Shell Arctic plans at risk after 9th Circuit Court tosses EIS


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A Jan. 22 U.S. 9th Circuit Court of Appeals ruling could invalidate a key section of the Environmental Impact Statement on the 2008 Chukchi Sea Outer Continental Lease Sale, throwing a wrench into planning by Shell to return to the Arctic this summer.

The U.S. Interior Department, the defendant in the case, could ask the Ninth Circuit for a hearing before the full court, as the Jan. 22 decision was not unanimous among a three-judge panel.

Alternatively, the case could be returned to the Alaska U.S. District Court, where Judge Ralph Beistline had earlier approved the EIS for the lease sale.

A coalition of 13 environmental groups and two tribal groups, the Native Village of Point Hope and the Inupiat Community of the Arctic, had brought the lawsuit.

Almost every legal option in dealing with the appeals court decision will take time, however, and Shell may be running out of time, for this year at least.

The company must begin making commitments soon to contractors and suppliers if it is to get its drill fleet ready to move north in July.

Approvals of an expenditure to mobilize a fleet of two drill ships and 20-odd support vessels must come soon, and it might involve a commitment of several hundred million dollars.

Shell has already laid out about $5 billion on its Arctic exploration program including $2.3 billion spent to acquire the Chukchi Sea leases in 2008.

If the decision of the three-judge panel isn’t reversed, the U.S. Bureau of Ocean Energy Management, the Interior Department agency which is responsible for OCS leasing, may have to prepare a new Environmental Impact Statement.

That could take 18 months to 24 months.

Any delay for Shell is also a delay for ConocoPhillips and StatOil, which also have plans to drill Chukchi Sea OCS leases those companies hold.

What’s at issue now is the size of an oil field the Interior Department estimated was most likely in the Chukchi Sea as a first discovery. The agency concluded that a one billion barrel find was reasonable.

Environmental groups contesting the sale argue that the agency should have used a higher figure, including the possibility that more than one field will be developed. The majority opinion of the 9th Circuit panel agreed, saying the federal agency used an “arbitrary and capricious” method for settling on one billion barrels in the lease sale EIS.

The figure is important because all of the analyses of environmental effects of the lease sale are based on that assumption.

Neither Shell or the BOEM would comment on the appeals court ruling, but the environmental plaintiffs were quick to offer their opinions.

 “We think they should go back and do a full EIS, or redo the one they have. The flaw in the assumption infects the entire analysis,” said Erik Grafe, an attorney with Earthjustice, an environmental law firm helping represent the plaintiffs.

“Right now the ball is in the agency’s court,” he said.

Grafe said the Interior Department may be in a weak position to assert the one billion-barrel figure because the agency made estimates in 2006 that as much as 12 billion barrels might be developed in the Chukchi Sea at an $80 oil price.

“The Interior Department should reevaluate its decision to offer leases in the Chukchi Sea in light of the higher risks,” he said.

The lawsuit has been around a long time. Environmental plaintiffs won the first round in challenging the adequacy of the EIS in 2010. The Interior Department redid the document, which took about 15 months.

The supplemented EIS got the approval at Judge Beistline’s court, but the plaintiffs appealed it to the 9th Circuit.

Meanwhile, BOEM issued permits and Shell moved ahead with its 2012 drilling based on the U.S. District Court approval.

Arguments were heard at the appeals court last March, and the decision was made by the three-judge panel on Jan. 22. Judge Ferdinand Fernandez and Judge William Fletcher agreed with the plaintiffs while Judge Johnnie Rawlinson dissented.

Rawlinson reasoned that judges should not substitute their own opinions for the expertise of government agencies in scientific determinations.

“We do not sit as a panel of super-scientists to dissect the agency’s analysis,” he wrote. “There is no such thing as a ‘perfect’ estimate and BOEM was not required to adopt a different benchmark in the face of its critics.”

Tim Bradner can be reached at tim.bradner@alaskajournal.com.