beneath their navigable waters out to three nautical miles from their shores. But it left it to the courts to determine whether any state could establish an historical claim to waters beyond that three-mile limit. Just three months later, the President attempted to clarify that issue by signing the Outer Continental Shelf Lands Act( OCSLA). It gave the federal government jurisdiction over submerged lands on the continental shelf more than three miles from the various states’ shorelines. It also ordered the Department of the Interior( DOI) to create a federal offshore leasing program. The practical result of both laws was to formally recognize a federal role in the development of offshore mineral resources. But disputes over the extent of that role persisted.
The DOI’ s Bureau of Land Management( BLM) and the US Geological Survey’ s( USGS) Conservation Division prepared maps of the tracts of offshore land that would be available for leasing; they also developed procedures for conducting competitive, sealed-bid auctions for the rights to develop those tracts. The results of the BLM’ s first three federal lease sales were quite lucrative.
• In October 1954, companies paid $ 129.5 million for the rights to develop tracts covering 417,000 acres off the coast of Louisiana; most of the acreage was well beyond 10 miles; some tracts were as far out as 50 miles.
• In November 1954, companies paid $ 23.4 million to explore 19 tracts— all more than 10 miles off the coast of Texas.
• In July 1955, companies paid another $ 108.4 million to explore 121 tracts off Louisiana and Texas.
But in the meantime, Louisiana and Texas continued to insist that their control over the tidelands should extend out to three leagues( about 10 nautical miles) from their shorelines. In August 1954, the Louisiana legislature had re-asserted the rights to not only its 10-mile boundary, but also territory extending another 27 miles beyond that point. Then in May 1955, the state auctioned leases for nine offshore tracts beyond the federally recognized three-mile limit. The Supreme Court stepped in to enjoin both Louisiana and the BLM from conducting any further auctions of offshore tracts until either 1) the
Many of the earliest offshore oil wells were drilled from piers at Summerland in Santa Barbara County, California. Photograph by G. H. Eldridge, circa 1901.
boundary dispute was finally adjudicated or 2) all parties figured out how to work together, even while that dispute made its way through the court system.
Everyone was highly incentivized to reach an agreement. Throughout the period 1954 to 1956, oil and gas companies had been actively exploring the leases they won under both state and federal leasing programs. Large exploration and development firms such as Gulf, Humble and Shell developed successful partnerships with contractors such as Glassrock Drilling, Zapata and ODECO, thus gaining access to those firms’ innovative mobile drilling equipment, such as submersibles and“ jack-up” rigs. Those new rigs, as well as some converted offshore barges called drillships, were capable of operating in water up to 70 feet deep. The industry enjoyed an unusually high drilling success rate and discovered more than 160 separate and lucrative fields that were producing more than 200,000 barrels per day.
In October 1956, all parties agreed to what they labeled an“ Interim Agreement.” It created offshore Zones 1 through 4, ranging from the immediate shoreline to the limit of the outer continental shelf. Zone 1 would extend out to three miles and clearly be under the jurisdiction of the individual states. Zone 2 would be in the disputed territory ranging from the threemile line to the three-league line. Zone 3 would extend from that point out about
25 more miles to Louisiana’ s purported extended state boundary. Zone 4 would extend from that point to the limit of the continental shelf and clearly be under the jurisdiction of the federal government. The revenue from leases, rentals and royalties in Zones 2 and 3 would be held in escrow and divided among the federal and state governments when all boundary questions were settled.
Moving to the Future
The next two years were challenging. In November 1956, fighting erupted over Egypt’ s attempt to nationalize the Suez Canal, an important waterway for shipments of oil from the Middle East. Closing that waterway caused worldwide oil prices to surge and led to a period of expanded drilling activity in the Gulf of Mexico. When the Suez reopened just six months later, oil prices declined to their former level. The large supplies of crude resulting from the recent Gulf Coast activity hit the market at the same time that a brief( eight months) but serious( GDP declined 3.7 %) economic recession hit the United States. During that time, the percentage of drilling rigs that were working dropped from 100 % to 37 %.
The economy and the offshore industry recovered quickly. In May 1959, the BLM generated lease sale revenue of $ 90 million. Later that year, the state of Louisiana
Courtesy of the National Oceanic & Atmospheric Administration
22 FINANCIAL HISTORY | Fall 2025 | www. MoAF. org