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Ninth Circuit Dismisses Shell Oil's Suit Against Environmental Groups


The Ninth Circuit on Wednesday remanded Shell Gulf Oil of Mexico Inc.’s preemptive suit against several environmental groups seeking to protect Department of the Interior approvals for Arctic offshore drilling, saying that the oil company couldn’t prove it had a legal controversy with the groups.

Shell had sued several environmental groups including the Center for Biological Diversity Inc., the Alaska Wilderness League, the Natural Resources Defense Council Inc. in February 2012, seeking to prevent them from suing to halt the oil company from drilling off Alaska’s coastline. But Shell couldn’t satisfy the case or controversy provision of Article III, which would have conferred standing, because it did not have adverse legal interests to the environmental groups, a three-judge panel determined in a published opinion.

Instead, the only parties with adverse legal interests in the matter were the environmental groups and the DOI’s Bureau of Safety and Environmental Enforcement, which issued the approvals, because the groups could challenge the bureau’s decision. The panel concluded that Shell could not be considered an aggrieved party because its plans were approved.

“Put simply, the bureau lies at the center of the underlying controversy and is the locus of the adverse legal interests created by the [Administrative Procedures Act]. Without its participation, no case or controversy can exist,” the panel said.

The panel noted that if it determined it had jurisdiction to oversee the dispute, the proceedings would have moved forward without the participation of the bureau. That could lead to “unusual consequences,” the panel said, including the potential for a district court to declare the bureau’s actions unlawful under the APA without a binding judgment on the bureau, and the inability of the bureau to provide justification for its actions.

Shell had argued that its legal disagreement with the environmental groups was substantial because it feared the groups would wait until the eve of the drilling season to file litigation at the most inconvenient moment. But the panel was unswayed.

“Shell’s economic interest in the outcome of a lawsuit between the bureau and the environmental groups is not a legal interest merely because it relates to a lawsuit,” the panel wrote. “Thus, it is not enough for a declaratory judgment plaintiff to assert, as Shell does here, a practical interest in the outcome of a lawsuit between other parties.”

On Wednesday, an NRDC spokesman said the group was pleased with the opinion.

“Shell was attempting to quash dissent and circumvent due process. It didn’t work – our legal system prevailed," said Chuck Clusen, NRDC director of national parks and Alaska Projects, in a statement.

Attorneys for Shell were not immediately available for comment on Wednesday.

Shell filed the suit after receiving approval from the bureau for two of Shell’s oil spill response plans, required by the Oil Pollution Act, for Alaska’s Beaufort and Chukchi Seas. Environmental groups including the Ocean Conservancy Inc., Center for Biological Diversity Inc. and the National Audubon Society Inc. followed up with a declaratory suit of their own in July 2012, alleging that the DOI’s approval of the plans violated the Clean Water Act, National Environmental Policy Act, and the Endangered Species Act by failing to properly evaluate the environmental effects of, and alternatives to, Shell's proposed plans.

The two suits were combined that same month, and a federal judge in August 2013 denied the environmental groups’ motion for summary judgment, ruling that the bureau’s approvals of the plans didn’t violate the law.

An appeal challenging the court's ruling on the permits remains pending before the Ninth Circuit, according to court records.

Circuit Judges Jerome Farris, Dorothy W. Nelson, and Jacqueline H. Nguyen sat on the panel for the Ninth Circuit.

The environmental groups are represented by Michael E. Wall and Jennifer A. Sorenson of the Natural Resources Defense Council; Steven A. Hirsch, Rachael E. Meny, and Justina Sessions of Keker & Van Nest LLP; and George E. Hays of the Law Office of George E. Hays.

Shell is represented by Kyle W. Parker of Crowell & Moring LLP; and Kathleen M. Sullivan, William B. Adams, and David S. Mader of Quinn Emanuel Urquhart & Sullivan LLP.

The case is Shell Gulf of Mexico, et al v. Ctr for Biological Diversity, et al, case number 13-35835 in the U.S. Court of Appeals for the Ninth Circuit.