Oil Sands Fact Book. Marathon

Transcription

1 Oil Sands Fact Book Marathon

2 About Marathon Oil Marathon Oil Corporation (Marathon) is a global energy business. We are the fourth largest U.S.-based integrated oil and gas company, with exploration and production operations in the United States, Canada, Angola, Equatorial Guinea, Indonesia, Libya, Norway, Poland and the United Kingdom. Marathon is also the fifth largest refiner in the United States. Our retail marketing system comprises approximately 6,200 retail locations in 18 states. Marathon has a strong and growing presence in Canada s oil sands through our subsidiary Marathon Oil Canada Corporation. Our oil sands investments include both mining and in situ interests located in the Athabasca region of northern Alberta, as well as upgrading facilities near Edmonton, Alberta. Cautionary Note This document contains forward-looking statements about Marathon s oil sands mining operations. Where, in any forward-looking statement, Marathon expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, there can be no assurance that the statement of expectation or belief will result or be achieved. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. In accordance with the safe harbour provisions of the Private Securities Litigation Reform Act of 1995, Marathon has included in its Annual Report on Form 10-K for the year ended December 31, 2009, and subsequent Forms 10-Q and 8-K, cautionary language identifying important factors, though not necessarily all such factors, that could cause further outcomes to differ materially from those set forth in the forward-looking statements. Copies of these reports are available at or by contacting Marathon s Investor Relations Office at Marathon assumes no obligation to update the information in this document. All monetary amounts referenced in this document are in Canadian dollars unless otherwise noted. Printed January 2010

3 Contents OVERVIEW Global Energy Challenge 3 Canadian Oil Sands 4 OPERATIONS Marathon Joins the Athabasca Oil Sands Project 7 Getting the Oil Out of Oil Sands 10 Outlook and Strategy 12 AOSP Facts 14 Canadian Oil Sands Facts 16 TECHNOLOGY Technology and Innovation 19 ENVIRONMENT Strong Environmental Regulations 21 Voluntary Environmental Commitments 21 Water Use, Conservation and Management 22 New Technologies to Manage Water Use 24 Tailings 27 Greenhouse Gas Emissions 30 Alberta s Climate Change and Emissions Management Fund 34 Canada s GHG Policy 35 Air Emissions 35 Air Quality 37 Land 37 COMMUNITY Community Involvement 41 Community Investment 42 Fort McMurray Infrastructure 42 CONSULTATION Environmental Consultation 45 Community Consultation 46 Glossary 48 Contacts 49 Oil Sands Fact Book 1

4 Overview Canada s oil sands are set to play a major role in meeting the world s growing energy demand. This unconventional resource is the second largest recoverable oil reserve in the world, currently estimated at 170 billion barrels. 2 Marathon Oil Canada Corporation

5 GLOBAL ENERGY CHALLENGE Global energy demand is increasing and will continue to increase well into the future. The International Energy Agency (IEA) projects that world primary energy demand will increase an average 1.6% per year between 2006 and 2030 a total increase of 45%. Energy is needed to power the economies of developed countries, support the rising standard of living in developing nations, and meet the needs of a growing world population. Developing nations, including population giants China and India, are entering their most energy-intensive phase of economic growth as they industrialize, build infrastructure and increase their use of transportation. Energy from alternative sources such as solar, wind, biofuels and nuclear will play a larger role in satisfying growing energy demand, as will fossil fuels like oil. All forms of energy combined with high efficiency energy technologies will be needed to meet rising global demand. Today oil accounts for 34% of the world s energy supply and it is expected to play a dominant role for many years to come. Supplies of oil from conventional drilling cannot keep pace with rising consumer demand. By 2015, growth in the production of more easily accessible or conventional oil and gas will not match the world s projected rate of demand growth. Unconventional oil reserves will be needed and Canada s oil sands are a major source, with estimated reserves of 170 billion barrels that are considered economically recoverable using today s technologies. Canada s oil sands are the second largest recoverable oil reserve in the world after Saudi Arabia s 260 billion barrels. The development of the Canadian oil sands poses a number of economic, technical and environmental issues that are challenging but not insurmountable. Continued investment in new technology and infrastructure will lower costs, improve recovery and reduce the environmental impacts of oil sands development. For example, new technologies currently being advanced include: efficiency measures to increase water recycling and reduce freshwater use; carbon capture and storage (CCS) to manage emissions of carbon dioxide, a greenhouse gas; and research to ensure land disturbed by oil sands development will be reclaimed and returned to an equivalent capability as existed prior to development. Total World Primary Energy Supply * 2007 International Energy Agency Energy Statistics Hydro 2.2% Nuclear 5.9% Combustible Renewables & Waste 9.8% Natural Gas 20.9% Geothermal/ Solar/Wind 0.7% Oil 34% Coal/Peat 26.5% *Excludes electricity trade. Note: For presentational purposes, shares of under 0.1% are not included and consequently the total may not add up to 100%. Oil Sands Fact Book 3

6 CANADIAN OIL SANDS Approximately 170 billion barrels of Canadian oil sands are rated proven meaning they are economically recoverable with today s technologies. However, the ultimate potential of these vast oil sands deposits is estimated at 1.7 trillion barrels of oil in place more than 10 times U.S. oil reserves. 1 Saudi Arabia is the only country in the world with a larger oil reserve base. Politically stable, Canada has a reputation for technical and contractual reliability as well as high environmental standards. In addition, Canada is situated directly adjacent to the world s largest energy consumer, the United States. Oil sands development is proceeding under comprehensive Canadian federal and provincial regulations. These regulations strictly govern all aspects of air, water, land, wildlife and socioeconomic impacts to the oil sands region and the wider environment. Oil Sands Basics Oil sands are naturally occurring mixtures of sand, clay, water and a thick, heavy substance called bitumen. At room temperature, bitumen is much like cold molasses and must be heated or diluted in order to flow through a pipeline. The Canadian oil sands deposits are found in three major areas of northern Alberta: Athabasca, Cold Lake and Peace River. Deposits are located beneath approximately 140,200 square kilometres (54,131 square miles) of land. Roughly 530 square kilometres (205 square miles) of land have been disturbed to date for oil sands development. Of the total oil sands deposit, about 20% is located within 75 metres (approximately 250 feet) of the earth s surface and can be extracted through open-pit mining, using large mechanical shovels and trucks. Oil sands mining and extraction is efficient, recovering approximately 90% of bitumen compared to the 20-35% recovery rate of conventional light oil. The other 80% of recoverable oil sands are classified as deep deposits because they are located more than 75 metres below the surface. Deep oil sands deposits are typically recovered by injecting steam to mobilize the oil, which can then be pumped to the surface, leaving the sand in place. For this reason, technologies to recover deep bitumen deposits are referred to as in situ, Latin for in place. In situ techniques recover 20% to 75% of the bitumen in the reservoir. Once recovered, bitumen can be diluted with a light hydrocarbon and sold as is or upgraded. Upgraders crack bitumen s large heavy hydrocarbon molecules into lighter molecules by extracting carbon or by adding hydrogen. The result is high-grade light and medium synthetic crude oil suitable as feedstock for conventional refineries that produce gasoline, diesel fuel and other consumer products. For more information see Footprint pg Alberta Energy, Oil Sands Statistics 4 Marathon Oil Canada Corporation

7 Alberta s Oil Sands Regions Athabasca Cold Lake Peace River Oil Sands Fact Book 5

8 Operations Marathon s mining and in situ oil sands interests provide politically stable, long-life production for our heavy oil upgrading and refining operations. 6 Marathon Oil Canada Corporation

