Responsible Canadian Energy Progress Report for the year ended December 31, 2011

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responsible canadian energY 2 0 1 2

P R O G R E S S

R E P O R T

S U M M A RY

View the full report online at www.capp.ca/rce


President’s Message

Table of contents President's Message.............................................3 About the RCE Program.................................... 4-5

On behalf of the Canadian Association of Petroleum Producers (CAPP) and all of our member companies, I am pleased to present the 2012 Responsible Canadian Energy (RCE) progress report.

Governance....................................................... 6-7 RCE Advisory Group and Statement................. 8-9 Performance Overview.................................. 10-11 People........................................................... 12-15 Air.................................................................. 16-19 Water............................................................. 20-23 Land.............................................................. 24-27 Canadian Upstream Oil and Gas Snapshot . 28-29 National Data Table....................................... 30-31

The overall industry performance outlined in the report largely speaks for itself. The report identifies areas where upstream oil and gas sector performance continues to improve, as well as areas where our industry must focus our efforts to deliver performance improvements. What the report does not fully capture are the broader social values and beliefs against which the industry operates, and the expectations Canadians have of industry and governments to ensure demonstrable performance gains over time in the areas that matter most to them – including safety, use and protection of fresh water, land and biodiversity, and air emissions. In this regard, we recognize that while regulatory approvals are a necessary condition and therefore remain extremely important, the external context in which the oil and gas industry operates requires that there also be broader “social license” for our activities. Social license is larger than any one of safety, water, air or GHG performance, economic benefits or our need for reliable energy. It’s a combination of all of these considerations underscored by the sincere belief that the upstream oil and gas industry – both companies and individuals – will behave responsibly and in the broader public interest.

Emerging Issues: Shale Gas........................................................32 Tight Oil............................................................32

The objective of CAPP’s Responsible Canadian Energy report is to ensure our performance reporting is credible and transparent, with the view that this will allow us collectively to assess how we are doing and to identify and act on opportunities for improvement. Through ongoing improvement in the program and in the performance measures, by implementing industry leading practices, by comparing our performance to other relevant comparators, by working with stakeholders and governments, and by demonstrating performance improvement over time, it should also go some way toward ensuring that our members have the social license necessary to responsibly develop and produce Canada’s oil and gas resources.

Pipeline Safety and Integrity............................33 RCE Award Program..................................... 34-35 About CAPP.........................................Back cover

Cover Photos (left to right): Terra Nova FPSO vessel, offshore Newfoundland and Labrador Photo Credit: Suncor Energy Inc. Oil pumpjack, Dalum, Alberta Photo Credit: Canadian Association of Petroleum Producers In situ operation, Wolf Lake, Alberta Photo Credit: Canadian Natural Resources Limited Oil sands production, Lower Athabasca River, Alberta Photo Credit: Canadian Association of Petroleum Producers

The overall report consists of two parts. The print report provides highlights of our industry’s performance and an overview of performance data for 2011. The website provides more comprehensive data, analysis and commentary regarding our performance in the areas of people, air, water and land for Western Canada, Oil Sands and Atlantic Canada Offshore. Emerging issues related to shale gas and tight oil developments and pipeline safety are also explored in the report, as the industry and regulators strive to ensure industry performance evolves with the application of new technology and the changing expectations of our stakeholders and the public.

Canada’s oil and gas industry delivers energy to Canada and the world in a responsible way every day. This report provides us an opportunity to demonstrate our progress, to be candid about our challenges, and to open the door for a collaborative approach to solutions. We welcome your feedback. Wolf Lake thermal operations. Photo Credit: Canadian Natural Resources Limited

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Testing water in CT wetlands in oil sands. Photo Credit: Suncor Energy Inc.

Responsible Canadian Energy program The Responsible Canadian Energy Program represents a collective commitment by CAPP’s member companies to continuously improve, measure and report performance in the areas of people, air, water and land, and engage collaboratively with the communities in which industry works. The measurement, reporting and analysis of information enables industry to show where it is making progress and where more focus is needed to reduce industry’s environmental footprint, to ensure every worker returns home safely each day and to improve the ways in which it engages stakeholders.

Vision and Principles

Measuring Performance

CAPP’s Board of Governors has endorsed the following vision and principles for the Responsible Canadian Energy Program.

The Responsible Canadian Energy Program focuses on four key performance areas: people, air, water and land. Objectives have been developed for each of the focus areas and are stated at the beginning of each section of the report. CAPP has standard metrics to assess industry’s performance in each of these areas and to evaluate performance against the objectives. Based on performance, this report outlines how, through continuous improvement, the industry is progressing toward meeting its Responsible Canadian Energy vision and principles.

We will conduct our business activities in a safe and sustainable manner, balancing social, economic and environmental considerations. We will hold each other accountable and measure ourselves against the following principles: • Provide a safe and healthy workplace for our employees, contractors and for the communities in which we work, with a goal to do no harm; • Conduct our activities in an environmentally responsible manner; • Engage our stakeholders in open and responsive communications; • Create opportunities for economic and social benefits in the communities in which we operate, at a local and national level; and, • Conduct our business activities with integrity, ensuring all people are treated with dignity, fairness and respect.

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Data on key metrics is gathered on an annual basis from CAPP members, as well as from government and regulators, and reported to illustrate industry’s performance. Examples of leading practices and case studies are also presented in this report to show the types of projects, technologies and innovation that are driving forward performance of the industry. See pages 30-31 for the complete National Data Table.

Responsible Canadian Energy progress report The Responsible Canadian Energy progress report provides data, information, trends and performance analysis, including descriptions of the significance and relevance of the program’s key performance areas. The goal of the publication is to put performance information into context to support an understanding of what the data is telling us and where industry needs to improve its performance. The 2012 report presents 2011 industry data and analysis.


LDERS/SOCIAL LICEN KEHO SE STA

Governance

RD OF GOVERNO P BOA RS CAP

CAPP EXECUTIVE

CAPP’s mission is to enhance the economic sustainability of the Canadian upstream petroleum industry in a safe and environmentally and socially responsible manner, through constructive engagement and communication with governments, the public and stakeholders in the communities in which we operate.

