Drilling for Black Gold in “California Oil World,” 24 May 1923

by Paul R. Spitzzeri

A major component of the development boom that roared in greater Los Angeles in the early 1920s was the enormous growth of the oil industry in the region. Walter P. Temple, the extraordinarily fortunate beneficiary of an accidental discovery by his nine year-old son, Thomas, of oil on their ranch near Montebello, took much of his proceeds from the royalties generated from wells on his lease to Standard Oil Company of California, now Chevron, and launched his own career, spotty as it was, in prospecting for petroleum.

He developed projects in Whittier, Huntington Beach, Signal Hill, and Ventura, as well as some in other states and in Mexico, but he relied heavily on those returns from Montebello for these as well as his growing involvement in real estate development. The problem was that the Montebello field was a very productive field for a short time, but experienced a dramatic slowdown in yields as the early 1920s progressed. Temple’s soaring expenses, including his projects at the 92-acre Homestead most notably the time-consuming and costly construction of La Casa Nueva, were counter to his declining oil revenues.

Tonight’s featured object from the museum’s collection provides both context and specifics for Temple’s petroleum projects with the 24 May 1923 edition of California Oil World, a Los Angeles-based daily, giving some excellent information about the industry, while also making mention of Temple’s latest and largest real estate project. As for general matters, the large headline on the front page blaring out in red letters is “PHYSICAL FACTS ALONE FORCE CUT IN OIL RUNS.”

There were six reasons why there was a vital need to cut oil production as it was observed that “development must go slower temporarily, existing wells must be beaned down until ways and means of handling the excess production are found.” A simple analogy was that you couldn’t push through an eight-inch oil pipeline a stream of crude that was double what it could handle.

In fact, the first of the half-dozen issues cited as “insufficient pipe line facilities” because of “the unprecedented increase of the output in the three great fields of Southern California.” These weren’t specified, but Santa Fe Springs, Long Beach and Huntington Beach were generated huge production with Midway-Sunset in the Central Valley also a major field at the time. It was added that lines were being constructed “as rapidly as labor and capital and the ability to obtain material will permit,” but those being built could not, of course, help with “existing surplus.” Parallel with this was reason number two comprising “insufficient storage facilities.”

Then, there was “refining capacity” which was “necessarily limited by extent of markets for the output that may be reached on the Pacific Coast, or abroad in competition with the world.” Capital, labor and material were natural considerations, but, as with the aforementioned, “until they are ready to run oil they are no factor whatever in the situation.” The problem with “insufficient harbor facilities” involved what was allowable by city officials and taxpayers, because “the oil industry has done, and is doing, what it can do to relieve the congestion.” While the Port of Los Angeles finally was making provision for improvements, there were also efforts at Huntington Beach and Newport Beach to allow for shipment of oil.

The fifth reason was that there was a “shortage of tank steamers,” as all available craft were being utilized while new ones were being built, slowly though the process necessarily was. Finally, there was the matter of “world markets,” which, it was concluded, were “limited by conditions entirely beyond control of the oil industry.” It was always an immense challenge dealing with the skyrocketing production of crude when the infrastructure and logistics elements were struggling to keep pace.

A separate article noted that production for April approached 21 million barrels (each barrel containing 42 gallons), with the daily average of close to 700,000 barrels per day being an increase of almost 60,000 more than in March. Supply was up over 2.3 million barrels during the month with a total stock of just shy of 69 million barrels. As for consumption is was north of 18 million barrels or a bit under 612,000 per day, a increase of not quite 37,000 barrels per day more than the prior month. While there were fewer completed wells during April (60 as opposed to 71 in March), daily production was over 117,000 barrels compared to above 97,000 in March.

As noted above, the four giant fields were responsible for close to three-quarters of all output in California. Santa Fe Springs yielded more 6.1 million barrels in April, with a daily average of some 204,000, with March being 152,000 and the prior October just about 59,000. Long Beach generated almost 4.3 million barrels, with the daily average of 143,000 a modest increase from March, but a huge leap from the past fall when it was about 90,000. Huntington Beach produced about 3.4 million barrels, with its daily yield also slightly higher than in March, but at 113,000 a major leap from the 41,000 of October. Midway-Sunset actually saw little change in the prior half-year with daily production growing just slightly from 79,000 to not quite 81,000 barrels per day for an April total of 2.4 million barrels.