9 MARATHON Joins THE Athabasca OIL SANDS project Marathon Oil entered the Canadian oil sands business in October 2007 with the $6.9 billion (US) purchase of the oil sands mining and in situ assets of Western Oil Sands Inc. The acquisition provides Marathon with a 20% joint venture interest in the Athabasca Oil Sands Project (AOSP) and interests in a number of in situ developments. Through the oil sands purchase, Marathon has access to stable, long-life production that is aligned with heavy oil upgrading capabilities within our refinery and distribution system. The AOSP is a joint venture among Marathon (20%), Shell Canada Energy (60%) and Chevron Canada Limited (20%). Shell Canada operates the AOSP on behalf of the joint venture partners. Marathon s Oil Sands Holdings Oil Sands Mining The AOSP came onstream in 2003 with a design capacity of 155,000 barrels per day (b/d) of bitumen and consists of the Muskeg River Mine and Scotford Upgrader. The AOSP Expansion 1, which began construction in late 2006, will increase design capacity by 100,000 b/d to 255,000 b/d. The expansion is planned to be onstream in 2010/2011 and includes two simultaneous construction projects: Mine construction of Jackpine Mine Phase 1, east of the existing Muskeg River Mine, as well as expansion of the froth treatment facilities at the Muskeg River Mine. To support this and future expansions, Albian Village a new on-site, 2,500-person, hotel-style accommodation facility, opened its doors in August An adjacent airstrip officially opened in November 2007 to transport workers, equipment and supplies. Upgrader construction of a stand-alone processing train at the Scotford Upgrader. Shell, as operator, and the AOSP currently hold regulatory approval for the production of 470,000 b/d of mineable bitumen in Athabasca. There are plans to pursue regulatory approval for a total of up to 770,000 b/d of mineable bitumen production. The Muskeg River Mine is an oil sands extraction and processing facility located approximately 70 kilometres (44 miles) north of Fort McMurray, Alberta, and about 500 kilometres (310 miles) north of Edmonton, Alberta. The Scotford Upgrader, located approximately 500 kilometres (310 miles) south of the mine site, near Fort Saskatchewan, Alberta, upgrades the bitumen into a synthetic crude oil. Of the total Canadian oil sands deposit, only 20% can be extracted using mining techniques, which involve large mechanical shovels and trucks. Oil Sands Fact Book 7

10 Future Options Jackpine Mine Expansion In 2007, an application was filed to expand Jackpine Mine Phase 1 by 100,000 b/d. The Jackpine Mine Expansion would include additional mining areas and associated extraction facilities, utilities and infrastructure. AOSP Mining and Upgrading Operations Pierre River Mine Development Also, in 2007, an application was made for approval of Pierre River Mine, a proposed 200,000-b/d mine and extraction facility, located west of the Athabasca River. Debottlenecking Specific projects are being designed to increase production from the mine and upgrader facilities either existing or currently under construction. In Situ Marathon holds ownership interests in both operated and non-operated in situ oil sands leases covering approximately 57,870 gross hectares (143,000 gross acres) or 22,258 net hectares (55,000 net acres). Recoverable resources from in situ leases are expected to grow to at least 1.5 billion barrels from several projects including: 100% working interest in the Birchwood project; 60% interest in the Marathon-operated Namur project; 20% working interest in the Chevron-operated Ells River project; and 33 1/3% working interest in the Shell-operated Saleski project. Marathon and Chevron have completed initial exploration of their respective operated projects. Marathon is currently conducting engineering assessments towards future project development. 8 Marathon Oil Canada Corporation

11 Marathon Area Leases (Leases in which Marathon has title or rights) Oil Sands Fact Book 9

12 GETTING THE OIL OUT OF OIL SANDS Mining Recovering bitumen from open-pit mines involves three basic steps: excavation, processing and upgrading. At the AOSP s Muskeg River Mine, large mechanical shovels excavate the oil sands ore, which consists of bitumen, water, sand and clay. The ore is transported by huge trucks, each capable of carrying 400 tons, to processing equipment located on the site. It is then mixed with warm water to separate the bitumen from the sand and clay. The resulting slurry is then treated with paraffinic solvent to remove impurities and dilute the molasses-like bitumen. Diluted bitumen, called dilbit, is then transported about 500 kilometres (310 miles) via pipeline to the Scotford Upgrader. The solvent is recovered, returned to the mine and reused. At the Scotford Upgrader, hydrogen is added to upgrade the high-viscosity, extra-heavy crude oil into a wide range of crude oils suitable as refinery feedstock. Scotford s hydrogen-addition processing results in a volume gain; approximately 102 to 103 barrels of synthetic crude are produced from every 100 barrels of bitumen processed. Adding hydrogen rather than removing carbon means Scotford does not produce any high-carbon coke (pure carbon) as a waste product, thereby extracting value from the full barrel of bitumen. In Situ At in situ oil sands developments, steam is typically used to separate bitumen from the sand while it is still underground. This is accomplished by drilling two parallel wells horizontally into the reservoir. Steam is injected into the top well, which heats the bitumen until it flows into the lower well. The bitumen is then pumped to the surface. This process, called steam-assisted gravity drainage (SAGD), is the most common in situ method used today. Since significant amounts of energy are required to generate the injected steam, other methods have been, and are being, developed that replace steam with natural gas liquids or underground combustion. These methods have the potential to significantly reduce greenhouse gas (GHG) emissions from in situ developments. While the use of in situ technology in the oil sands is relatively new, it is anticipated that the technology will have lower construction and operating costs than mining. There is also less surface disturbance since open-pit mines and tailings ponds are not required. In Situ Process 10 Marathon Oil Canada Corporation

13 Mining and Upgrading Process Oil Sands Fact Book 11

14 Outlook and strategy The Canadian oil sands is a world-class resource with multibillion-barrel, long-life potential. Marathon s 2007 acquisition of key oil sands mining and in situ assets strategically links this substantial bitumen deposit to our U.S. Midwest downstream operations. With our growing refining capabilities and well-established retail network, Marathon is well positioned to provide solutions that will maximize the value of our oil sands assets in both these objectives by optimizing operations at our current facilities and by managing our extensive, high-quality portfolio of landholdings. With the AOSP, Marathon has joined an ongoing and expanding project supported by strong and experienced partners. The technical and business expertise Marathon and its joint venture partners bring to the AOSP will not only maximize recovery of this resource, but also create high-value crude oil products. the short and long term. Our oil sands strategy is focused on operational excellence and profitable growth. We will pursue Continued development of our oil sands assets will also result in additional Marathon-operated projects. New projects will build on the capabilities Canadian Association of Petroleum Producers (CAPP) Refiner Survey & Market Outlook Thousands of barrels per day Source: CAPP *PADD Petroleum Administration for Defense Districts. The United States is divided into five PADDs which were created during World War II but are now used for data collection purposes. 12 Marathon Oil Canada Corporation

15 and competencies Marathon has developed as a global energy producer. Marathon s current and future oil sands developments will operate within the overarching principles of health, safety, security and environment. We are committed to working with key stakeholders to ensure our oil sands developments are conducted in an environmentally responsible manner that respects the well-being of the individuals and communities where we work. The oil sands business environment continued to be challenging in 2009 with high capital and operating costs and shortages of craft labour. During the first half of the year, the industry saw a slowdown in projects being developed, with several postponement announcements citing unfavourable costs and deteriorating economics overall, due in part to lower oil prices. As oil prices rebounded, interest in the oil sands also began to pick up with a number of mergers, acquisitions and investments in additional production in the latter half of Cost reductions were a major focus for the AOSP in A cost savings initiative is under way and we are working with our joint venture partners, key contractors and suppliers to identify areas to reduce costs. Marathon s Refining, Marketing and Transportation Network Oil Sands Fact Book 13

