Arctic lease sale flawed, appeals court rules

A federal appeals court dealt a new setback to Royal Dutch Shell’s efforts to drill for oil off Alaska’s Arctic coast Wednesday, saying the Interior Department’s $2.7 billion lease sale in the Chukchi Sea in 2008 relied on a flawed environmental impact statement.

The U.S. Court of Appeals for the 9th Circuit, ruling in favor of environmental and Alaska Native groups, said the impact statement relied on an estimate that there could be 1 billion barrels of economically recoverable oil in the area, a figure the court said was “arbitrary and capricious.”

The three-judge panel sent the case back to U.S. District Judge Ralph R. Beistline, who could ask the Interior Department to revise the environmental impact statement. If that process takes a prolonged time, it could postpone Shell’s drilling plans .

The company, which last year failed to complete a well in the face of ice, permitting delays and equipment problems, would not comment Wednesday. “We are reviewing the opinion,” said Shell spokesman Curtis Smith.

Environmental groups were pleased. “Oil companies are not able to operate safely in the Arctic Ocean, and the government should not offer leases there,” said Michael LeVine, Pacific senior counsel for Oceana, a group opposed to offshore drilling. “As this court decision makes clear, our government cannot justify the bad decision to hold Lease Sale 193 and, now, five years later, should stop trying.”

Steven Mufson covers energy and other financial news.
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