After these behemoths were two more Central Valley fields, Kern Valley and Elk Hills, both not far above 600,000 barrels for the month. Richfield in the Placentia/Yorba Linda area of northeastern Orange County produced 530,000 barrels, while Coalinga in the Central Valley yielded 410,000. Ninth on the list of 21 fields was Montebello, which produced about 373,000 barrels, a slight increase from March, but a decline of not quite 15% from October. In general California fields jumped from a little over 430,000 barrels per day in fall 1922 to just about 690,000 in April 1923, something like a 60% increase.

With respect to stocks, there were nearly 41 million barrels of heavy crude (see below), a modest uptick from the prior year, while lighter crude grew more rapidly, especially from the the prior fall. Inventories at refiners were up about two-thirds from October, while those in fields, pipelines and tank farms grew more than 10%. Concerning development, there were more than 40 new wells in construction and almost 200 in operation, while Long Beach had almost three dozen new ones and 240 existing wells. Since 1918 total new rigs grew from 50 to 138, active wells leapt from about 360 to over 800, and daily output skyrocketed from about 10,600 barrels per day to over 117,500, even as producing wells only grew by about 10%, a testament to a stunning growth in efficiency in output.

Elsewhere in the paper it was noted that crude oil prices declined in the previous three months on the usual sliding scale with drops greater for heavier degrees, close to 30% at the upper end, while unchanged for the lightest, refinable grades. Notably, these declines were in Los Angeles and Orange counties, as prices were unchanged elsewhere.

With regard to shipping facilities, it was reported that crude generated from Huntington Beach was to be sent to Newport Beach for export as a ten-year lease for the city pier was granted to a syndicate of independent oil operators including William Harmon Taylor, an associate of Temple at Huntington Beach, as well as that city’s Thomas Talbert, chair of the Orange County Board of Supervisors. The plan was to make improvements on the order of $500,000 to the pier “so that tank steamers may be docked, a pipe line from the Huntington Beach field to be constructed” and storage tanks with a 400,000 barrel capacity.

Another major news item was that Atlantic Refining Company, which merged with the local Richfield Oil Company in the mid-1960s to become ARCO, “has just closed a deal for about 20,000 barrels of California crude for an indefinite period and for practically the entire output of gasoline of the General Petroleum Company of California” from its terminal facilities at San Pedro. This was reported to be the largest such acquisition since the completion nearly a decade before of the Panama Canal and it was added that Atlantic was switching to California sources from those emanating from Mexico. Hearkening back to the main feature, it was noted “that the quantity of crude to be taken is really limited only be the ability of [the] seller to supply and of the buyer to transport the oil.”

Although concerns were essentially non-existent when it came to the impact on the environment from fossil fuels, there was an article about pollution of the oceans and rivers because of the shipment of oil. Secretary of State Charles Evans Hughes, the Republican presidential nominee in 1916 and Chief Justice of the United States Supreme Court from 1930-1941, received a report that observed “that at times the pollution, especially along the North Atlantic harbors and at some of the Gulf ports, was great.” He was informed, however, that “there is no easy way to prevent such pollution, except at considerable cost.”

Despite this, it was added that “steps have been taken at European ports for prevention, the steps being taken with a view to utilizing the products now wasted.” Yet, the report continued, “petroleum is so comparatively cheap in the United States that saving the oil that is now wasted would be an item of expense instead of economy.” This was because the waste would not sell for enough of a price to justify the expense of the material used in salvage operations.

It was averred that the majority of the pollution was from water ballast discharged by in the cargo and bunker holds of ships which were returning to America after delivering oil to other places and water ballast was a necessity. Still, the point was made “that there are no accurate figures, or even approximations as to the amount of ballast . . . required to take aboard and discharge before entering an American port.” This needed to be determined before Hughes decided on a course of action.

Secretary of Commerce Herbert Hoover, who would be president at the end of the decade, suggested that ships could discharge ballast as early as ten hours before arrival at a port, meaning that a captain “would try to get rid of the last of that ballast while thirty or forty miles out so as to avoid complaint [about pollution] to as great an extent as possible.” Further detail was given about the recovery costs of the waste, which “would hardly do more than pay for the lubricating oil the recovery machine would use.”

The article did conclude with the observation that,

of course, in the end the question may not be wholly one of profit and loss because it may be necessary to consider the damage to shore points resulting from the discharge of the oil into the water. Agreement between the maritime nations may make it obligatory on oil carrying and oil using ships to incur the expense, without thinking of the value of the recoverable oil.

Also of note was an article about the newly devised “provident fund” enacted by the Union Oil Company for its employees and which was scheduled to go into effect on 1 July for the firm’s 8,000 workers and “which will not affect the profit sharing plans already in force” or the existing benefit fund for medical needs and life insurance.