The Responsible Canadian Energy report is an important annual deliverable for CAPP and the upstream oil and gas sector. It is a key element of the broader Responsible Canadian Energy Program. The program is overseen by the manager, corporate responsibility and is supported by a team of staff across the organization, with input from members.

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Allan Knight Chair of the Board, Canadian Association of Petroleum Producers

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G

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RCE ADVISORY GROUP

RCE PROGRAM MANAGEMENT

It provides a vehicle by which to report on industry performance and provides members with guidelines and tools to improve management systems and support performance improvement. Progress on design and implementation of the Responsible Canadian Energy Program is regularly communicated to member companies and the Board of Governors. To ensure consistent performance reporting across the Canadian upstream oil and gas industry, CAPP has developed its own reporting and data submission guideline. CAPP’s reporting guideline aligns in principle with company, national and international reporting practices. The guideline outlines how data and information is to be submitted to CAPP on a regular basis. Additionally, CAPP and member companies developed guidelines for the management of specific and important areas of operations and engagement. The purpose is to set a baseline for companies to refer to when developing their own management systems. The guidelines developed to date include:

Dave Collyer President, Canadian Association of Petroleum Producers

CAPP MEMBER COMMITTEES

• Air and energy management • Safety and well-being • Stakholder engagement • Water management

• Land management • Community impacts and benefits • Aboriginal engagement

Responsible Canadian Energy Program Governance

CAPP’s Board of Governors is composed G O V E R N A N C E of senior executives from 30 members representing small, medium and large companies. It sets strategic direction and objectives for CAPP to ensure that the mission is achieved.


Responsible Canadian Energy Advisory Group The Responsible Canadian Energy Advisory Group (RCEAG) is composed of leaders representing the safety, environment, labour, Aboriginal, academic, private, finance and investment communities. The RCEAG is an independent body whose role is to advise and challenge industry to effectively manage its risks and continuously improve its performance. They review and provide feedback on the Responsible Canadian Energy report process, the program and the progress industry is making as demonstrated in the annual Responsible Canadian Energy progress report. The RCEAG has reviewed the 2012 Responsible Canadian Energy progress report and the statement reflects the group’s perspective on the progress CAPP members have made over the past year toward achieving the Responsible Canadian Energy vision and principles. For some key performance metrics, data provided by CAPP members has been supplemented by publicly available data from federal and provincial governments and regulators. CAPP will continue to take this approach to provide as complete a picture of industry performance as possible.

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Advisory Group Statement The RCE Advisory Group is pleased to provide the following comments on the 2012 progress report. We hope our observations and recommendations will help CAPP more fully define what RCE entails and to improve reporting on performance in a way that is transparent, credible and meaningful to the public. We note that corporate responsibility reporting by industry in general is continually evolving to greater levels of sophistication and relevance. Public expectations of better performance are increasing and government regulation on its own will not be sufficient to address broader public concerns. The challenge for CAPP members is to move in parallel with changing stakeholder expectations to maintain and enhance their social license to operate. In this broader context, we view the 2012 RCE progress report as presenting an improved assessment of the current performance of the oil and gas industry, though work is needed to augment and improve metrics in certain areas, specifically some dimensions of performance in the land, water and people areas.* We highlight in particular, significant improvements in data collection, analysis and presentation, as well as relevant linkages and comparisons to external governmental data and information sources. However, we are disappointed that progress has not been made on developing water quality and better land disturbance metrics and we recommend active work by CAPP in these areas for the 2013 report.

A key area of concern to the Advisory Group members is that the primary focus on reporting progress against prior years does not on its own adequately demonstrate how the CAPP membership is conducting its businesses in an environmentally responsible manner. A combination of intensity-based and absolute metrics should continue to be used in the report and, as far as possible, these performance metrics should be augmented by contrasting them against industry’s performance in other countries and ideally, against credible environmental benchmarks or standards. Recognizing that it may be challenging and will take time to do comprehensively, Advisory Group members urge CAPP to begin augmenting the RCE report with more robust metrics that help provide this added context, which would aid in understanding and assessing upstream oil and gas industry impacts and benefits and in demonstrating industry performance in the context of broader societal goals. The Advisory Group continues to believe it would be helpful if governments across Canada further clarified their policy direction and expectations regarding cumulative effects, ecosystem limits, and sustainable performance, for example by building on existing land use frameworks and developing or clarifying carbon policies. This would assist in guiding industry actions and would also contribute to greater clarity in performance measurement and reporting.

CAPP members should be given positive recognition for efforts to accelerate technology development and deployment. At the same time the industry should more openly explain what is being done to address areas where performance has not improved (e.g. land reclamation) or has plateaued (e.g., safety performance and GHG emissions). The Advisory Group encourages members to continue working together collaboratively on ways to improve performance across the board in safety, air, land and water. Collaboration should raise the standard of performance across the membership. We respectfully submit these comments to CAPP as our contribution to the continuous improvement of performance for the benefit of all Canadians. *To obtain our statement to the report issued in 2011, and the changes CAPP has made in response over the past year, refer to www.capp.ca/rce

The Responsible Canadian Energy Advisory Group:

Ken Ogilvie

Bonnie D. DuPont

Stewart Elgie

John Lounds

Cameron MacGillivray

RCEAG Chair, Environmental Policy Consultant

Corporate Director, ICD.D

Director, Institute of the Environment, University of Ottawa

President and CEO, The Nature Conservancy of Canada

President and CEO, Enform (Succeeds Wally Baer who retired from Enform in 2012)

The Honourable A. Anne McLellan Bennett Jones, LLP

Dr. Robert (Bob) Page

Gary Redmond

Chris Smillie

Robert Walker

Director, Enbridge Centre for Corporate Sustainability, University of Calgary

Executive Director, Synergy Alberta

Senior Advisor, Government Relations and Public Affairs, Canadian Building Trades

