Protesters blocked port entrances and the US city declared that Shell and its maritime host lacked a proper permit.
Seattle issued a violation notice, saying use of Terminal 5 by a massive floating drill rig breached the site’s permitted use as a cargo terminal.
The 400ft Polar Pioneer and its support tug Aiviq must be removed from the terminal or Shell’s host, Foss Maritime, must obtain an appropriate permit, the Seattle Department of Planning and Development said.
The companies can appeal and possible fines start at $150 a day (£96) and can rise to $500 (£320). The notice says the violation must be corrected by June 4.
“It remains our view that the terms agreed upon by Shell, Foss and the Port of Seattle for use of Terminal 5 are valid, and it’s our intention to continue loading-out our drilling rigs in preparation for exploratory drilling offshore Alaska,” Shell spokesman Curtis Smith said.
“Terminal 5 is permitted to tie up ships while they are being loaded and unloaded,” Foss Maritime spokesman Paul Queary said. “That is exactly what Foss is doing there.”
Mr Queary noted that both Foss and the Port of Seattle were appealing against an earlier determination by the city that the use of Terminal 5 was not permitted. Yesterday’s notice followed that ruling.
Earlier, protesters spent several hours blocking entrances to the terminal where the rig will be loaded before heading to waters off Alaska this summer.
Holding banners and flags, demonstrators marched across a bridge to Terminal 5, temporarily closing the road during the morning rush hour. Once at the terminal, they spread out across the entrances and rallied, danced and spoke for several hours before leaving the site in the early afternoon.
Organisers had prepared to engage in civil disobedience to stop work on the drill rig, but Seattle police said no one had been arrested and the demonstration remained peaceful.
The mass demonstration was the latest protest of the Polar Pioneer’s arrival in Seattle. Protesters greeted the rig last Thursday, then hundreds of activists in kayaks and other vessels turned out on Saturday for a protest dubbed the Paddle in Seattle.
Mr Smith said the “activities of the day were anticipated and did not stop crews from accomplishing meaningful work in preparation for exploration offshore Alaska this summer”.
There were minimal operations at Terminal 5, “so there’s not much to block”, Port of Seattle spokesman Peter McGraw said.
Activists say they are concerned about the risk of an oil spill in the remote Arctic waters and the effects that tapping new frontiers of oil and gas reserves will have on global warming. Officials in Alaska have touted the economic benefits that drilling could bring there and to the Pacific Northwest.
Protesters of all ages sang, rapped and danced at the vehicle gate of Terminal 5. They chanted and held signs saying “Climate Justice For All” and “You Shell Not Pass”.
Musician Lisa Marcus, 58, who participated in Saturday’s protest, turned up with her “Love the planet” sign for another day of activism.
“We’ve got to wake up” to the dangers of human-caused climate change, she said. “Shell is trying to make it worse and that’s not acceptable.”