NRCan Oilsands presentation

8/2/2019 NRCan Oilsands presentation

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Oil Sands: Opportunities andChallenges for North America

"Geography has mad. usneighbours. History has made us friends.Economics has made us partners. And necessity has made us allies."John F. Kennedy, Address to Canadian Parliament, 1961.. + . =_ =....aturole.

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Canada and the US - the most integratedenergy relationship in the World

Net imports of Natural Gas to the US,bysource - 20089 %With an integrated US-Canada energy market91% Climate change and energysecurity are the crucial issues

Net Imports of Crude Oil and PetroleumProducts to the US,by source - 2008

27% 20% We have a common agendato address these issues

And oil sands are at thenexus of this dialogue

Source: Energy Information Administration

53%

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Canada and the U.S. both benefit from our highly integrated energy markets. Canada supplies the U.S. with more energy, with greater security and reliability, than anyother country in the world.

Canada and the U.S. operate free market systems where energy companies operate freelybetween both jurisdictions, and pipelines and transmission lines cross boundaries across the49th parallel,. Canada is the largest energy supplier to the U.S. of oil, natural gas, uranium and electricity.

This relationship underpins the two fundamental issues of energy security andclimate change Canada and the US need to work together to address these issues - and the clean energydialogue agreed to by our Prime Minister and President Obama is a part of that And, at the heart if this, is finding a way to develop the vast and strategically important oilsands in a sustainable wayKey Facts In 2007, Canada supplied the US with: Crude oil and Petroleum products: 18% of imports; 12% of total supply Natural Gas: 82% of imports; 16% of total supply Electricity: 98% of electricity imports; 1% of total supply (Our net exports of electricity dorepresent about 1% of US supply, -40 Terawatt hours (Twh) versus -4000 Twh used in theUS)

Uranium: More than 25% of the uranium used to fuel US reactors (powering about 5% of USelectricity supply) 20 pipelines (9 natural gas and 11 oil) and 33 transmission lines cross boundaries across the49th parallel

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The flow of crude oil from Canada is akey component of this relationship

All numbers in ' 000 barre ls per dayCanadian Crude Oil Production 2.766 I:l i!

-1,824 Oil sands supply overhalf of Canada's crudeexports to the US'This share is projected>tQi'growover time'

....--------.US companies areamong the largestinvestors in oil sandsoperations

Canada's exports of crude oil into the US exemplify this energy relationship It is Canada, not Saudi Arabia, that supplies the most crude oil to the US We estimate that oil sands derived crude make up the majority of crude exported tothe US Canadian, US and firms from around the globe have invested in developingCanada's oil resources, including the oil sands

Key Facts In 1990, Canada produced1.7 million barrels per day, of which 0.6 million barrelsper day (or 39%) was exported By 2007, Canada produced 2.8 million barrels per day of crude oil, 67% (1.8 millionbarrels per day) was exported

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Canada's oil sands potential is vastand largely untapped

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Ultimately recoverablereserves estimated at315 billion barrels

S ou rc es : O il a nd G as J ou rn al. A lb er ta E ne rg y R es ou rc es C on se rv atio n B oa rd . th e O E CD4

The oil sands are not only important in terms of current production, but alsofor their untapped potential

Oil sands make up 97% of Canada's oil reserves Oil sands also contain thelargest bitumen resource in the world; with 1.7 to 2.5 trillion barrels ofbitumen in-place The Alberta Energy Resource Conservation Board estimates that 315 billionbarrels of bitumen could ultimately be recovered by the time all productionhas been completed.

Key Facts US oil reserves, 21.3 billion barrels Canada's conventional oil reserves, 5.4 billion barrels The "in place" volume is the total hydrocarbon content of the oil sandsresource - this contrasts with reserves, that are the technically andeconomically recoverable portion of oil sands.

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Oil sands place Canada2nd in world oilreserves

World 011ReservesSeven countries have about ~ ofthe world's known oil reserves300r-------------------~

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~ 200' "~ 150.2~ 100

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Saudi CanadaArabia

Iran Iraq Kuwait Venezuela UnitedArab

EmiratesS ou rce : R ese rv e dat a, Oi l a nd Gas JOIXnaI. December 2 2. 2 008 - 'Work! Reserves~ image. CAPP 5 S au di Arabia and K l INa i t' s f ig u re s I n cludes ha lf o f t h eSaud i -Kuwa it i " n eu t ra l z one" , wh ich has 5 b iU ionba r rel s of oil.

