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Shell mulls appealing federal court ruling

Posted: Sunday, November 30, 2008

FAIRBANKS - The head of Shell Alaska says the company may appeal a recent federal court ruling that has delayed its plans to drill exploratory wells in the Beaufort Sea next year.

Last week the 9th U.S. Circuit Court of Appeals ruled that a federal review of Shell's plan was insufficient.

The court ruled the plan came up short in assessing the potential impact on marine mammals and the subsistence life of people living along the Beaufort Sea.

The company's general manager Pete Slaiby says the company was disappointed, particularly after investing $2.5 billion over the last three years on leases and operations in the state.

"The Ninth Court decision is really a tremendous disappointment," Slaiby said. "This, in fact, becomes a de-facto moratorium the Ninth is imposing on us, against the will of the nation."

Slaiby said last week's decision could press the company into some difficult decisions.

"Any company is going to have to be careful about how they manage the capital of their shareholders," Slaiby said. "We have a huge investment here. It is becoming a concern."

The court ruled that the Minerals Management Services, which approved Shell's exploration plan, failed to critically look at the effects of development on bowhead whales and other subsistence activities.

Among the failures was how noise coming from drill ships and icebreakers would disturb the endangered whales, and potentially prompt them to deviate from migration routes and feeding grounds. This would force Native whalers farther from the coast in their search for the mammals.

Betsy Beardsley is the environmental justice program director for Alaska Wilderness League, which pushed the case before the 9th Circuit.

"There is no proven science that shows that this kind of activity, exploratory drilling, wouldn't have impacts on the bowhead whales and other species in the Arctic," Beardsley said. "We believe this court decision is really sending a message that there needs to be a better understanding of what impacts would occur, should this kind of development happen in the Beaufort or Chukchi sea."

Slaiby disagrees. He points to Shell's proven record as a responsible oil and gas developer, and that the company's presence in these waters is not new.

Shell and other oil companies drilled exploratory wells in the 1980s and 1990s, but economic conditions didn't favor development then. Slaiby said there was no noticeable impact recorded then, nor did seismic and scientific research conducted this summer appear to adversely affect whales, Slaiby said.

So, Slaiby said Shell officials are weighing options, including an appeal. Meanwhile, meetings with North Slope communities will continue early next year.



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