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QUEST Carbon Capture & Storage Project Project Overview and Regulatory Process

International Energy Agency CCS Regulatory Network November 8, 2012

J.P. Jepp- Regulatory Policy Advisor- Shell Canada

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Quest- Project Overview

Capture and Compression

Capture at Shell Scotford Upgrader- amines

CO2 source 3 x HMUs (SMR technology)

Up to 1.2 Mtpa CO2 ; CO2 > 95% purity

Pipeline

Agricultural lands with distributed population

12 inch line; about 80 km length

Laterals pipelines from main to wellheads

Disposal Scheme

3-8 wells

Target zone is saline aquifer- over 2000m depth

39+ townships Area of Interest (AOI)

MMV Program

To verify containment and storage performance

Project Status

July 2012- Regulatory Approvals

Sept 2012- Final Investment Decision!!

Quest- Project Overview

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Quest- Major Regulatory Applications

Pore Space Tenure (Alberta Energy- Sequestration Leases)

Well Licenses (ERCB- Directive 56)

Pipeline License (ERCB- Directive 56)

Capture Infrastructure (ERCB- OSCA Amendment)

CO2 Disposal Permit (ERCB- Directive 65)

Environmental Assessment (Alberta Environment)

Environmental Impact Assessment (Environment Canada)

MMV Plan / Closure Plan (Alberta Energy)

Closure Certificate (Alberta Energy)

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Alberta- Addressing Gaps in CCS Regulation

Alberta Carbon Capture and Storage Statutes Amendment Act (December 2010)

Enables the government to assume liability for stored CO2 from project operators

Clarifies the ownership of pore space (i.e. the Province of Alberta))

Enables Alberta to create a Post-Closure Stewardship Fund

Enables Alberta to issue Tenure Agreements (i.e. pore space tenure)

Alberta Carbon Sequestration Tenure Regulation (April 2011)

Provides administrative details on evaluation permits and carbon sequestration leases

Provides framework for MMV Plans and Closure Plans

Alberta Regulatory Framework Assessment (2011/2012)

Multi-stakeholder group examining existing regulatory framework for CCS in Alberta

Provides recommendations to Government on how gaps in framework may be addressed

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With the Carbon Capture and Storage

Statutes Amendment Act Alberta has

clarified pore space ownership

Carbon Sequestration Tenure

Regulation, enabled Alberta to grant

evaluation permits and sequestration

leases

Tenure no longer a gap in Alberta

Alberta’s first Carbon Sequestration

Leases granted May 2011

Regulatory Challenges- Tenure

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Existing permitting geared for single acid

gas and similar disposal wells- doesn’t

work for multiple wells and large scale

O&G approach is to drill field, and then

convert to injection

With CCS, may also not know total wells

needed until after period of operation

Regulatory Challenges- CO2 Disposal Approval

Need to be able to use non-invasive

techniques (e.g. seismic) to prove field

Should be able to apply for a broad field

concept (i.e. scheme), that gets refined

with period of operations

RFA- Recommendations for scheme

approach to approvals for projects with

multiple wells

Well

License Drill

Injection

Permit

Well

Licenses Drill

Injection

Permit

Amended

Injection

Permit

(scheme)

Current Requirements

Shell Proposal

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Existing requirements specific to sour

gas and HVP lines- no requirement for

site-specific ERP

Requirement only to include specifics of

CO2 as a hazard in corporate ERP

For landowner safety and public

acceptance, site-specific ERP needed

Consultation and notification should be

based upon the unique aspects of CO2

(i.e. dispersion modeling) when

establishing the required distances

RFA- Recommendations for Emergency

Planning Zone requirements

Regulatory Challenges- Emergency Response

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Effective stakeholder engagement is

critical- to include potentially affected

parties and to support CCS on forward

basis

Existing requirements specific to

petroleum- need to be adjusted for CCS

1. Expansion of subsurface notification

to include additional potentially

affected parties

2. Notification of surface occupants in

relation to proposed subsurface

activity

RFA- Recommendations for expansion

of consultation and notification in-line

with subsurface CO2 dispersion

Regulatory Challenges- Consultation/Notification

1.6 km

1.6 km

e.g. Mineral Notification

D56 Requirement

- 1.6 km radius from section

hosting well (3x3 grid)

Shell Quest

- Maximal radius of

CO2 plume

- Penetrations of

target zone within

AOI

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With Carbon Capture and Storage Statutes Amendment Act,

Alberta has ability to grant Closure Certificate and accept

long-term responsibility for stored carbon dioxide

Alberta would then become responsible for all obligations of

lessee - including facilities, environment, and land

Entirely appropriate- provides continuity and a “carrot” for

good operators

Stringent criteria must, however, be in place, for public

protection and confidence

The minimum closure period and performance criteria that

must be met before Alberta can assume liability and grant

Closure Certificate have not yet been identified

RFA- Recommendations for minimum closure period and

performance criteria

Regulatory Challenges- Handover Criteria

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With Carbon Capture and Storage Statutes

Amendment Act, Alberta has ability to

accept responsibility for stored carbon

dioxide. This includes liability for tort

action.

Question of who responsible for “true up”

of granted CO2 credits if loss of CO2 from

container (i.e. climate liability)

RFA- Recommendations that

responsibilities be amended to include

liability for climate

Regulatory Challenges- Liability

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After CO2 transferred to Alberta, government

responsible for post-closure monitoring (i.e.

MMV), reclamation of transferred facilities,

orphaned facilities, and unforeseen events

Appropriate that operators cover some/all

costs, but details are important-

For projects needing cost certainty, questions:

How PCSF rates are determined?

What is an appropriate use of the PCSF?

What if PCSF funds are exhausted?

Could PCSF rates rise, or there be

subsequent assessments on operators?

RFA- Recommendations for determinants of

rates and appropriate uses of PCSF

Regulatory Challenges- Post Closure Stewardship Fund

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