If fossils of fish and sea shells are found in an area that is now desert, we might assu that:

• Fish could breathe air at one time in their history.
• Sea shells could live on land millions of years ago.
• The area in which the fossils were found was once covered with water.
• None of the above.

The area once contained water.

Explanation:

Fish do not have the anatomical structures necessary for breathing on land.  Even if they did, they would likely desiccate in the arid environment of the desert.  The same reasoning applies to seashells.  As a result, the environment must have been different in order to support the needs of these creatures.  Since the Earth's continents are continuously shifting due to plate tectonics, and the Earth's climate changes over time, it would be reasonable to say that the desert was once a body of water that could support marine life.