Future of US Arctic operations in question after court ruling

A federal appeals court ruled Wednesday that the Interior Department issued an unsound environmental review of 2008 drilling leases for oil development in Arctic waters.

The flaw: the Interior based the environmental impacts from needed infrastructure to carry out operations off of 1 billion barrels of oil benchmark. But in the court's opinion, it says the Bureau of Ocean Energy Management estimates the amount of economically recoverable oil from the Arctic's Chukchi Sea could reach up to 12 billion barrels.

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The decision comes on the heels of Defense Secretary Chuck Hagel announcing a new Arctic strategy for the U.S., due to the rapidly diminishing ice caps  allowing for more oil, gas and mineral exploration.

But the environmental groups that challenged Interior's analysis in Wednesday's case say the federal appeals court decision offers President Obama a chance to lead on climate change.

"This ruling provides an opportunity for the administration to reconsider its decision to open up Chukchi Sea to oil and gas drilling," said Erik Grafe, an attorney for Earthjustice.

"It provides an opportunity for the administration to consider leaving oil in ground that would otherwise exacerbate climate change."

"Obama can take a leadership role. The Arctic presents opportunity for him to lead on climate change and take different path than the administration has up to this point," Grafe, who represented the 15 environmental groups that filed the lawsuit.

Still, oil giants like Shell have been pushing to get the show back on the road. After experiencing a series of mishaps in its operations in 2012, Shell submitted a revised plan for drilling in the Chukchi Sea to the Interior in November.

While the federal court's decision requires the Interior to reexamine all of its 2008 lease sales, it doesn't directly address whether companies could continue with drilling plans on the already issued leases.

"Since the court sent back the leasing decision, Interior shouldn't allow drilling to happen on the 2008 leases when it has to figure out if the leases should even be there at all," Grafe said.

So far, out of the companies that received leases in 2008, Shell is the only one that began drilling in the Arctic. ConocoPhillips and Statoil have conducted surveying but have not started drilling operations.

Grafe said companies are hesitant to start drilling when the 2008 leases have been subject to question twice now.