Environmentalists challenge Shell’s Gulf plans in court *updated*

The Deepwater Nautilus was used to drill Shell's Appomattox discovery in the Gulf of Mexico. (Houston Chronicle file photo)

Environmental advocates today filed lawsuits challenging the federal government’s approval of an offshore exploration plan that paved the way for Shell to drill five new exploratory wells in the Gulf of Mexico.

In two separate filings, conservationists argue the government was acting prematurely in green-lighting the plan last month and that regulators are bound by federal law to first finish a post-spill environmental study of the Gulf of Mexico that could last until next year.

The cases will present a major test of the federal government’s power to swiftly review and approve deep-water exploration plans that form the blueprint for well-by-well permitting decisions.

Both lawsuits were filed in the Atlanta-based 11th Circuit Court of Appeals — one by the Defenders of Wildlife, the Center for Biological Diversity and the Natural Resources Defense Council and a second by Earthjustice, the Gulf Restoration Network, the Florida Wildlife Federation and the Sierra Club. The Defenders of Wildlife, CBD and NRDC also notified the Bureau of Ocean Energy Management, Regulation and Enforcement of their intent to sue under the citizen lawsuit provision of the Endangered Species Act.

The groups allege that by approving Shell’s exploration plan, the government violated a host of federal laws, including the National Environmental Policy Act and the Marine Mammal Protection Act, which generally require environmental studies and coordination with other agencies before actions that can hurt marine life or affect the environment.

Although the ocean energy bureau has approved 19 offshore exploration plans since June last year, Shell’s drilling blueprint stood out, said David Pettit, a senior attorney for the NRDC.

“We’ve looked at each of these approvals and have been waiting for a case that best exemplifies what’s wrong with the current process — a test case, if you will,” Pettit said. “From our standpoint, it had to have one with facts that really cry out.”

Pettit said the Shell plan fit the bill. The exploration plan proposes five new exploratory wells in roughly 7,160 to 7,259 feet of water at the company’s Appomattox prospect 72 miles off the Louisiana coast.

Shell told regulators that if there was a worst-case spill from one of the proposed wells, it could take 128 days to intercept it with a relief well. In the meantime, it could discharge a projected 45 million barrels of oil into the Gulf.

“That’s nine times Deepwater Horizon,” Pettit noted, referencing the BP spill last year that gushed an estimated 4.9 million barrels before it was finally killed on July 15, 2010.

The conservationists say the government isn’t able to make a fully informed decision about the impact of the project now, because the ocean energy bureau has just begun work on a supplemental environmental review of the Gulf — essentially a post-spill update of a similar study conducted years ago. The groups argue that under the National Environmental Policy Act, the Gulf-wide study should have provided the basis for more specific reviews of the Shell exploration plan at issue and others like it.

“It is as if the government regulators have learned nothing from the BP disaster,” said David Guest, an Earthjustice attorney. “Before new deep-water Gulf drilling occurs, the government must make a realistic assessment of the risk to the Gulf’s ecosystem, its communities, and the many jobs that depend on tourism, fishing, and recreation. It has utterly failed to do so here.”

The case puts the pressure on the federal government — not Shell — to defend its site-specific environmental assessment of the company’s plan, which concluded with a finding that there likely would be “no significant impact” from the proposed drilling.

But Shell will “fully assist the government in defending this plan,” said spokesman Bill Tanner. Tanner said the legal filings “fail to take into account the comprehensive nature of the approved exploration plan.”

“This plan was approved by BOEMRE and reflects numerous improvements to enhance safety and to protect the environment,” Tanner added. “Shell’s rigorous global safety standards underpin our approach to deep-water exploration and production.”

A spokesman for the ocean energy bureau refused to comment on the legal filings. But Michael Bromwich, the bureau director, said earlier this year that he was hopeful the agency’s site-specific environmental assessments would withstand legal scrutiny.

Andy Radford, a senior policy adviser for the American Petroleum Institute, said BOEMRE’s review process was “well thought out” and “was designed to withstand a legal challenge.”

Kevin Ewing, an attorney with Bracewell & Giuliani who is a NEPA expert, noted that the ocean energy bureau has been under the microscope since last year’s Gulf spill and has consequently been more cautious in building a record to support its decisions.

“This is an agency that has fretted tremendously about the adequacy of its review and the adequacy of its documentation,” Ewing said. “Those are the best circumstances under which the agency can defend an administrative law challenge.”

A decision in the agency’s favor would allow the Shell plan to go forward and bolster the bureau’s chances of swiftly reviewing offshore drilling plans in the future.