Among the important aspects of the program was that Union would contribute as much as each individual did; that pensions would be provided for men entering the workforce when aged 18-49 after reaching 60, while women would receive benefits at 55, after joining the company between the ages of 18 and 44; that there were additional disability benefits except when worker’s compensation was involved; loans were made upon five years of service were buying life insurance; new death benefits were introduced above the $1,000 life insurance under the existing benefit fund; that more than half of the resources in the fund was to be comprised of stock in Union Oil and its Union Oil Associates auxiliary, with the rest invested in high-grade securities, property, life insurance and loans to employees; and special payments were to be made “as a reward to unusual services” by workers.

As for pensions, these would be 2% of the average salary for the past decade multiplied by the number of years worked subtracted by one, as long as “their total credit will purchase such pension.” This was to be paid for the life of the retired worker or to a beneficiary for fifteen years after death, while two-third of the amount would be paid out to the latter for the remainder of their life. For disabled retirees with five years’ membership in the fund, regardless of how old they were, they were to receive at minimum 20% of their salary for the last five years and 1% for each year’s involvement in the fund. If covered by worker’s comp, the employee could take the entire credited fund amount.

Payments into the fund were on a sliding scale, so that 18-year old workers were docked 3% while those above 41 were at the maximum of 5%, but eligibility was dependent on at least one year’s service to Union. Current workers could contribute up to 3% of their average salary multiplied by years of service “as back contributions to place them on the same plane as those now entering service.” If an employee was over 41, had a decade of experience with the company, and who were under 50 when joining, the scale went from 5.4% at age 42 to 10% at 50, though the piece concluded that “it is entirely optional with employees to avail thsmelves of this special provision.”

There were many small news items, with one reporting that the state Department of Motor Vehicles released data showing that “more automobile licenses were issued during the first three months this year than during all of 1922, and almost as many licenses for trucks, trailers and motorcycles. So, the last year there were some 825,000 licenses handed out for cars, but just above 822,000 to date for 1923. Truck registrations were almost 4,000 below the prior year, while motorcycles licenses totaled more than 10,000 compared to above 16,000 in 1922. It was added that “if the same ration of increase is maintained during the other nine months of 1923 as during the first, the year’s total registration will pass the million mark” and may best the record from New York state.

In the “Gossip of the Petroleocrats” is a news item pertaining to Temple, with the paper noting:

Walter P. Temple, who made a fortune through the discovery of oil on his ranch in Montebello, has bought 300 acres a few miles east of Alhambra, where he will build a new town to be known as Temple and to serve as a memorial of the pioneer family of which he is a member, and for which Temple Street in Los Angeles is named.

It was added that $500,000 was spent on the purchase, while development was expected to be double that amount. Among the plans were four business structures (these all still standing at the corners of the intersection of today’s Temple City (then called Sunset) Boulevard and Las Tunas Boulevard) to cost $200,000. Lots of 60-foot width were to surround the business center, while half-acre parcels were on the periphery, with a total of about 1,000 lots in the development.

Moreover, what was also known as the Town of Temple (the name was changed five years later to Temple City) was to have “a central park of two acres,” which still exists with city hall on one end, where a Pacific Electric streetcar depot once stood as the terminus of an extension from Alhambra, and the county library on another portion. There were also to be “building and racial restrictions,” this latter meaning that only “Caucasians” could live in town, despite Temple’s part-Latino ancestry and his late wife being a Latina, along with “other features calculated to make a high-class community.

The article concluded by noting that there was a plan for a rodeo and barbeque, apparently referencing the early days of California (again, more than ironic given the racial covenants placed in the town), while it was noted that “Mr. Temple is now a resident of Alhambra, where he has made numerous investments and became a leader in civic affairs” and that “he is also operating in oil at Huntington Beach.”

To wrap up, a short editorial note in all bold letters on the last page warned that, when it came to new refineries, such facilities needed to be free from stock speculation and certainly not those “built or managed by amateurs in business or men without technical knowledge” or “operated on a shoe-string of capital.” The size of the refinery did not matter, but the goal was also to avoid “cut-throat competition and ultimate injury” because California needed to avoid what happened in Texas “where the overbuilding of refineries a few years ago became a public scandal.”

With its wealth of information about the state of the oil industry in the region and state in the boom year of 1923, as well as its specific reference to Walter Temple’s signature real estate project, this issue of California Oil World is especially interesting as a source for what as happening in the world of petroleum prospecting.

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