State Ex Rel. California State Lands Commission v. City of Long Beach

SUMMARY

The City of Long Beach (the City) is the owner of the Long Beach tidelands, holding them in trust for the people of the State of California for purposes of navigation, commerce and fishing. The City derives oil revenue from the Long Beach tidelands, a substantial portion of which has been freed from the public trust as no longer necessary for trust purposes. The freed revenues must be paid to the State of California (the State), which may use them for any purpose. The City is permitted to retain, out of oil revenue each month, an amount equal to all subsidence costs and money expended by the City in administering oil and gas operations. The City must pay to the State the remaining oil revenue, except for an annual lump sum amount to be used for specified trust purposes.

In 1999 the City, faced with the certainty of large future costs—estimated by the State and City to be at least $200 million—for oil well plugging and abandonment and facility removal, created an abandonment reserve fund. The reserve was funded through a continuing monthly per barrel charge based on tidelands oil production. The City retained these funds monthly from oil revenue, along with…