This has led to Canada being second only to Saudi Arabia in terms of provenoil reserves

Among the seven largest oil reserves countries in the world, Canada is theonly one that is not a member of OPEC Also, Canada's oil market is not nationalized, development is made byprivate industry including many of the major international oil companies suchas Chevron, Exxon and ConocoPhilips

In terms of world oil reserves, 87% of these are state owned or statecontrolled Only 13% is openly accessible to international oil companies Almost half of that accessible oil is located in Canada's oil sands These seven countries represent about % (74%) of the world's known oilreserves

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The oil sands are needed as wetransition to a new energy economy

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Canada, like others, ispreparing for a long term shiftaway from fossil fuels Targets and investments inrenewables, cleaner fossilfuels, energy efficiency, etc.

But this transition will be a longone and oil will be a dominantfuel for decades

There is also a world-wide shiftto heavier crudes, as lightercrudes are depleted - oil sandsare a part of this trend

World Energy OutlookPrimary Energy Demand 2006' 2 : ] e s" . Q DeoalDGasD Non-Emittlng

34%

This cllmale policyscenario assumesatmospheric CO2slebilization at 450 ppm.

Source: International Energy Agency. World Energy Outlook. 2008 6

Canada, along with the rest of the world, are preparing for a long term shift away fromfossil fuel use through:- raising energy efficiency standards- sett ing targets for biofuel use in transportation- a goal of meeting 90% of electricity needs from non-emitting sources- major investments in wind, solar and other renewables

The lEA made two climate change policy forecasts, one where C02 stabilizes in theatmosphere and 550 and a more stringent one where C02 stabilizes at 450 ppm.

The lEA's WEO most stringent climate change scenario, fossil fuels account for 67% ofthe world's primary energy mix in 2030 - with oil remaining the dominant fuel

- Non-emitting includes, nuclear, hydro, biofuels and other renewablesKey Facts The Government is committed to reducing Canada's GHG emissions by 20 percent by2020.

- Under the Energy Efficiency Act, Natural Resources Canada (NRCan) is introducing orraising energy efficiency standards for a wide range of energy-using products, includingproposed regulations to phase out the use of inefficient light bulbs by 2012.- We have also commited to set stringent C02 emissions standards for light duty vehicles

- Government would regulate an annual average renewable content of five per cent ingasoline (by 2010) and a two per cent requirement for renewable content in diesel fuel andheating oil (by 2012).

- It has also set an objective that 90 percent of Canada's electricity needs be met by non-emit ting sources, such as hydro, nuclear, clean coal, and wind power by 2020.

- The Government is also making investments in a series of ecoENERGY initiatives to helpCanadians use energy more efficiently, boost renewable energy supplies and develop newcleaner technologies

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This makes the oil sands a strategicNorth American resource ...

The global economic Canadian Oil Production Forecast 20082020slowdown aside, ~ 5,000,----------------,Canada Will continue i::~~~-------=--.IIl(=.:.s.;.;;.;.to be a major oil - a l 3,500+---------".......,::...-=producer and exporter ~ 3,0008 2,500e 2,000g 1,500 The oil sands will be a g 1,000growing component of 50~Canadian production

.. Light, medium, heavy and offshore .. Oil SandsSour ce : C a na di an A s so ci at io n o f P e tr ol eum P ro d uc e rs , D e cem be r 2 00 8

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Canada's current oil production includes a large portion of oil sands crude This forecast is from CAPP, the dashed line shows the total from CAPP'sprevious forecast in June 2008

It shows that the economic slowdown will likely lead to delays in oil sandsprojects, but we are still seeing projects come on steam in the future

Our current forecasts show oil sands crude becoming an increasing greatercomponent of Canada's production, in fact, with out the oil sands, Canada'scrude production would be declining as conventional and offshore fieldsbecome depleted

The recent financial turmoil has impacted the availability of capital and theprice of oil, leading to project deferrals in the oil sands as producers aim tobridge this uncertainty

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Baseline forecasts show large increases in GHG emissionsdespite ongoing efforts to reduce energy intensity

Growing oil sands production will increase demand for wateruse from local rivers

Mining projects have important waste water and land usechallenges

The slow down in oil sands activity provides an opportunity tofocus on the next stage of their development/ 8

While we expect Canada's oil sector to continue growing in the longer term,we now have an opportunity to focus our efforts on the next stage ofdevelopment

Federal and Provincial Governments are committed to ensuring futuredevelopment is sustainable, that means addressing the environmentalimpacts of oil sands on the air, water and land:Air: Oil sands production and upgrading are more energy intensive thanthe production of light oil and, as a result, create more GHG emissions.Oil sands industry currently accounts for approximately 5 per cent ofCanada's total emissions.Water: There are a number of environmental concerns associated withincreasing water usage in the oil sands sector. These include thepotential negative impact on the aquatic ecosystem, the removal ofwater from the watershed (both surface and groundwater) and the largetailings ponds that are being created.Land: The Athabasca oil sands deposit is situated wholly withinCanada's boreal forest with large individual mine sizes. The in-situprocess requires no excavation and less surface area for operation butis associated with fragmentation of the forest from the construction ofnew roads in the area, seismic lines and exploration well sites.

