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Shell moves to pre-empt Arctic drilling challenges

By Jennifer A. Dlouhy: Published 11:06 p.m., Friday, June 29, 2012

SEATTLE – During Shell’s seven-year, $4.5 billion quest to search for oil under Arctic waters, environmentalists have put the company on the defensive by challenging government-issued drilling approvals and permits in federal court.

The strategy has been so successful that in 2011, Shell was forced to abandon its plans to launch exploratory drilling in the Chukchi and Beaufort seas after air pollution permits essential for the work were tossed out in one of those legal challenges.

Now the tables may have turned. Instead of waiting for court fights that Shell Oil Co. views as inevitable, the company has filed its own lawsuits against more than a dozen environmental organizations and is asking a federal judge to declare some of its government approvals valid, even before any legal filings calling them into question.

Last Tuesday, U.S. District Judge Ralph Beistline of Alaska handed Shell its first win in the litigation, ruling against the environmental groups’ initial request to dismiss the case.

Early is key for Shell

Shell’s unorthodox legal maneuver feeds an image of a well-heeled Big Oil Goliath bullying environmentalists with far less cash in their pockets.

But Shell executives say they aren’t trying to close the courtroom door to anyone – just ensure any legal challenges are filed early enough to be resolved before the brief Arctic drilling window opens this summer.

Otherwise, challengers effectively could run out the clock on summer drilling by delaying the work until after a mid-September cutoff for exploration in the Chukchi Sea and an Oct. 31 deadline in the Beaufort Sea.

“It’s not trying to circumvent any process,” said Pete Slaiby, vice president of Shell Oil’s Alaska venture. “It’s just trying to bracket the time so the challenge is used as a way to determine if there is indeed an issue that would be impacted by the permit, rather than as a way to delay the program.”

Permits probable

A flotilla including two drilling rigs is sailing toward Alaska, and Interior Secretary Ken Salazar said last week that the government probably will grant the remaining permits required for Shell’s operations.

Environmental activists suggest Shell’s legal gambit is an intimidation tactic designed to draw their money and attention away from fighting the company’s plans to drill 10 wells in the Chukchi and Beaufort seas over the next two summers.

“Having spent billions and billions of dollars, they are absolutely determined to let nothing stand in their way and figured out how to use our legal system to actually aid and abet them in destroying the Arctic,” said Jackie Dragon, Greenpeace‘s senior oceans campaigner.

Not the defendant

Shell’s lawsuits are novel not just because they seek to get ahead of legal action by potential opponents, but also because even if those cases were filed, Shell would not be the defendant. Instead, environmentalists would be pitted against the federal agencies that issued permits and approved the company’s oil spill response plans.

The few legal precedents for Shell’s move are not on the company’s side. For instance, in 2003, a federal judge tossed out a California water district’s bid to get a court judgment that the government’s approval of a water delivery contract was valid, in anticipation of a challenge by the Natural Resources Defense Council.

In three separate lawsuits, Shell essentially is asking Judge Beistline to validate federal agency decisions pre-emptively and rule any hypothetical legal challenges of the approvals without merit even before they materialize.

Each possible challenge

“What Shell is asking the court to do in this case is to imagine every possible legal argument anybody might ever think of and decide that none of them are (valid),” said Mike LeVine, Pacific senior counsel for the conservancy group Oceana.

“When an organization like ours chooses to file a lawsuit, we do a lot of research, and we think about what the record says, the comments we submitted and we identify deficiencies in the agency’s decision-making process,” LeVine added. “They’re generally targeted arguments about why the agency didn’t comply with specific provisions of law.”

Andrew Hartsig, the Ocean Conservancy’s Arctic program director, said Shell’s maneuver is an attempted end run around the federal administrative procedure law that dictates how agency decisions can be challenged.

Greenpeace, Oceana and the Ocean Conservancy are among the defendants in Shell’s lawsuits.

The environmental groups squaring off against Shell told the federal court that the company was attempting to co-opt the judicial system and hinder their constitutionally protected efforts to influence government policy. And the activists insisted that Shell is wrong to assume they would file lawsuits against all of the permits and approvals the oil giant is seeking to validate.

But Shell said in court papers that it is “a virtual certainty” that “environmental groups determined to block Arctic oil and gas exploration would file such a challenge.”

In his ruling last week, Beistline accepted Shell’s arguments that environmentalists’ still- hypothetical legal challenges would materialize eventually.

“Nothing could be gained by postponing the inevitable challenge … for a couple of weeks,” Beistline said.

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