16 AOSP FACTS AOSP Operations Design capacity of 155,000 b/d. More than 2,000 people employed at mine and upgrader. AOSP Expansion 1 The largest industrial oil and gas construction project in Canada. Among the largest trade union projects in Canada, with more than 5,000 skilled building trades members. Employed more than 10,000 skilled craft workers between the mine and upgrader expansion sites at peak construction in Water The AOSP, which includes Muskeg River Mine and Jackpine Mine, has permits to withdraw million cubic metres, about 0.6% of the Athabasca s total annual flow. Environmental Regulations The AOSP, like all bitumen mining and extraction operations, is strictly regulated by Alberta Environment under the Environmental Protection and Enhancement Act and the Alberta Water Act as well as by Fisheries and Oceans Canada. Alberta Environment has issued conditions of approval specific to the AOSP, and each year the AOSP is required to file annual reports that detail how it is meeting these environmental approval requirements. In addition to complying with all Alberta and Canadian environmental requirements, the AOSP has signed agreements with key stakeholders to address environmental issues related to each phase of the AOSP s mining development. The AOSP is the first oil sands project to receive ISO accreditation, an international standard for environmental management that demonstrates our commitment to continuous improvement. About 85% of the water used for extraction is recycled water; the rest is freshwater and small amounts of groundwater. Water is lost to evaporation and pore space in the sand. 14 Marathon Oil Canada Corporation

17 Energy Efficiency & GHG Reductions At the AOSP s oil sands mine and upgrader, natural gas is used on-site to produce electricity and steam, both of which are used in our processes. Tailings The AOSP s $100-million Tailings Test Facility is experimenting with various tailings technologies to identify the best mix of solid particles and techniques for increasing water recovery and creating dry or trafficable tailings. The AOSP is investigating low-carbon alternatives to natural gas to supply energy to the oil sands in the future. Today about 650 cubic feet of natural gas is required to produce one barrel of synthetic crude oil. In energy terms, 650 cubic feet of natural gas is about 10% of the energy in a barrel of oil. In 2009 the Alberta Energy Resources and Conservation Board (ERCB), which regulates Alberta s energy resources, issued a new tailings directive that applies to the AOSP and other oil sands operators. The directive is designed to reduce the amount of liquid tailings, thereby speeding reclamation. The AOSP is conducting appraisal work on a carbon capture and storage project to manage carbon dioxide (CO 2 ) from the Scotford Upgrader. The Quest CCS Project would capture and store one million tonnes of CO 2 per year in a deep geological formation. Oil Sands Fact Book 15

18 CANADIAN OIL SANDS FACTS Oil Sands and Greenhouse Gases Canada, with 0.5% of the world s population, produces 2% of global GHG emissions. Total GHG emissions from the oil sands industry are approximately 33 million tonnes per year. This is equivalent to about 5% of Canada s GHG emissions, 0.5% of GHG emissions of the United States and 0.1% of global GHG emissions. 2 On a well-to-wheels basis, about 75% to 85% of GHG emissions come from the combustion of transportation fuels by the end user. Only 15% to 25% of GHG emissions result from the production, transport and refining of crude oil, whether from conventional or unconventional sources. In 2007, 106 industrial facilities reported a combined megatonnes of GHG emissions to the Government of Alberta 44% of these emissions were from power plants and 23% of these emissions came from oil sands. 3 Water On average, oil sands mining operations use two to three barrels of freshwater to extract one barrel of bitumen. About half to three-quarters of a barrel of water (fresh and recycled) is needed to convert the bitumen into synthetic crude oil. Footprint Mineable oil sands cover less than 3,500 square kilometres (1,351 square miles): > roughly 2.5% of the total oil sands area in Alberta (140,200 square kilometres or 54,131 square miles); or > 0.53% of Alberta s total land mass (661,848 square kilometres), (255,583 square miles). So far, 530 square kilometres (205 square miles) have been disturbed by oil sands development. Canada s boreal forest covers 3.2 million square kilometres (1.2 million square miles). As of March 2008, approximately 65 square kilometres (25 square miles) of mined oil sands land is undergoing reclamation. Technology and conservation are the answers on the GHG issue carbon capture and storage, using the lowest CO 2 sources of energy, and simply using less, will all play a role in reducing emissions. In March 2008, Syncrude s Gateway Hill became the first reclaimed area in the oil sands to receive official certification from the Alberta government. 2 Environment Canada: Canada s Greenhouse Gas Emissions: Understanding the Trends Annex 1. November Alberta Government, 2007 GHG Report 16 Marathon Oil Canada Corporation

19 Global Energy Related Emissions by Country China 21% United States 20% OECD* Europe 15% Non-OECD Europe & Eurasia 10% Other 23% Australia 1% Source: U.S. Energy Information Administration 2006 Japan 4% India 4% Canada 2% Canada s GHG Emissions by Sector Transportation 22% Manufacturing & Heavy Industry 16% Agriculture 10% Residential 7% Electricity 16% Service Industries 7% Oil Sands 5% Oil & Gas Excluding Oil Sands 17% Source: Environment Canada Understanding the Trends *OECD Organization for Economic Co-operation and Development Oil Sands Fact Book 17

20 Technology Technological advances will continue to lower costs, improve recovery and reduce the environmental impacts of oil sands development. 18 Marathon Oil Canada Corporation

21 TECHNOLOGY AND INNOVATION The AOSP partners bring innovative solutions and advanced technologies to our oil sands operations. The continuing development and application of technology, including the following examples, will be key to our success: A carbon capture and storage project called Quest CCS Project is being proposed for the Scotford Upgrader. Quest would involve capturing carbon dioxide from the hydrogen manufacturing units of the Scotford Upgrader, processing it to create a high-quality CO 2 stream, and compressing it for cost-effective transportation via pipeline and storage in deep geological formations. Sulphur recovery regulations at the Scotford Upgrader are met and exceeded through advanced sulphur recovery systems that achieve better than 99% sulphur recovery. New technology being implemented at the Scotford Upgrader Expansion means production will increase by 100,000 b/d while reducing sulphur dioxide emissions by 10%. Advanced energy and heat integration features were designed into the upgrader, making Scotford s direct CO 2 emissions intensity best-in-class compared with that of other operators. Hydrogen-addition technology used at the Scotford Upgrader produces approximately 102 to 103 barrels of synthetic crude oil for every 100 barrels of bitumen processed, with no coke waste product. The AOSP is the first oil sands project to receive ISO accreditation, an international standard for environmental management that demonstrates our commitment to continuous improvement. A $100-million tailings pilot plant was commissioned at the Muskeg River Mine to produce trafficable tailings, which can be walked on by animals and people, to support fast-track reclamation of land disturbed by oil sands mining. The AOSP Expansion 1 includes a new hightemperature froth treatment system that will reduce energy use by about 10% compared with current techniques, avoiding 40,000 tonnes per year of greenhouse gas (GHG) emissions. Shell Enhance froth treatment is the first commercial application of an innovative technology that will reduce costs and improve energy efficiency in oil sands production. The new froth treatment technology uses higher temperatures to more efficiently remove impurities from the oil sands froth. With this technology, the AOSP will be able to use smaller equipment, less water and less energy. Shell Enhance is currently being built at the Muskeg River Mine as part of Expansion 1. For more information on how technology and innovation are being used in the AOSP s operations, see: New Technologies to Manage Water Use pg 24; Energy Efficiency pg 33; Carbon Capture and Storage pg 33; and AOSP and Land Reclamation pg 39. Oil Sands Fact Book 19

