Total-- Method of computation for Long Beach Oil Develoment Co., and Paid to Long Beach Oil Development Co. by city (14.45 per- Paid to Richfield by city (5.9 percent) $15, 000, 000 1,300,000 152,200,000 168,500,000 59, 987, 060 5, 185, 492 Deducting 50 percent to cover city and county property taxes, mining-right taxes, State income taxes, attorney fees, office rentals, and so forth, then apply 50 percent corporate tax to balance. Average value of 1 barrel of oil is $2.11. Multiplying this times 566 million barrels gives $1,194,260,000 as total value of oil produced for all other producers. Deductions follow: Total value_‒‒‒‒ Deduct: 272-percent depletion allowance.. 30 percent of $1,194,260,000 for production and operating expenses. Estimated amount subject to tax.. $507,560,500×30 percent (estimated average tax rate)--The CHAIRMAN. Thank you, Mr. Congressman. Mr. HOSMER. Thank you, Mr. Chairman. $1, 194, 260, 000 328, 421, 500 358, 278, 000 507, 560, 500 152, 268, 160 The CHAIRMAN. Now, members of the committee, to refresh your mind, let me give this fact. The estimated cost of the Long Beach Naval Shipyard to date has been $65 million. Now, we have spent $65 million there. The shipyard has sunk 17 feet at 1 point since 1945, and at the rate of about 6 inches a year. Now, approximately 2 billion barrels of oil has been drawn out from under the Navy shipyard. Now bear in mind that they slant the wells under the shipyard. They take out today around 100,000 barrels of oil. Now, last year we appointed Mr. Doyle and others to go out and look over this situation. As a result of the interest we began to take in this matter, they passed some law in California requiring the operators to try to reduce the subsidence by pumping water back into the field. However, there is some limitation on the statute. Now, Mr. Kelleher, will you tell the committee what those limitations are? Mr. KELLEHER. Yes. The CHAIRMAN. The law passed is not as clear and mandatory as we were hoping it would be, and they put some limitation. We want to see now if these limitations are such that it never will be accomplished. Mr. KELLEHER. There are three of them, Mr. Chairman. First, the producers entitled to at least 65 percent of the proceeds of the oil or gas production of the pool in question must have assented to the unitization plan. Second, that the supervisor find that compulsory repressuring will not substantially reduce the maximum economic quantity of oil or gas ultimately recoverable from the unit area as a whole under proven and proper operations. Third, that the supervisor finds that the estimated cost of initiating and carrying out such repressuring operations within the unit area as a whole, including both capital and operating costs, will not exceed the estimated value of the increased production therefrom. Mr. HOSMER. May I The CHAIRMAN. Members, those are the limitations that are in the statute. Mr. BROOKS. Well, Mr. Chairman, those are the normal conservation limitations on repressurization; aren't they, Mr. Congressman? Mr. HOSMER. That is the same as the Oklahoma law and many other laws. It is language that almost has to be in there in order toMr. BROOKS. It is similar to Louisiana and Texas, too. Mr. HOSMER. In order to handle the constitutionality question. Mr. HOSMER. Now, in considering these factors, one part of the law was not mentioned, and that permits the public bodies-the city of Long Beach and the State of California, which they are willing and very anxious to do-to put up the money to do this job. And that amount of money that they put up thereby reduces the requirement as to economic return, and so forth. The CHAIRMAN. State that over again. The city of Long Beach is willing to do what? Mr. HOSMER. They are willing-and they got this law so written that they could advance all the financing necessary to put in a repressurization plan, and that the private operators then-and only after secondary recovery is obtained-would have to share in that cost. So, it is practically automatic. And, in connection with the amount of percentages of people required to agree, there are 6 fault blocks out there, and already in 5 of them we have more percentage of the operators agreeable to these plans than is required by the law. As a matter of fact, those figures were put in the law with that in mind, so that there would be plenty of room. The sixth fault block is in the area of Wilmington, where there is a bunch of townlots, and they just haven't been able to get that amount of people, physically, together yet. But it is not an important area to this problem of ours, pinpointed to the shipyard. The CHAIRMAN. Now, is it being used for the purpose of repressuring the whole area, or is it just around the area of the Navy shipyard? Is Signal Hill involved in it? Mr. HOSMER. The law covers the whole field. The CHAIRMAN. All right. Mr. HOSMER. The immediate attack has been made at the fault blocks which underlie the shipyard, because, as first things are, they should come first. The amount of engineering and geology that has to be done in order to create a feasible, effective repressurization plan is large. So, they concentrate on this area of particular necessity first. The CHAIRMAN. Now, members of the committee, this is a very important item, because they are asking for $6 million. The House meets at 12 o'clock on the reciprocal trade, and the witness is here from Long Beach. So, I regret to say that I think we had better put it off until in the morning, and start off in the morning, because we will have to go to the floor any minute to