Vice President, ESG Services, NEI Investments


PERFORMANCE OVERVIEW In 2011 the upstream oil and gas industry in Canada experienced performance improvement in areas including emissions of NOx, SO2 and water intensity. Neutral performance was seen in both GHG emissions and with safety performance. Industry recognizes that more focus and effort must be brought to bear to progress in these areas. Additionally, CAPP and its members are aware of gaps in performance measurement, particularly around social performance in the communities in which industry works as well as in understanding performance of ecosystems and biodiversity. CAPP will work with its members, stakeholders and the RCE Advisory Group to identify and implement appropriate metrics and indicators in these areas. A meeting of Canadian Association of Petroleum Producers employees with president, Dave Collyer Photo Credit: Canadian Association of Petroleum Producers

Overall safety performance as measured by Total Recordable Injury Frequency (TRIF) has remained relatively flat over the past three years. TRIF is a measure of rate of injury and the industry recognizes a safe work environment means no one gets injured. Industry will continue to focus on reducing hazards that can lead to injuries, as individual companies and in part through Enform, the industry safety association. Direct GHG emissions from Canada’s oil and gas sector declined in 2011. Indirect emissions increased slightly in 2011. Taken together, the total GHG emissions for the sector remained flat at 102.4 million tonnes even while there was a one per cent growth in oil and gas production in 2011. Against CAPP’s objective of reducing GHG intensity, 2011 performance also remained flat with GHG emissions of 0.32 tonnes/m3 of oil equivalent production. Working together as industry through organizations like Canada’s Oil Sands Innovation Alliance (COSIA) and with key stakeholders, technologies can be identified and implemented to help meet the challenge of continuous reduction in GHG emissions intensity.

Due to implementation of new technologies in the last five years, absolute emissions of SO2 and NOx continued to decline in 2011. An absolute reduction in these air contaminants helps to maintain air quality and reduce the contribution to such issues as acid rain and smog. Oil and gas production, which often occurs in an area over a period of decades, results in an increased focus on measuring and mitigating industry impacts on ecosystems. Industry has used well counts as a proxy for land impact, though recognizes this does not provide a sufficient indicator of ecosystem health, including biodiversity. Additional metrics on biodiversity are under discussion with CAPP and stakeholders. In this report, industry performance is discussed from a national perspective, combining Western Canada, Oil Sands and Atlantic Canada Offshore, and regionally in more detail in the full web version of the report. For the full story visit: http://www.capp.ca/rce

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FACT: While the five-year trend for Total Recordable Injury Frequency (TRIF) has declined overall, it has plateaued since 2009. Source: Canadian Association of Petroleum Producers

PEOPLE The Responsible Canadian Energy Program’s objectives relating to people are: • We will provide a safe environment for our employees, contractors and the communities where we operate.

People are at the heart of the oil and gas industry.

• We will provide employment and business opportunities for regional communities, including Aboriginal peoples. • We will respectfully engage with directly affected stakeholders through all stages of our operations.

The safety and well-being of people and communities is industry’s first priority. Industry also recognizes the importance of investing in communities where it operates and in encouraging employment and business opportunities for local people, particularly Aboriginal peoples. There is also a need to engage directly with affected stakeholders, ensuring they understand the positive impacts and mitigation of potential negative impacts associated with oil and gas activity. CAPP’s metrics and information around people include the number of fatalities at operations, the frequency of injuries at operations, how industry engages communities, the amount of employment operations provide and the amount of taxes and royalties paid by the oil and gas industry.

High angle rescue training. Photo Credit: Enform Canada

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PEOPLE

HIGHLIGHTS

Social and Economic Impact

SAFETY

consistent safety training to workers. CAPP members collaborate and share lessons learned from incident investigations through processes established by Enform.

Collaboration is a key approach to reducing injuries, improving efficiencies, and promoting positive working relationships. Industry leverages its relationship with Enform to provide • In 2011, CAPP member companies reported five fatalities, as compared to seven fatalities in 2010. These fatalities were all contractors working on behalf of member companies. • Industry is working with Enform, the industry safety association, to develop and implement improvements in safety management systems, industry guidelines, training and reporting to realize ongoing improvements in worker safety. National – Safety and Wellbeing

• CAPP members' five-year trend for Total Recordable Injury Frequency (TRIF) shows the total worker (employee and contractor) reported injury rate declined from a TRIF of 1.15 in 2007 to a TRIF of 0.89 in 2011. However, cumulative data indicates that injury rate reductions are virtually unchanged and have plateaued since 2009 while total exposure hours have increased by about 10 per cent (almost 42 million hours) between 2010 and 2011. This means National – Total Recordable Injury Frequency

National – Fatalities

National – Total Recordable Injury Frequency

25

2.00

Employee TRIF

1.80

Contractor TRIF

1.60 Injuries/200,000hrs

Nimber of Fatalities

20

15

10

Combined Worker TRIF

1.40 1.20 1.00 0.80 0.60

5

0.40 0.20

0

0.00

2007

2008

2009

2010

2011

The number of fatalities continues to decline. The tragic helicopter accident in 2009 accounted for 17 fatalities that year.

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Source: Canadian Association of Petroleum Producers

2007

2008

2009

2010

2011

The national total recordable injury frequency, which takes into account Western Canada, Oil Sands and Atlantic Canada Offshore, shows that while the five-year trend for TRIF has declined overall it has plateaued since 2009. Source: Canadian Association of Petroleum Producers.

that although injury rates in a larger workforce have been maintained at a low level relative to other years, the absolute number of injuries is up. Focus is needed on ongoing reduction in both the absolute number of injuries as well as injury rates. For the full story visit: http://www.capp.ca/rce

Safety training and developing a culture of safety are key to improving performance.

