Environmental advocacy group Greenpeace and members of the aboriginal community in New Zealand applied for a judicial review of a permit awarded to Brazilian energy company Petrobras two years ago.
The lawsuit aims to nullify the permit "on the basis that the government did not properly consider the environment," reports The Southland (New Zealand) Times.
The government last year generated roughly $1 billion in royalties and taxes from oil and natural gas operations.
David Robinson, chief executive officer at New Zealand's Petroleum Exploration and Production Association, said the government likely acted according to the rule of law.
"I'm pretty sure you'll find the crown thinks they have done what they should have done," he was quoted as saying.
Seven Greenpeace activists, including actor Lucy Lawless, were removed from the Noble Discoverer drill ship and arrested at Port Taranaki in New Zealand in February. The drill ship was to leave for the Chukchi Sea off the Alaskan coast to drill exploratory oil wells.
An Alaskan court in June issued an order setting limits on what Greenpeace can do to protest Shell operations off the state coast.