22 Environment Marathon and its AOSP partners adhere to strict government conditions for developing the oil sands and work closely with all stakeholders to address environmental issues. 20 Marathon Oil Canada Corporation

23 STRONG ENVIRONMENTAL REGULATIONS Understanding and managing both project-specific and cumulative effects of oil sands development is fundamental to obtaining the regulatory approvals required to operate. Bitumen mining and extraction operations are strictly regulated by Alberta Environment under the Environmental Protection and Enhancement Act and the Alberta Water Act as well as by Fisheries and Oceans Canada. Alberta Environment issues conditions of approval specific to each oil sands operation. Each year, oil sands operators are required to file annual reports that detail how they are meeting these environmental approval requirements. Staff and third-party experts provide data demonstrating that all conditions have been met. Some of the areas the AOSP reports on include: tailings; air emissions; groundwater monitoring; participation in regional environmental initiatives; river water quality; waste management; wetland research; conservation and reclamation; erosion control; bitumen recovery; and diluent losses. VOLUNTARY ENVIRONMENTAL COMMITMENTS In addition to complying with all Alberta and Canadian environmental requirements, the AOSP has signed agreements with key stakeholders to address environmental issues related to each phase of the Athabasca Oil Sands Project s mining development. The agreements address issues such as: building environmental knowledge and expertise among local citizens through the funding of college fees and living allowances for local First Nations; involving Aboriginal groups in the design of our environmental monitoring program; supporting community advisory groups; documenting local Traditional Environmental Knowledge (TEK) about plants and animals; supporting biodiversity monitoring in the oil sands region; and purchasing land for conservation to mitigate the AOSP s environmental footprint. These agreements set out the AOSP s environmental commitments to First Nations and others. Each agreement defines actions the AOSP will undertake to address specific environmental concerns. While most concerns are a direct result of our current and planned mining operations, some are related to more general community environmental improvements. The commitments are entered into a database, tracked and progress reported at regular meetings with stakeholders. Oil Sands Fact Book 21

24 WATER USE, CONSERVATION AND MANAGEMENT No process water at the Muskeg River Mine is released into the Athabasca River. Other than losses from evaporation, all of the water recovered from our tailings is recycled back through our operations many times over. Currently, oil sands extraction is a water-based process. Warm water is used to separate bitumen molecules from the sand and clay. The primary source of freshwater for our mining operations is the Athabasca River. The Athabasca River is a natural river with no dams to moderate natural seasonal flow variations. This seasonal variation in flow levels means that in winter, when the river is low, water withdrawal must be carefully managed to ensure the river is not negatively impacted. Regulatory limits are in place to restrict water withdrawals by the oil sands industry during winter low-flow conditions. on-site storage so that we do not have to withdraw as much water during low-flow periods. Industry plans call for increasing oil sands mining production from 1.2 million barrels per day (b/d) (current production) to 3.5 million b/d over the long term. While this production level, on average, will use less than 3% of the mean annual flow in the Athabasca River, an extensive research program and a multi-stakeholder committee have been established to recommend future withdrawal limits to ensure the Athabasca River is protected. The Muskeg River Mine s current water withdrawal rate is less than 0.3% of the Athabasca River s mean annual flow and would average 2.3% of the lowest recorded daily flow. The mine currently uses about one-quarter of its allotted water. The AOSP, which includes Muskeg River Mine and Jackpine Mine, has permits to withdraw about 0.6% of the Athabasca annual flow. At the AOSP, we also work hard to minimize and manage our water use, recycling as much water as possible from our tailings or settling ponds, which store process-affected water containing sand, clay and residual bitumen. We are also developing As the AOSP increases oil sands production in the future, our water allocation will also increase. For example, at 770,000 b/d our water allocation would rise to 0.8% to 0.9% of the Athabasca River s mean annual flow. The Muskeg River Mine restricts water withdrawals during low-flow conditions to protect fish and aquatic ecosystems. 22 Marathon Oil Canada Corporation

25 Water Use From the Athabasca River Athabasca River Flow m 3 /s (Cubic Metres per Second) Oil Sands Fact Book 23

26 NEW TECHNOLOGIES TO MANAGE WATER USE New technologies and processes are being developed to improve the management of freshwater at the AOSP s Muskeg River Mine and Scotford Upgrader. This will allow the AOSP to increase water treatment, recycling and storage at both facilities. On average, oil sands mining operations use two to three barrels of freshwater to extract one barrel of bitumen. This fluctuates depending on recycling rates from tailings. About half to three-quarters of a barrel of water (fresh and recycled) is needed to convert the bitumen into synthetic crude oil. The AOSP is undertaking several projects to reduce its water consumption: At the Muskeg River Mine, a large-scale pilot project began operation in 2007 to test technology that will reduce the water content of the sand and clay waste streams, called tailings, that remain following oil sands extraction. Removing more water would increase the volumes available for recycling, reducing freshwater consumption. It would also result in a more solid tailings material that could be returned to the mine pit as part of land reclamation. This would reduce the size of facilities or ponds needed to store tailings. The Scotford Upgrader has begun reusing effluent from a wastewater treatment plant, resulting in a 10% to 15% reduction in the amount of water used to produce a barrel of synthetic crude. The AOSP is also exploring opportunities to replicate the Muskeg River Mine s zero liquid discharge criteria at the Scotford Upgrader. New technologies and processes will allow the AOSP to increase water treatment, recycling and storage, reducing the need for freshwater withdrawals. 24 Marathon Oil Canada Corporation

27 AOSP Net Freshwater Consumption (Thousands of cubic metres) Muskeg River Mine 20,459 21,533 8,370 * 5,715 13,505 Scotford Upgrader 3,413 3,447 3,289 3,735 3,304 *In 2006 and 2007 the mine had an excess amount of water available for recycling from its tailings pond, reducing freshwater requirements. In 2008, available water from tailings inventories began to return to normal and freshwater was required to compensate for water lost to evaporation and pore space. Athabasca Oil Sands Project Water Intensity As water use in oil sands mining and extraction can vary widely from year to year based on the amount of clarified water available for recycling from the tailings pond, we provide both a three-year average and a normal year (2005) as the best indicators of water use. The 2005 to 2007 three-year average water intensity at the mine is 1.4 barrels of freshwater for every barrel of bitumen produced. Water recycling in 2006 and 2007 was high, therefore reducing the need for freshwater. A more normal year, 2005, saw 2.32 barrels of freshwater used per barrel of bitumen produced. Upgrading uses substantially less freshwater than mining. Upgrader water use is about 0.25 barrels of freshwater for every barrel of synthetic crude produced. Upgrader Water Use At the Scotford Upgrader, a portion of the freshwater (also called raw water) withdrawn from the North Saskatchewan River is held in a storage pond where it is clarified by gravitational sedimentation. The clarified water is sent either to the utility water system or to the cooling towers to make up for evaporative water losses. The rest of the freshwater is sent directly to the raw water treatment unit. Treated water is used, among other things, as boiler feed, to produce the steam required in the upgrading process. The steam is then condensed and reused. Wastewater from the plant is treated in a biological treatment unit and sent to holding ponds. After being tested to meet government quality requirements, it is discharged into the North Saskatchewan River. Oil Sands Fact Book 25

28 How Big is the Athabasca River? Average Total Flow of Athabasca River Average Total Flow of Alberta Rivers South of Athabasca River 22,000 20,000 Mean Annual Flow Mm 3 (Millions of Cubic Metres) 18,000 16,000 14,000 12,000 10,000 8,000 Athabasca Milk Battle Beaver Red Deer N. Sask S. Sask* 6,000 4,000 2,000 0 * S. Sask includes the river and its tributaries (eg: Bow River, Elbow River, etc.). 26 Marathon Oil Canada Corporation