The oil and gas industry actively works with communities in areas of operations. • In 2011, Canada’s oil and gas industry paid more than $20 billion to governments in taxes and royalties. • Within the oil sands region, contributions to Aboriginal communities were approximately $12 million while contracts with Aboriginal companies topped $762 million in 2011. As noted in the highlights above for the oil sands region, a key benefit of oil and gas activity is jobs and business for local communities. Beyond direct support and sponsorship, the economic contribution from Canada’s oil and gas industry positively impacts people across the country. As Canada’s largest product selling industry, the economic contributions from Canada’s oil and gas industry benefit Canadians across the country. Taxes and royalties of $20 billion, collected by government in 2011 from the upstream oil and gas sector, provided social, education, health and infrastructure support for small and large communities across Canada. From a jobs perspective, over 550,000 Canadians were directly or indirectly employed in support of this industry. This employment extended from rig hands in the oil field to technology experts developing new water management tools to workers manufacturing buses to transport oil field workers back and forth from work. Whether steel manufacturing in Ontario, offshore facilities construction at Marystown in Newfoundland and Labrador, or truck and rail shipments from the port of Vancouver, the oil and gas industry has had a positive economic impact for Canadians. RCE program quantitative metrics designed to measure the oil and gas industry’s impact (positively and negatively) on communities are inconsistent and work toward suitable metrics to assess industry’s social performance will be an area of development over the next two years. High angle rescue training. Photo Credit: Enform Canada


FACT: Oil sands total GHG emissions are approximately 6.9 per cent of Canada’s GHG emissions. Source: Environment Canada and United Nations Statistics Division

AIR The Responsible Canadian Energy Program’s objectives relating to air are: • We will design and operate our facilities to be better than provincial air quality objectives. • We will continue to reduce greenhouse gas emissions per barrel equivalent of production by improving our energy efficiency and by developing new technologies.

Air emissions data is typically presented in two distinct ways, volume and intensity.

Industry continues its commitment to reduce air emissions intensity. Suncor Energy's oil sands facilities near Fort McMurray, Alberta. Photo Credit: Suncor Energy Inc./Canadian Association of Petroleum Producers

Volume is important as it provides information regarding overall trends in total emissions. It is impacted by many factors and does not provide a perspective on efficiency of operations. Intensity measures are important in understanding how efficient an operation is in terms of the emissions associated with delivering each unit of production. CAPP’s objective is to have continuous improvement in emissions intensity. While both absolute and intensity measures provide important information to the oil and gas industry, intensity is the more relevant measure of operational performance. It normalizes, or accounts for, changes in product, production volumes and mix and it allows oil and gas companies to evaluate their own operations and against their competitors – both domestic and international.

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AIR

• The oil and gas industry is focused on reducing greenhouse gas (GHG) emissions intensity. Industry recognizes that as production grows, ongoing investment in innovation and technology will be needed to reduce the amount of GHG emitted for each barrel of oil or thousand cubic feet of natural gas produced. For example, collaboration on technology to reduce GHG emissions is a focus of Canada’s Oil Sands Innovation Alliance (COSIA), announced by oil sands producers in February 2012. Technology and innovation will continue to be critical tools for reducing emissions intensity as production of unconventional oil and gas resources continues to grow across Canada and as new conventional resources are developed in offshore Atlantic Canada.

• Overall GHG emissions intensity remained flat in 2011compared to 2010 at 0.32 tonnes of GHG emitted per m3 of oil equivalent production. Industry’s objective is to decrease the overall intensity of GHG emissions per unit of energy produced. It is recognized that a shift to more energy intensive production methods, such as oil sands and hydraulic fracturing to produce natural gas, as well as expanding in situ oil sands production, means reducing GHG emissions intensity will continue to be a challenge in the near term. For the full story visit: http://www.capp.ca/rce

National – GHG Emissions

National – GHG Emissions Intensities

National – GHG Emissions

National – GHG Emissions Intensities

70

0.6 Western Canada

Oil Sands

Atlantic Canada Offshore

Western Canada

60

Tonnes CO2e /m3 OE

Total CO2e tonnes/yr Millions

Atlantic Canada Offshore

0.5

50 40 30 20

0.3 0.2

0

0

2007

2008

2009

2010

2011

Total GHG emissions for the sector remained flat while there was a one per cent growth in oil and gas production in 2011. Source: Canadian Association of Petroleum Producers

2007

2008

2009

2010

Regional GHG intensities are generally holding flat or declining. Source: Canadian Association of Petroleum Producers

2011

Atlantic Canada Offshore

1.60

Western Canada

Oil Sands

Atlantic Canada Offshore

1

1.20

200

1.00

150

0.80 0.60

100

Tonnes/103m3 OE

1.40 250

0.40

50

0.00

0

2007

2008

2009

2010

0.8 0.6 0.4 0.2

0.20

0

2007

2011

Total NOx emissions increased slightly in 2009 though show an overall decline from 2007 through 2011. Source: Canadian Association of Petroleum Producers

2008

2009

2010

2011

Atlantic Canada Offshore NOx intensity has increased since 2008, while Western Canada has seen a decrease in NOx intensity since 2008 and Oil Sands has been relatively flat since 2008. Source: Canadian Association of Petroleum Producers

SO2

(sulphur dioxide)

• Nationally, SO2 emissions intensity has declined by 41 per cent since 2007. • Oil sands production has the highest SO2 emissions per barrel of production, due to the high sulphur content. Implementation of new sulphur recovery technologies helps reduce emissions to the environment. As a result, the oil and gas industry reduced SO2 intensity by 19 per cent in 2011 compared to 2010 demonstrating an ongoing trend of reduction in SO2 emissions intensity. • In Western Canada, the SO2 emissions intensity decreased by 19 per cent since 2007, and has fallen five per cent in 2011 compared to 2010. The continued decline in SO2 emissions intensity is due to improved process stability and better sulphur recovery technology at new facilities.

0.4

0.1

10

18

Oil Sands

Oil Sands

300

• With growing production in oil sands and increased energy demands required to extract oil and gas from reservoirs in the Western Canada Sedimentary Basin and declining production off Canada’s Atlantic Coast, industry anticipated upward pressure on NOx emissions intensity. In spite of these business factors, 2011 was the fifth consecutive year that NOx intensity declined, and industry also observed a fiveyear downward trend in absolute emissions of NOx.

1.2

1.80 Western Canada

• Since 2007, absolute SO2 emissions have declined 35 per cent to 179,000 tonnes.

