by Yereth Rosen

ANCHORAGE, Alaska - A federal appeals court has dismissed a legal action that challenged Royal Dutch Shell's (RDSa.L: Quote, Profile, Research, Stock Buzz) plans to drill several wells over three years in Alaska's Beaufort Sea, now that the company itself has ditched the program and replaced it with a more limited exploration proposal.

The 9th Circuit Court of Appeals on Tuesday dismissed the administrative appeal filed by environmental and Alaska Native groups. Since Shell on May 5 dropped its 2007-2009 exploration plan and the Minerals Management Service subsequently rescinded its approval, the litigation was moot, the court said in its order.

Shell has scaled back its drilling plan to span a single year, 2010, to involve a single drill rig instead of two and to encompass two wells instead of the dozen or more than initially had been proposed.

A company executive in Anchorage said the reduced drilling plan reflects Shell's willingness to listen to the concerns of the Inupiat Eskimo people of Alaska's North Slope and North Slope Borough Mayor Edward Itta, who are wary of offshore drilling because of potential impacts to whales and other Arctic marine life.

But when the company announced its new plan last month, "We didn't go into the fact that reducing our drilling program would eventually cost Shell tens of millions of dollars," David Lawrence, Shell's executive vice president for exploration, said in a speech Tuesday to the Resource Development Council for Alaska.

Lawrence expressed frustration about the delays inflicted on the company's Alaska development plans because of environmental litigation and appeals, including the just-dismissed case.

"Shell to date has spent $3 billion in Alaska. And to date, we have no monetary return to show for it," he said in his speech.

The company remains committed to its plans for exploring and developing the Beaufort and Chukchi Seas, however, Lawrence said.

"We believe that there's possibly more oil and gas in offshore Alaskan than there is remaining to be found in the offshore Gulf of Mexico. That's why we're here," he said.

Shell last year spent $2.1 billion acquiring leases in federal waters of the remote Chukchi, which lies between northwestern Alaska and eastern Siberia.

The company spent $84 million in 2005 and 2007 acquiring leases in the Beaufort, off Alaska's northern coast, and had intended to start drilling there two years ago at a known oil prospect called Sivulliq. (Editing by Christian Wiessner)