«LEGAL ASPECTS OF OFFSHORE OIL AND GAS OPERATIONS OLIVER L. STONE* The states' own title to the lands, minerals and other things underlying the ...»
LEGAL ASPECTS OF OFFSHORE
OIL AND GAS OPERATIONS
OLIVER L. STONE*
The states' own title to the lands, minerals and other things
underlying the navigable waters within their respective boundaries.'
This ownership rests on the fact that the thirteen original colonies
acquired from the Crown of England title to all lands and waterbottoms within their respective boundaries. When these colonies formed themselves into the United States, they ceded their vacant lands to the Union, but retained title to the beds and subsoil of their navigable waters.8 Since states subsequently entering the Union did so on an "equal footing" with the original states, the waterbottom ownership doctrine applies to all states.4 The ownership by the individual states extends also to "tidelands"-those lands lying between high and low water mark subject to the ebb and flow of tides." Individual state ownership of the waterbottoms of navigable "inland" waters, including rights to the oil, gas and other mineral resources therein, is, therefore, a long-settled concept in the United States."
In the 1930's, however, interest emerged in the oil and gas potential of the submarine areas off the coast of California. That state, asserting that under the "equal footing" doctrine it was the owner of the submerged lands underlying a belt extending seaward three English miles 7 from the low water mark, granted leases to private * General Attorney, Shell Oil Company, New York, New York.
1. Unless otherwise indicated, the term "state" or "states" is used in a domestic sense and refers to the individual state or states of the United States.
2. Pollard's Lessee v. Hagan, 44 U.S. 212 (1845) ; Manchester v. Mass., 139 U.S.
3. Id. Prior to its entry into the Union, Texas was an independent nation, not a Territory of the United States, hence, unlike other States, it retained title to its vacant lands as well as its waterbottoms. See note 4 infra.
4. See, e.g., United States v. Texas, 339 U.S. 707, decree at 340 U.S. 900 (1950).
5. Borax Consolidated v. Los Angeles, 296 U.S. 10 (1935).
6. The federal government has power to regulate navigation and commerce on the overlying navigable waters. We are not here, nor elsewhere in this paper unless otherwise indicated, dealing with regulatory powers pertaining to navigation on or fishing rights in the waters of the continental shelf. We are concerned here only with the ownership of or the jurisdiction over the submarine minerals.
7. One English, statute, or land mile equals approximately.87 geographical, marine or nautical mile. The oft-referred to "3-mile limit" is equal to three geographical, marine or nautical miles (or one marine league), or approximately 3.45 land miles.
See United States v. California, 381 U.S. 139, 148 n. 8, 180 n. 4 (1965).
JULY 1968] OFFSHORE OIL AND GAS OPERATIONSconcerns covering the oil and gas rights in portions of this threemile marginal belt. Thus began a long, rigorous, judicial-legislative struggle between the federal government and several of the coastal states.8 The economic stakes were high. At issue was the potential mineral wealth underlying the marginal belt of the United States.
To resolve the issue, the federal government instituted an original action in the United States Supreme Court against California, and later against Louisiana and Texas, as these were the states whose offshore areas seemed most promising for oil and gas.' The Supreme Court held that California, Louisiana and Texas had no title to or property interest in the submerged lands off their respective coasts, outside of inland waters. The federal government was decreed to be possessed of paramount rights in and full dominion and power over the lands, minerals and other things underlying the offshore waters, to the extent of three marine miles off California, twenty-seven marine miles off Louisiana, and to the outer edge of the continental shelf off Texas.' I THE SUBMERGED LANDS ACT OF 1953 This law" was enacted to upset the foregoing decisions of the Supreme Court.' 2 It vests in the coastal states ownership of "lands beneath navigable waters" within their respective historical boundaries, and the natural resources within such lands and waters, together with the right to lease said lands and natural resources.
8. All aspects of this 30-some-odd-year controversy have not yet been settled, although many of the major issues are now at rest. See United States v. Louisiana, 382 U.S. 288 (1965).