answer the rollcalls on the reciprocal-trade debate. So, I am sorry that the witness will have to be requested to stay over. I understand the mayor is here, and others are here. So, we will take a recess until tomorrow morning at 10 o'clock. And all witnesses in connection with other phases of the bill please be back, because we are anxious to get this bill marked up. Mr. BECKER. Mr. Chairman, before you adjourn. Mr. BECKER. Is the House meeting tomorrow morning at 11 o'clock? Mr. SMART. We had better meet at 9, then. The CHAIRMAN. Then we will meet at 9 o'clock in the morning. The committee will take a recess until 9 o'clock in the morning. I hope you will all be here. (Whereupon, at 11:50 a. m., the committee adjourned, to reconvene at 9 a. m., Wednesday, June 11, 1958.) HOUSE OF REPRESENTATIVES, Washington, D. C., Wednesday, June 11, 1958. The committee met at 9 a. m., Hon. Carl Vinson, chairman of the committee, presiding. The CHAIRMAN. Let the committee come to order. Now, members of the committee, as the House convenes this morning at 10 o'clock, we can only have a session for 1 hour. When we recessed yesterday afternoon, the distinguished Representative from the Long Beach district was testifying. Now, have you, Mr. Congressman, finished your statement? Mr. HOSMER. If I may, sir, I would like to correct 2 or 3 things that occurred yesterday during my testimony. I stated that there wasn't enough owners as yet in fault block I agreeable to repressurization to carry out the law. I was in error. The CHAIRMAN. I didn't catch that. Mr. HOSMER. I stated that, out of the 6 fault blocks, owners in 5 of them were sufficient in numbers to implement the California law and repressure, and that on the sixth one it wasn't so. Actually, I made an error. Within the last couple of days there are sufficient owners in the remaining fault block I also agreeable to these plans. So, there is not a question as to repressurization in any of the fault blocks. The CHAIRMAN. Let me get this. When did the law pass? Mr. HOSMER. The law passed-it was signed April 24 of this year. The CHAIRMAN. Of 1958? Mr. HOSMER. At a special session. The CHAIRMAN. Of 1958? Mr. HOSMER. It goes into effect July 24, 90 days after it was signed by the Governor. The CHAIRMAN. It hasn't gone into effect until the 90 days after April? Mr. HOSMER. No, sir. Even in anticipation of that, all this tremendous amount of work has been carried on, in order to have these agreements well along at the time the law goes into effect. The CHAIRMAN. Now, have they signed up, or just merely made a statement that they would participate? Mr. HOSMER. They have indicated and signed a written intention. And the reason that the agreement itself is not signed is because of the fact that the geology beneath this area is tremendously complicated. The plan that is actually signed must be based on an engineering job on that geology. The city tells me that by the 1st of July all of this data will have been gathered and put in one place. It is necessary to draw up the plan, and that the plan, as soon as it can be engineeringly drafted and legally drafted, after that time, should be ready for final signature. The CHAIRMAN. Then do I understand that the law is merely permissive, but not mandatory? Mr. HOSMER. The law has both permissive and mandatory features, the reason being that it was felt, as a practical matter, that, if these oil operators could be induced to agree to a voluntary repressurization plan, it would be much more quickly put into effect than a compulsory plan. I think this intention and the work that is going on The CHAIRMAN. All right; let's assume they do not agree. Then does the law give to anyone the authority, the right, to force them to repressure the wells? Mr. HOSMER. The State oil and gas commissioner can issue a compulsory order to repressurize either the entire field or any portion of it. The CHAIRMAN. That is based upon the fact that it does not reduce taking out certain quantities of oil? Mr. HOSMER. As Mr. Brooks explained yesterday, that is language that had to be in in order to protect the constitutionality of the law. It is standard language that is in these repressurization laws in Oklahoma and in other States that have passed them. The CHAIRMAN. Now, any further statement you desire to make? Mr. HOSMER. I would like to correct, also, another couple of things that occurred in yesterday's record. I think, Mr. Chairman, I stated that some 2 billion barrels of oil had been taken from this field. The actual figure is 800 million barrels for the whole field and 30 million barrels extracted from the area of the shipyard. At the present moment the production of the entire field amounts to some 82,000 barrels a day, and the production in the area of the shipyard amounts to offly some-plus or minus-2,800 barrels a day. The CHAIRMAN. Let me get this clear. Now, when the Government acquired the land upon which the shipyard is erected, and particularly that in which the drydock is constructed, was the mineral rights retained by the sellers to the Government? Mr. HOSMER. Yes. The land was acquired by a friendly condemnation suit, in which there was an agreed judgment. The Government paid $1 for the property. The CHAIRMAN. But did not Mr. HOSMER. The mineral rights were retained by the city. As you recall, at that time, the tidelands and all of those things had not come into issue, and the Government had no interest in anything but the surface. The CHAIRMAN. Then the city retained its mineral rights under this land which is in the navy yard today? Mr. HOSMER. Yes, sir. |