The time-domain marine controlled-source electromagnetic method, based on injection of electric currents into the sea via a vertical cable and measurements of the transient vertical electric field, is characterized by high sensitivity to resistive reservoirs and robustness with respect to distorting effects of lateral heterogeneities. This is due to the fact that a vertical electric dipole induces in a stratified medium only a transverse magnetic (TM) field. In addition, the vertical electric field is not directly contributed by the transverse electric (TE) component of the field scattered by heterogeneities. Nevertheless, a closed-form solution shows that the first order effect of a lateral heterogeneity displays itself as a parallel shift of the late time response curves. The effect is also observed in 3D responses evaluated by numerical solutions of the integral equation of the modified iterative dissipative method. Moreover, in “favorable” conditions, scattering on heterogeneities may change the law of the field decay. The parallel shift of the late time curves is caused by vertical polarization of the scatterer, while its horizontal polarization leads to an abnormally fast decay of the vertical electric field. The latter effect, observed against the background of the general decay of the free electromagnetic field, can be associated with “energy channeling from the TM to TE field.” Neither of the effects necessarily deteriorates the method sensitivity. Unlike the vertical electric field, the horizontal electromagnetic field is contributed by the scattered TE field. As a result, the abnormally fast decay of the vertical electric field is accompanied by an abnormally slow decay of the horizontal components. The transient horizontal electric field may become almost insensitive to the reservoir resistivity. In addition to unrealistically harsh requirements to the transmitter tilt, this may render accurate measurements of the horizontal electromagnetic field of a vertical electric bipole not feasible.