(See Correction & Amplification below.)

Congress was still convulsed over the Exxon-Valdez oil spill on Dec. 6, 1989, when Shell Oil flashed an announcement that would revolutionize American energy policy: The Anglo-Dutch giant had hit oil—a lot of oil—nearly 3,000 feet below the surface of the Gulf of Mexico.

The bulletin on the Auger Field discovery marked the start of a rush into the Gulf's deep waters. At the time it looked as if the Gulf might be a magic-bullet solution to America's energy and national-security needs.

It made nearly everyone giddy. Politicians in both parties offered incentives to boost offshore production. Regulators—especially under President Bill Clinton—eased rules to support the boom. And oil companies, deploying ever more complex drilling technology, barreled ahead, leaving four administrations scrambling to keep pace.

While environmentalists fought fiercely to prevent offshore oil drilling in places like California—where crude was still being found in shallow waters—they decided to tolerate drilling in the Gulf. One environmentalist dubbed the region a "national sacrifice area."