For years, Royal Dutch Shell PLC and environmental groups like Greenpeace and the Sierra Club have been locked in an almost ritualized dance of litigation.
Step by step, Shell has won federal approval for plans to drill for oil in the Arctic Ocean. And at each turn, the conservationists have protested that the permits are improper and sued the government to block them.
But this year, with permits finally in hand to drill the first exploratory wells in the Beaufort and Chukchi seas on the Alaskan Outer Continental Shelf, Shell didn’t wait for what it called the “virtual certainty” of an 11th-hour suit to derail its plans. Instead, it launched a pre-emptive strike, filing three suits against 13 environmental groups and asking the court to pronounce the permits valid up front.
It’s an unprecedented move, and if it succeeds, lawyers say it could turn administrative litigation on its head, unleashing a flood of suits seeking court approval of agency actions before they’re even challenged.
So far, Shell’s tactic is working. An Alaska federal judge, Ralph Beistline, in June refused to dismiss the first of the complaints, ruling in an issue of first impression that if the environmental groups can sue to block the permits, then it “stands to reason” that Shell ought to be able to sue to uphold them.
The environmental groups are appalled. “These cases are an improper use of the judicial system,” said Michael LeVine, who is a senior counsel for Oceana, one of the groups being sued. “Shell has tried to do an end-run around the proper procedure and has effectively sought to use the courts to penalize public interest organizations for participating in public processes regarding ocean resources.”
The environmental groups have asked the U.S. Court of Appeals for the Ninth Circuit to take the rare step of reviewing a district court order while the lower court case is still ongoing. The appeals court has not yet said whether it will review the order. Shell counsel Kathleen Sullivan of Quinn Emanuel Urquhart & Sullivan and Kyle Parker of Crowell & Moring declined comment.
Part of the Arctic Ocean, the pristine Beaufort and Chukchi seas are located off Alaska’s North Slope. Bowhead and beluga whales swim in their waters; polar bears and walruses live on their shores and ice floes. But the seabed also contains an estimated 25 billion barrels of oil and 120 trillion cubic feet of natural gas, according to the federal government.
As a result, the area has become “ground zero for the battle against offshore oil drilling,” as Pacific Environment, another group being sued by Shell, put it.
In 2008, Shell in an auction paid the U.S. Department of the Interior $2 billion for oil and gas leases in the Chukchi Sea, on top of $74 million for development rights in Beaufort’s Camden Bay in 2007. The company has spent close to $3 billion more on project planning and execution, and has yet to pump a drop of oil.
Winning regulatory approval to drill has been one of the most difficult and time-consuming aspects. In court papers, Shell puts much of the blame on the environmental groups, which it says “have a long history of bringing challenges to each and every stage of Shell’s Arctic [Outer Continental Shelf] exploration projects, as well as bringing countless other challenges to practically every federal regulatory decision pertaining to oil and gas activities in the Arctic.”
Acting alone or in combination, conservationists have filed four suits objecting to air permits awarded to Shell by the U.S. Environmental Protection Agency; four suits opposed to Shell’s exploration plans approved by the Interior Department; two concerning the government’s five-year plan and lease sales to Shell and one suit over seismic activity authorization. Another three suits involve the designation of animals under the Endangered Species Act, and two more challenge incidental-take regulations, which allow for activity that might harm marine mammals. Some of the cases are ongoing, others have been dismissed.
“Defendants have challenged virtually every agency approval associated with [Shell's] exploration activities in the Arctic,” Shell’s complaint states.
In February, the Interior Department’s Bureau of Safety and Environmental Enforcement approved Shell’s Chukchi Sea oil spill response plan. The following month, the government gave Shell’s Beaufort spill plan a green light. The approvals “have concrete legal consequences: they permit Shell to proceed with its exploration activities,” according to Shell’s complaint.
Poised at last to sink 10 exploratory wells into the untouched seabed, Shell and its lawyers took a bold step. Why wait to be hit with a lawsuit? Especially since the open-water drilling season, which runs from July until late October, is so short?
Shell went on the offense. On February 29, subsidiaries Shell Gulf of Mexico Inc. and Shell Offshore Inc. filed suit in U.S. District Court for Alaska against the Center for Biological Diversity; Resisting Environmental Destruction on Indigenous Lands; the Alaska Wilderness League; the Natural Resources Defense Council; Northern Alaska Environmental Center; Pacific Environment and Resources Center; the Sierra Club; The Wilderness Society; Ocean Conservancy; Oceana; Defenders of Wildlife; Greenpeace; and the National Audubon Society.
“Shell’s exploration activities could be stymied, and a significant portion of its investment lost, by a last-minute judicial challenge,” the complaint states. Shell asked the court to issue a broad declaratory judgment that its oil spill response plans are valid and comply with the Outer Continental Shelf Lands Act, the Oil Pollution Act of 1990 and Section 7 of the Endangered Species Act.
