The Tidelands and Oil

by ROBERT E. HARDWICKE

A NEW frontier, one-tenth the size of the United States, and rich in petroleum and other natural resources, extends seaward from our shores. This frontier, often called the tidelands, is that part of the continental shelf covered by the comparatively shallow waters of the Gulf of Mexico and the Atlantic and Pacific oceans.

The ownership of this belt of submerged lands and the right to take its resources are now in dispute. The protagonists are the Federal government on one side, and a large ma jority ol the states on the other. That it will be a bitter contest seems inevitable — a contest involving difficult questions of law and troublesome questions of policy.

Our present economy and our future safety depend heavily on petroleum. If we are to be prepared against sudden attack, we must have adequate petroleum supplies in this country, and we should not rely on foreign sources. It is not enough to know that, with time and unlimited money, large new deposits could be found inland, and also outward under the seas. There may be billions of barrels of oil in the continental shelf, but that oil will be of little use until it has been discovered, developed, and made available in adequate quantities at the right place and time.

It takes more than courage and hard work to get crude oil on short notice out from under the seas, and its refined products into the possession of the armed forces. Skill can be commandeered by the government, organization can be achieved, money can be had, costs can be ignored in an emergency; but you can’t buy time.

The story of the search for oil deep under the seas is interesting enough to justify the telling, even if it were not enlivened by the quarrel over who owns it or who should control its development. The outcome of this quarrel will inevitably affect all the states and may even change materially our dual system of government.

Our continental shelf, in area about 290,000 squares miles (Alaskan portions excluded), extends to the line where the gradual seaward slope of the continent steepens rapidly into the abysmal oceanic basins. The line marking the 100-fathom depth (600 feet) is ordinarily considered the edge of the shelf. Its width varies from about 5 miles on parts of our western coast to some 140 miles at the Texas-Louisiana line, and more than 175 miles off the New England and Florida shores. The approximate areas of the portions of the shelf bordering the different coasts also vary materially: the Pacific coast, 18,500 square miles; the Atlantic coast, 127,000 square miles; and the Gulf of Mexico, as much as 144,000 square miles.

The shelf itself, as distinguished from the waters above it, contains many valuable resources, such as oysters, clams, shells, kelp, sponges, and sand, as well as salt, sulphur, oil, gas, and other minerals. Already large deposits of oil and gas have been discovered off the shores of California, Louisiana, and Texas, and it is with these resources and the Gulf Coast area that we are now primarily concerned.

Copyright 1949, by The Atlantic Monthly Company, Boston 16, Mass. All rights reserved.

Petroleum was first discovered in the shelf in 1894 when a well was drilled from a platform over shallow waters off the coast of California. The search for underwater deposits in that area was further stimulated in 1927 by the discovery that the drilling bit, instead of going almost straight down, would drift so that a well started on or near the shore might slant seaward and penetrate the producing zone at a point beneath deep water a considerable distance from shore. By 1935, California operators had perfected methods of controlling the drift or of conducting directional drilling; consequently, a well could be started on shore and be bottomed with astounding accuracy close to a predetermined point under water a considerable distance from the starting point.

The present and potential value of the petroleum deposits in the shelf which can be produced at reasonable profit may be very great. Despite the difficulties encountered in development of the Pacific shelf, where deep water is close to shore, the total production of four fields producing from the California shelf, up to January 1, 1949, had amounted to about 152 million barrels of oil, worth about $2.50 a barrel at present prices. The future production from those four fields was recently estimated at about 168 million barrels. Great quantities of valuable gas are also produced along with the oil.

Although production in the Gulf of Mexico far off shore has hardly begun, it is very probable that much oil will be found. Already eleven separate fields have been discovered off the Louisiana shore, and three off the Texas coast. In the 31½-mile strip (27 nautical miles being the seaward boundary of Louisiana and Texas as declared by statutes of those states in 1938 and 1941) there are about 16 million acres claimed by Louisiana, of which some 12 per cent are under lease, and about 19 million acres claimed by Texas, with approximately 2 per cent under lease. The seaward boundary of Texas was further extended by statute in 1945 to the outer edge of the shelf. Whether a state can extend its boundary without the consent ol the Congress is a question beyond the scope of this article and will not be discussed.

