The EPA said the settlement involved air permit violations during work in the Chukchi and Beaufort Seas in Alaska.
The EPA said Shell agreed to pay $710,000 for Discoverer violations and $390,00 those by the Kulluk .
The U.S. Interior Department had said Shell went ahead with plans last year even though it lacked key components of its drilling program. The department said there were weaknesses in the way Shell managed contractors, which the government said led to many of the company's problems.
"Based on EPA's inspections and Shell's excess emission reports, EPA documented numerous air permit violations for Shell's Discoverer and Kulluk drill-ship fleets, during the approximately two months the vessels operated during the 2012 drilling season," the agency said in a Thursday statement.
Kulluk ran aground off Alaska while being towed to Seattle in December. The grounding followed a 2012 exploration season in the arctic waters of Alaska that was complicated by equipment failures and extreme weather.
In February, Shell announced it was suspending its exploration campaign for 2013 to ensure its equipment and personnel are ready to proceed safely.