Evening star. [volume] (Washington, D.C.) 1854-1972, 1943-07-14
Elk Hills Contract Negotiations
Of Navy and Standard Traced

by the Navy to help evaluate the
properties. The company was rep
resented by several biologists and
engineers.
An engineering report, used as a
basis for the agreement, was draft
ed after studies on the ground and
conferences at the company's offices
in San Francisco. During the ne
gotiations, Admiral Stuart relates,
he rejected two demands by Stand
ard, one for bonus of several mil
lion dollars to compensate 1t for
limiting its drilling to what the
Navy would allow, the other for in
terest, amounting to $l1 100000 in
20 years, for curtailing operations.
The eventual agreement was
drawn up in Admiral Staurt's Office
in Washington. 1t required the
Navy to pay Standard $1,748 ,408 IS.
Standard agreed to convey to the
United States surface rights in the
8.297.60 acres it owned and all it's
oil and gas wells and equipment,
with the exception of pump sta
tons and pipelines.
"AS a further conSidera ton"
Standard received the right, Under
Nays direction" to operate all
wells on the combined properties,
and to drill such other wells as might
be required to maintain an average
production of $4,000 barrels daily for
five years, or, if the war lasted
longer, for the period of the
emergency.
Admiral Stuart, in memoran-
dunn to House Appropriations
Subcommittee, pointed out that,
while Navy and Standard would
share the oil produced-with Navy,
which owned two-thirds OF the
lands, receiving "a per cent and the
company, which owned most of the
other third, "a per cent-during the
five-year period Standard would
make no payment to the United
States. Navy also agreed to bear
it's share of the costs of develop
ment. Nays share of the oil would
accrue on the company's books, to
be repaid after the emergency in
refined products on the installment
plan.
The admiral said that while it
was difficult to compute the cost of
production, he would estimate that
/ 5,250O0O barrels would be required
to meet Nays share, so that at the
end of the five years Standard
would owe Navy something like
l2.25O,0OO of the 27,375,000 barrels
which the company would produce
during the period.
The Navy estimated Ill $50 900
barrels recoverable from the shallow
zone on Standards land. Admiral
Stuart. in a memorandum to the
Secretary of the Navy August %,
! 1912, had estimated total reserve
! of 500 900, 900 barrels in Elk Hills
400 100000 on naval land and 900
600 900 on Standard territory. In
/ his report to the House subcC>nmit-
tee March 10, l943, which has been
quoted here, he reduced his estl-
mates to OO,0O0,000 for the whole
Z neIQ-3Uu. UtU.UUU III tIlt Sildllo" GOilC
and 100000 in the deep zone.
Deep Zone Unexplored.
While the engineering report on
which the agreement was based did
not estimate total reserves, dealing
only in acre-feet of oil-bearing
sands. a projection of its results
brought an estimated reserve, after
deductions for past production, OF
329,419,000 barrels in the shallow
zone, with an estimated reserve Of
262 100000 in the deep zone. The
deep zone has not been explored
adequately enough to yield definite
predictions, engineers say.
After the five-year period STAN
dard's right to take oil would be
limited to $50 barrels day-unless
Navy decided otherwise. Thus, Ad-
miral Stuart contended, after the
preliminary 27,500.000 barrels had
been removed, practically all the
rest of the oil would be conserved in