Estimates of oil reserves (oil recoverable at reasonable profit) in the 3½-mile strip along the Louisiana and Texas shores range from 4 billion to 10 billion barrels. These estimates are not based on fanciful speculation or unreasonable assumptions. In comparison, the total 1948 production of crude oil in the United States was little more than 2 billion barrels, and the total proved oil reserves (probable recovery from deposits already discovered) were estimated at less than 24 billion barrels — a figure which of course does not include the tidelands.

The stakes are high, and so is the ante yet a few operators are taking the gamble and risking millions. They have leased from the states enormous areas of the shelf in the Gulf and lower Atlantic. The approximate areas leased and the approximate bonuses (cash payments for the purchase of leases) paid to the states since 1944 are as follows: Florida— $29,000 for 6,500,000 acres; Mississippi — $111,000 for 800,000 acres; Louisiana — $26,500,000 for 2,541,604 acres; Texas — $7,300,000 for 370,000 acres; a total of $33,940,000. In addition to the bonuses, operators have paid to the states large amounts in annual rentals (payments made to keep a lease in force until drilling is commenced), and are obligated to pay royalties (usually one eighth) on oil and gas produced and saved. No areas off Mississippi and Alabama are currently covered by leases. At the present time, the Louisiana and Texas coasts offer the best opportunities for successful development, and most of the activity is in that section.

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WITH the purchase of the leases, an operator’s troubles begin. Assuming that he has leased an area located some 20 miles from shore and under 40 feet of water, he must first locate the tract accurately, and then find some practical way to keep it readily identified. Obviously, the ordinary methods of marking boundary lines (stakes, pipes, trees, and rocks, with bearings on near-by objects) cannot be used. Triangulation and shoran (a specialized type of radar) are used and positions are described by latitude and longitude. In a very real sense, a tract is often tied to the stars.

Having located the area, the operator must then decide whether the earth formations are such that, at reasonable depth, oil and gas in large quantities might be trapped. More than a hunch or an intelligent guess is required to justify the expense of drilling even one well in deep water.

Usually the operator will drill if he has an indication of a “high” or a domal arrangement of the strata far beneath the ocean floor. Along the Gulf mainland, many subsurface highs have been located which were formed by movements of bodies of salt. Such domes are found by geophysical methods. During geologic time, great salt beds accumulated in the region of the present Gulf coastline of Louisiana and eastern Texas, and were eventually covered by many layers of sedimentary material which finally became rock. The weight of the sediment, combined with other causes, such as folding and faulting, forced the salt masses to move or flow, following the lines of least resistance, usually upward. The effect locally was about the same as if a gigantic plug of salt, shaped something like a bullet with a diameter up to 5 miles, had been pushed by tremendous hydraulic pressure upward against the covering strata of rock, bending some of them into domal shapes, and sometimes actually breaking through several layers. The resulting shapes of some of the layers of rock, called structures, were favorable for the accumulation of oil and gas.

The task of collecting and interpreting accurately the geophysical data, and of correlating them with a great mass of other data concerning subsurface conditions in the area, requires the skill of geologists, geophysicists, paleontologists, and other specialists.

Having found what appears to be a favorable structure, the operator who elects to drill must then overcome innumerable difficulties not encountered on dry-land operations. Offices, camps, supply depots, repair shops, and giant cranes or other lifting devices must be established on shore and be duplicated in part at the wellsite, and many forms of expensive water transportation are required.

A real challenge to ingenuity comes with preparation for drilling operations. Here, 20 miles from shore, is our assumed location for the well in 40 feet of water. Safe and comfortable living quarters must be devised for the men, and adequate space must be provided for great quantities of heavy machinery and materials. The discomforts and dangers of burning sun, cold winds, fogs, ocean currents, and waterspouts (a species of tornado) must be met: also, the frequent danger from sudden line squalls which, though of short duration, have wind velocities up to 75 miles an hour. Finally, adequate protection must be provided against hurricanes, common in the Gulf, frequently with winds of over 100 miles an hour and with 30-foot waves. In spite of all these and other difficulties, the operator hopes to carry on operations around the clock, without costly delays for lack of men or materials.