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GHG Emissions Life cycle GHG fuel emissions of oilsands are 10-25% higher than fromCanadian light crude But improvements are being made

GHG intensity reduced on average by32% between 1990 and 2006

And there is a plan for greater improvement The Government of Alber ta Legislation passed in 2007 required an

immediate 12% reduction in emission intensity for large emitters The Government of Canada has committed to reduce our total GHGemissions by 20% by 2020, and 60 - 70% by 2050

While the extraction and processing of oil sands crude can be as much as 2 to3 times more GHG intensive than lighter crudes, over the life cycle of the fuel,from extraction to use, oil sands emissions are 10-25%higher than lightCanadian crudes This gap is lower for other heavier crudes imported into the USOverall emissions from oil sands facilities are about - 5% of Canadian GHGemissions The government of Canada has made a commitment to significantly reduceemissions from the economy with specific targets for the oil sands sector. Proposedregulations included a standard based on the application of carbon capture andstorage. While we are not mandating the use of any particular technology, we arecalling for significant reductions in the GHG emissions from oil sands facilities . Alberta introduced regulations for large industry in 2007. Facili ties that emit over100,000 tonnes annually are required to reduce their emissions intensity 12%.Facilities built after 2005 are assigned a target of 2% in the third year of operation,this is increased 2% annually until they reach 12%. Three compliance optionsavailable: improve the energy eff iciency of their operations, buy carbon credits in theAlberta-based offset system or pay $15 into the Climate Change and EmissionsManagement Fund for every tonne over their reduction target. Facilities could alsochoose a combination of the options.Key Facts When assessing GHGs associated with oil sands production it is important toacknowledge that the life cycle basis for GHG emissions is what counts and thataround 75 - 80 % of life cycle GHG emissions from gasoline arise from combustion(in other words from the tailpipe) with only 20 - 25 % generated from upstream orfrom source.In 2007, the Province of Alberta became the first jurisdict ion in North America tointroduce GHG regulations on industry. Facilities that emit over 100,000 tonnes ofcarbon dioxide annually are required to reduce their emissions intensity by 12%. Asystem of carbon credits and a Technology Fund has been established, but theobjective is real emissions reduction.

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Energy Intensity Oil sands development is about 2-3times more energy intensive whencompared to light western Canadiancrude and consumes large amounts.of natural gas

However, much of this energy is derived from the oil sands crude itself Mining and processing oil sands crude consumes about as much external

energy as for l ight crude Governments and industry are investing inways to improve efficiency andfind alternatives to natural gas use

new technologies are being developed that have the potential to significantlyreduce energy use

Source: GHGenius, Version 2. 14 b 10

Since oil sands crude is an extra heavy crude oil, extraction and processingis energy intensive and can consume large amounts of natural gas It takes about 2-3 times more energy to deliver a unit of gasoline derived byoil sands crude vs. light western Canadian crude However, since much of the energy comes from the bitumen itself, extractingand processing crude from an integrated mining operation or from lightwestern crude consumes about the same amount of external energy (interms of natural gas, electricity and diesel fuel)

Oil sands producers who use steam to mobilize the crude below the groundand then pump it to the surface do use large amounts of natural gas, as thisis a significant cost to operators, they are seeking ways of improvingefficiency and finding alternatives It is often said that burning natural gas to develop the oil sands turns a cleanfuel into a dirty fuel or "gold into lead". While we support the industry's shiftaway from natural gas, it is important to note that within the world economy, itis liquid transportation fuels which are prized over other forms of energy, atthis is what oil sands and other crude oil producers are responding to.

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Water Use Significant use of water - net 1 to 4barrels of water for each barrel of oil But there have been improvements

75% - 90% of water use is recycled Oil sands operat ions are increasingly Trucks carry 01 1sands to crusher where wannmoving to the use of brackish water water Is added.