National – SO2 Emissions

National – SO2 Emissions Intensity Regional Comparison

National – SO2 Emissions

National – SO2 Emissions Intensity

300 Western Canada

Oil Sands

Atlantic Canada Offshore

250 200

1.80

1.8

1.60

1.6

1.40

1.4

1.20

1.2

1.00

150

0.80 0.60

100 50 0

2007

2008

2009

2010

2011

Atlantic Canada contributions are negligible at 1 tonne with respect to the national total

Tonnes/103m3 OE

(Greenhouse Gases)

National – NOx Emissions Intensity

350

Kilotonnes

GHG

• Direct GHG emissions from Canada’s oil and gas industry declined 0.5 per cent from 88.1 million tonnes in 2010, to 87.6 million tonnes in 2011. Indirect emissions increased slightly from 14.3 million tonnes in 2010 to 14.8 million tonnes in 2011. Taken together, the total GHG emissions for the sector remained flat at 102.4 million tonnes even while there was a one per cent growth in oil and gas production in 2011.

(Nitrogen oxides)

Kilotonnes

HIGHLIGHTS

NOx

National – NOx Emissions Intensity Regional Comparison

National – NOx Emissions

National – NOx Emissions

Western Canada Oil Sands Atlantic Canada Offshore

1 0.8 0.6

0.40

0.4

0.20

0.2

0.00

0

2007

2008

2009

2010

2011

Atlantic Canada contributions are negligible at 10-5 with respect to the national total

National SO2 emissions continue a downward trend.

SO2 emission intensity continues to decline year-over-year.

Source: Canadian Association of Petroleum Producers

Source: Canadian Association of Petroleum Producers

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FACT: The use of saline, instead of fresh water, for hydraulic fracturing continues to increase. Source: Canadian Association of Petroleum Producers

WATER The Responsible Canadian Energy Program’s objectives relating to water are: • We will continue to reduce the amount of fresh water required per barrel equivalent of production by improving water recycle rates, using low quality (e.g. saline) water sources where feasible, and by developing new technologies. • We will safeguard the quality of regional surface and ground water resources.

Industry is working to reduce fresh water withdrawal per barrel of production. Debolt Water Treatment Plant. Photo Credit: Canadian Association of Petroleum Producers / Encana Corporation / Apache Canada Ltd.

Canadians are concerned about the amount of water the oil and gas industry withdraws to explore for and develop oil and gas, and about potential impacts to fresh water quality. As fresh water sources are increasingly allocated across industries and users by governments, oil and gas companies are increasing focus on ways to reduce fresh water per barrel equivalent of production. For example, reduction in fresh water use is primarily achieved through improving water recycling rates in hydraulic fracturing, in situ oil sands and other operations. Using non-potable water sources, where feasible, developing and implementing new technologies, such as treating water from underground saline aquifers, are other ways industry is working to manage water. Industry is also working with provincial and federal government agencies to monitor the quality of regional surface and groundwater resources, striving to ensure that any water re-entering waterways meets all applicable standards. 21


WATER

HIGHLIGHTS • CAPP first introduced mandatory reporting of water metrics in 2009. As industry continues to collect and refine metrics and analysis of water data, CAPP data is supplemented with additional data sourced from government. • Total (Western Canada, mining and in situ) fresh water withdrawal decreased from 192.9 million m3 in 2010 to 178.7 million m3 in 2011. This downward trend is primarily due to decreasing fresh water withdrawals for oil sands mining, which are closely tied to timing of new mining project start-ups. • Oil sands mining represented approximately 75 per cent of industry’s total fresh water withdrawal in 2011.

National National – Total Industry Fresh Withdrawal – Total Industry Fresh WaterWater Withdrawal by Region (2009-2011) by Region (2009-2011) 250 Western Canada

Oil Sands in Situ

Oil Sands in Mining

Millions m3

200

150

100

50

0

2009

2010

2011

Overall fresh water withdrawal has decreased over the last three years driven by reductions in oil sands mining withdrawals. Source: Government/Geowa Information Technolgies Ltd.

• Fresh water withdrawal per barrel of production has continued to improve in 2011: - Conventional oil required withdrawal of 0.7 barrels of fresh water to produce one barrel of oil, which is the best ratio achieved in the last three years. - Oil sands mining required withdrawal of 2.7 barrels of fresh water to produce one barrel of bitumen, which is the best ratio achieved in the last five years. - Oil sands in situ required withdrawal of 0.4 barrels of fresh water to produce one barrel of bitumen, consistent with the last three years and also the best ratio achieved. • It became mandatory for CAPP membersto report water re-use in Western Canada horizontal, multistage hydraulic fracturing operations in 2011. Based on the data received in 2011, five per cent of water was reused in these projects. Industry recognizes this level of water reuse in hydraulic fracturing must be improved and is currently advancing a number of research initiatives to address this issue. • CAPP members developed and adopted “Guiding Principles for Hydraulic Fracturing” in 2011 and “Hydraulic Fracturing Operating Practices” in 2012. Implementation efforts are underway in 2012 and member conformity with the practices will be measured in next year’s progress report.

Safeguarding water quality Fracturing of gas wells occurs hundreds or thousands of metres below groundwater aquifers. Distance between groundwater and horizontal well separations can be between hundreds of metres to thousands of metres

Municipal water well

Private well

Shallow groundwater aquifer Deep groundwater aquifer

Exercise Synergy is a yearly full scale drill to test equipment and ensure key personnel and external resources are competent and prepared to respond should their skills be required.

Surface gas-well lease

Protective steel casing: Steel casing and cement provide well control and isolate groundwater zones

Lim esto ne

HYDRAULIC FRACTURING

Induced shale fractures

San

dsto

ne

Gas

-rich

For the full story visit: http://www.capp.ca/rce Hor

sha

le

Exercise Synergy demonstration. Photo Credit: Husky Energy

izon

tal b

ore Note: Buildings and well depth not to scale

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Protecting water includes offshore marine environments.

Illustration Credit: Canadian Society for Unconvential Resources


FACT: Advances in horizontal drilling and the use of multi-well drilling pads have greatly reduced the amount of land disturbed in drilling operations. Source: Canadian Association of Petroleum Producers

LAND The Responsible Canadian Energy Program’s objectives relating to land are: • We will mitigate our impact on the land while maintaining regional ecosystems and biodiversity.

Land and biodiversity are critical resources to Canadians and it is important to measure, manage and mitigate the footprint of industry. Horn River Basin in northest British Columbia. Photo Credit: Nexen Inc.

