Paul Kelly, Consultant, World Oil Senior Editorial Advisor
The presidential campaign debate over expanding offshore drilling is only the latest in 70 years of conflict over who should control the resources of the Outer Continental Shelf (OCS).
The federal OCS oil and gas program originated offshore Louisiana and Texas in the Gulf of Mexico in late 1954 following years of conflicting federal and state claims for offshore jurisdiction. This struggle became known as the Tidelands controversy.
Federal vs. state control. In 1937, federal legislation was introduced that would confirm federal ownership of lands seaward of the low-water mark. In 1938, as the proposed legislation was being considered and ultimately defeated in Congress, Louisiana enacted a law asserting its jurisdiction out to 27 miles. Texas and California also made claims to the seabed off their shores.
In 1945 President Harry Truman issued a proclamation asserting federal jurisdiction over offshore resources. That same year, the Department of Justice filed litigation to enjoin offshore leasing activities being administered by the state of California. In 1947, the Supreme Court decided the case in favor of the federal government, stating, “California is not the owner of the three-mile marginal belt along its coast, and the Federal Government rather than the state has paramount rights in and power over that belt, and incident to which is full dominion over the resources of the soil under that water area, including oil.”
In 1950 the Supreme Court issued similar findings with respect to offshore claims by Louisiana and Texas.
During the 1952 presidential election, jurisdiction over offshore lands became a hotly debated political issue. Congress passed legislation granting states ownership and jurisdiction over the first 3 miles off their coasts. Citing the Supreme Court’s rulings, President Truman vetoed the bill. He called for using offshore oil and gas for national defense, and issued an executive order to make the continental shelf a naval petroleum reserve. Meanwhile, presidential candidate Dwight D. Eisenhower pledged support for the measure that had been approved by Congress.
Subsequently, in 1953, President Eisenhower signed into law the Submerged Lands Act, which established state jurisdiction over offshore lands within 3 miles of shore - or 3 nautical leagues for Texas and the Gulf Coast of Florida - and federal jurisdiction over offshore lands beyond that.
Further, the Eisenhower administration was opposed to bills proposing to share OCS revenues and decision-making authority with the states.
The Submerged Lands Act remains the law of the land. However, ownership and management of the continental shelf were also affected by the enactment in 1953 of the OCS Lands Act, which authorized the Secretary of the Interior to lease the federal offshore lands - i.e., the OCS - for minerals exploration, development and production, and provided for very limited state involvement. Thus, after nearly two decades of intense haggling, the federal-state compromise gave the federal government ownership of the vast majority of the continental shelf along with primacy in the management of its mineral resources. The OCS Lands Act also gave the federal government a mandate to develop OCS resources, referring to “an urgent need for further exploration and development of the oil and gas deposits of the submerged lands of the Outer Continental Shelf.”
New concerns shape debate. That management regime worked well enough from 1953 to 1973, as both the states and the federal government were able to receive ample benefits associated with developing OCS resources in established producing areas. Those benefits generally were also perceived as greatly outweighing any costs that were understood at the time. However, in 1969 a blowout and oil spill from a production platform occurred on a federal OCS lease in the Santa Barbara Channel, causing significant environmental damage that attracted national attention, and with it the first groundswell of opposition to offshore oil and gas development arose.
In 1971, just two years after the Santa Barbara spill, President Richard Nixon called for expanded and accelerated OCS leasing to trim the nation’s imports and head off future energy shortages. The debate concerning management of the OCS was heated, much as today, as a result of the Middle East oil embargo of late 1973 and early 1974. The Interior Department scheduled numerous lease sales off Alaska, the Atlantic Coast, California, Oregon and Washington. Heightened debate resulted, and after two years of congressional deliberations, the OCS Lands Act was amended extensively in 1978. These amendments were intended to provide more environmental consideration and to allow more state and local government involvement in OCS decision making. However, the Secretary of the Interior still retained broad discretion to accept or reject their recommendations. Thus, the OCS Lands Act Amendments of 1978 preserved the long-standing federal primacy in the management of OCS oil and gas resources.