And a regulatory framework that supports ongoing improvements The Federal and Alberta Governments' 'Water Management Framework' for

the oil sands Provides ongoing oversight that can react to changes in water availabilityand establishes weekly maximum water withdrawals

All existing and approved oil sands projects allocated to withdraw less than3% of the average annual flow of the Athabasca River

Target has been set for a 30% improvement for water use efficiency by 201511

In the oil sands industry, water is required to help extract the oil from thesands and to help create hydrogen to improve the quality of the oil andremove impurities. While oil sands producers already recycle a Significant amount of the waterthey use, the use of fresh water in the oil sands impacts local rivers Water use in the oil sands areas is regulated through a system of licensingand monitoring. In 2007, the federal department of Fisheries and Oceans and the AlbertaDepartment of the Environment released the" Water ManagementFramework" document for the oil sands that looked at oil sands needs andthe river needs for the medium term and ensures ongoing oversight that canreact to changes in water availability in the Athabasca River basin. Thisframework sets maximum water withdrawals and ensures that oil sandscompanies reduce withdrawals during periods of low flows. All existing and approved oil sands projects are allocated to withdraw lessthan 3% of the average annual flow of the Athabasca River and their actualdraw is much less on average. The province has set a target for the industry of a 30% efficiencyimprovement in water use

Key Facts Surface-mine operations currently use the most water. In a report by the Pembina Institute, the licensed allocation for currentprojects is noted as 11.39 m3/s, and for current and approved projects, 15.54m3/s. According to officials at Alberta Environment, the exlstlnq four majorprojects actually withdraw about 4.15 m3/s from the Athabasca River.

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Since all operators have a zero-discharge policy, all process-affectedwater that is not recycled is kept on-site. In the approximately 35 years of commercial development of the oil sands,almost 190 billion gallons (720 million cubic meters) of a clay tailings orwaste product known as fluid fine tailings has accumulated, with some of thedeposits visible from outer space.

In addition, tailings ponds are toxic and although mitigation measures are inplace to deter wildlife, they are not always effective. The Alberta Government (through the Energy Resources ConservationBoard) has issued new industry-wide criteria for managing oil sandstailings, and specific enforcement actions if tailings performancetargets are not met. The directive specifies performance criteria for the reduction of fluid tailingsand the formation of trafficable deposits. If companies don't comply, they face increased inspections, shutdown ordersand delays in approving any upgrades or improvements. Both levels of government are also taking steps when companies don'tcomply In April 2008, a spring snowstorm led to the shutdown of wildlife protectionmeasures at Syncrude and 500 ducks landed on a tailings pond andsubsequently drowned, both the federal and provincial government are nowcharging Syncrude.

The maximum penalty for the provincial charge is a $500,000 fine, and themaximum on the federal charge on summary conviction is a fine of $300,000or six months imprisonment, or both.

Tailings Ponds Oil sandsmines have largetailings ponds which take yearsto settle But there regulatory safeguardsincluding a zero discharge policyto protect groundwater

A new provincial regulatoryregime requires operators to: prepare tailings plans and report annually reduce the accumulation of fluid tailings

Enforcement where compliance is found wanting

T ailin gs p on ds a lr ea dy c ov er a n a re a o f la ndg re at er t ha n 50 s qu ar e m il es

Safeguards are in effect to protect wildlife and charges are being laidover the death of 1600 ducks last year

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/ ~?and .~~ Oil sands mines are large and 60,000 .- 54,000operate for years - reclamation is j! 50,000slow E 40,000 34,900 But the disturbed land area is limited c r .a:!'!li_I II 30,000 Oil sands mineable area represents e r--; 20,000one tenth of 1% of Canada's boreal I! ! r-forest - c 10,000 1,300 200Iii . .Disturbed area represents about 40% 0 Oil Sands Mineable Disturbed Protectedthe size of LA Area Area Area Areas inAlberta And there are reclamation activities and stringent regulatory requirements 25 sq. miles is currently under act ive reclamation and 7.5 million seedlings

have been planted Companies are required to remediate and reclaim land so that it can support a

range of activities similar to i ts previous use Less than 20% of the oil sands resource ismineable / 13

Companies are required to remediate and reclaim land after the oil sandshave been extracted so it can support a range of activities similar to itsprevious use