Operators have met the physical challenge in a variety of ways, showing a versatility characteristic of our competitive system. One operator constructed a giant, double-decked structure on 100 piles driven from 150 to 200 feet into the Gulf floor, capable of sustaining a load of 10,000,000 pounds.

A more common arrangement makes use of a smaller platform for the derrick and drilling equipment, supplemented by a barge, usually a converted LST, securely anchored and moored to serve as a floating warehouse, repair shop, and houseboat. When a well is finished, either as a dryhole or producer, the barge can be readily moved to another location.

One operator is now building a huge doubledecked structure especially designed so that it may be easily dismantled and moved from one location to another.

From most of the structures in the deep Waters of the Gulf, several wells can be drilled to test a relatively large area. This can hr done by directional drilling, so that the bottoms of the wells are widely separated though the wells are started in a cluster on the platform. Already drilling operations are being conducted in approximately 60 feet of water in the open Gulf, and operators claim that before long they will drill in water 100 feet deep. Wells have been drilled in Lake Maracaibo, Venezuela, in water that deep, but there the waters are quiet and the difficulties not so great as in the open Gulf.

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THE operators have taken great care to make the men comfortable, to protect their health, and to provide for their safety, both ashore and in the Gulf. Under one typical arrangement, the men stay twenty days at the well, then go ashore for ten days. At the drilling sites, pure water is obtained by distillation. Operators do not use gasoline in any boat or at any location, such as a drilling platform, where it would be dangerous to do so. Radar and radio telephones are standard equipment, and are put to many uses. Special studies have been made of currents, winds, and wave action in the Gulf, and operators are coöperating with the United States Weather Bureau in securing information as to the weather, especially adequate advance information of line squalls and hurricanes. The science of oceanography is being extended, under conditions existing in the Gulf, with new experts in that field being developed by the oil companies.

The problem of keeping the seas out of a well is relatively simple. A string of pipe of large diameter (20 inches or more) is lowered from the drilling platform to the bed of the sea, and then driven at least 100 feet into the ground. The upper end extends to the platform, the lower end is considerably below the bed of the sea; consequently, the sea is effectively cased off, though the pipe is full of sea water. The drilling bit, attached to a string of drill pipe, is then lowered through the water-filled pipe. The weight of the equipment may carry the bit through many feet of mud and silt.

Actual drilling begins by rotating the drill pipe, thereby rotating the drilling bit so that it will penetrate the sea bed, cutting or breaking up the rock and other material at the bottom of the hole. During drilling operations a fluid, usually called “mud” (water, mud, and other substances carefully selected and mixed to proper weight and consistency), is continuously pumped under considerable pressure down the hollow drill pipe, through openings in the bit to the bottom of the hole where the fluid mixes with and collects the cuttings, and carries them to the surface. The sea water originally in the pipe is soon displaced or pushed out.

Should oil or gas in quantity be discovered far from shore in deep water, unusual problems of production, storage, and transportation are presented, far different from those encountered in operations on dry land. All activities in the Gulf present bewildering problems of marine transportation, especially in the frequent periods of fog and high winds. Many types of vessels are used, such as speedboats, launches, tugs, barges, shrimp trawlers, luggers, cargo carriers, houseboats, yachts, and others, some of which are queer hybrids. There are also converted naval craft —subchasers, air-rescue boats, Navy YF barges, LST’s, LSM’s, LCI’s, and LCT’s — carrying on strange activities for warcraft .

The public records show that twenty-eight companies own leases or an interest in leases covered by the coastal waters of Louisiana and Texas. Among this group, fourteen of the twenty largest companies own leases directly or through subsidiaries. About half of the owners are individuals or smaller companies. Few operators have been willing to take the financial, legal, and political risks that are inherent at present in operations in the Gulf of Mexico.

