ANCHORAGE - A federal judge on Wednesday stopped companies from developing oil and gas wells on billions of dollars in leases off Alaska's northwest coast, saying the federal government failed to follow environmental law before it sold the drilling rights.
The lease sale in February 2008 brought in nearly $2.7 billion for the federal government from the sale of 2.76 million acres in the Arctic waters of the Chukchi Sea, including $2.1 billion in high bids submitted by Shell Gulf of Mexico Inc.
U.S. District Judge Ralph Beistline said that the Minerals Management Service failed to analyze the environmental effect of natural gas development despite industry interest and specific lease incentives for such development.
The agency analyzed only the development of the first field of 1 billion barrels of oil - despite acknowledging that the amount was the minimum level of development that could occur on the leases.
The agency also failed to determine whether information it acknowledged was missing before the sale was relevant or essential under environmental law, or whether the cost of obtaining that information was exorbitant.
Beistline enjoined all activity under the lease sale pending additional environmental reviews.
Caroline Cannon, president of the Native Village of Point Hope, an Inupiat Eskimo whaling community of more than 700 on a peninsula jutting into the Chukchi, said news of the decision brought tears of joy in the village.
"So little is known about our Arctic Ocean," Cannon said. "Scientifically, they have not enough data. That's the message we brought at the table. And it's so good that we're on the same page, that the world has heard us, in a sense. That we're visible and not on the corner of the back page. That we exist and we count."
Erik Grafe, a spokesman for Earthjustice, which represented 15 Alaska Native and environmental groups in the lawsuit, said MMS admitted there were unknowns about drilling but didn't take the necessary next step of identifying what missing information was relevant to analysis of a lease sale's effect.
The decision comes after the massive oil spill from a BP PLC well in the Gulf of Mexico and is a blow to the unit of Royal Dutch Shell PLC, which had hoped to drill three exploratory wells this summer in the Chukchi Sea. Those plans were halted with President Barack Obama's decision in May to delay offshore oil drilling in the Arctic Ocean until at least 2011.
Offshore drilling is strongly supported by Alaska Gov. Sean Parnell and other elected officials in the state, where upward of 90 percent of general fund revenue is provided by the petroleum industry. A spokeswoman for Parnell said the governor had not had a chance to review the decision.
Shell Alaska spokesman Curtis Smith said the company is analyzing the ruling and how it might affect planned operations this year and aspirations to drill in 2011.
Environmental and Alaska Native groups contend it would be impossible to clean up a spill in Arctic waters, far from deep water ports and airports, especially during periods of broken ice. The nearest Coast Guard base is on Kodiak Island more than 1,000 miles away.
The decision was not a complete victory for environmental groups.
Beistline chose not to vacate the leases but ruled that the Interior Department and MMS, since renamed the Bureau of Ocean Energy Management, Regulation and Enforcement, must analyze the environmental impact of natural gas development and determine whether missing information was essential.
Brendan Cummings, an attorney for the Center for Biological Diversity, one of the plaintiffs, said the court did what current Interior Secretary Ken Salazar should have: reject a flawed and illegal plan to allow dangerous drilling in the heart of polar bear habitat.
Cummings said the Chukchi lease sale was administered under the Bush administration but the court decision puts the future of the Arctic Ocean into the hands of Obama and Salazar.