While the oil sands area is large, only a small portion has been disturbed bymining operations Only about 20% of the oil sands resource is mineable. The rest is availablethrough in situ, or below the earth extraction methods In situ extraction methods are also impact on the affected ecosystems due tohabitat loss and fragmentation of the forest. However, as they do not requirethe removal of soil, and do not require tailings storage, reclamation may besimpler than for mines. Currently, 25 square miles is under various stages of reclamation, 12% of theland disturbed by oil sands development And about 0.4 square miles have been reclaimed (1 square kilometre) andcertified by the province This land was from syncrude and was replanted in the early 1980sKey Facts Of the total area of Canada's boreal forest (1.2 million square miles),Canada's oil sands are in less than 5% (54,000 square miles), but only aboutone tenth of 1% is oil sands mineable area (1300 square miles). Los Angeles _ the city of los Angeles is 498.3 square miles 1 Km2 = 0.386 mil2

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Governments are addressing thesechallenges through regulatory oversight

The Province of Alberta sets the framework for oil sandsdevelopment through legislation and regulation Mines and Minerals Act Oil Sands Tenure Regulations Oil Sands Conservation Act for the AERCB approvals of oil sands

The Federal Government has important levers Canadian Environmental Assessment Act, Fisheries Act Canadian Environmental Protection Act Navigable Waters Protection Act Migratory Birds Convention Act Species at Risk Act

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Under the Canadian system, the Provinces own their natural resources,including the oil sands, and Alberta sets the framework for oil sandsdevelopment The Government of Canada has more specific regulatory responsibilities forcertain components of the environment, such as the management of fishand fish habitat, migratory birds, navigable waters and other specificinterests with respect to habitat and wildlife protection, water quality, healthand Aboriginal consultations.

Both the Governments of Canada and Alberta clearly recognize that theeconomic and security benefits of our en'ergy resources, including the oilsands, must be balanced by sound environmental stewardship

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Environmental Assessments (EAs) arethe primary tool to achieve results

EAs are a process to predict and evaluate possibleeffects and propose mitigation measures They provide a meaningful opportunity for the publicto influence decisions about projects

Joint Federal/Provincial Review Panels (JRP) Conduct public hearings that address air emissions,groundwater effects, fish and wildlife habitat, uti li tycorridors, transportation issues and socio-economicconcerns

Comprehensive project approval and monitoring Approval renewals every 10 years

Example: Kearl oi l sands mining projectThe JRP for the Kearl project was the first that was required to just ifytheir conclusions regarding the project's GHG emissions. This setsthe stage for similar scrutiny for upcoming projects.

Example: Shell'sJackpine oil sandsmining projectThe JRP maderecommendations thatwere accepted andbecame legalrequirements, for example:1) Develop and implementa f ish and fish habitatmonitoring program2) Provide reporting on thefish habitat compensationlake3) Continued support andparticipation in theCumulative EffectsManagement Association

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Both the federal and provincial government often have legislativeresponsibil ities to conduct environmental assessments on proposals forprojects to develop natural resources, such as the oil sands.

Issues for the JRP include air emissions, groundwater effects, fish andwildlife habitat, utility corridors, transportation issues (trucking vs. pipeline)and socio-economic concerns

Last 4 oil sands mines referred to Joint Review Panel on basis of potentialsignificant adverse cumulative environmental effects From Notice of Application to the Report of the Panel takes about 18 monthswith detailed approval and permitting thereafter It is only after these environmental assessments have been completed thatapprovals can be granted for a project For example, non-oil sands project but one that was not recommended to goforward, Kemess North Gold-Copper Mine - In conformity with the approvalof the Governor in Council, a decision was taken on March 7, 2008 and wasthat the authorities shall not exercise any power or perform any duty orfunction with respect to the project because, after taking into considerationthe report of the review panel and taking into account the implementation ofappropriate mitigation measures, the authorities are of the opinion that theproject is likely to cause Significant adverse environmental effects that cannotbe justified in the circumstances.

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There is improvement but we mustdo better We are investing in new technology breakthroughs toreduce:

tailings ponds Canadian Government labs are leading the development of drystackable tailings which could cut water consumption by half

energy use, GHG emissions and water use New technologies are being pl10ted by industry, such as Toe toHeel Air Injection, VAPEX, JIVE

the use of natural gas Research areas include air injection, gasification of residuebitumen and even nuclear energy as alternatives to natural gas

Industry and Governments are investing substantially tosupport these improvements

Broad areas of Federal research effort include reducing the accumulation oftail ings, improving the efficiency of bitumen extraction and upgradingprocesses, development of process water management, and of methods forthe remediation and risk management of oil sands impacted water, sedimentand soil.

Tailings - By improving the recycle rate of water within mining operations,their will be fewer tailings and they will be easier to manage. This will alsorequire less fresh water from local rivers.