• We will progressively reclaim all lands affected by our operations, returning them to self-sustaining landscapes.

The oil and gas industry recognizes that lands with rich biodiversity are critical resources to Canadians and it is important to assess the impact of industry activities on the land, as well as the effectiveness of mitigation activities. While it may not be possible to return an area back to its original state, it is possible to return the land to a self-sustaining landscape with biodiversity equivalent to its original state. Biologists and environmental scientists work with engineers to ensure that each phase of development, from preparing the site for work, through the exploration and production stages and the reclamation phase is designed to reduce the impacts of operations. CAPP’s land management metrics include the number of active and inactive wells, the number of wells abandoned annually, the number of wells certified as reclaimed each year and the total area in the oil sands in reclamation or reclaimed but not yet certified.

25


LAND

HIGHLIGHTS Over the last five years, the total well count (active plus inactive wells) in Western Canada has increased by 14 per cent (36,843 wells), which means industry is drilling new wells at a faster rate than it is reclaiming existing wells. The inactive portion of the total well count in Western Canada has also increased by four per cent over the last five years. Low-producing wells are made inactive, often referred to as shut in, as they become uneconomic. • Of the inventory of 32,684 abandoned conventional wells in Western Canada, CAPP members reported that 50 per cent are undergoing active reclamation/remediation; 23 per cent are in the monitoring/assessment phase and should be ready for certification in the next one to three years; and 27 per cent are temporarily deferred (where reclamation/remediation has not begun because the site is being risk-managed or is being held for future potential). • The number of reclamation certificates earned in both Western Canada and in the Oil Sands increased compared to 2009 and 2010. Increased reclamation activity is a response to a more positive financial environment, supported by a stable regulatory regime. • Total active footprint for oil sands mining operations was 76,070 hectares at the end of 2011, an increase of seven per cent from 2010. Mineable oil sands are a growing resource, so 26

the total active footprint is expected to increase. 90 per cent of the total active footprint is cleared and disturbed land and 10 per cent is in some stage of reclamation. • In 2011-2012, the Oil Sands Leadership Initiative (OSLI) developed a tool that was used to analyze land disturbance data in the oil sands in situ development area. The current in situ footprint was measured to be 50,114 hectares, which is 66 per cent of the size of the oil sands mining footprint. The in situ footprint is primarily linear in nature (seismic, pipelines, roads) and thus contributes to habitat fragmentation. Industry is targeting its reclamation efforts on restoration of seismic lines to mitigate the effects of in situ development on habitat for woodland caribou and other large mammals.

Making the most out of local resources in northern British Columbia CAPP members look for ways to fully use resources, such as timber, that must be removed in preparing a site for development. Trees removed are milled by local First Nations businesses and the lumber is used in regional construction projects and as a source of material for elementary and high school students in trade programs at their school.

For the full story visit: http://www.capp.ca/rce

Photo Credit: Quicksilver Resources Canada Inc.


CANADIAN UPSTREAM OIL AND GAS SNAPSHOT

The oil and gas industry employs more than

550,000 Canadians directly and indirectly.3

YUKON TERRITORY

Canada has the third largest oil reserves in the world with

174 billion barrels of recoverable oil.

NUNAVUT

Canada exported

3.2 trillion cubic feet of natural gas to the U.S. in 2011.1

NEWFOUNDLAND & LABRADOR

NORTHWEST TERRITORIES

In 2011 there were

BRITISH COLUMBIA

5 fatalities as compared to 7

in 2010, fatalities continue to decline though are variable, 9 in 2007 to 5 in 2011.3

Fresh water withdrawal for 2011 was

178.7 million m3 as compared to 192.9 million m3

PRINCE EDWARD ISLAND

ALBERTA

MANITOBA

SASKATCHEWAN

ONTARIO

NEW BRUNSWICK

6

CRUDE OIL PRODUCTION

in 2010.5

QUEBEC

Average water use for fracturing operations ranges from

5,000 m3 to 100,000 m3.

NATURAL GAS PRODUCTION

POTENTIAL RESOURCES

NOVA SCOTIA

footprint is 50,000 hectares.

Oil sands in situ

3

Canadian crude oil production is

3 million barrels per day. 3

15 per cent of Canada’s GHG emissions* CAPP member companies accounted for about in 2010, or 102 megatonnes.

3, 5

2

Upstream oil and gas industry paid more than

$20 billion in taxes and royalties in 2011.

3

Industry injury frequency has decreased from

1.15 to 0.89 since 2007,

while exposure hours have increased by 33 per cent.3

Sources: 1 = National Energy Board 2 = Oil and Gas Journal 3 = Canadian Association of Petroleum Producers 4 = Canadian Energy Research Institute 5 = Government 6 = BC Oil and Gas Commission * The upstream oil and gas industry accounted for about 18 per cent of Canada’s greenhouse gas emissions in 2010, or 123 megatonnes.

29


NATIONAL DATA TABLE Five-year oil and gas industry performance1 Download the 2011 data here

NATIONAL 2007

2008

2009

NATIONAL 2010

2011

PEOPLE Worker fatalities (number/yr)

Total recordable injury frequency (TRIF)

9

12

25

7

5

Employee total recordable injury frequency (trif)

0.80

0.64

0.6

0.58

0.56

Contractor total recordable injury frequency trif)

1.31

1.24

0.94

0.99

1.00

Combined 2 total recordable injury frequency (trif)

1.15

1.08

0.85

0.88

0.89

5

Community engagement

Qualitative indicator discussed in report

N/A

Spending on Aboriginal related projects

Qualitative indicator discussed in report

N/A 3

Taxes and royalties Employment (direct and indirect)

So2 emissions (tonnes/yr) Air emissions

Investment spending

Discussed in report

Payments to government

Discussed in report

Employment (direct and indirect)

Discussed in report

Fresh water withdrawal for in situ operations (million m3/yr) Fresh water withdrawal for mining operations (million m3/yr)

Fresh water as a percentage of total water withdrawal

Fresh water as a percentage of total water withdrawal for Western Canada Sedimentary Basin operations (%) Fresh water as a percentage of total water withdrawal for oil sands in situ operations (%) Fresh water withdrawal per barrel of production for Western Canada Sedimentary Basin operations (bbl/bbl)