9. This litigation is sometimes referred to as the "tidelands oil controversy," even though "tidelands," in a technical sense, were not involved. Neither "tidelands" nor ownership of the bottoms of "inland waters" was in issue. The federal government conceded ownership by the coastal states of their "tidelands" and the bottoms of "inland waters."
10. United States v. California, 332 U.S. 19, decree at 332 U.S. 804 (1947) ; United States v. Louisiana, 339 U.S. 699, decree at 340 U.S. 899 (1950) ; and United States v.
Texas, 339 U.S. 707, decree at 340 U.S. 900 (1950). The different geographical limits for each of the three States were based upon the fact that these states were then respectively claiming those areas. The decrees, of course, dealt with the matter from a purely domestic standpoint.
11. 43 U.S.C.A. §§ 1301-15 (1964).
12. The Constitution of the United States (art. IV, § 3) vests in Congress the power to dispose of property belonging to the United States. The power of Congress to grant submerged lands to the states as it did in the Submerged Lands Act was challenged, but the Act was sustained. Alabama v. Texas, 347 U.S. 272 (1954).
NATURAL RESOURCES JOURNAL [VOL. 8"Lands beneath navigable waters" are defined as all submerged land lying within three geographical miles seaward of the "coast line," and to the boundary line of each such state where such boundary, as it existed at the time the state became a member of the United States, or as approved by Congress prior to the Act, extends seaward beyond three geographical miles. In no event, however, shall a state's boundary extend from the coast line more than three marine miles (one league, or about 3.45 land miles) into the Atlantic or Pacific Ocean, or more than three leagues into the Gulf of Mexico. "Coast line" is defined as the composite line of ordinary low water along that portion of the coast which is in direct contact with the open sea, and the line marking the seaward limit of inland waters."a The Submerged Lands Act did not define the term "inland waters." This omission, together with the uncertainty as to the "historical" offshore boundaries of some of the coastal states, has given rise to federal-state offshore boundary disputes. The question concerning the historical boundaries of the states bordering the Gulf of Mexico was set at rest in 1960 in the companion cases of United States v. Louisiana14 and United States v. Florida.5
The Court's decree reads in part:
As against the respective defendant States, the United States is entitled to all the lands, minerals and other natural resources underlying the Gulf of Mexico more than three geographic miles seaward from the coast lines of Louisiana, Mississippi and Alabama, and more than three leagues seaward from the coast lines of Texas and Florida, and extending seaward to the edge of the Continental Shelf.
... As used in this decree, the term "coast line" means the line of ordinary low water along that portion of the coast which is in direct contact with the open sea and the line marking the seaward limit of inland waters.' 6
13. 43 U.S.C.A. §§ 1301, 1311 (1964).
14. 363 U.S. 1 (1959).
15. 363 U.S. 121 (1959).
16. 364 U.S. 502-03 (1960) (emphasis added). It will be observed that three of the states bordering on the Gulf of Mexico (Louisiana, Mississippi and Alabama) get rights only 3 marine miles into the Gulf, whereas the other two states (Texas and Florida) are recognized as owning rights out 3 leagues (9 marine miles) into the Gulf.
This result flows from the Court's resolution of the "historical" boundaries of these states, that is, the extent to which the boundary of each of these states purported to extend into the Gulf of Mexico at the time of its admission into the Union, or as the Congress of the United States might have recognized the state's gulfward boundary prior to enactment of the Submerged Lands Act.
