A federal appeals court Tuesday rejected Drakes Bay Oyster Company's bid to stay in business in the Point Reyes National Seashore, backing the Interior Department's decision to terminate the company's commercial shellfish operation.

In a 2-1 ruling, the 9th Circuit U.S. Court of Appeals in San Francisco held that the oyster company was "not likely to succeed" in proving in court that former Interior Secretary Ken Salazar erred in refusing in November to renew the company's permit to operate in the federally protected waters of Drakes Estero.

The ruling rebuffed farm owner Kevin Lunny's request for an order, known as an injunction, to continue harvesting $1.5 million worth of oysters a year from the nearly pristine estero, a 2,500-acre Pacific Ocean estuary, while it pursues its court case.

But it did not specify the consequences of that decision, and Lunny said Tuesday he is still operating "in full swing" following a busy Labor Day weekend at the farm near the west end of Sir Francis Drake Boulevard.

"I don't know what's next," Lunny said in a telephone interview. "A lot of people's livelihoods are riding on this."

The farm employs 30 people, and if it ultimately loses in court would likely be required to remove about 18 million oysters from the water, lay off its workers and possibly remove five miles of wooden oyster-growing racks from the shallow estero.

The seven-year-old controversy over the oyster farm has divided neighbors in West Marin County and gained national attention, with advocates for greater commercial use of public lands jumping in on Lunny's side.

A Washington, D.C.-based nonprofit called Cause of Action, which critics said had ties to the ultra-conservative Koch brothers, argued Lunny's case in court until he cut ties with the group in May.

In March, Sen. David Vitter, R-La., included a provision granting the oyster company a permit in a bill aimed at creating 2 million jobs and $2 trillion in federal taxes through commercial use of natural resources, including offshore oil drilling and approval of the Keystone XL pipeline.

Lunny said Tuesday he "strongly disagrees" with the ruling, which upheld a judge's decision in February in an Oakland federal district court.

Lunny appealed that decision and was granted permission to remain in business pending an appeals court hearing.

In a written statement, Lunny said his attorneys "are now reviewing all of our options before we announce our plans moving forward."

The oyster farm could appeal to an 11-judge panel of the 9th Circuit or to the U.S. Supreme Court.

However, if the farm cannot continue selling oysters, the case is most likely moot, Lunny said in May.

The legal battle began in December, when Lunny filed a federal lawsuit alleging that Salazar's refusal to renew the oyster farm's permit was "arbitrary and capricious and an abuse of discretion."

Rejecting that claim, the appellate court majority said that the oyster company "failed to raise a serious question about the Secretary's decision" and that it would be "unlikely to prevail" on that point.

The 50-page decision also dismissed repeated allegations in legal papers and by allies of the oyster farm that the National Park Service had used "flawed science" to assess the farm's impact on the 2,500-acre estero, home to extensive eelgrass beds and a harbor seal colony.

"Any asserted errors in the NEPA (environmental) review were harmless," the decision said. At another point, it said that "any claimed deficiencies are without consequence" and that the oyster company "is unlikely to succeed in showing that the errors were prejudicial."

Lunny said he hadn't read the opinion and restated the science complaint. "We repeatedly have seen science that has been misused," he said. "We'll see if that kind of conduct is rewarded."

Tito Sasaki, president of the Sonoma County Farm Bureau, said he hoped Lunny would appeal.

"It's really disheartening to see this operation will be punished like this," said Sasaki, a Sonoma Valley grape grower, calling the oyster farm an "exemplary" case of "sustainable aquaculture."

"There's absolutely nothing wrong with it," he said. "People should be praising it."

The farm bureau was one of 10 parties, including famed Berkeley chef Alice Waters, who filed a "friend of the court" brief supporting the oyster company.

Judges M. Margaret McKeown and Algenon L. Marbley ruled against the oyster company. Judge Paul J. Watford dissented, arguing that Salazar's action was based on a "misinterpretation" of the 1976 act of Congress that established the Point Reyes wilderness.

The other two judges, Watford wrote, offered "some hand waving, to be sure, but nothing of any substance" in response to his analysis.

Amy Trainer, executive director of the Environmental Action Committee of West Marin, hailed the decision. which she said "supports the estero's full wilderness protection."

The farm's supporters point to the history of oyster cultivation in the estero dating back to the 1930s, but the decision said that when Lunny bought the property in 2005 he did so "with eyes wide open" to the 2012 expiration date for the federal permit.

Johanna Wald, an attorney with the Natural Resources Defense Counsel, said in a statement that "today's decision is another affirmation of the principle that 'a deal is a deal.'"

Neal Desai, associate director of the Pacific Region for the National Parks Conservation Association, said the ruling "affirms that our national parks will be safe from privatization schemes, and that special places like Drakes Estero will rise above attempts to hijack Americans' wilderness."