Trevor Thielen Offshore Drilling: An American Controversy

For several decades Americans have struggled to adapt to the rising cost of energy. For a majority of Americans, their opinion on offshore drilling has risen or fallen with the price of gasoline. Consequently, as the demand for energy has increased, a growing segment of the population has begun to reevaluate the role of offshore drilling as part of our county’s comprehensive energy strategy. For the first time in decades, offshore drilling was a key issue in the recent presidential election. As a result, offshore drilling has evolved into an American controversy.

This analysis will examine the origins and history of offshore drilling. Special emphasis will be given to highlighting the hurdles and obstacles that have made modern offshore drilling operations possible. Included will be a detailed examination of offshore federalism and the international law of the ocean. Lastly, will discuss the positions held by proponents and opponents of offshore drilling. By analyzing the dialog contained within this debate, the reader will have a basis upon which to reflect on his or her own views of offshore drilling.

I. Historical Introduction to Offshore Drilling

A. Origins of Offshore Drilling

Currently, there are more than 5,600 natural gas and crude oil platforms operating off the coast of the United States in waters up to 10,000 feet deep.¹ Modern technology, based on decades of innovation, is credited with allowing for efficient and safe underwater oil and gas exploration. Today, offshore drilling accounts for roughly twenty-five percent of the natural gas and nearly thirty percent of the oil produced in the United States annually.² While debate rages as to whether offshore oil and gas exploration should be allowed to continue, be increased or be reduced, drilling itself would have never been possible were it not for the efforts of early energy pioneers.

While oil and natural gas are the most commonly used sources of energy today, mankind has utilized these resources for a variety of applications for thousands of years. The earliest sources came from pools of water in which oil and natural gas rose to the surface through natural seeps in the earth’s crust.³ Eventually, in an effort to capture more oil, the first oil well was drilled on land in 1859.⁴ In 1887, H.L. Williams drilled the first offshore oil well in Summerland, California, from a wooden wharf extending 300 feet into the ocean.⁵ Soon after, a crowd of oil drillers descended upon Summerland and multiple offshore wells were constructed with no oversight from either the state of California or the federal government. These early wells required nothing more than the consent of the property owner from which they were located and resulted in the release of large quantities of pollutants into the coastal waters.⁶

By 1910 oil had become the United State’s primary energy source, which prompted increased demand for oil production.⁷ However, limitations in drilling technology required that offshore drilling be restricted to shallow water.⁸ Eventually, Summerland residents, having suffered years of dissatisfaction with the oil industry’s impact on their city, prompted the California legislature to pass the Minerals Leasing Act in 1921.⁹ The act implemented the first requirements for offshore leasing and declared Californian’s jurisdictional claim over its coastal waters. However, because the act contained few penalties, little progress was made in curbing environmental abuses.

Offshore drilling transformed in the 1940s with the development of free-standing and floating platforms. Improved technology allowed for drilling in deeper waters, which resulted in increased production.¹⁰ By 1949, 11 fields and 44 exploratory wells were operating in the Gulf of Mexico.¹¹ As the industry continued to expand, oil production in the 1950s became the nation’s second source of revenue behind federal income taxes.¹² By 1954 there were over 100 offshore wells. Production continued to expand and following the oil crisis of the 1970s there were more than 1,200 new offshore wells. ¹³ Eventually, as demand for oil increased, tension developed between the coastal states and the federal government over ownership of this vital natural resource.

B. Drilling and Federalism

Today, the Gulf of Mexico alone is believed to hold the fourth largest oil reserve in the world.¹⁴ As a result, control of this resource is of vital national and international importance. However, in the early days of offshore drilling, due to the indifference of the federal government, coastal states were the prime regulators of the sea.¹⁵ The federal government’s unwillingness to regulate coastal waters stemmed from its disinterest in managing an area perceived to contain nothing of sufficient economic value.¹⁶ As a result, each coastal state adopted its own regulatory leasing scheme. However, as petroleum became an increasingly valuable commodity, tension between the federal government and the states developed into what is commonly referred to as the “Seaweed Rebellion.”¹⁷ In 1947, United States Supreme Court Justice Hugo Black commented, “[t]he question of who owned the bed of the sea only became of great potential importance at the beginning of this century when oil was discovered there.”¹⁸ As a result, the concerns regarding federalism and the ocean were destined for judicial examination.

In Pollard v. Hagan¹⁹ (1845) the United States Supreme Court first addressed the issue of ownership of the sea.²⁰ The court held that navigable waters and the soil beneath them were the property of the individual states.²¹ The court concluded that to award ownership of the waterways to the federal government “would be to place in [its] hands a weapon which might be welded greatly to the injury of state sovereignty.”²² As a result, states were vested with exclusive jurisdiction over the sea.

