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9th Circuit dismisses Shell's pre-emptive lawsuit against environmentalists

A federal appeals court on Wednesday threw out a Royal Dutch Shell lawsuit that was intended to inoculate the company's oil-spill plans from challenges by environmentalists.

The 9th U.S. Circuit Court of Appeals said Shell's 2012 lawsuit against numerous environmental groups, including Greenpeace and the Center for Biological Diversity, represented a "novel legal strategy" but violated the U.S. Constitution.

The lawsuit, filed before Shell started its mishap-laden 2012 Arctic drilling season, had sought to have the courts validate the Bureau of Safety and Environmental Enforcement's approval of Shell's oil-spill plans -- essentially neutralizing any possible legal challenge against BSEE that the environmental groups would file under the Administrative Procedures Act.

But Shell, which is not a federal agency, does not have the right to block legal complaints against BSEE's actions, the court said in its ruling.

"The environmental groups were 'aggrieved' by the approval of Shell's oil spill response plans, and the Bureau is the federal agency responsible for their approval," the appeals court said. "Because its plans were approved, Shell was not 'aggrieved' by the Bureau's actions. Moreover, since Shell is not a federal agency, it cannot possibly have any legal obligations under the APA to the environmental groups."

A representative of one of the environmental groups sued by Shell said the lawsuit was part of a series of mistakes made by the company.

"Shell's lawsuit seemed like a desperate attempt to circumvent clear constitutional protections and intimidate us. As today's decision shows, those tactics will not work," said Michael LeVine, senior Pacific counsel for Oceana. "Shell wasted time, money and energy pursuing a fruitless court challenge. The company's poor decisions that led to this case are emblematic of broader problems that have led to Shell's failed efforts to pursue exploration in the U.S. Arctic Ocean."

Jim Adams, policy director for Audubon Alaska -- another group that was sued by Shell -- said the company's legal strategy could have had far-reaching consequences.

"Shell was arguing that it, or any other corporation, could sue a conservation group or even an individual if there was a chance that the group or person would sue a government agency that failed to do its job," Adams said in an email. "The suit would have opened the door to billion dollar corporations bringing intimidation suits against anyone who dared to state a contrary opinion about government action. At bottom, the suit was an effort to undermine citizen participation in government."

Shell spokeswoman Megan Baldino said the company believed the lawsuit was sound.

"We believe this was a legitimate use of the declaratory judgment act, however, we respect the court's ruling," she said in an email.

Wednesday's 9th Circuit ruling reverses a 2012 decision by U.S. District Court Judge Ralph Beistline, who declined to dismiss Shell's lawsuit against the environmentalists.

In a related ruling, on the merits of the oil-spill response plans, Beistline on Aug. 5, 2013, upheld BSEE's approval of Shell plans for both the Chukchi and the Beaufort seas. He rejected environmentalists' arguments that the plans relied on overly optimistic Shell estimates of its ability to recover spilled oil and that the federal agency had fallen short of requirements in the Endangered Species Act and other federal laws.

The environmental plaintiffs appealed the 2013 ruling, and the 9th Circuit Court has yet to issue a ruling in that case.

Shell, which is seeking to drill several wells starting in 2015, is promising to make some updates to the 2012 oil-spill plan. Environmentalists argue that the plan needs an entire rewrite to match the new exploration plan.

Shell is planning to drill only in the Chukchi, leaving its Beaufort leases unexplored, at least temporarily. The revised plan, filed in August, proposes two drill rigs operating simultaneously in the Chukchi. In its 2012 drilling program, Shell used one rig in the Chukchi and another in the Beaufort, drilling one well in each theater. The company managed to drill only the top portion of each well.

Although Shell's BSEE-approved Chukchi oil-spill plan from 2012 remains active, that appears to be only a technicality, contends Rebecca Noblin, Alaska director for the Center for Biological Diversity.

"We would argue that they don't have a spill plan in place for this exploration plan because this exploration plan is different," she said.

Shell, in its revised exploration plan, said it will update its approved oil-spill plan to fit with "operational changes" proposed in the revised exploration plan. Some administrative changes made at the end of 2013 have already been approved by BSEE, Shell said in its revised exploration plan.