29 TAILINGS Tailings the waste product of the bitumen extraction process are a major focus for the oil sands industry. Due to their high water content and toxic elements, tailings are a challenging disposal issue that remains the subject of intensive industry research and development efforts. Tailings are comprised largely of water that is mixed with sand, silt and clay particles from oil sands ore. Tailings also contain trace amounts of toxic components such as hydrocarbons and a concentration of naphthenic acid from the bitumen extraction process. Additionally, some of our tailings have a high clay content and high capacity to hold water, making them difficult to stabilize and reclaim. In response to these challenges, the AOSP carefully assesses and manages tailings to reduce potential risks to surface and groundwater as well as wildlife. The AOSP operates above-ground tailings facilities or ponds, involving leading engineering and construction technologies, regular maintenance, water recycling, surface and groundwater monitoring and wildlife deterrence. In addition, we continue to conduct research and development into technologies that, ultimately, should enable us to accelerate the reclamation of the tailings areas to a dry landscape in accordance with regulatory requirements. About Tailings Ponds When a mine first opens, tailings are stored in an above-ground tailings pond created by a dam constructed of compacted low-grade oil sand. Once an area that has been mined is available, Wildlife Deterrents for Tailings The BirdAvert system tracks approaching migratory birds using radar, while computer-controlled equipment triggers loud cannon sounds and other effects to deter the birds. dykes are then constructed inside the mined pit to hold future tailings. These tailings pits or ponds can become quite large due to the size of the mined area and the water content of the tailings. Currently, the AOSP s tailings pond is approximately 12 square kilometres (4.6 square miles) and has a government-approved extension project under way. The AOSP s tailings management plan is designed to remove all water and then blend the remaining solid tailings for use in land reclamation. Land is reclaimed by revegetation or reforestation to a capability equivalent to what existed prior to development as required by the Alberta government. Oil Sands Fact Book 27

30 Tailings Present Tailings Today tailings ponds are constructed in areas of the pit where mining is complete. The sides of the ponds are constructed of compacted low-grade oil sand. In the future, technological advances will allow industry to reduce the water content of tailings to create a dry material that is trafficable, meaning animals and people can walk on it. The dry tailings will be used in ongoing reclamation of land disturbed by oil sands development, significantly reducing the need for tailings ponds. In-Pit / Trafficable Tailings Future 28 Marathon Oil Canada Corporation

31 Tailings composition Each grain of sand is surrounded by a layer of water and a film of clay. Where Does the Water Go? The AOSP s bitumen extraction process is designed to be water efficient. All of the water recovered from the bitumen extraction process is recycled. However, water is lost to evaporation and the pore space between the clay and sand grains in the tailings that was originally occupied by the bitumen. Increasing Water Recycling Significant reductions in freshwater use will only occur by removing more water from tailings. The AOSP s $100-million Tailings Test Facility is experimenting with various tailings technologies to identify the best mix of solid particles and techniques for increasing water recovery and creating dry or trafficable tailings. New Tailings Regulations In 2009 the Alberta Energy Resources and Conservation Board (ERCB), which regulates Alberta s energy resources, issued a new tailings directive designed to reduce the amount of liquid tailings, thereby speeding reclamation. The directive is technically challenging, and to ensure compliance, the AOSP has made substantial investments in tailings research. Work on tailings technology includes engineering work on-site and collaborations with academic and other energy company researchers. Water Recycling Process Oil Sands Fact Book 29

32 GREENHOUSE GAS EMISSIONS Oil sands development is energy-intensive. A lot of energy is needed to excavate and transport oil sands ore, heat the water required to separate bitumen from the oil sand, and upgrade bitumen into a variety of crude oils that are then transported to refineries. Fuels are made from a variety of feedstocks, including bitumen, and are produced, distributed and used in many ways. As a result, there are differences in the total greenhouse gas (GHG) emissions generated by each fuel type, when measured from the point of production to eventual consumption. This measurement is commonly referred to as life cycle GHG emissions. Life cycle GHG emissions are affected by the amount of energy required to extract and process the crude; more energy consumed means more GHG emissions. In addition, GHG emissions are created when fuels are consumed by end users. For example, transportation fuels consumed in vehicles produce GHG emissions. About 75% to 85% of life cycle GHG emissions result from end-use consumption. Crude oil feedstocks can be divided into two categories: conventional and unconventional. There are differences in the quantity of GHGs created during the production of conventional feedstocks. More energy is required to extract and refine heavy crudes (e.g. California Heavy Oil) than light crudes (e.g. Saudi Light.) This means that fuels derived from heavy crudes typically have higher associated GHG emissions than light crudes. Unconventional feedstocks include oil sands crude from Canada. Oil sands crude is one of the many types of crude oil being imported into the United States to replace declining U.S. domestic production. The AOSP and others have compared the GHG emissions of fuels derived from oil sands to a range of imported heavy and light crudes. On a life cycle basis, the GHG emissions of oil sands-based fuels can be higher, lower or on par with conventional crude-based fuels, depending on which fuels are compared. A recent report by IHS CERA Inc. compared the GHG emissions of fuels from a range of conventional and oil sands crudes to a fuel from the U.S. average crude consumed baseline. The report found that on a life cycle basis, fuel produced from mined oil sands has about 5% greater well-towheels emissions than the average fuel consumed in the United States, and fuel produced from steam-assisted gravity drainage (SAGD) projects with a steam-oil ratio (SOR) of three has life cycle emissions about 15% greater. 5 5 IHS CERA Inc. 30 Marathon Oil Canada Corporation

33 Life Cycle GHG Emissions for World Crude Oil Fuel Combustion* Well-to-Retail Pump Saudi Light Average US Barrel Consumed Mexico Venezuela Canadian Oil Sands: Mining Synthetic Crude Oil Angola California Heavy Oil** Canadian Oil Sands: SAGD Dilbit*** Nigeria Country Average Middle East Heavy Oil** Canadian Oil Sands: SAGD Synthetic Crude Oil*** Kg CO 2 Equivalent per Barrel of Crude Copyright 2009 by IHS CERA Inc. All rights reserved. Reprinted by permission of IHS CERA Inc. No further reproduction is allowed without permission from IHS CERA Inc. * The life cycle GHG emissions estimate is based on a per-barrel-of-crude basis, assuming an average carbon content. To convert this to a refined product basis, such as gasoline or diesel, additional assumptions would be needed to apportion well-to-retail pump emissions to individual refined products. This depends on the product slate associated with individual crude sources and refinery-specific configurations. ** Assumes steam-assisted gravity drainage is used for production. *** Assumes a steam-oil ratio of 3. Oil Sands Fact Book 31

34 AOSP GHG Emissions Natural gas is the primary energy source used at the AOSP to separate bitumen from the oil sand although diesel fuel powers the large trucks and mechanical shovels used to excavate oil sands ore. And like all fossil fuels, natural gas and diesel produce carbon dioxide, which is a greenhouse gas. The AOSP is working to reduce the GHG emissions from oil sands development through energy efficiency, technology and offset programs. Although we have invested heavily in energy efficiency measures, both emissions and energy intensity have increased since This is due to a variety of factors, including lower grade ore (which yields less bitumen per ton mined), planned and unplanned maintenance work at both the mine and upgrader, and severe weather. Also diesel consumption at the mine has increased due to heavy equipment used in the construction of an external tailings facility, in-pit facilities and stripping. 80 Total AOSP GHG Emissions Intensity (CO 2 Equivalent Tonnes/total mine production) 4.0 Total AOSP GHG Emissions (CO 2 Equivalent Tonnes) Kg CO 2 e/bbl production Mt CO 2 e Total AOSP Energy Intensity Oil Sands Upgrader Mine Gigajoule/bbl production CO ² Carbon dioxide bbl Barrel Kg Kilograms Mt Megatonnes Graphs are based on direct and indirect sources. 32 Marathon Oil Canada Corporation