Fresh water - To reduce fresh water use, oil sands operators are turning toother water sources and developing new technologies that do not use steamto make the bitumen flow to wells- Toe to heel air injection is an experimental method that combines avertical air injection well with a horizontal production well. The processignites oil in the reservoir and creates a vertical wall of fire moving from

the "toe" of the horizontal well toward the "heel", which burns the heavieroil components and drives the lighter components into the productionwell, where it is pumped out. (l.e., no steam required)- VAPEX (vapour extraction process) and JIVE (Joint Implementation ofVapour Extraction) - experimental processes that uses hydrocarbonsolvents, instead of steam, to dilute and mobilize the bitumen towardsthe well

Natural gas - To reduce the use of clean burning natural gas, companies areimproving efficiencies and moving to alternative energy sources -

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Canada leads the world in CCS CCS is expensive and energy intensive - but we are committed to make itwork Canadian Governments and Industry are at the leading edge ofdemonstrating large scale commercial CCS projects

Federal Government: $1 B Clean Energy Fund, $400 M for BoundaryDam and other projects under the ecoTECHNOLOGY Initiative Alberta: $2 B for CCS demonstration projects

This leadership involves an important Canada-US component: Weyburn-Midale Project: A project that moves carbon from NorthDakota and stores it in Saskatchewan . North American Geological storage mapping being carried out under theCanada-US Security and Prosperity Partnership Shared research and development work

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Canada and the U.S. are global leaders on CCS; in policy, regulatorydevelopment, primary and applied research, demonstration projects, andstorage mapping.

Significant investments have been made by Canada's federal and provincialgovernments Often, these projects have a Canada-US component

Shared research and development includes:~ The US Department of Energy, British Columbia, and Spectra EnergyInc.'s acid-gas injection feasibility study is part of a larger initiative topursue a large-scale CCS project."'A project under the Security and Prosperity Partnership has Canada,the U.S. and Mexico collaborating on mapping the storage potential ofour geological basins. The countries are sharing methodologies,databases, and integrated products such as C02 sources/sites maps.'" The Canada-California Strategic Innovation Partnership is a university-led partnership between Canada and California. It launched a $2 Mrequest-for-proposals in October 2008. Sustainable energy is a priorityfor the Partnership, and supporting the demonstration of a breakthroughCCS capture technology will be a key focus.~Stanford University's Global Climate Energy Project plans to work withCanada on a joint CCS workshop.

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/.~ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

Canada and the US face commonchallenges ...

"The only technology to mi tigate GHG emissions f rom large-scale fossil fuel usage is CCS lEA 2008NA .G -- --j)

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... and now share a common agenda / ..

On energy and climate change, Canada and the UShave a common agenda to: address long-term energy security in a North Americancontext reduce GHG emissions in all sectors move to lower carbon fuels and cleaner fossil fuels

To pursue this common agenda, Canada and the UShave established a Clean Energy Dialogue As a strategic resource, the oil sands will be central tothis agenda

I 19 The US, specifically the Obama Administration, and Canada share acommon energy and environment agenda.

President Obama's energy and environment agenda (according to the WhiteHouse website) includes:Pledged to promote the responsible domestic production of oil andnatural gas, as has Canada

Increase fuel and energy efficiency, as has CanadaEnsure that 25% of electricity comes from renewable sources by 2025,while Canada has set a target of 90% from non-emitting sources by2020.Develop and deploy Clean Coal and CCS: $3.4 billion from the US, $3billion from Canada

Climate change and energy security were high on the list of priorities whenPresident Obama and Prime Minister Harper met. To pursue their commonagenda, the Leaders established a senior-level U.S.-Canada Clean EnergyDialogue- Expand clean energy research and development- Develop and deploy clean energy technology- Build a more efficient electricity grid based on clean and renewablegenerationUnited States and Canadian officials will meet in the coming weeks to launchthe Clean Energy Dialogue

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Canada's oil sands - key messages j.'_ Oil sands development provides a large and growing amountof crude to the US, enhancing North American energysecurity

There are significant environmental challenges in air, landand water Improvements have been made but we must do better We have the environmental regulatory regime to support theimprovements we need We are investing in CCS and other technologies to make theimprovements we need

We are committed to bring on the oil sands resource in aresponsible way for Canada, North America and the World/ 20

In closing, here is a summary of the key messages from this presentation: The oil sands are strategic to North American energy security But we acknowledge that there are significant environmental impacts fromtheir development While improvements have been made, we need to better

We have or are establishing the regulatory regime to support the requiredimprovements

We are investing in technologies such as CCS to make the improvements weneed We are committed to bringing on the oil sands resource in a responsible andsustainable way for Canada, North America and the World

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And we will get there ...Source: Syncrude

Until the late 1990s, only two companies operated oil sands mines Images from Syncrude - While Syncrude has reclaimed over 4,500 hectaresof land since beginning operations in 1978, it takes many years before theyapply for government reclamation certification. In order to receivecertification, Syncrude must prove the reclaimed land can sustain vegetationand wildlife similar to that before disturbance. More than 300 wood bisonnow graze on land reclaimed from oil sands mining and tailings operations.

