Note that the state boundary is not the middle of the Potomac River
(Source: Terraserver)
A 1632 colonial charter, two negotiated settlements by the states in 1785 and 1958, and several Supreme Court decisions defined how Maryland and Virginia would deal with the potomac River as a boundary line. Other disputes have shaped the boundary on the Eastern Shore, separating Accomack County in Virginia from Worcester/Somerset counties in Maryland.
The Virginia colony included all what is now Maryland for twenty years after James I issued the Third Charter in 1612. In 1632, a later king (Charles I) granted a charter to Cecil Calvert, Baron of Baltimore for a new colony located north of the "River of Pattowmack...unto the further Bank of the said River." Lord Calvert knew how to be politically correct, just like the first English settlers who tried to establish colonies on the Outer Banks in 1584-87. They had named the first English colony after the "virgin" Queen Elizabeth, who never married. Lord Calvert named his colony "Maryland" after the wife of Charles I, Queen Henrietta Maria.
The Maryland grant extended from basically the 40 degree parallel south to the mouth of the Potomac (about the 38 degree parallel) - and Lord Calvert was specifically granted control down to the low water mark of the Potomac River ("unto the further Bank of the said River" on the Virginia shore).
After the American Revolution, Virginians were not legalistic about honoring the low-water mark being the boundary. Maryland fishermen objected to Virginians poaching from Maryland waters, including the Potomac River. George Washington, for example, operated a herring fishery in the Potomac River offshore from Mount Vernon. It provided a more-reliable source of income than growing tobacco and wheat, but he never asked for permission or paid Maryland anything for "their" fish.
Washington led the negotiations in 1785 at Mount Vernon that clarified the boundaries and property rights of the two states. In its claim to the entire Potomac River and its fishery resources, Maryland had a key legal document on its side - the colonial grant from Charles II. By 1785, however, the colonies had successfully rebelled against the King of England. It was not clear how Maryland could enforce the law, as it interpreted the 1632 charter. The new, loosely federated nation was governed by a weak national Congress. The "United States in Congress Assembled," operating under the Articles of Confederation, was not obliged to follow the rules defined in ancient land grants from a now-rejected English government. (Remember, prior to ratification of the Constitution in 1788, there was no Supreme Court operating as an independent third branch of government.)
Virginia's leverage in the negotiations was also based on authority from the King of England. Virginia, as it interpreted the language in its three charters, "owned" the mouth of the Chesapeake Bay. While Maryland might control the Potomac River, Virginia controlled the entrance to the Chesapeake Bay and all ocean-going traffic passing between Cape Charles and Cape Henry on the way to the Potomac River. Under the Articles of Confederation, Virginia could impose a high tax on all vessels sailing into the bay. Maryland's ports were on the bay and the rivers draining into the bay, not on the Atlantic coast - so nearly all commercial traffic going to (or from) Maryland could be forced to pay an import or export fee on their cargoes to Virginia.
The Virginia General Assembly appointed George Mason, Edmund Randolph, James Madison, and Alexander Henderson as commissioners to negotiate the compact at Mount Vernon in March, 1785. The two states agreed in the Compact of 1785 that neither Virginia or Maryland could interfere with the other's trade or fishing in the Potomac River.
The commissioners reached agreement for resolving conflict between two states, and recognized that the current form of a confederated national government was not successful in dealing with multi-state concerns. After resolving the Virginia/Maryland issues, the commissioners called for another meeting among all the states to address larger interstate commerce issues. This led to the Annapolis Convention, which begat the Constitutional Convention in Philadelphia in 1787, which begat the current United States of America.
Under the Commerce Clause of the new Constitution adopted in 1788 to replace the Articles of Confederation, export taxes were banned and individual states lost the authority to tax imports. Virginia could no longer impose a fee on ships sailing into the Chesapeake Bay to reach Maryland destinations. However, by the time the Constitution was ratified, Maryland had already agreed to the Compact of 1785 and agreed to share the Potomac River, in exchange for free access to Chesapeake Bay ports.
Why did Virginia and Maryland settle their differences and agree to the Compact of 1785, when the rules would be changed only three years later with a new form of national government? The development of the Constitution was not pre-ordained. The leaders of the newly-independent states had no crystal ball showing that a Commerce Clause would change the authorities of the individual states.
For that matter, in 1785 it was not even clear the 13 states would remain under one federal government. To get a sense of the challenge faced by the negotiators trying to resolve a relatively minor conflict over the rights to the Potmac River, look at today's debates over governance in Europe. Can you guarantee how the relative authority of individual states (France, Italy...) vs. a higher-leveral "federation government "(United States of Europe?) will evolve there?
