History of U.S. Offshore Oil Drilling

The exploration history of the U.S. offshore oil and natural gas industry began in the Pacific Ocean at the end of the 19th century. In 1896, a 300-foot pier was built off the Santa Barbara Channel in California and a standard cable-tool rig was mounted on it. By 1897, this first offshore well was producing oil, which lasted for 25 years. Another 22 companies joined in, constructing 14 more piers and over 400 wells within the next five years. Early explorers noticed bubbles in the water from natural seeps of oil that gave them clues that oil might lie beneath the ocean. In 1911, Gulf Refining Company abandoned the use of piers, drilling in Caddo Lake, Louisiana, using a fleet of tugboats, barges, and floating pile drivers. The well (Ferry Lake No. 1) was drilled to a depth of 2,185 feet and produced 450 barrels per day.

In 1938, the first offshore well was constructed in the Gulf of Mexico. Pure Oil and Superior Oil Company built a freestanding drilling platform—a 320-foot by 180-foot freestanding wooden deck in 14-feet of water about a mile offshore near Creole, Louisiana. The Creole platform was designed to withstand winds of 150 miles per hour and was constructed 15 feet above the water with three hundred treated yellow pine pilings driven 14 feet into the sandy bottom. By the end of 1949, 11 oil and natural gas fields were found in the Gulf of Mexico with 44 exploratory wells. Revenue generated from the production of oil became the second-largest revenue generator for the country, after income taxes. By the last decade of the 20th century, advanced technology ensued and new depth records for drilling reached 7,625 feet in the Gulf of Mexico. New technologies have produced drilling rigs capable of drilling 250 miles offshore to ocean depths exceeding 10,000 feet and an additional 28,000 feet below the seabed. In 2019, Gulf of Mexico federal offshore oil production produced 692 million barrels, accounting for over 15 percent of total U.S. oil production; federal offshore natural gas production in the Gulf of Mexico accounted for 3 percent of total U.S. marketed gas production. Over 45 percent of total U.S. petroleum refining capacity is located along the Gulf Coast, making the area an essential part of the oil and gas industry and the U.S. economy.

Legislative History

Prior to 1953, individual states issued leases for oil production in all offshore waters. The passage of the Submerged Lands Act and the Outer Continental Shelf Lands Act clarified state-federal jurisdiction over offshore oil and gas resources. The Submerged Lands Act of 1953 reaffirmed the states’ authority to grant leasing rights within the boundaries of state waters, generally three miles from shore. The Outer Continental Shelf Lands Act (OCSLA) gave the Department of the Interior jurisdiction over all offshore lands beyond state waters and directed the Secretary to issue leases for oil and gas development. The offshore lands of the United States total 1.76 billion acres, an area over 10 times the size of Texas.

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In 1978, amendments were added to the OCSLA to promote expeditious and orderly development of oil and gas reserves while protecting the environment and the interests of the coastal states. The amendments directed the Secretary of the Interior to prepare periodic five-year leasing programs that incorporated reviews at each stage of the leasing process. It also established the Environmental Studies Program within the Department of the Interior. In 1982, Congress placed a moratorium on new leasing off the U.S. West Coast due to concerns about the potential environmental impact of possible accidental spills from oil and gas development. That was followed by a moratorium on leasing in the Mid-Atlantic and eastern Gulf of Mexico planning areas. Leasing continued in the central and western portions of the Gulf of Mexico and also in Alaska. However, the Exxon Valdez accident in 1989 resulted in Congress banning all drilling in Bristol Bay and passing the Oil Pollution Act of 1990. The Oil Pollution Act required changes to oil tanker construction, increased penalties for failing to report a discharge, and authorized the Oil Spill Liability Trust Fund funded through industry fees to pay for oil spill removal costs, natural resource damage assessments, and restoration activities. It also required the development of oil spill contingency plans to coordinate response efforts and established an oil pollution and research program within the U.S. Coast Guard. In 1995, Congress passed the Outer Continental Shelf Deep Water Royalty Relief Act, which was designed to accelerate drilling in the Gulf with an eye towards reducing foreign energy dependency. The Act eliminated royalty payments on new deep-water leases issued from 1996 to 2000 up to specified volumes based on depth and allowed different levels of relief for leases issued before and after these dates.

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The Gulf of Mexico Energy Security Act of 2006 (GOMESA), enacted as part of the Omnibus Tax Relief and Health Care Act of 2006, created a Congressional moratorium over “leasing, preleasing or any related activity” in portions of the Outer Continental Shelf. The legislation permits oil and gas leasing in areas of the Gulf of Mexico, but also established a new moratorium on preleasing, leasing, and related activity in the eastern Gulf of Mexico through June 30, 2022. It also authorized the sharing of federal revenues from offshore energy development with coastal states in the Gulf.

Presidential Moratoria

In addition to the Congressional moratoria, Section 12(a) of the OCSLA authorizes the President to issue moratoria on offshore drilling. On June 26, 1990, President George H. W. Bush prohibited “leasing and related activities” in the areas off the coast of California, Oregon, and Washington, and the North Atlantic and certain portions of the eastern Gulf of Mexico, confirming through executive actions the annual bans placed in annual appropriations bills by Congress. The legislation further prohibited leasing, preleasing, and related activities in the North Aleutian basin, other areas of the eastern Gulf of Mexico, and the Mid- and South Atlantic. That presidential moratorium was extended by President Bill Clinton by memorandum dated June 12, 1998. On July 14, 2008, when oil prices reached $147 per barrel, President George W. Bush issued an executive memorandum that rescinded the executive moratorium on offshore drilling created by President George H. W. Bush in 1990 and renewed by President Bill Clinton in 1998. President George W. Bush’s memorandum revised the language of the previous memorandum to withdraw from disposition only areas designated as marine sanctuaries. This was an historical reversal of increasingly restricted access to offshore lands and waters. President Barack Obama later reversed policy and issued moratoria on exploration and production activities in certain areas off the coast of Alaska and also those areas “associated with 26 major canyons and canyon complexes offshore the Atlantic Coast.”

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In 2017, President Trump issued Executive Order 13795, which modified prior moratoria to eliminate all of the areas withdrawn by the previous orders except “those areas of the Outer Continental Shelf designated as Marine Sanctuaries under the Marine Protection, Research and Sanctuaries Act of 1972.” As a result, only the North Aleutian Basin Planning Area and Bristol Bay, along with the Marine Sanctuaries, were withdrawn. More recently (September 8, 2020), however, President Trump signed a memorandum prohibiting drilling in the waters off both Florida coasts, and off the coasts of Georgia and South Carolina for a period of 10 years—from July 1, 2022, when the Congressional moratoria ends, to June 20, 2032.

Conclusion

Offshore oil drilling started in the late 1890s off the coast of California and moved into the Gulf of Mexico in 1938. The Gulf of Mexico currently provides 15 percent of the nation’s oil. Various moratoria have been placed on offshore drilling by Congressional action and by Presidential memoranda, the most recent by President Trump, removing the coasts of Florida, Georgia, and South Carolina from drilling through 2032. Moratoria traditionally have restricted access to U.S. resources until energy prices rise, and are reinstated when there is less pressure from consumers for lower gasoline prices.