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 A three-judge panel of the 9th U.S. Circuit Court of Appeals sent
the on-going dispute — pitting environmental groups and Native
Alaska tribes against the federal government and energy companies — back to U.S. District in Anchorage, Alaska.
It was not immediately clear what the decision would mean for the
oil company Royal Dutch Shell Plc and its plans, revealed in
December, to resume exploratory drilling this coming summer in the
Chukchi.
Shell is the major lease holder from the sale six years ago. Company
spokeswoman Megan Baldino said in an email statement: "We are
reviewing the opinion."
A spokeswoman for the Interior Department declined to comment,
saying the agency does not discuss pending legal matters.
But the plaintiffs' Juneau-based attorney, Mike LeVine, said, "It's
unlikely that the government could authorize drilling activities on
leases the court says were improperly awarded."
The 9th Circuit ruled that the Interior Department leases in
question, opening nearly 30 million acres (12 million hectares) of
the sea floor to energy drilling, were based on a flawed estimate of
1 billion barrels of economically recoverable oil for the scope of
production.
The appeals court called that estimate "arbitrary and capricious,"
before sending it back to U.S. District Judge Ralph Beistline for
additional review.
The court ruled that under the National Environmental Policy Act,
the government must "base its analysis on the full range of likely
production if oil production were to occur. It did not do so here."
The last Chukchi lease sale by the government in 2008 drew a record
$2.66 billion in bids, with nearly $2 billion of that from Shell.
The balance was paid by ConocoPhillips and Statoil.
Environmental and tribal groups challenging the leases contend they
should never have been granted six years ago because the federal
government failed to consider the full scale of the project and
associated risks.
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LeVine said Wednesday's decision supports that argument.
"This tells me that the time has come for the federal government to
stop trying to provide justification for a poor decision that was
made in 2008," LeVine said.
Shell commenced preliminary drilling on one Chukchi well in 2012 — marking only the sixth well ever drilled in the area — but after
experiencing equipment failures and accidents, the company declined
to drill there again last year.
In one high-profile mishap of January 2013, Shell's drill ship
Kulluck ran aground while being towed south after completing its
work off Alaska.
The company said in December that it was planning to deploy an
upgraded drilling vessel to the Chukchi, while keeping a newly
contracted backup drill ship ready if needed. Exploratory drilling
operations were set to be carried out from July through October of
2014.
U.S. Alaska Senator Mark Begich, a Democrat who backed Shell in its
bid for drilling permits, said he believes the company will still
have a drilling season this year.
"The Arctic has already been and will continue to be subjected to
unprecedented safety standards, and today's announcement does not
delay the important progress we have made," he said in a prepared
statement.
(Reporting by Steve Quinn; editing by Steve Gorman and Ken Wills)
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