Cal. PRC § 6875

If the Legislature has transferred to any city or county the administration of the trust, whether or not limited, under which tide or submerged lands or beds of navigable rivers and lakes are held by the State, the commission, pursuant to this chapter, may enter into agreements upon behalf of the State to compensate any such city or county for the use of surface drilling and operating sites upon such lands from the royalty or revenue to be derived by the State from oil and gas taken from such lands by lessees of the State.

Any such compensation shall include an amount sufficient reasonably to compensate any such city or county for any damage to or interference with the use or uses to which the surface of such lands are being or may be utilized by or upon behalf of such city or county. The consideration to the State in any such agreement shall include the right to a lessee of the State to carry on all operations on any such tidelands or beds of navigable rivers and lakes necessary to accomplish the purposes of this chapter and such terms and conditions as shall be determined by the commission to be in the interests of the State.

The consideration to the State in any such agreement shall also include a compromise, settlement and release of any and all claims and rights which such city or county has or may have against the State arising out of or in connection with the extraction and removal of oil and gas from such lands. All money paid to any city or county under this section shall be used by it solely in furtherance of the trust under which the administration of tide and submerged lands and beds of navigable rivers and lakes has been transferred to such city or county and for the purposes expressed in the act so transferring administration of such lands.