One hundred years after Pollard was decided, in 1945, President Harry S. Truman issued a proclamation claiming federal jurisdiction over “the natural resource of the subsoil and seabed of the continental shelf beneath the high seas but contiguous to the coast of the United States.”²³ Truman’s actions, taken in response to national security concerns, reignited controversy over ownership of the sea and its natural resources.²⁴

As a result, the Pollard decision was fated for reexamination. In 1947, the United States Supreme Court heard arguments in the case of United States v. California.²⁵ In previous cases, the court had interpreted the Commerce Clause of the United States Constitution as vesting power in the federal government to regulate the nation’s navigable waterways.²⁶ However, until this point, the court had never explicitly overruled Pollard; in California the court took the opportunity to do so. The court determined that federal interest in offshore waters and resources were paramount to state claims.²⁷ In addition to expressly overruling Pollard, the court vindicated President Truman’s proclamation two years earlier.²⁸ As a result, offshore leases issued by state regulatory authorities were invalidated and the federal government acquired the enormous challenge of regulating the nation’s offshore waters.

In response to the California decision, tension increased between coastal states and the federal government. Constituents of coastal states pressed Congress to rectify the Supreme Court’s decision by restoring to states jurisdiction over their coastal waters. In response to the enormous political pressure, Congress passed bills in 1946 and 1952 that sought to restore jurisdiction over the ocean to the coastal states.²⁹ However, President Truman vetoed both bills. As a result, the topic of ocean jurisdiction became an important issue in the 1952 presidential election.³⁰

In 1953, with the election of President Dwight D. Eisenhower the coastal states were finally given an ally in the Seaweed Rebellion. Consequently, on May 22, 1953, President Eisenhower signed the Submerged Lands Act (SLA) into law.³¹ The SLA was an attempt to compromise ownership of the sea between the states and the federal government. Under the SLA, states were reinstated ownership over the water and natural resources extending three nautical miles from their coastline, while the federal government retained jurisdiction over the remaining continental shelf.³² Shortly after the passage of the SLA, Congress also passed the Outer Continental Shelf Act (OCSLA) which created a regulatory scheme for the leasing of drilling sites in federal waters.³³

Today, tension between the coastal states and the federal government caused by the Seaweed Rebellion continues. At the time the SLA was passed in 1953, offshore drilling technology, compared to the standards of today, required platforms to operate near the coast in waters that were relatively shallow. In many instances, federal waters were simply too remote and inaccessible for drilling operations. Consequently, the first three nautical miles of ocean owned by the coastal states were the most valuable and accessible waters for drilling operations. As a result, for many years coastal states enjoyed more control than the federal government in regard to access to available waters.

Nevertheless, with the advent of improved technology, drilling rigs eventually were able to drill in deeper waters and operate at distances further from the coast. As a result, the three nautical miles of ocean owned by the states came to represent only a portion of the waters available for drilling operations. Consequently, to the dismay of the coastal states, the federal government in the end became the principle regulators of offshore drilling.

In recent years, tension between coastal states and the federal government continues to persist. Both sides have recognized the potential in capitalizing on the profitability of oil and gas revenues. While the Seaweed Rebellion has spanned decades and has involved acts, decisions and proclamations from the Legislature, Judiciary and the Executive branches of the federal government, the jostling for control over the ocean’s natural resources is not likely to end anytime soon. As a result, in response to their weakened position, coastal states sought to procure more regulatory authority over offshore drilling, to little success.

Coastal states, having engaged in a frustrating and lengthy battle with the federal government over ownership of the sea to a subsequent impasse, eventually turned their efforts in the Seaweed Rebellion toward recovering a share of the leasing revenues generated from offshore drilling.³⁴ Since the passage of the Outer Continental Shelf Act (OCSLA) in 1953, the United States has received nearly $100 billion from the sale of offshore drilling leases, the largest federal revenue source outside the U.S. Treasury Department.³⁵ Consequently, coastal states yearning for a share of these proceeds, appealed to Congress to give them a stake in the earnings from offshore drilling located in federal waters. In response to pressure from coastal states, Congress passed the Coastal Zone Management Act (CZMA) in 1972.³⁶

In passing the CZMA, Congress’ goal was twofold. First, Congress intended to “preserve, protect, develop and where possible, to restore or enhance, the resources of the Nation’s coastal zone.” Second, Congress sought to “encourage and assist the states to exercise effectively their responsibilities in the coastal zone” by implementing Coastal Management Plans (CMPs) containing a state’s recommendations for use of their coastal zone areas.³⁷ In order to further these goals, the CZMA contained two important incentives designed to encourage coastal state participation. First, in developing a state CMP, the CZMA authorized the Secretary of Commerce to issue grants to coastal states. Second, once a coastal state developed a CMP, the CZMA ensured that the state maintained a consultative role in the federal government’s decisions concerning the coastal zone area.³⁸ However, under the CZMA, the final decision concerning denial or acceptance of actions consistent with a state’s CMP remained within the discretion of the federal government.³⁹