The cost of carrying on deep-water operations is very great. Seismograph crews cost more than $1000 a day; drilling costs average about $3000 to $4000 a day; complete drilling platforms for deep water vary in cost from $200,000 to $2,000,000. Aside from the cost of the platform, the expense of drilling a well in deep water to 14,000 feet is estimated to be about $500,000. One company had spent a total of $18,000,000 on Gulf leases, exploration, equipment, and operations up to January 1, 1949, with only two fields to show for it.

The amount spent in Gulf operations by all companies since the middle of 1945 has been estimated at more than $100,000,000. To offset this, the cumulative production of oil to date from wells in the Gulf, excluding the Creole Field, which was discovered close to the Louisiana shore in 1938, is about 130,000 barrels of a value not exceeding $300,000. The companies are, therefore, some $100,000,000 in the red and are still spending millions. At least sixteen dry holes had been drilled off the Louisiana coast, and nine off the Texas coast, up to January 1, 1949.

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IN addition to physical, financial, and economic problems, operators are also faced with the claim by the United States that their lessors, the states, had no title to the land leased and no right to control the development of the resources.

The California Legislature, assuming that the state owned the seaward area out to its western boundary line (3 English or statute miles from shore), provided in 1921 for its development under state leases. Several oil fields were discovered within a few years, so that the value of the petroleum resources of the strip was evident by 1937. That was the year when Gerald P. Nye, United States Senator, questioned the title of California and other littoral states to the offshore strip, and tried unsuccessfully to persuade the Congress to declare that the strip was part of the Federal public domain. Indeed, the Congress even refused to direct the Attorney General to file suit to determine the question of title. Similar resolut ions were introduced in several succeeding sessions of the Congress, but all failed to pass.

Unquestionably, there were many decisions by the Supreme Court of the United States, and there were other legal and historical precedents, which apparently established title in California and other littoral states to a line at least 3 statute miles from shore. Officials of the United States, including Harold L. Ickes, as Secretary of the Interior, had, before 1937, formally declared that the individual states, not the United States, had title to the strip and the right to grant permits for the development of oil and gas. Mr. Ickes, in 1937, took the position that, since the title of the states to the strip had been questioned, the issue should be settled in the courts. He testified before a joint committee of the Congress in March, 1948, that it was President Roosevelt who had raised the question of title in 1937, and that he (Ickes) and the Secretary of the Navy had promptly urged the Attorney General to file suit. No suit was filed until 1945, though President Roosevelt himself had suggested it in 1937, and though various cabinet officers and others in high places urged the Attorney General to commence legal proceedings to determine whether the United States had title to the submerged areas.

During the period 1937 to 1945, offshore development continued in California. Its beginning in the Gulf of Mexico was in 1938, when oil was discovered in a well drilled in relatively shallow water about a mile from the Louisiana shore in what is known as the Creole Field. The second field, Rabbit Island, was discovered in 1942 some 7 miles out in the Gulf close to Rabbit Island. Some operators do not consider these fields to be in the Gulf, but in any event the production proved that fields would be found in open water; so large areas were leased in August, 1945, from Louisiana, and plans were made to start extensive operations. Because of World War II, new operations in the Gulf were virtually impossible during tlic period 1941 to 1945, but operations began on a large scale after the war, as soon as materials were available.

All this development took place under state leases. Beyond doubt, the states and oil operators had reason to be confident that the Supreme Court of the United States would hold against the United Stales in the suit brought against California. This the Court did not do.

By a six to two decision, announced June 23, 1947, the Court declared, in an opinion by Mr. Justice Black, that California did not own the belt extending 3 English miles (3 x 5280 fect) off her coast, but that the United States, because it had to protect the country and conduct our foreign relations, had paramount rights in and power over the area, anincident to which was full dominion over its resources, including oil. The opinion of the majority admits that prior decisions of the Court justified the belief that the “states not only owned tidelands and soil under navigable inland waters, but also owned soils under all navigable waters within their territorial jurisdiction, whether inland or not.” In spite of these prior decisions, the Court held that California did not own the strip, but the Court refused to declare that the United States was the owner. Justices Frankfurter and Reed dissented. Mr. Justice Jackson look no part in the decision.

