AER Peace River Proceeding Panel Makes 20 Recommendations Regarding Heavy Oil Operations

CALGARY, ALBERTA--(Marketwired - March 31, 2014) - The panel of the Alberta Energy Regulator (AER) Peace River proceeding (examining odours and emissions from heavy oil operations in the Peace River area) has released its report, including 20 recommendations.

The report, written by independent AER hearing commissioners, contains multiple recommendations, including calls for regulatory change, regional air monitoring, and ongoing stakeholder engagement in the region. The proceeding was called by AER president and chief executive officer (CEO) Jim Ellis.

"I called this proceeding as part of the AER's commitment to ensuring the safe, efficient, orderly, and environmentally responsible development of Alberta's energy resources," said Mr. Ellis.

"AER technical and regulatory staff are now reviewing the report's findings and the panel's recommendations and we will provide a formal response to the report by April 15, 2014."

Copies of the report are available at www.aer.ca.

The proceeding consisted of four phases:

• Phase 1: Organizational meeting
• Phase 2: Expert selection and information gathering (written)
• Phase 3: Solutions and recommendations (written)
• Phase 4: Oral proceeding

The oral proceeding started on January 21 and ended January 31, 2014, in Peace River, Alberta. The panel provided its report to the AER on March 31, 2014.

"I would like to thank all those who participated in the proceeding," said Mr. Ellis. "Specifically I thank the panel, as well as the area residents and local industry operators who expended a great deal of time and effort to provide the panel with relevant, quality information."

The Alberta Energy Regulator ensures the safe, efficient, orderly, and environmentally responsible development of hydrocarbon resources over their entire life cycle. This includes allocating and conserving water resources, managing public lands, and protecting the environment while providing economic benefits for all Albertans.

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The panel of the Peace River proceeding delivered its report, including 20 recommendations, to the Alberta Energy Regulator today. The report stems from the recent proceeding examining odours and emissions from heavy oil production in the Peace River area. According to AER president and CEO, Jim Ellis, the regulator will review and respond to the recommendations by April 15, 2014.

Peace River Proceeding: Summary of Recommendations

Calgary, Alberta (March 31, 2014)… The AER proceeding examining odours and emissions from heavy oil operations in the Peace River area consisted of four phases:

• Phase 1: Organizational meeting
• Phase 2: Expert selection and information gathering (written)
• Phase 3: Solutions and recommendations (written)
• Phase 4: Oral proceeding

The oral proceeding started on January 21 and ended January 31, 2014, in Peace River, Alberta. The panel provided its report to the AER on March 31, 2014. The report included 20 recommendations, detailed below:

Geology

The Panel recommends that

1. The AER conduct or require operators in the Peace River area to submit a geochemical analysis of the volatile compounds from the heavy oil from the Gordondale-sourced bitumen

1. at surface prior to processing and
2. from the tank prior to transport.

Health

The Panel recommends that

1. the Government of Alberta encourage the research community to conduct studies that would assist policy makers and regulators to better understand potential linkages between odours and emissions from heavy oil operations, including long-term exposures to individual chemicals and chemical mixtures, and health effects; and
2. Alberta Health ensure that appropriate avenues exist to link local physicians with specialists in environmental health to assist in diagnosing symptoms associated with odours and emissions from heavy oil operations and to enable physicians to provide appropriate treatment to residents.

Operations

The Panel recommends that

1. the AER require that all produced gas be captured. Tank top gas will be captured using a VRU

1. within four months from the issuance of this report in the Reno and Three Creeks areas, and
2. immediately with respect to all new operations in the Peace River area.
   The captured gas may be sent to a flare or incinerator until such time that the feasibility study (discussed in recommendation 5 of the Operations section) is implemented;

2. each operator in the Seal Lake and Walrus areas provide a report to the AER within two months of the issuance of this report outlining its plan to install VRUs to eliminate venting from existing facilities. The Panel expects the AER, after considering the information in such reports, to work with operators to implement an appropriate and timely plan to eliminate venting;
3. following implementation of gas capture measures contemplated in these recommendations, the AER prohibit venting from all facilities. In the event of an emergency or upset situation and where flaring infrastructure is not available (which results in venting), the well must be immediately shut in;
4. where gas conservation measures have been implemented, and where upsets and/or emergencies occur, the AER require that flaring be limited to a maximum of three percent of the annual operational time, with the duration of the flaring reported to the AER monthly;
5. toward the objective of conserving all captured gas, the AER require that by October 31, 2014, operators, either collectively or independently, provide a feasibility study to the AER into options and timelines to conserve all gas at sites in the Peace River area. The Panel expects that the AER, after considering the information in the feasibility study, will require operators to implement an appropriate conservation plan;
6. the AER require that operators conduct monthly fugitive emission inspections using appropriate equipment (e.g., FLIR camera). The results of monthly fugitive emission inspections must be submitted to the AER for review and made available to area stakeholders;
7. the AER require that where sources of fugitive emissions are identified, these be repaired within 12 hours of being detected or the facility be shut down until such repairs are completed. Repair responses would be submitted to the AER for review and made available to area stakeholders;
8. the AER require that operators implement measures (such as scrubbing or recovering displaced truck tank emissions) to minimize odours from truck loading and unloading activities; and
9. the AER should review the results of the Stantec and Clearstone studies and

1. require operational changes in the Three Creeks area, if necessary, to reduce odours and emissions from sources identified in those studies;
2. determine the applicability of the results and operational changes to the other Peace River areas.

Monitoring and Modelling

The Panel recommends that

1. the AER engage industry, residents, and stakeholders to establish a scientific and technically credible regional air quality monitoring program for the Peace River area that, to the extent possible,
2. builds on the efforts of the existing continuous monitoring program;
3. includes the Reno area;
4. considers the studies and monitoring surveys conducted to date by ESRD, industry, Stantec, RWDI, Clearstone, Chemistry Matters, Odotech, and Dr. Zelt;
5. provides greater geographic and spatial coverage by monitoring in areas of anticipated highest concentrations and where people might be exposed to emissions and odours;
6. is operated collaboratively by industry, residents, the AER, and other government agencies (using a Clean Air Strategic Alliance [CASA] type model);
7. provides transparent and real-time data to residents and stakeholders; and
8. assesses innovative monitoring technologies to better understand odours and emissions sources, and use the technology where appropriate;
9. the AER require that holders of new approvals issued in the Peace River area join the regional monitoring program; and
10. the AER work with stakeholders engaged in the air quality monitoring program to provide a progress report to the Peace River area community within six months of the issuance of this report. The report should describe
11. progress that has been made in establishing the governance framework for the monitoring program,
12. progress that has been made in modelling or in characterizing emissions and odours, and
13. other efforts made to address the monitoring recommendations above.

Regulatory

The Panel recommends that

1. the AER establish localized, "play-based" regulatory requirements for all heavy oil operations in the Peace River area that are producing or will produce Gordondale-sourced bitumen;
2. the AER release the current draft edition of Directive 060 as soon as possible, with any additional changes arising in response to the recommendations of this report to be developed in a timely manner; and
3. ESRD assess the feasibility of defining an ambient odour objective for Alberta based on a perception threshold.

Stakeholder Engagement

The Panel recommends that

1. the AER provide support to allow stakeholders to work together and determine what stakeholder engagement processes would meet their needs on a go-forward basis, and
2. the AER enhance its operational and enforcement presence in the Peace River area.