Winning would “certainly clear the air,” Ewing said. “While a legal challenge is unwelcome, it at least has the benefit of calling the question and allowing for a definitive confirmation that both the industry and the government are in fact acting prudently — and, I would say, painstakingly — in reviewing and approving safe oil and gas development.”

By contrast, a legal ruling against the ocean energy bureau could deal a crippling blow to the agency and thwart any chance of companies quickly launching new deep-water drilling projects in the Gulf.

That would “cast a cloud over the approval process,” Ewing said.

Historically, before last year’s spill, the federal government used a “tiering” system of environmental reviews to analyze coastal drilling projects, with comprehensive assessments of broad offshore lease sale plans followed by increasingly more limited environmental studies of specific drilling proposals. And the government traditionally used so-called “categorical exclusions” to waive environmental reviews of exploration and development plans — including the one for BP’s failed Macondo well — that would normally be required under NEPA.

That tiering process has allowed the government to issue permits relatively quickly, noted Benjamin Salisbury, an FBR Capital Markets analyst earlier this year.

“Under this process, the agency does most of the legwork of assessing environmental consequences in generic documents that govern the five-year leasing programs and multiple individual lease sales,” Salisbury said. “As the agency moves through the process of auctioning leases, approving drilling plans and approving drilling permits, it must prepare additional NEPA documentation at each step but can refer (or tier off of) previous analyses.”

The alternative would be a slow and lengthy process. “It would be administratively impossible to conduct extensive environmental reviews for every offshore well,” Salisbury said.

But the conservationists argue that is exactly what the government is required to do. They argue that the Deepwater Horizon disaster proved that environmental reviews done before Gulf lease sales in 2007 gave short shrift to the consequences of offshore drilling. After all, they note, that study — known as an environmental impact statement — concluded that the most oil likely to be spilled over 40 years and 11 proposed lease sales would be just 26,500 barrels, about half a percent of what was estimated to come out of Macondo.

The groups challenging the Shell exploration plan approval telegraphed their arguments in public comments filed with the government in April, while regulators were still reviewing the proposal. According to NRDC, CBD and Defenders of Wildlife:

“The Deepwater Horizon oil spill not only altered the baseline conditions for the gulf of Mexico offshore marine and coastal environments, it also dramatically altered assumptions regarding both the risk and the likely environmental consequences of a major blowout and oil spill. In light of these risks, it is crucial that BOEMRE suspend approval of oil drilling activities until it has completed consultation and has conducted a full supplementation of the outdated environmental impact statement to ensure full consideration of environmental risks involved with deep-water drilling in the Gulf.”

In concluding that Shell’s proposed drilling posed “no significant impact” to the environment, the ocean energy bureau was “tiering off of documents that are out of date, incomplete and inaccurate,” those three groups said.

The same groups also argue that neither Shell nor the government is equipped to deal with a spill at Appomattox and question whether the containment equipment that would be used in case of a blowout — from the Marine Well Containment Company — “is a viable option.”

“The system has never been tested by BOEMRE, and, as Shell admits, would not be fully operational for weeks at best,” the environmentalists said.

The MWCC’s current system has the capacity to contain 60,000 barrels per day of liquid; an expanded system expected to go online later is expected to be able to deal with 100,000 barrels daily.

The conservationists also argue that Shell and federal regulators have not dealt with possibly widespread problems in the blowout preventers used as a last line of defense against uncontrolled surges of oil and gas. An examination of the blowout preventer at BP’s well concluded that shearing blades were unable to cut through drill pipe that had been pushed askew by surging hydrocarbons and seal off the well hole.

In public comments filed April 21, Earthjustice said it was “unreasonable” for the government “to continue approving exploration plans that anticipate the drilling of wells (that) rely upon subsea blowout preventers in the face of this newly acquired knowledge and its own acknowledgment that new BOP rules are needed to reduce the risk of a major blowout.”

Earthjustice also complained that it was difficult for the public to access information about proposed offshore exploration plans.

Shell operates and holds an 80 percent working interest in the Appomattox project. Its partner on the project, Nexen, holds the remaining 20 percent interest. Shell Oil Co. President Marvin Odum has called the Appomattox field a “significant new oil discovery,” in light of estimates that more than 250 million barrels of oil equivalent could be recovered from the site.

Check out the legal filings here and here.

Below are copies of the Shell exploration plan and the complaint letter filed in April by some of the environmental groups now mounting the legal challenge:

Shell ox Exploration Plan

Comment Letter on Shell Ep

EJ Public Comments on Shell Ep