In 1979, the Iranian revolution and resulting oil supply disruptions gave another boost to the sense of urgency for developing the OCS. The Jimmy Carter administration established an aggressive leasing program for 1980-1985 that included waters outside the GOM. Coming into office during this program, President Ronald Reagan decided it was inadequate and inefficient. Thus, his Interior Secretary, James Watt, issued a new 5-year program and announced a policy of “area-wide” leasing intended to make available the largest area of the OCS ever - nearly 1 billion acres.
Watt’s action launched a new round of debate, and the concept of area-wide leasing turned out to be short-lived. The secretary’s decisions were challenged in litigation, where federal primacy was consistently upheld. Frustrated, in 1982, opponents turned their attention to the congressional appropriations process as a means of delaying OCS leasing. From FY1982 through FY1993, the acreage covered by these congressional moratoria grew from 0.7 million acres to more than 266 million acres off the Pacific and Atlantic Coasts, in the eastern GOM and in the Bering Sea off Alaska. Over the years, the scope of these moratoria has also expanded from restricting the issuance of new leases to prohibiting pre-lease activities - including environmental studies - and E&P activities on existing leases.
Politics overcame the law, when George H. W. Bush, concerned about votes in the key states of California and Florida, issued the first presidential moratoria, leaving only the central and western GOM and areas offshore Alaska remaining in the federal OCS leasing program. Presidents Bill Clinton and George W. Bush followed with their own presidential moratoria. There is irony in the predicament in which the elder Bush found himself. Along with genius inventor R. G. LeTourneau, the drilling company Zapata Offshore, which was headed by Bush, had introduced the first jackup drilling rig, a very safe engineering marvel that today numbers in the hundreds and remains the workhorse of offshore drilling worldwide.
After Truman, Eisenhower, Nixon and Reagan, who all believed strongly in federal supremacy over the shelf’s resources and whose views were supported by the courts, federal supremacy has been steadily eroded by congressional delegations from the East and West Coasts supported by environmental interests.
The next administration. The earlier presidents spoke of offshore oil and gas development as an “urgent need.” Only in 2008 have the American people, upset by high fuel costs, risen up to demand that we drill offshore. In passing the OCS Lands Act Amendments in 1978, Congress itself called for expedited offshore development, but only in 2008 have inland states and their congressional delegations realized the high economic price they have paid for “going along” with California, Florida and their coastal allies.
It will be interesting to see if, after Democratic victories in both houses of Congress and the White House, House Speaker Nancy Pelosi, Senate Majority Leader Harry Reid and/or the new president will attempt to reinstate the moratoria. Even if they do not, we will undoubtedly see new obstacles to expanded offshore development. These could include:
- “Buffer zones” where no oil and gas leasing and development can occur, such as an arbitrary limit of 25, 50 or 100 miles, or a prohibition against permanent surface occupancy within some distance from shore based on line of sight
- Legislation that attempts to resolve the perceived lease inventory surplus (i.e., “idle leases”) and ensure due diligence in developing federal leases
- Severance taxes on existing oil and gas production, reassessment of the existing royalty regime, and changes in the Royalty in Kind program
- Legislation that prohibits leasing off a state’s coast unless that state requests that the Interior Department open the offshore areas to development.
The final proposal, if successful, would really upset the historic federal supremacy over offshore lands.
Intelligent, rational arguments can be made against all of these possible initiatives. Most of them show little understanding of the differences in resource potential in various areas or the negative effect such limitations would have on oil and gas production. In the face of rising oil demand and declining supply, such proposals will
appear to other world leaders as immature, indeed frivolous.
The petroleum industry and its trade associations will almost certainly be challenged with these issues. The time to start preparing for them is now. It is also time for leaders in the new administration and Congress to recapture the sense of urgency and national interest demonstrated by our earlier US presidents. 
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THE AUTHOR
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Paul L. Kelly is a consultant on energy and ocean policy, and a retired Senior Vice President of Rowan Companies, Inc., where he was responsible for special projects as well as government and industry affairs. He was a member of the US Secretary of the Interior’s Outer Continental Shelf Policy Committee, serving as its chairman from 1994 to 1996. Mr. Kelly holds BA and JD degrees from Yale University.
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