Shell ordered to suspend Arctic offshore drilling

ANCHORAGE, Alaska (Reuters) - A U.S. federal appeals court has ordered Royal Dutch Shell Plc (RDSa.L) to suspend oil exploration operations in the Beaufort Sea off the north coast of Alaska pending a legal challenge being brought by environmental activists and Alaska native groups.

The ruling deals a serious blow to Shell's plan to drill up to four exploration wells during the brief Arctic summer to test a $44 million bet the company placed on the region in 2005. Oral arguments in the case are set for August 14 in San Francisco.

"We will comply with the court order and continue to welcome discussions with the North Slope," Shell spokesman Curtis Smith said in an email.

Federal officials said Shell's drilling permit runs through October, so it is possible Shell could do some drilling if it gets a favorable ruling in August.

Opponents of drilling in the Beaufort Sea argue that environmental impact studies carried out by Shell and approved by the U.S. Department of the Interior failed to take seriously the threat posed to bowhead whales and other wildlife.

Native whalers also are concerned that hunting the whales, which they are permitted to do by the International Whaling Commission, could become more difficult and dangerous.

"The industry and the government have to slow down and listen to the scientists and the concerns of the whalers," said North Slope Borough Mayor Edward Itta in a statement. "We stand the chance of losing our whaling crews and the traditional food that feeds our families."

The Interior Department's Minerals Management Service approved Shell's drilling plans in February.

Shell had planned to drill four wells on the Sivulliq prospect this summer. Oil had been discovered at Sivulliq in the 1980s but the field was abandoned at the time due to the high cost of developing oil fields in the Beaufort Sea.

Itta said the broad reach of Shell's Sivulliq exploration plan -- three to four wells drilled a year over three years -- demands more environmental review.

The Shell program is the biggest ever to hit this offshore area, he said.

Betsy Beardsley, Arctic environmental justice program director for the Alaska Wilderness League, said she, too, is hoping for a more long-lasting drilling delay.

"Our hope is that when the court hears oral arguments and makes their final decision, they will halt all exploration work in 2007," Beardsley said.

Shell's plan calls for activity to run through late October, she said, so if the company gets a favorable court ruling, "They would have at least a couple of months," she said.

"Certainly the timeline is tight. We are going to continue to work with the North Slope Borough and Alaska Eskimo Whaling Commission to reach agreement," added Smith. "It is important to remember that Alaska is a long-term investment for Shell."

(Additional reporting by Justin Grant)