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Appeals Court Vacates Own Order that Denied Alaska Drilling

March 16, 2009
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In an unusual turn of events, the federal appeals court that last year stopped Shell Oil Co. subsidiary Shell Offshore Inc. (SOI) from drilling offshore Alaska has vacated and withdrawn its decision.

The case involves a permit to drill that was approved for SOI by the Minerals Management Service (MMS) in February 2007. SOI planned to drill some exploration wells offshore Alaska in the Beaufort Sea beginning in August 2007 (see NGI, July 16, 2007).

However, the permit approval was challenged in court by several groups, including the Alaska Wilderness League, Natural Resources Defense Council, Pacific Environment and Resources Council, Center for Biological Diversity, Sierra Club, North Slope Borough and Alaska Eskimo Whaling Commission. The groups alleged that the MMS had failed to fully consider the impact of drilling on the people and wildlife of the Beaufort Sea region as required under federal law.

The groups also argued that the Department of Interior (DOI) agency had erred by failing to prepare an environmental impact statement for the proposed exploration activities, which the groups said carried potentially significant harmful effects on the environment.

The U.S. Court of Appeals for the Ninth Circuit, based in San Francisco, temporarily halted SOI's plans about a month before the producer's exploratory drilling program was to begin (see NGI, Sept. 17, 2007). After a review of the case, the circuit court last November vacated the MMS permit approval and remanded it back to MMS (see NGI, Nov. 24, 2008). The court said the agency had to conduct a "hard look" analysis required by the National Environmental Policy Act. Following the court's decision, MMS said it would review SOI's plan closely.

On March 6, the same court that had remanded the case back to MMS ordered that its previous opinion be vacated (Alaska Wilderness v. Kempthorne, No. 07-72183; DOI No. 2007-152). The court gave no indication whether it would revise the Nov. 20, 2008 ruling and allow SOI to drill offshore, or whether it would replace the decision with a similar ruling.

According to the order by circuit Judges Dorothy W. Nelson, Stephen Reinhardt and Carlos T. Bea, SOI's "petition for rehearing and suggestion for rehearing en banc is denied as moot. All pending motions to file amicus briefs in support of rehearing are likewise denied as moot. The opinion vacated and withdrawn will be replaced by a new opinion. Our denial of the petition for rehearing with suggestion for rehearing en banc is made without prejudice to any party who may wish to file a petition for rehearing or petition for rehearing en banc with regard to the new opinion."

Mike Bybee of the Sierra Club told the Associated Press that he was surprised by the decision.

"We felt that the argument in the original decision was very clear," Bybee said.

On the same day the court vacated its order, Shell released a study that it paid for about the economic impacts of oil and gas development on Alaska's Outer Continental Shelf. The study indicated that Alaska's offshore could hold as much in reserves as the prolific Prudhoe Bay. Consulting group Northern Economics and the University of Alaska's Institute of Social and Economic Research prepared the report for Shell.

Alaskan offshore development could bring more than 50 years of employment for 35,000 jobs, the study claimed.

"If you add all three basins together...the Beaufort Sea, the Chukchi Sea and the north Aleutian basin...you could be in the realm of a Prudhoe Bay," said Northern Economics President Pat Burden.

According to the study, there are several benefits to developing offshore Alaska, including the fact that the infrastructure might allow other marginal onshore fields to be developed, which in turn would add transportation capacity for pipelines.

The report is available at www.northerneconomics.com.

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