Alaska pipeline. Photo: toffehoff via Flickr.com.
Shell oil licences in Alaska 'unlawful'
24th January 2014
A landmark court ruling has set back Shell's plans to drill for Arctic oil. It represents a great victory for indigenous peoples and environmental groups - and a serious setback for the oil giant's Arctic expansion.
It's unlikely that the government could authorise drilling activities on leases the court says were improperly awarded.
Shell's plans to restart exploration drillings off Alaska this summer have been halted by a US court judgment which casts doubt on the legitimacy of leases awarded for oil drilling in the Chukchi Sea.
A US Federal Court ruled this week that the US Interior Department wrongly awarded the oil leases off Alaska without fully considering environmental risks from Arctic drilling.
It said that the Department's estimates that the 30 million acres under lease contain 1 billion barrels of economically recoverable oil were made "arbitrarily" and based on "inadequate information".
Yet another setback for Shell
Greenpeace described the court ruling as "another setback for Shell" in its bid to exploit the environmentally sensitive Arctic. "Shell's Arctic misadventure just got worse", said the group's UK Executive Director John Sauven.
In 2012 Shell suffered a number of problems resulting in the grounding of Kulluk, one of their barges. The company then said in December 2013 that they intended to resume drilling work in Alaska between July and November 2014, subject to permissions.
Now the Interior Department will have to "go back to the drawing board" before it can issue any new licences, said Sauven. Greenpeace estimmtes that Shell has spent $5 billion to date in its failed search for Arctic oil.
Market observers pointed to a tough start for the Anglo-Dutch oil giant's new Chief Executive Ben van Beurden as share prices took a hit after a profit warning was issued last week.
The future remains uncertain
The ruling is a signal victory for native Alaskan tribes and environmental groups who brought the case against energy companies and the US Government. But it's not the end of the affair: the case has been returned for review to a US district judge in Alaska.
The plaintiffs' attorney, Mike LeVine, said the court ruling supports the argument that the leases should never have been granted in the first place six years ago: "It's unlikely that the government could authorise drilling activities on leases the court says were improperly awarded."
But Alaska Senator Mark Begich, a Democrat who backed Shell in its bid for drilling permits, said he believes the company will still have a drilling season this year:
"The Arctic has already been and will continue to be subjected to unprecedented safety standards, and today's announcement does not delay the important progress we have made."
A spokesman for Shell said the company is "reviewing the opinion".
Sophie Morlin-Yron is a freelance journalist.
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