Suncor Images - Suncor Energy Inc. is in the process of filling in its firsttailings pond, located next to the Athabasca River and called Pond 1 or TarIsland, partly with composite tailings reclaimed by mixing with gypsum andsand. It is to be ready for reclamation by 2010. Images show a test tailingspond. Certification means public access, if operators require access, there is noability to certify. Syncrude has also received the Alberta Government's firstreclamation certificate for a 1 km2 area known as Gateway Hill. The site wasoriginally used to store overburden and be the early 1980s, the site was nolonger needed and reclamation began. Caution - Gateway Hill represents 0.2% of the total land base disturbed bymines. Gateway Hill did not include tailings materials or waste by-productsthat are proposed to be incorporated into the reclaimed landscape.Stakeholder concerns regarding the reclamation of tailings waste are far frombeing resolved.

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"How we produce and use energy is fundamental to oureconomic recovery, but also our security and our planet"President Obama, Ottawa, Feb. 19, 2009 .

. + . Na t u ra l R e s oun : : esca.-

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A strategic resource for Canada,North America and the worldThe oil sands are a strategic resource that is important for energy security in Canada, NorthAmerica and the world. The oil sands comprise 97 percent of Canada's 178 billion barrels of oilreserves. With rapid increases inproduction over the past few years, the oil sands now providealmost 1.5 million barrels of crude oil per day. Although 6 billion barrels of oil sands crudeoil have been produced to date, this represents only a small portion of the overall resource.Therefore, we expect ongoing growth in oil sands production in the coining years.

Sources: Oil & Gas Journal, Alberta Energy Resources Conservation Board,Organisation for Economic Co-operation and Development

1+1 Governmentof Canada Gouvernementdu Canada

Like other significant crude oil sourcacross the world, the oil sands will be needeto meet growing oil demand over the comindecades. Even with the investments thworld governments, including Canada, neto make in renewables, in efficiency, ain other measures to support a low carboenergy future, the International EnergAgency's World Energy Outlook for 200still expects world oil demand to grow1 percent per year to 2030.The challenge is to develop this resourcin a sustainable way. Like other emerginoil sources, oil sands development ha significant environmental footprinThrough our regulatory regime and ne

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~nological developments, Canada is~tted to develop this needed resourcein a sustainable and responsible way andcontribute to world energy security.The oil sands are a mixture of sand, clay,water and an extra-heavy crude oil known asbitumen. They can be extracted using twomethods, depending on how deep they arebelow the earth's surface. About 19 percent ofthe oil sands resource is near enough to thesurface that it can be accessed through open-pit mining. The ore is dug up and mixed withwarm water to recover the bitumen from thesand. The remaining oil sands reservoirs aretoo deep to mine and some form of in siturecovery is required to extract the bitumen.The most common method of in situ oilsands production involves pumping steamunderground to separate the bitumen from thesand and recover the bitumen through wells.Raw bitumen cannot be shipped becauseit is too heavy to meet pipeline regulations.Bitumen is either blended with lighterhydrocarbons to allow it to flow freely inpipelines or it is upgraded at or near thepoint of extraction. Upgraders are similarto refineries and specialize in transformingbitumen into a light, sweet crude oil that oftensells at a premium price to benchmark crudeoils such as West Texas Intermediate (WTI).

Sour ce : S y nc ru de C a na d a

Density range of select crude blends by country of orig

Source: United States Energy Information AdministrationSelect API gravities by country: Venezuela: Bachaquero 17- TiaJuana Ligh31; Mexico: Maya aao - Isthmus 33;Canada: Hardisty Heavy aao - CanadiaPar 40; Saudi Arabia; Arabian Heavy a7 - Arabian Light 34;Kuwait; Kuwa31- Khafji a8; Iran: Heavy 30 - IGrkuk 36; Nigeria: Forcados 31c - BonnyLight 37; UAE:Fateh 3ao - Murban 39

Oil plays a dominant role in meeting the world's curreenergy needs and this situation is expected to continue fyears. As the more easily accessible lighter crude oils adepleted around the world, countries are turning increasinglto heavier oil resources. In fact, many of the main crudeexporting countries provide several crude oil blends to tglobal market, ranging from light to heavy. Canada, wiits range of lighter crude oils and bitumen resources, isexception.