While the stated purpose of the CZMA was to encourage coastal states and the federal government to work together in deciding how best to manage the nation’s coastal zones, implementation of this goal proved ineffective. In many situations, coastal states grew frustrated as the federal government flatly ignored the state recommendations contained within their CMPs. Consequently, in 1978 Congress attempted to amend the CZMA by giving coastal states a more “leading role” in the coastal zone management process.⁴⁰ The amendments to the CZMA mandated that before decisions regarding coastal zone areas were made, the Secretary was first required to review the comments contained with the state’s CMP.⁴¹ However, because the federal government continued to retain the right to make the final decisions, the 1978 amendments made little progress in ensuring recommendations from the coastal states were not simply read and then discarded.

In 1982, at the height of the United States’ domestic offshore oil production, Congress passed the Federal Oil and Gas Royalty Management Act (FOGRMA).⁴² Designed to reform the OCSLA passed over thirty years before, FOGRMA mandated procedures for the protection of the environment, the leasing of drilling sites and the collection of royalties awarded through competitive bidding.⁴³ At the same time, Congress also created the Minerals Management Service (MMS) within the Department of the Interior to serve as the chief agency responsible for implementing FOGRMA.⁴⁴ In addition to enforcing the FOGRMA, the MMS was also created to serve as the arbitrator between the federal government and the coastal states in order to ensure compliance with the Coastal Zone Management Act (CZMA).

Despite Congress’ intent, the CZMA did little to bridge relations between coastal states and the federal government. In 1984, in a case entitled Secretary of the Interior v. California,⁴⁵ the United States Supreme Court went further and effectively rendered the CZMA meaningless. The court interpreted the provisions of the CZMA to mean that the leasing of offshore drilling sites does not directly affect the coastal zone areas. As a result, the court determined that the federal government was not required to review the coastal states’ CMPs.⁴⁶ Four years later, in response to outrage from coastal states caused by the court’s decision, Congress again amended the CZMA. The CZMA now reads: “[e]ach Federal agency activity within or outside the coastal zone that affects any land or water use or natural resources of the coastal zone shall be carried out in a manner which is consistent to the maximum extent practicable with the enforceable policies of approved State CMPs.”⁴⁷ Nevertheless, despite Congress’ amendments to the CZMA, coastal state recommendations have continued to be overshadowed by the decisions of the federal government.

In the attempt to assume more influence over offshore drilling, coastal states have fought hard but procured little success. As testament to their labor, to date, coastal states have received less than five percent of the total revenue collected by the Minerals Management Service (MMS).⁴⁸ Consequently, some coastal states have resorted to litigation as a means to continue the Seaweed Rebellion, leaving critics to charge that these states are relying upon a strategy of last resort.⁴⁹

D. International Jurisdiction of the Sea

In recent decades, with the advent of improved technology, offshore drilling operations have expanded into deeper waters further from the coast. Consequently, tension has developed between the United States and neighboring countries over the control of international waters and access to natural resources. Although each coastal country has long claimed ownership rights to the waters directly off its shoreline, until recently, the scope of these rights has never been fully stated.

Ultimately, the continental shelf of North America is an extension of the continent’s land mass under the ocean. ⁵⁰ The continental shelf consists of shallow waters that are usually less than 200 meters in depth and can extend 12 to 249 miles from the coast.⁵¹ Early offshore drillers operated exclusively within this area as the natural shallow waters of the continental shelf provided for the most accessible oil and natural gas deposits. In recent years, as energy demands have increased and technology has improved, drilling operations have ventured beyond the continental shelf to deeper waters, where the continental shelf gradually descends to an abrupt and sharp drop called the continental slope. The slope extends to a depth of 3,000 to 5,000 meters and levels off to form the foot of the continental shelf, which composes the base of the ocean floor.⁵² Recently, as deeper waters have become more accessible to offshore drilling, ownership over these resources has spawned international debate.

In 1983, President Ronald Reagan, acting in response to national and economic security concerns, issued a proclamation declaring ownership on behalf of the United States to all waters extending up to 200 nautical miles from the coast.⁵³ Called the Exclusive Economic Zone (EEZ) the area includes waters off the eastern and western coasts of the United States as well as territories in possession of the United States.⁵⁴ Eventually, in 1994, the United Nations, in accordance with the International Law of the Sea, extended EEZ rights to all countries in conformity with the Reagan proclamation.⁵⁵ Consequently, today all waters not included within a country’s EEZ remain the province of the high sea.