Such a declaratory judgment “is appropriate here to settle all aspects of the controversy at issue and clarify Shell’s rights to proceed with its planned exploration activities, without causing any inconvenience to the parties,” wrote Shell counsel Parker, a partner in Crowell & Moring’s Anchorage, Alaska, office.
Shell in two later complaints also went on to ask the court to validate a permit from the National Marine Fisheries Service and to uphold letters of authorization from the U.S. Fish and Wildlife Service.
The environmental groups seemed almost flabbergasted by the suits. “Apparently unsatisfied with the process Congress provided for judicial review of agency action, Shell now asks this Court to disregard those requirements — and to exceed its jurisdiction — for the sake of Shell’s convenience,” reads the first sentence of the environmental groups’ motion to dismiss, filed by Keker & Van Nest partner Rachael Meny. Timothy Seaver of Seaver & Wagner in Anchorage also represents the groups, and the Sierra Club is represented by San Francisco solo practitioner George Hays.
The oil company has “asked this Court to ignore all jurisdictional and procedural requirements simply because Shell wants to begin drilling quickly,” Meny’s motion states. “Federal law contains no mechanism for Shell to obtain the relief it seeks.”
The fundamental problem, Meny argued, is that there is no jurisdiction or cause of action. Shell doesn’t face any liability over the validity of its oil spill response plans. The Department of the Interior is the one on the hook, and that’s the party the environmental groups would sue — not Shell — to challenge the plans. Quite simply, she argued, there is no cause of action that permits one private party to sue another private party to affirm an agency action.
Although Shell and the environmental groups may deeply disagree about the wisdom of drilling for oil in the Arctic, that “does not transform their disagreement into a case or controversy,” Meny wrote. “Shell’s suit is, at its core, an attempt to obtain an advisory opinion about the outcome of hypothetical litigation.”
But Beistline, an Alaska native who was appointed to the bench in 2002 by President George W. Bush, didn’t buy it. In a 31-page order issued on June 26, he denied the motion to dismiss. He reasoned that Shell has standing because if the environmental groups did successfully challenge Shell’s permits, that “would constitute an injury-in-fact to Shell” and its “protectable property interests.”
Beistline also agreed with Shell that the environmental groups were bound to sue over the plans. “Nothing could be gained by postponing the inevitable challenge,” he wrote. “Adjudicating the present contention between the parties now would not be a hardship to the Organizations, but waiting, even a short while, would be a burden to Shell.”
As for using the Declaratory Judgment Act as a vehicle for pre-emptive review, he concluded it was appropriate. “If the Organizations could sue to invalidate the approvals, Shell should have the ability to seek the approvals’ validation,” he wrote.
A QUESTION OF PRECEDENT
Shortly after Beistline issued his decision, 10 of the environmental groups did indeed sue the government in a bid to invalidate Shell’s oil spill response plans. They argue that the plans are inadequate and put the area at risk for “potentially devastating effects of a large oil spill.” That case is pending and has been consolidated with the others before Beistline.
The environmental groups also asked Beistline to certify his order for an immediate review by the Ninth Circuit, writing that it was “the first time that a party has been given permission to use the Declaratory Judgment Act to seek judicial review of an administrative agency decision without making a claim against the agency.”
He agreed — grudgingly — on September 13. “The Court understands that the Ninth Circuit is without controlling precedent concerning the instant matter,” he wrote. But in bold type, he also stated that he did not personally believe “exceptional circumstances” exist to merit such a review.
The Ninth Circuit has not yet said whether it will review the order. Shell lawyers argue there is little reason now to do so, since the suit challenging the permits has been consolidated with their bid for a declaratory judgment. Regardless, the lower court will review Shell’s oil spill plans.
Still, there’s the question of precedent. Baker & Hostetler partner Christopher Marraro, who is not involved in the case, said that the decision, if it stands, could “have great utility in the energy project area,” where litigation risk plays a large role in the decision to finance projects, he said. “That’s where this type of decision really would be helpful. It helps address litigation risk early on.”
But the environmental groups stress that Shell’s tactics, if allowed, will have “a chilling effect on expression protected by the First Amendment,” as Ellen Medlin, a lawyer for the Sierra Club, said in an interview. All 13 groups sued by Shell had previously submitted comments to the government that were critical of the proposed oil spill plans.
In their appeal to the Ninth Circuit, the groups argue that Shell’s declaratory judgment suits strike “at the heart of constitutionally protected advocacy.” Anyone thinking of commenting negatively on a proposed agency action would have to decide whether it’s worth being sued by a beneficiary of the action, they said. “Many citizens, faced with the threat of being hauled into court, would self-censor, limit their participation, or simply sit the process out.”
Jenna Greene can be contacted at firstname.lastname@example.org.