Production and investment

Oil sands production is driven by the private sector, wimajor investments from companies based within Canadthe United States, Europe and Asia. Since the first oil sanproject in 1967, oil sands crude production has grownthe technologies to extract and process the resource habecome more cost-effective. Past estimates have indicatethat about $100 billion would be invested in oil sands projecbetween 2000 and 2020. While the economic downturn athe associated decline in world oil prices has led to delays

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se}Q"al oil sands projects, current oil sands crude productionis\--11 expected to rise from 1.45 million barrels per day in2009 to more than 3 million barrels per day by 2020. Thisproduction would contribute to Canada's overall crude oilproduction, which is forecasted to rise to 4.2 million barrelsper day by 2020, despite declining production from othersources.

Canada's forecasted oil production to 20204000~------------------------~--------~

S4000+--------------------------=. .~ 3000+----------------=j!. 3000+---='g ~ 2000~ ~ 2000G o J:I 1000~ 1000- 500

o

Graphic source: Canadian Association ofPetroleum Producers. December 2008.Photo source: Syncrude Canada .

In Canada, the provinces are responsible for their naturalresources, including the. oil sands, and set the frameworkfor their development. The Government of Canada hasor shares specific regulatory responsibilities for issues ofnational interest, including environmental protection.' Boththe federal and provincial governments in. Canada -clearlyrecognize that the economic and security benefits of ourenergy resources, including the oil sands, must be balancedby sound environmental stewardship.

As for other fossil fuels, the extraction andprocessing of oil sands crude has led tenvironmental concerns over greenhousegas (GHG) and air pollutant emissions, wateuse and tailings ponds, and the impacts onthe boreal forest.

Addressing environmentalimpactsOil sands development is subject to stricenvironmental standards that are among themost comprehensive in the world. Oil sandsprojects require environmental assessmentsbefore they can be approved by governments.Extensive environmental monitoring andreporting is also required by governments.GH G emissions: Oil sands facilities accountfor approximately 5 percent of Canada'sGHG emissions and these facilities will berequired toreduce theirGHG emissions underthe Government of Canada's commitment toreduce total emissions by 20 percent from2006 levels by 2020. This goal is supportedby investment, including a $ l-billion fund tosupport clean energy technologies.Water. use anti quality: Oil sands facilitiesrecycle thetnajority ()ffhe4- water use; butone to four new barrels of water are needed toproduce eachbarrel ofcrudeoil. Much of thiswater comes from the Athabasca River and

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~ederal and provincial governments~anaging this water use by settingwithdrawal limits from the river. Toprotect the quality of the river water,any water used in oil sands production isstored in tailings ponds. The provincialgovernment has established performancestandards to reduce the accumulation oftailings that result from the oil sandsmining process.Boreal forest: Canada's boreal forestcovers 3.2 million square kilometresacross the country. The oil sandsmineable area is situated in this forestand represents only one tenth of1 percent of the forest's area. Todate, oil sands mining has disturbedapproximately 530 square kilometres ofland. Companies are required by law to. remediate and reclaim land after the oilsands have been extracted so the areacan support a range of activities similarto its previous use.

Using t~chnology to achieve sustain abilityThe challenge of developing the oil sands resource as cleanerenergy will be met with the development of new, environmentallyfriendly technologies. Innovation provides opportunities toreduce the impacts of oil sands development, and industry andgovernments are making substantial investments to supportrange of new technologies.New technologies will reduce water use, energy use, and GHGemissions. In situ technologies that reduce steam requirementsare being developed and piloted by industry. These technologiesuse either alternatives to steam, such as solvents, to movethe bitumen towards the wells, or they employ radically newtechniques, such as heating the bitumen through electricity othrough in-place upgrading. In addition, some companies areusing sources other than freshwater to generate steam.Oil sands mining research includes processes to better separatethe bitumeri from the sand and to reduce the water requirements.More efficient water use and better recycling through thedewatering of tailings will reduce the need for large tailingsponds as well as freshwater requirements from nearby rivers.Advances in upgrader technologies include innovativecombustion techniques, such as gaSification, that could reducethe industry's reliance onnOlturalg~,~~i1~also epabling the useof other transfonnative technologies,~.~Gh as carbon capture andstorage.

The oil sands are a strategic resource for Canada, North America and theworld. Although there are challenges associated with their development, Canadahas a regulatory framework to address these issues. Through implementingperformance-based regulations and supporting technological innovation, we are

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