Appeals court rulings pave way for additional exploration, drilling in GOM, Arctic

By Katie Mazerov, contributing editor

In what signifies a major victory for the oil and gas industry, two federal appeals courts have shot down environmental challenges to the US government’s approval of development plans in the Gulf of Mexico (GOM) and the Arctic, in effect paving the way for new exploration and drilling activities in the two resource-rich regions.

In a consolidated ruling on 25 May, the Ninth Circuit Court of Appeals in San Francisco upheld an August 2011 decision by the US Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE) to allow Shell to proceed with exploration programs in the Beaufort and Chukchi seas off the North Slope of Alaska. In the ruling, the court dismissed petitions filed by environmental groups challenging the agencies’ approval. The court also had received an amicus brief from several industry and business advocacy groups, including IADC, API, the US Chamber of Commerce and the National Association of Manufacturers, requesting a decision on the matter.

On 30 May, the Fifth Circuit Court of Appeals in New Orleans dismissed a petition filed by the Sierra Club, the Gulf Restoration Network and the Center for Biological Diversity, all nonprofit environmental  organizations, claiming that the US Department of Interior’s (DOI) approval of 16 GOM drilling plans violated the Outer Continental Shelf Lands Act (OCSLA) and the National Environmental Policy Act (NEPA) of 1969. The petitions for judicial review were dismissed as moot or because the petitioners failed to participate in the administrative proceedings related to the DOI’s approval of the plans.

“These decisions demonstrate the regulatory community’s faith in the industry’s ability to carry out offshore exploration and drilling activities that are safe and environmentally responsible,” said IADC president and CEO Stephen Colville. “The significance of these two important regions to the US government, energy consumers and the industry cannot be underestimated as we strive to meet increasing global demand for hydrocarbons.”

IADC chairman Dan Rabun, Ensco chairman, president and CEO, echoed that sentiment, noting that the dual rulings could be a significant turning point for offshore production. “This is very positive news for drilling contractors,” he said. “We look forward to ramping up activity in these key areas.”

A decade-old issue

The Arctic ruling marked the culmination of a decade-old case that began when the former Minerals Management Service (MMS) established a five-year lease sale schedule for the outer continental shelf of Alaska. Several environmental groups filed a court challenge to the MMS’ 2007 approval of Shell’s exploration plan for the Beaufort Sea, a petition that was upheld by the Ninth Circuit Appeals Court. Shell’s revised plan was approved by MMS and upheld by the court.

Following the Macondo incident and the ensuing drilling moratorium, Shell in August 2011 submitted new exploration plans for the Beaufort and Chukchi seas to the new BOEM and an oil spill response plan to BSEE. The approvals were again challenged in court by several environmental groups, including the Alaska Wilderness League, the Native Village of Point Hope, Greenpeace, the Sierra Club and the National Audubon Society, among others, claiming the plan failed to comply with OCSLA requirements and lacked adequate oil-spill response and well-capping measures. The court, however, ruled in favor of the government, stating that the plans did in fact include adequate safety measures and complied with OCSLA requirements.

In the GOM case, the petitioners had argued that the DOI’s 2010 approval of 16 drilling plans violated OCSLA because it failed to consider the Macondo incident in approving further deepwater drilling and that the agency conducted an inadequate review of the plans under NEPA because it incorrectly applied “categorical” exclusions from NEPA requirements to those plans. But the court concluded that four of the OCSLA-based challenges were moot, and dismissed the remaining challenges because of the petitioners’ failure to participate in the required administrative proceedings.