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Scorn in 9th Circuit for Hypothetical Suit by Shell

(CN) - Oil giant Shell cannot sue environmentalists to stave off a hypothetical challenge of its oil-spill-response plans in Alaska, the 9th Circuit ruled Wednesday.

Shortly after two Shell subsidiaries won approval from the U.S. government of two oil-spill-response plans from the Bureau of Safety and Environmental Enforcement - a requirement under the Oil Pollution Act - the oil giant sued for a declaration that the approval conformed to federal law.

The company claimed it needed a swift validation of the approval by a court so its plans for exploratory drilling would not be hijacked by environmentalist legal wrangling.

The Center for Biological Diversity, Greenpeace and 10 others asked a federal judge to dismiss Shell's pre-emptive strike, arguing that there was no case or controversy for which Shell could bring an action.

Some of the environmentalists have since sued the government over its approval of Shell's plans. After consolidating that case with Shell's, Chief U.S. District Judge Ralph Beistline in Alaska dismissed the environmentalists' challenge and denied their motion to dismiss Shell's case.

The groups took the latter denial to the 9th Circuit, where a three-judge panel in Anchorage held Wednesday that Shell had no business bringing its Declaratory Judgment Act case against the environmentalists in the first place.

"With respect to declaratory judgment claims arising out of the Administrative Procedures Act, the relevant 'adverse legal interests' are held by the federal agency and a person aggrieved by that agency's actions," Judge Dorothy Wright Nelson wrote for the panel. "It follows that the only entities with adverse legal interests are the bureau and the environmental groups. 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. Since the APA therefore allows the environmental groups to file suit against the bureau, adverse legal interests exist between those parties. Shell, by contrast, does not have legal interests under the APA that are adverse to either the bureau or the environmental groups. 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. Put simply, the bureau lies at the center of the underlying controversy and is the locus of the adverse legal interests created by the APA. Without its participation, no case or controversy can exist."

It would be "odd" to say that a controversy existed just because Shell wanted know if it would prevail in a purely hypothetical challenge by environmentalists, Nelson said.

"Were we to conclude that jurisdiction exists, our holding would create several unusual consequences, two of which are particularly noteworthy. First, it would allow a district court to declare the bureau's actions unlawful under the APA in a judgment that is not binding on the bureau itself," Nelson wrote. "After all, the bureau need not participate in this lawsuit, and it would therefore not be bound by any judgment. Thus, a district court entertaining Shell's lawsuit would be potentially unable to enter a judgment resolving the very question Shell seeks to litigate. Second, absent agency intervention, such a lawsuit would allow the lawfulness of agency action to be adjudicated without hearing the agency's own justification for its actions. We conclude, therefore, that it would be unwise to exercise jurisdiction over a dispute concerning agency action while potentially omitting the critically important perspective of the agency itself."

While acknowledging that Shell and the environmentalists probably don't see eye-to-eye on much - and that the oil giant could see negative financial effects from a future lawsuit - Nelson reiterated that hypotheticals, no matter how probable, do not create a case.

"Shell merely has a practical interest in the outcome of a lawsuit between the bureau and the environmental groups, and that is not enough to satisfy the case or controversy requirement," Nelson concluded.

The federal appeals court in Anchorage previously green-lit Shell's plans to drill for oil in the Beaufort and Chukchi Seas, and has also barred Greenpeace from interfering with the drilling ships.

The full 9th Circuit declined to revisit the restraining order against Greenpeace in 2013.

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