OFFSHORE OIL AND GAS OPERATIONSJULY 1968] The foregoing litigation involving the historical boundaries of the five states bordering on the Gulf of Mexico did not determine "the seaward limit of inland waters," hence this phase of the federal-state dispute in the Gulf of Mexico remains unsettled. However, in 1965 the Supreme Court resolved some of the major unsettled issues in the long-pending dispute concerning California's offshore boundary.' 7 The focal point of the second California case was the meaning to be ascribed to the term "inland waters," as used in the Submerged Lands Act. Giving substantial weight to the 1958 Geneva Convention of the Territorial Sea and the Contiguous Zone,' 8 the Court held that the waters lying between California's mainland and a series of offshore islands were not inland waters. 1" With further reference to that Convention the Court observed that "it may now be said that there is a settled international rule defining inland waters, ' 20 and went on to state that the twenty-four-mile closing line, together with the semicircle test (recognized by the Convention), represents the position of the United States. 2' Accordingly, the Court held that, of the various bays which California claimed were inland waters, only Monterey Bay met the twentyfour-mile closing line-semicircle test that the United States had adopted.
Thus, subject to such disputes as may still exist concerning the precise location of the outer limits of certain inland waters, the federal-state offshore ownership dispute may now be regarded as settled, with the coastal states owning the waterbottoms and underlying resources of their respective offshore areas to the extent of their historical boundaries. The oil and gas leasing laws and regulaUnited States v. California, 381 U.S. 139 (1965), sometimes referred to as the second California case.
18. U.N. Doc. A/Conf. 13/L.52 (1958).
19. Some of the islands are more than 50 miles from shore. The state of California claimed that these waters were historically regarded as "inland" hence were within the state's historic seaward boundaries. California also claimed that it was free to use the Straight Base Line method and to use boundary lines around the offshore islands.
The Court rejected both of these contentions. As to the Straight Base Line method sanctioned by the Geneva Convention on the Territorial Sea and the Contiguous Zone, the Court concluded that it was for the federal government, not individual states, to elect whether to adopt the Straight Base Line method or the 24-mile closing line plus "semicircle" test as a criterion of inland waters.
20. Supra note 17, at 163.
21. "The semicircle test requires that a bay must comprise at least as much water area within its closing line as would be contained in a semicircle with a diameter equal to the length of the closing line. Unquestionably the 24-mile closing line together with the semicircle test now represents the position of the United States." 381 U.S. 139, 164 (1965).
NATURAL RESOURCES JOURNALtions of the respective states apply in these offshore, state-owned submerged lands. These state-owned submerged areas might be called the "inner continental shelf," to distinguish them from the "outer continental shelf" which, as we shall soon see, appertains to the federal government and is subject to its exclusive jurisdiction and control.
This Proclamation, issued by President Truman, was the key which unlocked the doctrine of the continental shelf. It proclaims
[T]he Government of the United States regards the natural resources of the subsoil and sea bed of the continental shelf beneath the high seas but contiguous to the coasts of the United States as apper- 2 taining to the United States, subject to its jurisdiction and control.
The Proclamation, which specifically recognizes the character as
high seas of the waters above the continental shelf, recites the following as its underlying justifications:
(a) Because of the long range worldwide need for new resources of petroleum and other minerals, efforts to discover new supplies of these resources should be encouraged;
(b) Such resources are believed to underlie many parts of the U.S.
continental shelf, and technology had progressed to the stage, or soon would, where their development is or shortly would be practicable;
(c) Recognized jurisdiction over such resources is required in the interest of their conservation and prudent utilization; and (d) Exercise of jurisdiction over the natural resources of such continental shelf by the contiguous nation is "reasonable and just"; and
22. 10 Fed. Reg. 12303 (1945) ; 13 Dept. of State Bull. 485 (1945). The Proclamation is also reproduced at S. Rep. No. 411, 83rd Cong., 1st Sess. 54-55 (1953).
23. Id. On February 26, 1942, the United Kingdom and Venezuela entered a treaty (1942 U.K. Treaty Series, No. 10) providing for division of the seabed of the Gulf of Paria between Venezuela and Trinidad. But President Truman's 1945 Proclamation was the first formal assertion by a nation of the principle that the natural resources of its continental shelf appertained to such nation and were subject to its jurisdiction and control.
For an excellent collection of data dealing with the emerging legal status of the continental shelf, see 4 M. Whiteman, Digest of International Law 740 (1965).