35 Energy Efficiency Closing the GHG emissions gap between conventional and unconventional crude oil can only be accomplished through improved energy efficiency, offsets such as tree planting, moving to a lower-carbon fuel, and the capture and storage of carbon dioxide (CO 2 ) emissions. Improving energy efficiency continues to be a top priority for the AOSP since it directly reduces costs and GHG emissions. At the AOSP s oil sands mine and upgrader, natural gas is used on-site to produce heat, electricity and steam, which are integral to our processes. Today about 650 cubic feet of natural gas is required to produce one barrel of synthetic crude oil. In energy terms, 650 cubic feet of natural gas is about 10% of the energy in a barrel of oil. The AOSP is investigating low-carbon alternatives to natural gas to supply energy to the oil sands in the future. Recent energy efficiency and CO 2 reduction projects at the AOSP include the following: Six new heat exchangers were installed between 2006 and 2008 at the Muskeg River Mine to recover useful energy that was lost from process cooling water used in bitumen extraction. This investment in energy efficiency will lower the amount of energy needed to meet our extraction requirements by more than three million gigajoules per year and reduce the amount of cooling water we use by about one-fifth, avoiding 120,000 tonnes per year of GHG emissions. Shell Enhance froth treatment technology is the first commercial application of an innovative technology that uses higher temperatures to more efficiently remove impurities from the oil sands froth. With this technology, the AOSP will be able to use smaller equipment, less water and less energy. By saving energy, we will prevent the release of about 40,000 tonnes per year of GHG emissions as well as air pollutants. Shell Enhance is currently being built as part of Expansion 1. Over the past eight years, the AOSP has worked with Tree Canada to plant a million trees across the country, which remove CO 2 from the atmosphere. We are also pursuing the purchase of cost-effective carbon credits from renewable energy projects including wind power. Carbon Capture and Storage The AOSP is advancing the Quest CCS Project. Quest is a fully integrated carbon capture and storage (CCS) project, meaning it would capture, transport, inject and store CO 2. Over one million tonnes of CO 2 per year would be captured from the Scotford Upgrader, transported safely by pipeline to an injection location northeast of the Scotford Complex, and stored permanently more than two kilometres below thick layers of impermeable geological formations. CO 2 could also be made available for use in enhanced oil recovery projects. The AOSP has conducted studies and drilled test wells to outline development options for Quest. Several additional years of work are still needed before a final capital investment decision is taken on Quest. That investment decision will ultimately depend on a range of factors, including the outcome of a structured consultation process, the results of appraisal activities and detailed integrated studies, as well as the ability to meet all regulatory requirements. Construction would only begin after all of these aspects have been addressed successfully, with the aim to start operations in The appeal of CCS stems from the technical feasibility of implementing large-scale projects, thereby starting Oil Sands Fact Book 33

36 to address the emissions of the existing base of large CO 2 emitters. At the same time, the framework and infrastructure will be developed to support broader deployment of CCS technology. CCS Process Introducing CCS in Alberta will create jobs, stimulate economic activity, establish initial infrastructure and, most importantly, support Alberta s and Canada s drive to address climate change as part of a global effort. The experience gained locally through the early implementation of CCS projects such as Quest will prove invaluable in developing the capability and the capacity to enable industrial facilities to significantly reduce greenhouse gas emissions. Alberta s Climate Change and Emissions Management Fund March 31, 2008, marked the deadline for Alberta companies to reduce the intensity of their greenhouse gas emissions by 12% as required by Alberta s Climate Change and Emissions Management Amendment Act and its accompanying Specified Gas Emitters Regulation, the first regulation of its kind in North America. Alberta gave companies three options for meeting the reduction: improve the energy efficiency of their operations; buy carbon credits in the Alberta-based offset system; or pay $15 for every tonne over their reduction target into the Climate Change and Emissions Management Fund. Facilities could also choose a combination of these options. The Alberta government forecasts that these and other measures will yield a 50% reduction in the province s absolute emissions by 2050 compared with business-as-usual, or a 14% absolute reduction below 2005 levels. To date, the options for compliance have resulted in approximately 2.6 million tonnes of actual reductions through operational changes and practices including better use and reuse of energy and investing in verified offsets created by other Alberta projects. Companies also chose to pay approximately $122 million into the Climate Change and Emissions Management Fund, which will be invested in projects and technology to reduce greenhouse gas emissions in Alberta Marathon Oil Canada Corporation

37 More information on Alberta s climate change strategy is available from the Alberta government at Provincial and federal governments are working toward a harmonized GHG regulatory system. Canada s GHG Policy The Government of Canada unveiled its Turning the Corner plan to reduce greenhouse gases and air pollution in April It outlined short-, mediumand long-term objectives for managing both GHG emissions and air pollutants in Canada. Under this plan, the government established a national target of an absolute 20% reduction in greenhouse gas emissions from 2006 levels by the year In late 2008, the federal government announced that the focus of its work on climate change policy would be alignment with U.S. policy. The government also indicated it would focus on developing positions for U.S. and international negotiations. considered, and is subject to adjustment to remain consistent. Canada s target is also contingent on all major emitting countries supporting the Accord. Further work on near-term Canadian policy seems to be linked to discussions with the United States on policy alignment, at least until the direction of those discussions becomes more evident. AIR EMISSIONS The AOSP is working to reduce oxides of nitrogen (NO x ) and sulphur (SO x ) emissions from our Muskeg River Mine and Scotford Upgrader. Mine Primary Emissions The Muskeg River Mine air quality monitoring program is focused on NO x emissions, which can be related to acidification or acid rain. The main source of NO x is emissions from the large trucks used in oil sands mining. Advances in vehicle emissions control technology will significantly reduce NO x. In December 2009, Canada joined more than 190 countries in Copenhagen, Denmark, for the United Nations Framework Convention on Climate Change s 15th session of the Conference of the Parties (COP 15).The Conference ended with a political agreement called The Copenhagen Accord. In effect, the Accord is a commitment by all major emitting countries to take action to avoid dangerous human interference with the climate system -- the main goal from the 1992 UN Framework Convention on Climate Change (UNFCCC). SO x emissions associated with the AOSP s oil sands mine are negligible, limited primarily to truck emissions. Ultra-low-sulphur diesel is used in the AOSP s mine fleet. Upgrader Primary Emissions Reduction of NO x and SO x emissions from the upgrader is a priority due to the sensitivity of air quality in the surrounding air shed, which includes the city of Edmonton, and emerging legislation that proposes absolute caps on pollutants. Early in 2010, the government announced the submission of Canada s 2020 emissions reductions target under the Copenhagen Accord. Canada s target, a 17 per cent reduction from 2005 levels, is aligned with the U.S. target currently being Advanced sulphur recovery technology such as SCOT (Shell Claus Off-gas Treatment) units will be implemented at the Scotford Upgrader Expansion to minimize SO x emissions. 6 Government of Alberta, Climate Change. Oil Sands Fact Book 35

