Royal Dutch Shell's plans to drill in the Arctic this summer grew more uncertain Wednesday when a U.S. federal court rejected the environmental analysis underlying the lease of the offshore parcel.
The Interior Department's Bureau of Ocean Energy Management used an "arbitrary and capricious" estimate that oil and gas production in the Chukchi Sea off Alaska's northwest shores would yield 1 billion barrels of oil, the U.S. Court of Appeals for the Ninth Circuit said in its opinion. That analysis potentially understated the environmental risks of development, the court said.
The ruling is another hiccup for Shell, which scaled back its Arctic drilling plans for this year after it skipped drilling last summer following a series of mishaps in 2012. The Bureau of Ocean Energy Management has not approved the oil firm's revised plan.
In the opinion, Judge William A. Fletcher wrote that the agency's reasoning "that since the most likely foreseeable outcome is no oil development at all, one billion barrels of oil production is actually a generous estimate" was "flawed."
The court noted that the agency estimated that as much as 29 billion barrels of recoverable oil existed in the area covered in the lease sale, which was offered in 2008 under former President George W. Bush. The court added that, "The assumption that there is a 10 percent chance of commercial oil development is itself without a rational basis in the record."
The ruling, which reversed and remanded a lower court decision, puts Shell's plans to finish one exploratory well and start four others in the Chukchi in limbo, said Michael LeVine, Pacific senior counsel with ocean conservation group Oceana.
"Will the government do a new [environmental impact statement]? Will it supplement the [environmental impact statement]? Will it buy back the leases and start over? It's also uncertain what the district court will decide," he said.
Green groups used the ruling to apply fresh pressure on the White House to back off Arctic drilling.
"This decision should give President Obama pause to reconsider the dangerous path he’s heading down by opening up the precious Arctic to rapacious oil giants," Greenpeace Arctic Campaign Leader Gustavo Ampugnani said in a statement. "If he wants to live up to his inspiring words on tackling climate change and protecting America’s stunning natural environment for future generations, he should put an end to this dangerous oil rush to the ends of the earth."
The Bureau of Ocean Energy Management declined to comment, citing agency policy on pending litigation.