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### Shell Offshore Inc. 3601 C Street, Suite 1000 Anchorage, AK 99503



### December 10, 2010

Natasha Greaves Project Manager/Permit Writer
United States Environmental Protection Agency, Region 10 1200 Sixth Avenue Seattle, Washington, 98101

Re: Notice of Intent to Submit an Air Permit Application for Kulluk Floating Drilling Platform – Beaufort Sea

Dear Ms. Greaves:

Shell Offshore Inc. (Shell) submits the atta ched Notice of Intent (NOI) to submit a minor source permit application to EPA Region 10. This application will be for operation of the Kulluk floating drilling pl atform (Kulluk) in the Beaufort Sea.

Please contact Mark Schindler (336-279- 0763), Rodger Steen (303-807-8024), or me (907-646-7112) for any additional detail EP A should need related to this NOI. We appreciate your attention to this matter.

Sincerely,

Susan Childs Regulatory Affairs Mana ger, Alaska Venture

Attachments:

cc: Jeff Walker, BOEMRE Jan Hastings, R10 Dave Bray, R10 Herman Wong, R10 Doug Hardesty, R10 Paul Boys, R10 Lance Tolson, Shell Mark Duplantis, Shell

### Nicole St. Amand, Shell Chuck Centore, Shell Kirk Lilley, Kirk Lilley, PLLC Alan Schuler, ADEC, DAQ Gene Pavia, UIC Mark Schindler, Octane, LLC Rodger Steen, Air Sciences Inc. Eric Hansen, ENVIRON In ternational CorporationKulluk NOI December 10, 2010 Page 1 of 4 

### Notice of Intent to Submit an Application for a Minor Source Preconstruction Permit

Kulluk Floating Drilling Platform - Beaufort Sea, Alaska Exploratory Drilling Program

Shell Offshore Inc. (Shell) submits the information below pursuant to the 40 CFR Part 55 Outer Continental Shelf (OCS) Air Regulations, Section 55.4 Re quirements to submit a Notice of Intent (NOI). Paragraph 55.4(b) lists nine specific requirements for exploratory sources to be included in the NOI. Each of the requirements is paraphrased below followed by Shell’s response.

Requirement No. 1 - 40 CFR 55.4(b)(1): General company information.

The pertinent owner, owner’s agent, and facility contact information is presented in Table 1.

Table 1: Company Information

Owner and Facility Contact

Name Shell Offshore Inc. Address 3601 C Street, Suite 1314, Anchorage, AK 99503 Contact Mark Duplantis Contact phone number (907) 646-7122 Contact e-mail address Mark.Duplantis@shell.com Owner’s Agent

Name Shell Offshore Inc. Address 3601 C Street, Suite 1314, Anchorage, AK 99503

Contact Susan Childs Contact phone number (907) 646-7112

Contact e-mail address susan.childs@shell.com

Requirement No. 2 - 40 CFR 55.4(b)(2): Facility description.

The Kulluk Floating Drilling Platform ( Kulluk ) will be an exploratory oil and gas drilling operation (North American Industry Classification System [NAI CS] code 211111 Crude Pe troleum and Natural Gas Extraction) which will operate on any of the current oi l and gas leases of record , regardless of ownership,
on federal OCS waters located in the Beaufort Sea. These leases are shown on Figure 1.

Each exploration drilling season will fall within the period from July through December, with the Kulluk being an OCS source for up to 120 days within th at period, weather and ice conditions permitting.

The Kulluk, as an OCS source, will have a fleet of associated vessels and it, with its associated fleet, will operate independently of other possible exploration drilling programs and OCS sources. Exploration drilling activities will be conducted from the Kulluk , an Arctic Class IV hull design drilling vessel without self propulsion. The Kulluk is equipped with a drilling derrick, a set of generators to power the drill motors, and other engines for related activities. It will also have boilers for heat and an incinerator. The engines and boilers will be diesel-fueled. The Kulluk’s associated fleet will consist of an ice management component, an oil spill response (OSR) component, possible quartering vessel, and resupply vessels. The purposes of the two ice management vessel s are to re-direct ice floes around the Kulluk when it is drilling
and to handle the Kulluk ’s anchors during connection and separation from the sea floor. The OSR fleet is expected to consist of one management vessel and several smaller (under 50-foot craft) for placing and moving containment floats, if needed. These small crafts will normally be st ored on the management vessel and will only be in the water for exercises and emergency oil spills. A more complete descriptionKulluk NOI December 10, 2010 Page 2 of 4 of the Kulluk and associated fleet, including photographs and diagrams, will be provided in the air permit application.

Requirement No. 3 - 40 CFR 55.4(b)(3): Estimate of the proposed project’s potential emissions (PTE) and Requirement No. 4 – 40 CFR 55.4(b)(4): Description of all emission points including associated vessels.

