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Drilling Deals In Alaska Uncertain After Court Ruling

April 21, 2009

Royal Dutch Shell’s Alaska manager said the company still intends to develop a major new source of production in the Arctic waters off the Alaskan coast despite last week’s decision from an appeals court in Washington, D.C. that ruled such activity to be illegal.

“We still have every intention of pursuing a drilling program in the Beaufort and the Chukchi,” Pete Slaiby, general manager of Shell in Alaska, told the Anchorage Chamber of Commerce.

The court ruling on Friday overturned the five-year federal leasing plan with the Minerals Management Service to allow oil and gas exploration in the Chukchi.

“Interior provides no explanation for how the environmental sensitivity of coastal shoreline areas can serve as a substitute for the environmental sensitivity of OCS areas, when the coastline and proposed leasing areas are so distant from each other,” said the decision passed by the three-judge panel.

Additionally, the court ruled that the MMS must rewrite the 2007-2012 leasing plan, which was completed under President George W. Bush.

According to the New York Times, the court agreed with one of several legal claims from the Center for Biological Diversity, the Alaska Wilderness League, Pacific Environment, and the Native Village of Point Hope. The groups were in opposition of leasing in the Beufort, Bering and Chukchi seas because they contain polar bears, whales, seabirds and other species.

The court found that the agency failed to conduct the proper environmental reviews before authorizing the leasing program.

With $2.1 billion, Royal Dutch Shell was the largest bidder for exploration rights in the Chukchi Sea.

Other firms, such as ConocoPhillips, Spain’s Repsol Exploration and Production, Norway’s StatoilHydro and Italy’s Eni purchased leased in the massive sale, according to Reuters.

Conoco Phillips allocated about $500 million in leases, and also intends to continue with plans for exploration drilling in 2010. Other sales of Alaskan lands are planned between 2010 and 2012.

“If there were some structural issues with respect to the way the five-year plan was put together, we’re hopeful that they can be addressed,” said Nicholas Pardi, a spokesman for the MMS.

According to the Associated Press, the American Petroleum Institute on Friday said that it would be reviewing the new court decision.

“It would be a disservice to all Americans “” and a devastating blow to the economy “” if this decision were to delay further the development of vital oil and natural gas resources,” the Institute said in a statement.

“Development in federal waters off the nation’s coast provides thousands of well-paying jobs, government revenues and the fuel needed to run America’s cars and factories, heat our homes and the feedstock needed to make the materials we use every day.”

Attorney William Snape, who represented the case for environmentalists, said the ruling represents a chance for President Barack Obama’s new Interior Secretary Salazar to “do the right thing.”

“We’re seeing a whole ecosystem potentially collapse,” Snape said.

Image Caption: Satellite photo of the Bering Strait. NASA

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