On Jan. 22, a panel of the 9th U.S. Circuit Court of Appeals issued an opinion that will help ensure federal agencies and the public have a more complete picture of the risks and environmental impacts that could result from the sale of offshore oil and gas leases. The court’s decision also raises serious questions about the status of Arctic leases in the Chukchi Sea off the northwest coast of Alaska, and could make it difficult for companies like Shell Oil to drill for oil anytime soon.

The 9th Circuit ruled that the Bureau of Ocean Energy Management (BOEM) did not follow legal requirements when the agency assessed the potential environmental impacts of a 2008 offshore oil and gas lease sale in the Chukchi Sea. Before deciding whether to sell offshore oil and gas leases, BOEM conducts an environmental analysis. Part of that analysis assesses the potential impact of oil and gas development that might result from the lease sale. In the case of the Chukchi Sea lease sale, BOEM’s analysis assumed the sale of the offshore leases would result in the production of a relatively low volume of oil. In fact, BOEM used the very lowest estimate that could possibly be expected.

The 9th Circuit determined that BOEM’s use of the low-end estimate was unjustified. Use of the low-end estimate, the court observed, skewed BOEM’s analysis in a way that minimized potential environmental impacts. If BOEM had included higher estimates of oil production, the agency’s analysis may have revealed the potential for greater environmental damage — and that could have influenced BOEM’s decision about whether or how to proceed with the lease sale. The court concluded that basing an environmental analysis on the lowest possible oil production was unlawful; instead, BOEM must consider the “full range” of oil production estimates in its environmental analyses.

The court’s ruling makes good sense. Requiring BOEM to include the full range of potential oil production volumes from offshore lease sales will help ensure that environmental analyses capture the potential for more serious environmental impacts, including impacts to people, wildlife and fish, habitat, and climate. That, in turn, will give government agencies and stakeholders a better understanding of the risks that accompany offshore drilling and enable better decisions about whether and how to allow offshore drilling in the future.

How does all this affect the Arctic Ocean and the Chukchi Sea lease sale? In some ways, the court’s decision requires BOEM to go back to square one. The agency must redo or supplement its environmental analysis, and this time BOEM must include higher estimates of oil production and consider the potential for more significant environmental impacts. Once BOEM has updated its environmental analysis, it must decide whether to affirm its 2008 decision to hold the lease sale.

In the meantime, BOEM must also decide how to treat the offshore leases that were purchased by oil companies like Shell, ConocoPhillips and Statoil in 2008. Given the uncertain status of the Chukchi leases, BOEM should not allow any oil and gas activity on those leases until the agency has updated its environmental analysis and decided whether to affirm the lease sale. In other words, Shell’s plans to drill in the Chukchi Sea may be on hold for some time to come.