Pursuant to 40 CFR 55.2, Shell currently defines the Kulluk as an OCS source between the time the Kulluk is declared by the Kulluk ’s on-site company representative to be secure and stable in a position to commence exploratory activity at the dr ill site through the time that the Kulluk ’s on-site company representative declares that, due to retrieval of anch ors or disconnection of anchors, it is no longer sufficiently stable to conduct exploratory activity at the drill site. 40 CFR 55.2 also specifies that vessels servicing or associated with the OCS source shall be considered as part of the OCS source’s potential to emit (PTE) determination while at the source and en ro ute to or from the source, when they are within 25 miles (40 km) of the source. The project’s primar y air contaminants include nitrogen oxides (NO
x ), carbon monoxide (CO), small-diameter particulate matter (PM 2.5 ), volatile organic compounds (VOC), and sulfur dioxide (SO 2 ). Emissions of each criteria pollutant during the time that the Kulluk is an OCS source as defined above, including emissions from its associated fleet, are estimated to be less than the 250-ton per year threshold for major source (PSD) New Source Review so the Kulluk will be a minor OCS source. The project’s annual emissions of hazardous air pollutants (HAPs) will be well below the applicable 10-ton single HAP/25-ton all HAPs major source MACT threshold.

The Kulluk’s sources are expected to consist of six emission unit groups. Four of the emission unit groups consist of diesel engines, the fifth consists of boilers, and the sixth consists of an incinerator. Of the four engine groups, the first consists of the primary generato rs used for drilling, and th e second consists of the engines powering the hydraulic pump units [HPUs] which are used only for drilling the mud line cellars. The third group consists of the cranes, and the fourth group consists of unspecified small and seldom used engines. The associated fleet of vessels incl udes ice management vessels, an oil spill response vessel, possible quartering vessel, and resupply vessels; all of which have propulsion engines, generators
and other miscellaneous sources of emissions. Cu rrent estimates of the project’s potential annual emissions, including both Kulluk sources and associated fleet so urces are presented in Table 2.

Table 2: Kulluk Estimated Potential Annual Emissions (PTE)

Emissions NO x (tpy) CO (tpy) PM 10 (tpy) SO 2 (tpy) VOC (tpy) HAPs (tpy)

Kulluk Ice Management Fleet

OSR Fleet Quartering Vessel

Total Kulluk and Fleet 240 160 70 3 36 3

Notes: < = less than
CO = carbon monoxide HAPs = hazardous air pollutants
NO x = nitrogen oxide
PM 10 = particulate matter the size of 10 micrometers or less
SO 2 = sulfur dioxide VOC= non-ethane and non-methane volatile organic compounds tpy = tons per yearKulluk NOI December 10, 2010 Page 3 of 4 Requirement No. 5 – 40 CFR 55.4(b)(5) : Estimate of quantity and type of fuels and raw materials to be used.

The estimated annual diesel fuel consumption is six million gallons. Shell would only purchase UltraLow-Sulfur-Diesel (ULSD) for both the Kulluk and its associated fleet sources. ULSD contains a maximum of 15 parts per millio n (ppm) sulfur grade of fuel.

Requirement No. 6 – 40 CFR 55.4(b)(6): Description of proposed air pollution control equipment.

In addition to the purchase of ULSD as stated abov e, and subject to additional engineering evaluation, Shell intends to employ the following control equipment:

 Selective catalytic reduction (SCR)/oxidation catalysts on the Kulluk primary generators which are the drilling engines to control NO
x , PM, VOCs, and CO emissions.

 Selective catalytic reduction (SCR)/oxidation catalyst on the ice management vessels’ main propulsion engines to control NO
x , PM, VOCs, and CO emissions, if vessels are available on which these controls are already or can be installed.

 Oxidation catalysts on the larger of the remaining Kulluk engines.

Requirement No. 7 – 40 CFR 55.4(b)(7): Proposed limitations on source operations or any work practice standards affecting emissions

.

Shell will seek several enforceable permit limits on emissions that could include, but not be limited to, one or more of the following:

 Diesel fuel quality: Kulluk and associated fleet wi ll use only ULSD fuel.

 Daily NO
x and PM emissions from each emission unit group will be capped.

 The OCS source will be limited to 120 days per year.

Requirement No. 8 – 40 CFR 55.4(b)(8): Other information affecting emissions.

None at this time.

Requirement No. 9 – 40 CFR 55.4(b)(9): Such other information as may be necessary to determine the applicability of onshore requirements.

Most of the Beaufort Sea leases are within 25 miles of the Alaska seaward boundary and are subject to Alaska regulation. The Corresponding Onshore Area for the Kulluk in the Beaufort Sea and within 25 miles of the Alaska seaward boundary is the Northern Alaska Intrastate Air Qu ality Control Region that has been classified by the Alaska Department of En vironmental Conservation (ADEC) as an Air Quality
Class II area.

Requirement No. 9 – 40 CFR 55.4(b)(10): Such other information as may be necessary to determine the source's impact in onshore areas.

Information needed to determine the impact of the Kulluk OCS source in onshore areas will be provided later in a permit application to EPA Region 10.Kulluk NOI December 10, 2010 Page 4 of 4 Figure 1: Beaufort Sea Current Lease Block