Prior to the United Nation resolution, neighboring countries relied on inconsistent and disjunctive treaties to define borders at sea. President Reagan’s proclamation and the subsequent action taken by the United Nations established conformity by clarifying the scope of international borders. Nevertheless, problems have since arisen. Some areas, such as the Gulf of Mexico, have proven not to be conducive to the creation of standardized EEZs because there is not enough water to accommodate multiple counties. For instance, extending EEZs off the southern coast of the United States and Mexico’s Yucatan Peninsula creates an overlapping zone of 129 nautical miles commonly referred to as the “Western Gap.”⁵⁶ Because of its plentiful abundance of natural resources, estimated at 232.5 trillion cubic feet of natural gas and 36.9 billion barrels of oil, both the United States and Mexico have claimed jurisdiction over this region.⁵⁷

In 1978 both countries attempted to reconcile their jurisdictional dispute concerning the Gulf of Mexico by signing the Treaty of Maritime Boundaries (TMB). However, the TMB did little to resolve the conflict. While the TMB decided jurisdictional disputes over the majority of the Gulf of Mexico, it made no provision for resolving the jurisdiction conflict over the Western Gap. Consequently, although the TMB was signed by both countries in 1978 and ratified by Mexico in 1979, it was not ratified by the United States Senate until 1997.⁵⁸

In 2000, the United States and Mexico finally resolved the jurisdictional dispute concerning the Western Gap. The agreement, termed the “Treaty Between the Government of the United States of America and the Government of the United Mexican States of the Delimitation of the Continental Shelf in the Western Gulf of Mexico Beyond 200 Nautical Miles” (Treaty) was signed on June 9, 2000.⁵⁹ According to its provisions, the Treaty granted the United States thirty-eight percent (1,913 square nautical miles) and Mexico sixty-eight percent (3,179 square nautical miles) of the Western Gap. ⁶⁰ The Treaty also created a 1.4 nautical mile buffer zone on each country’s side, which included a ten-year moratorium on energy exploration. In 2010, when the moratorium expires, each country will be permitted to extract natural resources from within their respective buffer zones.

Today, most of the international jurisdictional disputes over ownership of the sea have been resolved. However, new problems have emerged. In recent years Cuba has acknowledged interests in selling its offshore drilling rights to foreign countries such as China.⁶¹ The prospect of Chinese oil platforms “in our backyard” has prompted concerns over national security. However, as the demand for energy continues to rise, the answer to this and other issues are unlikely to be resolved in the near future as impediments to offshore drilling brought by coastal states and foreign countries are nothing new. Ultimately, the largest factor governing the progress of offshore energy development remains the amount of support for drilling, or lack thereof, held by the American people.

The history of offshore drilling in the United States has been marred by the ebb and flow of popular opinion. For decades, Americans have struggled with two fundamentally incompatible values—the desire of cheap affordable energy while simultaneously maintaining ocean conservation. As one commentator stated, “everybody’s got a price and at a certain price per gallon, we’re all going to want more drilling.”⁶² Consequently, depending on the circumstances of the day, a majority of Americans have either supported or opposed the need for increased offshore drilling. As the pendulum of support for offshore drilling has swung back and forth, coastal states and the federal government have been at an impasse to find lasting solutions that successfully balance America’s competing interests.

Following the height of the Seaweed Rebellion of the 1940s and 1950s coastal states and the federal government actively pursued expanded offshore drilling. At that time the largest opponents of increased offshore energy exploration were ocean front property owners who argued that drilling operations detracted from their view of the ocean. By contrast, the majority of Americans approved of offshore drilling as a suitable basis for acquiring energy. Proponents marginalized offshore drilling’s environmental impact, arguing that drilling operations were perfectly safe. Consequently, in 1967 the federal government approved the first offshore drilling leases off the coast of California.⁶³

Less than two years later, America’s perception of offshore drilling changed dramatically on January 28, 1969 when Union Oils Platform “A,” off the coast of California, suffered a catastrophic blowout.⁶⁴ Termed the Santa Barbara Oil Spill, approximately 80,000 barrels (3,360,000 gallons) of crude oil was discharged into the ocean over the course of ten days.⁶⁵ News accounts of the spill prompted public outcries eventually resulting in environmental legislation at both the state and federal levels. Congress responded by passing several acts including the National Environmental Policy Act, which mandates detailed environmental review, and the Clean Air Act, which regulates the emission of air pollutants from industrial activities.⁶⁶ Today, more than forty years later, the Santa Barbara Oil Spill is still viewed as the primary catalyst influencing resistance to offshore drilling in California.⁶⁷