Fresh water withdrawal per barrel of production

Greenhouse gas (GHG) emissions Taxes and royalties Employment (direct and indirect)

Per cent water reuse (shale gas, tight oil and gas)

First reported in 2009 15.8

18.5

23.3 16.6

23.0 17.5

20.5

2010

2011

240,388

214,047

228,448

197,334

178,618

0.71

0.68

0.72

0.63

Nox emissions (tonnes/yr)

0.56

290,856

286,555

299,852

283,407*

265,948

Total co2 equivalent emissions (tonnes/yr) Tonnes ghg emitted per m3 OE of production

0.98

0.97

0.93

0.90

0.84

94,898,732

90,607,676

98,826,706

102,399,539

102,442,702

0.28

0.28

0.31

0.32

0.32

Investment spending

Discussed in report

Payments to government

Discussed in report

Employment (direct and indirect)

Discussed in report

125.6

184.3

162.4

152.4

140.4

198,604

207,595

204,198

213,991

215,220

Inactive wells

78,196

82,081

90,045

94,748

102,304

Annual well abandonments

2,947

1,791

1,914

3,126

2,682

First reported in 2009 51%

56%

First reported in 2009

56%

57%

54%

50%

49%

51%

11,967

11,771

11,370

13,407

20,285

9,100

5,556

6,994

11,600

9,882

Annual certifications or releases received

Annual certifications or releases received

1,482

1,821

1,505

1,709

2,007

Total active footprint (oil sands mining)

Total active footprint - oil sands mining (ha)

First reported in 2009

67,331

71,362

76,070

Total area cleared or disturbed - oil sands mining (ha)

First reported in 2009

59,814

63,820

68,383

Total area in reclamation or reclaimed not certified oil sands mining (ha)

First reported in 2009

7,517

7,542

7,687

0.87

0.86

0.72

Total area in reclamation or reclaimed and not certified (oil sands mining)

0.40

0.36

Fresh water withdrawal per barrel of production for oil sands mining operations (bbl/bbl)

2.8

4.4

3.4

3.1

2.7

5%

5%

First reported in 2010

Flowback/produced water generated (m /yr)

First reported in 2010

127,648,644

146,839,047

Flowback/produced water produced (m3/yr)

First reported in 2010

116,972,156

135,412,609

9,788

Abandoned wells in monitoring/assessment or application

Total area cleared or disturbed (oil sands mining)

0.43

First reported in 2011

Abandoned wells in active reclamation/remediation

Status of abandoned wells in reclamation

0.54

Qualitative indicator discussed in report

Annual well abandonments

Active wells

Temporarily deferred abandoned wells

0.51

3

Active wells and inactive wells

17.8

Fresh water withdrawal per barrel of production for oil sands in situ operations (bbl/bbl)

Per cent water reuse (shale gas, tight oil and gas)

N/A3 1

30

2009

Land Management Fresh water withdrawal for Western Canada Sedimentary Basin operations (million m3/yr)

4

So2 intensity (tonnes per thousand m3 OE of production) Nox intensity (tonnes per thousand m3 OE of production)

3

WATER Management

Water quality

2008

Air and Energy Management

Fatalities

Fresh water withdrawal

2007

5

2011 data relative to the previous four years, 2 "Combined" includes both employees and contractors in TRIF calculation, 3 N/A - Not available, 4 Currently 100 per cent of water withdrawal for oil sands mining is fresh water, 17 of the fatalities in 2009 were the result of a helicopter accident offshore Newfoundland and Labrador. *Since this report went to print, this number has been corrected.

31


EMERGING ISSUES Unconventional Reservoirs

SHALE GAS Shale gas is gas trapped in tight pore spaces in limestone, sandstone and shale where permeability is extremely low (see illustration). Shale gas is released from cracks in the rock produced by hydraulic fracturing. Hydraulic fracturing, or fracking, is a process to open cracks in the gasbearing reservoir deep underground using water, sand and small amounts of chemicals pumped into the earth under high pressure. Depending upon the density of the reservoir, between 5,000 m3 and 100,000 m3 of water is required to complete a hydraulic fracturing operation.1 The use of chemical and biological corrosion treatments is common to both oil and gas production operations where their use is necessary. Hydrate inhibitor and dehydration chemicals are almost exclusively used in gas production. To ensure safe and healthy work sites, industry continues to raise awareness of the specific hazards presented by the products used in the upstream industry. Canada’s shale and tight gas industry supports a responsible approach to shale gas development, including water management and is committed to continuous performance improvement. Protecting the environment and specifically water resources during sourcing, use and handling is a key priority for industry. Canada’s natural gas producers support and abide by all regulations governing hydraulic fracturing operations, water use and protection. CAPP members continue to work collaboratively to determine appropriate measurement, reporting and analysis of information related to shale gas performance, demonstrating where natural gas producers are making progress and where more focus is needed to achieve performance objectives.

0.0001

0.001

Limestone

Tight 0.01

Similar to tight gas, the word tight refers to the type of reservoirs that the oil is found in, typically sandstone, siltstones, dolomite and less frequently from shale. These reservoirs all have varying levels of permeability. As a result oil does not flow through the rock without using techniques such as hydraulic fracturing.

Natural Gas from Coal

Low 0.1

Moderate 1.0

High 10.0

100.0

Permeability (mD)

Poor

Quality of Reservoir

Good

Gas is trapped in very small pore spaces in the rock resulting in extremely low permeability for gas movement.

Illustration Credit: Canadian Society for Unconventional Resources

CAPP members developed new shale gas operating practices for hydraulic fracturing in 2012. The practices are designed to improve environmental performance and specifically focus on water management and water and chemical reporting for shale gas and tight gas development. The operating practices apply to all CAPP members exploring for and producing natural gas in Canada. The operating practices support the guiding principles for hydraulic fracturing, which were developed in 2011 and strengthen industry’s focus on continuous performance improvement. The practices address sound wellbore construction, alternatives to use of fresh water or recycling fresh water as practicable, voluntary water reporting, fracturing fluid chemical disclosure, technical advancement and collaboration, and managing induced seismicity.

