Shell to pay $1.1 million in fines to settle with EPA over Arctic drilling

In a settlement with the federal government announced late Thursday, Shell Oil Co. will pay $1.1 million in fines to settle claims that it violated air pollution permits while drilling in U.S. Arctic waters last year.

Shell agreed to pay $390,000 for running afoul of the federal permit governing emissions from its Kulluk drilling rig in the Beaufort Sea and $710,000 for violations of the air permit associated with its contracted drillship Discoverer and support vessels operating in the neighboring Chukchi Sea.

The Environmental Protection Agency said it documented “numerous air permit violations” for Shell’s fleets based on inspections and the company’s own excess emission reports during the approximately two months the vessels operated in the waters north of Alaska.

The EPA issued violation notices to Shell in January, saying the company’s self-reporting of emissions revealed excess nitrogen oxide was released from both the Discoverer and Kulluk.

Emissions from the Discoverer were a known problem heading into the brief Arctic drilling season. After the EPA granted a one-year air pollution permit to Shell for the Discoverer and its support vessels, Shell asked to be allowed to release an unlimited amount of ammonia and more nitrogen oxide than originally authorized from the ship’s main generator engines.

Because the generator engines were not the biggest source of nitrogen oxide, Shell did not exceed its overall annual cap on emissions.

Shell spokesman Curtis Smith said the company “accepted stringent emission limits that were based on assumptions and modeling” for its 2012 operations, but “following a season of operations, we now better understand how emissions control equipment actually functions in Arctic conditions.”

Smith stressed that despite the excess emissions, the EPA did not allege the pollution caused any harm to local populations.

Environmentalists cast the size of the fine as a slap on the wrist, especially given that Shell has invested nearly $6 billion in its Arctic drilling pursuit already. Conservationists previously have noted that the pollution violations were just one more mishap in a problem-plagued drilling season that included the failed test of a unique oil spill containment system, the drifting of the Discoverer in Dutch Harbor and the grounding of the Kulluk on an Alaskan island on New Year’s Eve.

Facing a long time to repair the Kulluk in an Asian shipyard, Shell called off its plans to resume hunting for oil in U.S. Arctic waters this year. ConocoPhillips followed suit, saying it would delay its own plans to begin a fresh round of Arctic drilling — decades after the last wells were completed in U.S. waters north of Alaska.