Federal regulators improperly granted Shell Oil permission for exploratory drilling in Alaska's Beaufort Sea, a federal appeals court ruled Thursday.
The 9th Circuit Court of Appeals ordered the Minerals Management Service to reconsider how exploratory drilling would affect wildlife and Inupiat Eskimo subsistence hunting and fishing.
The ruling was hailed by conservation groups.
"This decision confirms that the Bush administration rushed to approve Shell's drilling program in the Arctic Ocean without a full review of impacts to whales and the subsistence way of life for people in the region," said Eric Jorgensen, an attorney for EarthJustice, which represented some clients in the case.
Sierra Club Alaska spokeswoman Trish Rolfe said the Bush administration fast-tracked oil drilling at the expense of communities, wildlife and clean water.
"It's time to bring the science back into decision-making on oil drilling," she said.
MMS spokesman David Smith said agency officials were disappointed by the ruling. The agency produced a nearly 1,600-page environmental impact statement and other reviews.
"These extensively analyzed potential impacts to wildlife, including the bowhead whale and subsistence activities," he said. "We believe that MMS did conduct the required 'hard look' to see if an environmental impact statement was necessary."
Agency: $300 million on studies
MMS over 30 years has paid nearly $300 million for environmental studies in Alaska waters, he said, and 30 to 40 active studies annually off Alaska's shore since 2000.
"The world energy situation continues to be strained," he said. "Alaska and its adjacent offshore areas have great potential for increasing our energy security."
Shell spokeswoman Darci Smith said MMS did a thorough review and Shell has met or exceeded requirements for responsible Arctic exploration.
"The decision by the Court delays drilling and extends the timeline it will take to bring this much-needed U.S. production on-line," she said by e-mail. "That timeline starts only after we drill our first well."
Shell Exploration & Production Co., part of Royal Dutch Shell PLC, in 2005 spent more than $44 million for 84 offshore leases in the Beaufort Sea.
MMS in February 2007 approved an outer continental shelf exploration plan submitted by Shell Offshore Inc. Shell proposed to drill up to 12 exploration wells on 12 tracts over three years.
The MMS environmental assessment determined the proposed exploration "would not significantly affect the quality of the human environment."
Alaska Native and environmental groups said the agency did not provide adequate time for public comment on its environmental review.
Subsistence hunters and fishermen said birds and animals could be affected by industrial activity. Bowhead whales, for example, could be diverted away from hunters by drilling noise. They said caribou, walrus and waterfowl could be adversely affected by offshore drilling and the air and marine operations needed to support it.
Environmental groups said the agency also did not consider potential effects of a crude oil spill during exploration.
Ruling: No convincing reasons
The 9th Circuit judges said MMS did not provide convincing reasons as to why Shell's exploratory drilling plans at specific sites would have an insignificant effect on bowhead whales and their migratory routes.
For example, studies relied on by the agency did not actually assess potential significance of underwater noise from drilling.
The agency's attempt to rely on a monitoring program as a mitigation measure was "similarly ill-founded," judges wrote.
As for Inupiat subsistence activities, "We are unpersuaded that MMS took the requisite 'hard look' at the environmental impact of this project," judges wrote.
The agency took only a cursory look at effects on other wildlife Arctic people rely on, such as caribou, beluga whales and especially fish. Judges said MMS acknowledged gaps in data on fish populations but concluded anyway that potential effects would be insignificant or unsubstantiated.
In a victory for the agency, however, the opinion said MMS adequately examined the potential of a crude oil spill based on the low rate of exploratory drilling blowouts per well drilled and the history of exploration spills on the Arctic outer continental shelf.
Whaler Robert Thompson, reached by phone in Kaktovik, a Beaufort Sea village 325 miles southeast of Barrow, said he was optimistic after hearing accounts of the decision, though he would reserve judgment until he had read it.
"The only year we didn't get a whale was when they had one of these rigs off the coast," he said.
He remains concerned over what a spill could do in the icy environment.
"The question, 'Can oil be cleaned up in the Arctic Ocean?' has never been answered anywhere," Thompson said.