Responsible Energy Development

CAPP’s Operating Practices for Hydraulic Fracturing

Oil & Gas Water Management Strategies Conference Calgary, Alberta

January 30, 2012 David Collyer

Advancing the 3Es

• Generating Economic Benefits

Jobs and revenues across North America

• Providing Energy Security

Safe, secure and reliable energy

Large energy resource potential

• Providing Environmental Stewardship

Strong regulations

Technology advances

•Competitiveness

•Social Licence

•Performance + Communication = Social Licence

Key Drivers

Responsible Canadian Energy Program

• Canadian Responsible Energy represents a collective commitment by CAPP’s members to:

Measure our performance

Find new and innovative approaches to reduce our environmental footprint

Ensure every worker returns home safely every day

Continue to improve the ways in which we communicate and engage the public and other stakeholders

• Western Canada (excluding oil sands)

• Oil sands

• Atlantic Offshore

• Highlighted shale gas development as an emerging issue, including concerns related to water and hydraulic fracturing

•2010 RCE Progress Report

Responsible Canadian Energy – Water Objectives

Through the RCE program, Canada’s oil and gas industry works to:

• Reduce the amount of fresh water required per barrel equivalent of production.

• Safeguard the quality of regional surface and groundwater resources.

Key Performance Areas

Key Performance Areas

Oil Sands Water Performance

Mining

3.1 barrels of fresh water per barrel of oil, with 80-90% recycled (2010 data)

Currently use 0.5 per cent of the annual flow of the Athabasca river

• In situ (drillable)

0.4 barrels of fresh water per barrel of oil, with 90-95% recycled (2010 data)

No water from Athabasca River

Shift to using non-potable (saline) sub-surface aquifers

Technology Solutions – Greater Recovery and Less Water

• Additives to reduce the need for both water and energy (steam)

LASER (Imperial), SAP (Cenovus), N-Solv

SC-SAGD (Laricina), SOLVE (Statoil/PTRC)

• Non-aqueous extraction

ET-Energy, Shell, Petrobank

• Saline water instead of fresh water

Devon Energy Jackfish Project

• Collaboration on tailings research

Oil Sands Tailings Consortium (OSTC)

Devon’s Jackfish Project

Suncor TRO Tailings Management Process

Key Performance Areas

The Global Context

• IEA expects global demand for energy to increase 47 per cent by 2035

• Global demand for natural gas is expected to increase 55 per cent by 2035

• IEA called next two decades a “golden age” for

natural gas

N.A. Natural Gas Supply Outlook

• Shale gas supply a game-changer

• Technology breakthroughs

• New producing regions

• Emerging stakeholder environmental concerns (footprint, water)

• Shifting S/D dynamic

How does hydraulic fracturing work?

• One-time use of water to hydraulically fracture a well

• Typical well produces 20 to 30 years

• Reservoirs typically 2,000 to 3,000 m below ground

• Freshwater aquifers usually at depths less than 300 m

• Fractures extend about 50 to 100 m

Concerns About Shale Gas

Does this make you feel more concerned about natural gas?

28%

51%

55%

47%

33%

34%

0% 20% 40% 60% 80% 100%

Natural gas is a fossil fuel

- doesn't seem as clean as

renewable sources of

energy

New sources of natural

gas, such as shale, require

a lot of water to get the

gas out of the ground

Some reported cases of

water wells being

contaminated near natural

gas developments

A lot more concerned Somewhat more concerned

Harris/Decima

Guiding Principles for Hydraulic Fracturing

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2

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5

We will safeguard the quality and quantity of regional surface and groundwater resources, through sound wellbore construction practices, sourcing fresh water alternatives where appropriate, and recycling water for reuse as much as practical.

We will measure and disclose our water use with the goal of continuing to reduce our effect on the environment.

We will support the development of fracturing fluid additives with the least environmental risks.

We will support the disclosure of fracturing fluid additives

We will continue to advance, collaborate on and communicate technologies and best practices that reduce the potential environmntal risks of hydraulic fracturing.

Operating Practices for Hydraulic Fracturing

Practices put Principles into Action

Fracturing Fluid Additive Disclosure

Publicly disclose all information on fracturing fluid additives

1

Practices Put Principles into Action

Fracturing Fluid Additive Risk Assessment & Management

Create demand for more environmentally sound fracturing fluids

Assess potential risks and mitigate these risks

Make processes for developing well- specific risk manage- ment plans publicly available

2

Practices Put Principles into Action

Baseline Groundwater Testing

Baseline groundwater testing prior to development and monitor over time

Sourcing freshwater alternatives and recycling

Share data collected as legally permitted

3

Practices put Principles into Action

Wellbore Construction and Quality Assurance

Ensure wellbore integrity

Make wellbore construction and assurance practices publicly available

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Surface Casing(Conductor)

Cement

Production Casing

Base of Ground Water Protection

Not to

Scale

Graphic from Shell Canada

Practices Put Principles into Action

Water Sourcing, Measurement and Reuse

Reduce overall use of freshwater

Measure water quantity

Monitor water sourcing

Make water sourcing, measurement and reuse practices publicly available

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Practices Put Principles into Action

Fluid Transport, Handling, Storage and Disposal

Mitigate potential risks of accidental spills

Ensure quick response to accidental spills

Make fluid transport, handling, storage and disposal practices publicly available

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Summary

•Huge opportunity for Canada

•Need to be competitive

•Social Licence to Operate

•Principles and Practices:

Guide development

Inform and complement regulations

Consistently deliver responsible operations across Canada

Continue to develop the resource safely