38 Alberta Air Quality Good Air Quality (% of Time) Urban Centres Calgary 97.20% Edmonton 96.47% Oil Sands Operations Areas Fort McMurray - Athabasca Valley 98.31% Fort McKay (WBEA)* 97.65% Fort McMurray - Patricia McInnes 98.82% Fort Chipewyan (WBEA) 99.03% Syncrude UE % Anzac 99.16% Fort Saskatchewan 97.96% Elk Island 97.14% Lamont 97.15% 95% *WBEA - Wood Buffalo Environmental Association Source: Clean Air Strategic Alliance (CASA) 36 Marathon Oil Canada Corporation

39 The AOSP also uses low NO x burners and ultra- low NO x burners to reduce NO x emissions at its facilities. AIR QUALITY In Alberta, air quality is monitored by a comprehensive network of stations operated by Alberta Environment, air quality management zones, Environment Canada and industry stations. Air quality data is available via Alberta Environment and the Clean Air Strategic Alliance (CASA), a consensus-based multi-stakeholder partnership composed of representatives selected by industry, government and non-government organizations. Air quality in Alberta is generally good and air quality in the oil sands mining region and near the AOSP s Scotford Upgrader is generally better than the air quality in urban centres. For more information on Alberta s air monitoring program, monitoring station locations, pollutants monitored and air shed zones, visit the Clean Air Strategic Alliance at LAND Impact on Landscape Northern Canada s vast expanse of boreal forest stretches across the country, covering 3.2 million square kilometres (1.2 million square miles). Canada s oil sands deposits lie under approximately 140,200 square kilometres (54,131 square miles) of this largely unsettled ecosystem an area larger than the state of Florida or twice the size of New Brunswick. About 2.5% of Alberta s total oil sands surface area contains deposits shallow enough to be mined from the surface. If all the mineable areas of the oil sands are eventually developed, less than 3,500 square kilometres (1,351 square miles) would be disturbed by mining activities. The mineable area of the oil sands (roughly 2.5% of the oil sands surface area) contains 20% of the oil sands resource that is recoverable with current technology. The other 80% of the recoverable oil sands are located deep underground and are only accessible using in situ techniques. These in situ oil sands projects have a limited surface disturbance that is similar to conventional oil development. About 10% to 15% of the surface area is disturbed for in situ production. Advanced technology, such as directional drilling, enables companies to drill multiple wells sometimes more than 20 from a single site, which limits surface disturbance. Whether mining or in situ, we are committed to minimizing the impact we have on the land by avoiding sensitive habitats, optimizing area use, and working with other users to reduce the overall footprint of our operations. To mine the oil sands, the land must be cleared to excavate bitumen with large trucks and mechanical shovels, and construct ponds to contain the tailings the water, clay, sand and residual bitumen that are left after bitumen is separated from the oil sands ore. So far, 530 square kilometres (205 square miles) have been disturbed by oil sands mining development. Oil Sands Fact Book 37

40 Oil sands operators are required to monitor wildlife through winter track counts. Wildlife Impacts Like any energy or resource production, oil sands mining and in situ developments have the potential to affect wildlife. In the case of oil sands, impacts can include: loss of habitat; loss of migration corridors; increased hunting; disturbance from activity and noise; and changes in the habitat s health. Wildlife is considered in all project planning and operations. All oil sands operations are required to monitor wildlife through winter track counts under the Alberta Environmental Protection and Enhancement Act approvals. The results of specific monitoring programs were the subject of two scientific workshops in 2005 and 2006 ( All oil sands projects include wildlife avoidance measures, including retention of moose habitat and timing of operations to accommodate calving and nesting seasons. In February 2009, the Alberta Biodiversity Monitoring Institute released a report on the impact of oil sands development on the biodiversity of northern Alberta. The report, The Status of Birds and Vascular Plants in Alberta s Lower Athabasca Planning Region 2009, found that 7% of the lower Athabasca region has been impacted by human development (including forestry, energy and agriculture), but that the region s biodiversity is 94% intact. 38 Marathon Oil Canada Corporation

41 AOSP and Land Reclamation Although the Muskeg River Mine has only been operating since 2003, preparations are already under way to reclaim the site. The AOSP has made a commitment to return mined land to a capability equivalent to what existed prior to development. That means the reclaimed site will be able to support a variety of uses but not necessarily the same uses as before development occurred. Our commitment meets Alberta Environment s land equivalency requirements, which are measured using a land classification system that was designed specifically for forest ecosystems by the multi-stakeholder Cumulative Environmental Management Association (CEMA). The AOSP has gone beyond government requirements for land reclamation. We have undertaken leading studies and soil modelling research to understand the scientific requirements of producing sustainable boreal forest ecosystems and features such as wetlands and peatlands. The AOSP is using satellite imagery and the latest Geographic Information System (GIS) to create before-and-after records of the oil sands mining landscape. GIS uses computer-based maps that allow environmental and human activities data to be overlaid on the same map, creating a more complete picture of evolving land use. Reclamation Starts Now The reclamation process starts as soon as the land is cleared of trees and brush. Soil is removed in layers and stored in separate piles to maintain several distinct soil types. Seeds from local plants such as blueberry are collected and sent to registered nurseries so they can be replanted during land reclamation. This process will ensure the propagation of plants with the same genetic material as those removed. To maintain biodiversity and reconstruct the different ecosystems of the boreal forest, the AOSP has undertaken leading-edge research to understand the specific soil and nutrient requirements of tree and plant species. This will help ensure reclaimed areas support the self-sustaining ecosystems that are part of our reclamation plans. We have taken the added step of collecting Traditional Environmental Knowledge (TEK) from local First Nations Elders in the research, design and implementation of land reclamation plans to ensure the end land use meets the needs of local communities. We are learning about the social, environmental, traditional and spiritual uses of the land, vegetation and wildlife. The AOSP will reclaim as we go. Large-scale reclamation is expected within 20 years of disturbance, sooner than the 25-year time frame historically used in the area. This means within 20 years of the mine s groundbreaking date, the soil will be reconstructed and put in place, and vegetation planted. A new directive ensures timely reclamation of tailings areas. Oil Sands Fact Book 39

42 Community We respect the cultural diversity and rights of others. We are committed to working with local municipalities, Aboriginal groups and others to address the impacts of our operations and determine how our business can contribute to the local community. 40 Marathon Oil Canada Corporation

43 COMMUNITY INVOLVEMENT Given the 40- to 50-year life of oil sands operations, the Athabasca Oil Sands Project has a long-term interest in the growth and well-being of communities in the Regional Municipality of Wood Buffalo and the Fort Saskatchewan area. As a major regional business, the AOSP respects the cultural diversity and rights of others. We work with local municipalities, Aboriginal groups, residents and other stakeholders to address the impacts of our operations and determine how our business can best contribute to local quality of life. The following is a sample of our community initiatives: In Bruderheim, a village near the Scotford Upgrader, the AOSP s contribution helped to restore native plants to the Spring Creek area of aspen parkland, create trails and install interpretive signage that explains the importance of wetlands for various forms of wildlife. In early 2008, the AOSP sponsored delivery of the Building Environmental Aboriginal Human Resources (BEAHR) program in Fort Chipewyan and worked with Northern Lakes College to help fly instructors into this remote northern Alberta community. The aim of the BEAHR program is to increase Aboriginal employment in the environmental sector. The program consisted of seven weeks of training focused on environmental monitoring, health and safety practices and developing technical skills. It provided graduates with the skills to participate in community-based environmental monitoring programs or to further their studies through programs like Keyano College s environmental monitoring program in Fort McMurray. Nine students from Fort Chipewyan completed the program in Women Building Futures (WBF) has helped more than 300 women escape poverty and obtain wellpaying employment in the skilled trades since the organization was launched in The AOSP s 2008 donation of $100,000 helped WBF expand its Edmonton facility and increase its capacity to train more women in the trades. The expansion also included the construction of affordable housing, one of the key barriers facing women entering training programs. In addition, site tours of the Scotford Upgrader are regularly provided to WBF students. Female workers at Scotford speak as guest lecturers as part of the WBF program, providing real-life examples of women successfully working in the trades at an industrial operation. About 95% of WBF s graduates secure and maintain employment in construction and related trades. More than 30% of WBF clients are Aboriginal. Ten women from the WBF Program are currently working at Expansion 1. In Fort Saskatchewan, the AOSP provided a three-year supply of blue bags (reusable bags for recycling waste) for the entire municipality. We also created a Boy Scouts fund-raising program to ensure every home in the city received the bags, which provide a single receptacle for all recyclable materials. The program garnered a 70% participation rate in the first year. Oil Sands Fact Book 41

