Shell agrees to pay $1.1m in fines

Alaska - MersShell has agreed to pay $1.1m for air-quality violations from the vessels it used to drill two oil-exploration wells in Arctic waters off Alaska last year, federal regulators said.

Shell will pay the civil fines for Clean Air Act violations that were discovered during inspections of the Discoverer and Kulluk drillships, which operated in the Chukchi and Beaufort seas, the Environmental Protection Agency said late on Thursday.

The breaches of air-quality permits that Shell needed to operate in the icy waters were among several mishaps for the oil giant as it sought to explore in the remote but potentially petroleum-rich Arctic outer continental shelf.

First, equipment problems delayed the start of its drill season. Instead of the five wells it had planned to complete in 2012, Shell could do only preliminary drilling on two wells, a limit placed by regulators because of equipment failures on a required oil-spill vessel. The Discoverer, contracted from Noble, was detained for safety and environmental problems.

It all culminated with the grounding of the Kulluk during a December storm near Kodiak Island. Federal investigations were launched into the grounding and the Discoverer's shortcomings, and the Department of Interior now plans to issue new rules for Arctic drilling by the end of the year.

The violations resolved by Shell's settlement include excessive hourly nitrogen-oxide emissions on the drillships and support vessels and lapses in use of emissions-cleansing equipment.

The agreement requires Shell to pay $710 000 for 23 violations that inspectors said occurred on the Discoverer and its support fleet and $390 000 for 11 violations on the Kulluk.

Shell spokesman Curtis Smith said the brief 2012 season had taught the company lessons about controlling air pollution.

And while Shell will pay fines for excessive hourly air pollution, the drilling operations produced only a tiny fraction of the total air pollution Shell would have been allowed to emit during a full year, according to the settlement agreement.

"Despite reported overages in 2012, the EPA did not allege any negative impact from Shell's emissions to local populations," Smith said in an email.

Shell has spent about $5bn on its Alaska offshore program, including $2.1bn in a 2008 Chukchi lease sale.