S U M M A R YIn recent years, marine controlled source electromagnetics (CSEM) has found increasing use in hydrocarbon exploration due to its ability to detect thin resistive zones beneath the seafloor. It is the purpose of this paper to evaluate the physics of CSEM for an ocean whose electrical thickness is comparable to or much thinner than that of the overburden using the in-line configuration through examination of the elliptically-polarized seafloor electric field, the time-averaged energy flow depicted by the real part of the complex Poynting vector, energy dissipation through Joule heating and the Fréchet derivatives of the seafloor field with respect to the sub-seafloor conductivity that is assumed to be transversely anisotropic, with a verticalto-horizontal resistivity ratio of 3:1. For an ocean whose electrical thickness is comparable to that of the overburden, the seafloor electromagnetic response for a model containing a resistive reservoir layer has a greater amplitude and reduced phase as a function of offset compared to that for a halfspace, or a stronger and faster response, and displays little to no evidence for the air interaction. For an ocean whose electrical thickness is much smaller than that of the overburden, the electric field displays a greater amplitude and reduced phase at small offsets, shifting to a stronger amplitude and increased phase at intermediate offsets, and a weaker amplitude and enhanced phase at long offsets, or a stronger and faster response that first changes to stronger and slower, and then transitions to weaker and slower. By comparison to the isotropic case with the same horizontal conductivity, transverse anisotropy stretches the Poynting vector and the electric field response from a thin resistive layer to much longer offsets. These phenomena can be understood by visualizing the energy flow throughout the structure caused by the competing influences of the dipole source and guided energy flow in the reservoir layer, and the air interaction caused by coupling of the entire sub-seafloor resistivity structure with the sea surface. The Fréchet derivatives are dominated by preferential sensitivity to the vertical conductivity in the reservoir layer and overburden at short offsets. The horizontal conductivity Fréchet derivatives are weaker than to comparable to the vertical derivatives at long offsets in the substrate. This means that the sensitivity to the horizontal conductivity is present in the shallow parts of the subsurface. In the presence of transverse anisotropy, it is necessary to go to higher frequencies to sense the horizontal conductivity in the overburden as compared to an isotropic model with the same horizontal conductivity. These observations in part explain the success of shallow towed CSEM using only measurements of the in-line component of the electric field.