Court Decision May Cloud Arctic Drilling Plans

A jack-up rig, an offshore oil and gas drilling platform, undergoes repair works at a shipyard in Singapore on March 17, 2009. Oil prices fell on Asian trade as investors continued to react to OPEC's decision to maintain its current production levels, dealers said. 
National Journal
Ben Geman
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Ben Geman
Jan. 22, 2014, 1:20 p.m.

A fed­er­al ap­peals court ruled Wed­nes­day that the In­teri­or De­part­ment botched an en­vir­on­ment­al ana­lys­is un­der­pin­ning the 2008 sale of oil-drilling leases in Arc­tic wa­ters off Alaska’s coast.

The de­cision, from the U.S. Court of Ap­peals for the 9th Cir­cuit, about the sale of leases in the Chuk­chi Sea ar­rives as Roy­al Dutch Shell is weigh­ing re­sump­tion of at­tempts to drill for oil in the re­gion.

Bloomberg un­wraps the di­vided de­cision here, not­ing it could delay drilling ef­forts by com­pan­ies in­clud­ing Shell and Cono­co­Phil­lips that bought leases in the con­tested 2008 sale.

The court found that In­teri­or wrongly based its en­vir­on­ment­al ana­lys­is on an es­tim­ate of 1 bil­lion bar­rels of re­cov­er­able oil from the Chuk­chi leases, a fig­ure green groups that sued the de­part­ment called too low.

“[W]e agree with plaintiffs that the agency’s es­tim­ate of one bil­lion bar­rels was chosen ar­bit­rar­ily, and that this ar­bit­rary de­cision meant that the agency based its de­cision on in­ad­equate in­form­a­tion about the amount of oil to be pro­duced pur­su­ant to the lease sale,” the de­cision states.

Shell, which is mulling an­oth­er stab at drilling off the U.S. coast in the Arc­tic after a series of mis­haps in 2012, told the As­so­ci­ated Press that it’s re­view­ing the de­cision.

En­vir­on­ment­al groups cheered the rul­ing and quickly sought to use it as polit­ic­al am­muni­tion in their cam­paign against Arc­tic drilling, which they con­tend is too risky.

“This de­cision gives the White House a chance to re­con­sider drilling in the Chuk­chi,” said Na­tion­al Audu­bon So­ci­ety CEO Dav­id Yarnold, whose group is among the or­gan­iz­a­tions that brought the case against In­teri­or.

En­vir­on­ment­al­ists have urged In­teri­or to re­ject Shell’s ef­forts to drill its ex­ist­ing leases in the re­gion. They’re also call­ing on the Obama ad­min­is­tra­tion to back off plans to sell new leases in the Chuk­chi and Beaufort Seas off Alaska’s coast in 2016 and 2017.

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