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THE implications of the decision are alarming and go far beyond the clouding of titles of states to offshore areas and to the beds of navigable streams and inland waters. The reasoning may logically be extended to inland waters and areas and to the resources of the uplands. Most of the states are joining the littoral stales in fighting extension of Federal control by such a doctrine, and are urging the passage of legislation which will restore the status which was thought to exist prior to the decision in the California case, or give paramount rights to the states.

Nevertheless, Attorney General Clark has asked leave of the Supreme Court to file suits against Louisiana and Texas, announcing that the decision in the California case is a conclusive answer to the claims of those two states. According to the Attorney General, it is wholly immaterial that Texas, as a recognized independent nation for about ten years (1836 1845), came into the Union under a formal agreement with the United States that Texas would “retain all the vacant and unappropriated public lands lying within its limits,” and would cede to the United States only edifices, forts, barracks, fortifications, navy yards, and “other means pertaining to the public defense.”

At that time (1845) and on subsequent occasions the United States recognized the southern boundary of Texas as extending to a line 3 leagues (10.5 statute miles) from shore. Yet now the Attorney General of the United States seeks to file suit to obtain a decree by the Supreme Court declaring that the United States, not Texas, has title to the belt and the right to control the development of its mineral resources. One state official was so disturbed by the action of the Attorney General that he suggested secession and the return of Texas to its status as an independent nation.

Since the decision in the California case, various bills have been introduced in the Congress which would release to the states any claim of the United States to the beds of navigable rivers and inland waters, and would release to each littoral state all claims of the United States to the beds of the seas to a line 3 nautical miles (3 x 6080.20 feet) from shore, or to a line representing the seaward boundary recognized by the United Slates, if farther than 3 miles from shore. A similar bill quitclaiming the seaward areas was passed by the Congress in 1946, while the California case was pending, but was vetoed by President Truman in the closing days of the session. Several bills of that nature are now pending.

The Council of Governors, the Council of State Governments, and the National Association of Attorneys General, in accordance with resolutions passed by almost unanimous votes of the representatives of those organizations, have actively supported quitclaim legislation, and have expressed great concern over the extension of Federal power and control over state and private resources which is implicit in the language and holding of the California case. These organizations have also vigorously opposed bills which would undertake to place the resources of the shelf under the control of an agency or department of the Federal government.

The value of the resources of the shelf may be very great, and undoubtedly there will be sensational appeals to greed and prejudice. Already the cry has been heard that the big oil companies, by favoring state ownership and control, are trying to grab the vast and wealthy Federal domain represented by the tideiands, and that this “steal" should be prevented.

It must be emphasized that the liltoral states for more than 150 years have exercised power and control over the resources of the tidelands, and for years have leased areas of the shelf for oil development. No adverse claim of title or superior right was made by any official in behalf of the United States before 1937, and even that claim was generally thought to be unsound, really fanciful, until the Supreme Court announced its decision in the California case in 1947.

The states and their lessees must have rights and equities which, as between private litigants, would be tantamount to title; otherwise the Administration would not have sponsored bills providing that a person holding a lease issued by a stale before June 23, 1947, or even at a later date, could, under certain conditions and upon the recommendation of a board, exchange it for a Federal lease containing in many respects the same terms as the state lease. The bills also provide that neither the states nor the operators shall be liable to the United States in damages on account of oil or gas produced before June 23, 1947. One of the bills would allocate to the states a part of the royalty received by the Federal government from production. Clear it is that the states, not the oil operators, are the ones faced with the greatest loss, and are the real opponents of the Federal government in this controversy.

Why should the sinister label of “land grab” be used to describe the efforts of the states (even though they may be aided by their lessees) to induce the Congress to pass a bill which would settle questions of title or control in favor of the states— thereby establishing righls which were recognized as theirs until June 23,1947 ? Indeed, if the term “ land grab” is to be used, there is some justification for saying that the United States has made the grab.