CAPP expects the hydraulic fracturing operating practices to inform and complement existing regulatory requirements. 32

Source: BC Oil and Gas Commission, 2 Canadian Society for Unconventional Resources

1

Tight oil is similar to tight gas in that both require hydraulic fracturing for production. Along with this comes the potential for issues related to water and chemical use. Unlike shale or tight gas, tight oil requires only a fraction of the water use during the fracturing process.

Conventional Oil or Gas Reservoirs

Shale

Very Tight

With advances in hydraulic fracturing technologies, Canadian tight oil plays such as the Cardium, Viking, Bakken and Lower Shaunavon in the Western Canada Sedimentary Basin are becoming increasingly economical to develop.

Conventional Reservoirs

Tight Gas or Tight Oil Sandstone

Extremely Tight

Tight Oil

Typically in multi-stage tight gas hydraulic fracturing operations, large amounts of water are used; between 5,000 m3 up to 100,000 m3 depending upon whether the gas is in sandstone or more dense shale. Tight oil operators currently use much less water, typically less than 4,000 m3, as the oil is in sandstone, a less dense rock.2 Despite this lower water use for tight oil, reducing fresh water use and ensuring there are no impacts on water quality are priorities for tight oil producers.

CAPP and its members are currently evaluating the extension of the hydraulic fracturing operating practices to tight oil, with the objectives of improving water management and water and chemical reporting.

The emerging issues section of the report is based on an environmental scan for issues that are starting to or anticipated to directly affect the oil and gas industry. This section is intended to provide stakeholders with industry’s perspective on the current state of the issues including shale gas, tight oil and pipeline safety and integrity.

Pipeline Safety and Integrity Over the past couple of years, high profile pipeline leaks have resulted in stakeholder concern and increased scrutiny of pipeline safety and integrity. This has heightened awareness for CAPP’s members who operate smaller diameter pipelines. The upstream oil and gas industry recognizes and shares the importance stakeholders place on the safety and integrity of pipelines, whether pipelines proposed to carry significant volumes to market or smaller pipelines that collect oil and gas from production fields for transport to larger transmission pipelines.

To mitigate risk, CAPP members have management systems in place to assure the integrity of oil and gas gathering systems they operate. These management systems include predictive and preventative maintenance programs that provide assurance of the integrity of oil and gas gathering systems. If spills occur, operators activate the appropriate incident management protocols including notifying neighbours and government as described in their emergency management plans. Another aspect of management systems is the reporting, recording and assessment of incidents that result in the release of oil or gas to the environment. Companies investigate the cause and incorporate any learning into ongoing maintenance programs or into the enhancement in design of future oil and gas gathering systems. Pipelines have proven to still be the safest and most reliable way to move crude oil and natural gas from production to market. In consultation with the Canadian Energy Pipeline Association (CEPA) and regulators CAPP is partaking in a review of pipeline safety and integrity. Based on findings from the review, CAPP and its members will look at ways to improve practices. Ensuring the safety and integrity of Canada’s pipelines continues to be a priority for industry.

33


AWARD NIGHT

Responsible Canadian Energy

AWARD PROGRAM Nominations are accepted annually for projects that demonstrate a commitment in the areas of environment, health and safety, and social performance. All CAPP member companies are encouraged to apply. Projects should demonstrate progress and that a long-term approach to continuous performance improvement is being implemented.

ConocoPhillips Aboriginal Network

34

The ConocoPhillips Aboriginal Network serves to empower Aboriginal employees by supporting and facilitating their professional and cultural development. Photo Credit: ConocoPhilips Canada

In 2011, 30 projects were submitted for consideration by the RCE Advisory Group. More than 420 industry representatives and other stakeholders attended an event to honour the 2011 award recipients.

Judging is undertaken by the Responsible Canadian Energy Advisory Group (RCEAG). This is an external group of respected leaders in their fields including safety, environment, labour, Aboriginal, academic, private, finance and investment communities.

Horn River Basin Surface Water Management Plan

Nexen is moving to a long-term allocation of variable volume, based on actual water availibility with a lifetime monitoring commitment. Photo Credit: Nexen Inc.

Scotford Tripartite Safety Leadership Initiative

The collaborative program draws upon the experience and expertise of groups to develop a strong safety culture for everyone working at Scotford. Photo Credit: Shell Canada

Photo Credit: Canadian Association of Petroleum Producers


About the Canadian Association of Petroleum Producers The Canadian Association of Petroleum Producers (CAPP) represents companies, large and small, that explore for, develop and produce natural gas and crude oil throughout Canada. CAPP’s members companies produce about 90 per cent of Canada’s natural gas and crude oil production. CAPP’s associate members provide a wide range of services that support the upstream crude oil and natural gas industry. Together CAPP’s members and associate members are an important part of a national industry with revenues of about $100 billion a year. CAPP’s mission is to enhance the economic sustainability of the Canadian upstream petroleum industry in a safe and environmentally and socially responsible manner, through constructive engagement and communication with governments, the public and stakeholders in the communities in which we operate.

Visit the CAPP website at www.capp.ca Connect with CAPP: http://twitter.com/OilGasCanada http://www.facebook.com/OilGasCanada View the full report online at www.capp.ca/RCE 2100, 350 - 7 Avenue SW, Calgary, Alberta Canada T2P 3N9 Phone: 403-267-1100 | Fax: 403-261-4622

Place FSC logo here

ENVIRONMENTAL BENEFITS STATEMENT The savings below are achieved when post-consumer recycled fiber is used in place of virgin fiber. This report uses 467 kilograms of paper which has a post-consumer recycled content of 100 per cent. By using the environmentally friendly paper, in a print run of 3,000 copies, CAPP contributed to saving the following resources: Trees 16 preserved

Water-borne Waste 21 kilograms not created

Wastewater 26,150 litres flow saved

Calculated based on data research by Environmental Defense Fund. Printed in Canada.

Solid Waste 346 kilograms not generated

Greenhouse Gases 686 kilograms prevented

Energy 11,519,200 BTUs not consumed 2012-0023


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