The western extension of the boundary between Maryland and Virginia followed the Potomac up to its source. Maryland and Pennsylvania got in a dispute about their colonial boundary based on problems with the royal grants to William Penn and Lord Calvert. They wanted top quality surveyors to demarcate it, not the local yokels, so they sent to England. Two respected surveyors named Mason and Dixon surveyed that colonial boundary in 1763.
Mason and Dixon's work impacted Virginia's northern boundary (at that time) because it set the Virginia-Pennsylvania boundary - back when Virginia included what is today's West Virginia. The modern West Virginia/Pennsylvania boundary is an east-west line continuing west of the actual line surveyed by Mason and Dixon; the Englishmen did not survey all the way to the southwestern corner of Pennsylvania (near Pittsburgh).
After West Virginia became an independent state during the Civil War, the West Virginia-Maryland boundary was the subject of litigation, together with the Virginia-West Virginia boundary. On May 31, 1910, the Supreme Court established that the low-water mark of the south bank of the Potomac River was the Maryland-West Virginia boundary. Splitting Virginia into two separate states in 1863 did not change the original 1632 Maryland/Virginia boundary between the mouth of the Shenandoah River and the Fairfax Stone.
In 1850, Maryland claimed that the western edge of the colonial grant to Virginia was the South Branch of the Potomac River. That stream discharges more water than the North Branch, but the surveyors of the Fairfax Grant had chosen the North Branch (with its wider valley) as the source of the Potomac River. Charles J. Faulkner, appointed by Governor Floyd, produced the initial defense of the Virginia claim in 1852 but it took a century to resolve the dispute between the states completely.
The Maryland-Virginia boundary on the Eastern Shore was settled by separate negotiations between the two colonies for the first time in 1668. Virginia expelled religious dissidents (primarily Quakers and Puritans) in 1660, and some settled on the Eastern Shore of Maryland. The new settlement triggered a need for a clear boundary line between Maryland and Virginia, so landowners could not avoid paying taxes to either colonial government.
In 1668 Phillip Calvert of Maryland (uncle of the governor, Charles Calvert) and Edmund Scarborough (the Surveyor General of Virginia) agreed to set the boundary along the 38th parallel, where the Potomac empties into the Chesapeake Bay. Unfortunately the boundary was marked with magnetic compasses, without correcting for the deviation from true north. Remember your physical geography - a compass doesn't really point to the North Pole; it points to magnetic north - a location NEAR, but not at, the geographic pole.
After the boundary was accepted, it was realized later that the line was about 5 degrees off from a true east-west slant. The line "tilts" to the northeast on the map today rather than runs due east, and as a fresult 15,000 extra acres ended up in Virginia.1 A stickier problem was where the state line crossed the Chesapeake Bay and its various islands. Watkins Point, on the western edge of the Eastern Shore (that is, on the Chesapeake Bay side, not on the Atlantic Ocean) had been named as the dividing line in the 1632 Maryland charter - but Watkins Point had eroded away.
This led to a continuous series of boundary disputes and boundary readjustments, including the 1877 "Black and Jenkins Award" and a series of later adjustments. In one of those negotiations, Virginian delegates finally obtained rights to the valuable fish and oyster resources of "Smith's Island, all of Fox Island, the great oyster rock known as Muddy Marsh in Tangier Sound, and the valuable crabbing flats from Green Harbor Island to Robin Hood Bar in Pocomoke Sound."
After the Civil War, Maryland and Virginia supported their separate watermen by establishing state navies on the Chesapeake Bay. In Virginia, a Board of the Chesapeake kept the Tangier and Pocomoke schooners , plus the Chesapeake and Accomac steamers on the bay, theoretically to protect Virginia watermen from the equivalent forces from shoot-outs between Maryland and Virginia fishermen. The Fisheries Commission inherited the responsibility in 1897, and added two other steamers, the Commodore Maury and James River. The Fisheries Commissioin was renamed the Marine Resources Commission in 1968.
Today, that portion of the state boundary zigs and zags across the Bay and cuts pieces of Smith Island off, finally reaching the point where the Potomac enters the Chesapeake along the low water line in Northumberland County. Disputes about which state could enforce varying rules about dredging oysters, etc., continued until the adoption of another Maryland-Virginia Compact in 1958 (at Mount Vernon, again). That agreement superceded the arrangements made in the 1785 compact.
NOTE: Virginia does not "own" any of the Potomac River below the low-water mark, but Maryland does not own all of the river -either. The District of Columbia actually owns some of the Potomac River. A portion of the river between Jones Point and Chain Bridge was once part of Maryland, but was incorporated within the boundaries of the District of Columbia when it was established. Maryland's rights to the Potomac transferred at that time to the District. However, after West Virginia was established in 1863, Maryland retained its claims to the entire river up to the West Virginia shoreline.