Federal control has not been urged as a method for getting the government into the oil business. Neither has Federal control been advocated because the states might not enforce adequate conservation measures. Nor has Federal control been proposed as a means of getting a new or better group of operators than those who hold or could acquire leases from the states. No claim has been made by the advocates of Federal control that petroleum supplies were lacking during our two World Wars because the Federal government did not have control of oil development onshore or offshore. This brings the discussion to what might be expected if an agency of the Federal government should be authorized to grant leases and control offshore operations.

It has been argued that the laws and their administration pertaining to the development of the federal domain for oil and gas for a period of twentyeight years (1921 1949) indicate what is likely to happen if the Federal-control bill becomes law. It has been said that the Teapot Dome scandal is proof that Federal officials are not always honest, although there was no intention to say that federal control of the development of the shelf would probably result in a similar scandal. It can be said, however, that the laws and administration of the public domain have often been publicly described as most unsatisfactory in comparison with state laws and administration.

The mineral leasing act was the cause of many complaints by operators, but this the Congress finally recognized by long-delayed revision ol the statutes in 1946 for the declared purpose of stimulating production on the public domain. The Department of the Interior, administrative agency under the act, has improved many of its regulations, forms, and practices to encourage development and meet objections, so that complaints as to administration of the mineral leasing act have materially decreased; however, some justifiable grounds for dissatisfaction still remain.

The history of the administration of the mineral leasing act indicates that inefficiency is inherent in an arrangement which places control of great faraway areas and activities in a Federal agency in Washington, subject as it is to inevitable frustrations and restrictions which can be blamed only in part upon inadequate appropriations. Perhaps much of the blame rests upon civil service laws and the volumes of regulations and rulings which govern the employment, transfer, promotion, discipline, and discharge of employees, and to a considerable extent govern the rates of pay —giving little discretion in those matters to the officials of the agency. The situation is quite different from that prevailing in industry and in most state agencies.

Regardless of the ability of top-rank Federal officials, no way seems to have been found to avoid a complicated routine or red tape with little flexibility, often affecting judgment and always slowing the processing of papers and the announcement of final decisions, even minor ones, to such an extent that planning by operators is made most difficult. The delays and uncertainties have been maddening. Moreover, Federal laws, leases, and regulations still impose upon operators obligations which are generally considered by them to be unnecessary and to confer powers upon the Secretary of the Interior which authorize arbitrary action with respect to important operations.

This much is certain: development of the public domain for oil and gas has not been comparable to the development of private lands or the public lands belonging to states. There is no indication that Federal laws and administration with respect to the reserves of the shelf will follow a different pattern, much less a better one. On the contrary, the bills sponsored by the Administration are unusually restrictive and harsh. For instance, they would require each lease to provide that the Secretary could control the rate of development and the amount produced as he thought advisable “in the interest of national defense or the public welfare.”Each lessee would be required to agree that the Secretary, during war or national emergency declared by the Congress or by the President, could suspend operations under a lease, or even cancel the lease, in which latter event the government would be obligated to pay the lessee “an amount determined in accordance with regulations promulgated by the Secretary which incorporate guiding equitable principles.” These are amazing provisions.

It may be said that the operators would be authorized by the Administration bills to supply capital, materials, and men, and take all the risks, while many of the usual functions of management would rest in the Secretary of the Interior. He would also have the power to cancel the lease and pay damages in accordance with his own ideas of values and fairness. Provisions of that nature would not be likely to stimulate leasing or development.

This country needs oil and gas in great quantities. Logically, operators should be induced in every reasonable way to develop without delay the petroleum resources of the shelf. Federal control is bound to be a deterrent of great magnitude. Under state control the operators have a brilliant record of achievement, overcoming the impossible almost every day. A prompt disposal of the controversy by the Congress in favor of the states will undoubtedly cause an increase in development activities, and will also avoid the strain and bad feeling which are inevitable if the issues are to be settled by further litigation and by bitter contests in the Congress.