44 COMMUNITY INVESTMENT Fostering and supporting local entrepreneurs and businesses, particularly Aboriginal businesses, remains a focus for the AOSP as we strive to maximize local benefits from our oil sands projects and build capacity within neighbouring communities. In 2008, more than $210 million of the AOSP s total local spending went to purchase supplies and services from Aboriginal groups such as the Athabasca Chipewyan First Nation (ACFN). Jobs, business experience and profits will flow into ACFN from a $97-million catering, housekeeping and maintenance contract for Albian Village a 2,500-person, world-class camp completed in August 2007 to accommodate workers on the AOSP s oil sands mining sites. Transportation and accommodation are also being provided for members of the ACFN, who live 300 kilometres away. The benefits of this contract go far beyond wages. The contract will help the ACFN business group gain valuable experience and build a track record to support other business ventures. To prepare individuals to participate in decisions that affect their communities, Leadership Wood Buffalo received $150,000 from the AOSP to train community members to become effective, longterm leaders. The program develops personal leadership qualities, heightens awareness of community challenges and opportunities, and establishes a cross-sector network of leaders who motivate people to participate in their community. stay in their community, rather than travelling the 65 kilometres to Fort McMurray. In some cases, individuals can work or parent while taking courses required for high school graduation. FORT McMURRAY INFRASTRUCTURE The Rural Municipality of Wood Buffalo (including the town of Fort McMurray and area) is experiencing enormous growth as a result of increased investment by the oil sands industry. While the area is experiencing typical growing pains seen in other parts of the world, the community takes pride in its schools and churches, recreational facilities and tourist attractions. In addition to new residents, there are also generations of oil sands employees who have completed their careers and chosen to retire in the Fort McMurray region because of the lifestyle and proximity to their children and grandchildren. Addressing the municipality s infrastructure concerns will require co-operation from all levels of government as well as industry. The AOSP has been working with the community directly, as well as through the Oil Sands Developers Group (OSDG) to address these concerns. The AOSP has supported the construction of new recreational facilities in Fort McMurray by contributing towards renovations of the YMCA of Wood Buffalo Birchwood Child Daycare and the purchase of equipment at the regional hospital. The AOSP funded an online high school to help youth from Fort McKay, the closest community to the Muskeg River Mine, overcome the many barriers they face to successfully complete Alberta s three-year high school diploma program. The Fort McKay E-Learning Centre allows youth to The Albian Village hotel-style accommodation facility and an adjacent airstrip to transport workers, equipment and supplies is intended to reduce traffic and other demands on local services, especially during the peak construction phases of our projects, and to contribute to sustainable growth. 42 Marathon Oil Canada Corporation

45 Albian Village Oil Sands Fact Book 43

46 Consultation The AOSP and its partners work with industry groups and multi-stakeholder committees to improve oil sands science and technology and manage cumulative environmental impacts. 44 Marathon Oil Canada Corporation

47 ENVIRONMENTAL CONSULTATION The AOSP and its partners work directly, or indirectly, with a number of industry groups and multi-stakeholder committees, and their many working subgroups. These groups undertake research to improve oil sands science and technology and develop management frameworks related to the cumulative environmental impacts of oil sands development. Oil Sands Industry Group Canadian Oil Sands Network for Research and Development (CONRAD) Network of companies, universities and government agencies organized to facilitate collaborative research in science and technology for Alberta s oil sands. CONRAD Environmental Research Group Multi-Stakeholder Groups Membership includes representatives from industry, Aboriginal groups, local communities, provincial and federal governments and regulators. Cumulative Environmental Management Association (CEMA) Develops recommendations on how best to manage cumulative impacts of industrial development and protect the environment. Sustainable Ecosystem Working Group (SEWG) Traditional Environmental Knowledge (TEK) Standing Committee Surface Water Working Group (SWWG) Water Quality Task Group Watershed Integrity Task Group Instream Flow Needs Technical Task Group NO x /SO x Management Working Group (NSMWG) Trace Metal and Air Contaminants Working Group (TMAC) Regional Aquatics Monitoring Program (RAMP) Monitors and assesses the health of rivers and lakes in the oil sands region. Wood Buffalo Environmental Association (WBEA) Monitors and reports regional air quality 24 hours per day. Terrestrial Environmental Effects Monitoring (TEEM) Program Human Health Effects Monitoring Program (HEMP) Ambient Air Technical Committee (AATC) Work carried out by CEMA: Reclamation Working Group (RWG) Biodiversity and Wildlife Subgroup Wetlands and Aquatics Subgroup Landscape Design Subgroup End Pit Lake Subgroup Soils and Vegetation Subgroup Reclamation Certification Subgroup Oil Sands Fact Book 45

48 COMMUNITY CONSULTATION The AOSP and its partners work together and individually with a number of industry groups and multi-stakeholder committees, and their many working subgroups. Through these efforts, we work to resolve issues and manage the social aspects of regional growth resulting from oil sands mining and upgrading activities as well as other industrial activities. Oil Sands Industry Group Oil Sands Developers Group Provides a proactive process that promotes the responsible sustainable development of resources within the Regional Municipality of Wood Buffalo for the benefit of all stakeholders. The group s work is carried out by: Aboriginal Affairs Committee Cogeneration/Transmission Committee Communications Committee Health Care Committee Housing Committee Regional Environmental & Regulatory Affairs Committee Transportation Committee Transit Subcommittee Stakeholder Groups Athabasca Tribal Council (ATC) Represents the interests of the five First Nations of northeastern Alberta. The Athabasca Chipewyan First Nation, Chipewyan Prairie Déné First Nation, Fort McKay First Nation, Fort McMurray No. 468 First Nation and Mikisew Cree First Nation include more than 2,500 Cree and Chipewyan people. Industry Relations Corporations Represent the interests of specific First Nations and act as a liaison between industry and the First Nation. The following First Nations have an Industry Relations Corporation: Athabasca Chipewyan First Nation Chipewyan Prairie Déné First Nation Fort McKay First Nation Fort McMurray No. 468 First Nation Mikisew Cree First Nation Alberta s Industrial Heartland Association (AIHA) Serves industry, government and municipalities in the city of Fort Saskatchewan, County of Lamont, Strathcona County and Sturgeon County. It promotes the region as a global leader in processing, manufacturing and eco-industrial development and is dedicated to ensuring mutual benefits to all stakeholders, including the private sector, public sector and government. Northeast Capital Industrial Association (NCIA) A not-for-profit industry co-operative that represents more than 20 of the largest industries in the Fort Saskatchewan area of Alberta. The NCIA works with all levels of the community to understand and reduce the environmental impacts of member industries while supporting sustainable industrial growth. Industrial Collaboration to Address Residents Issues (ICARI) An industry group that works to resolve issues related to the cumulative operations and expansion of industry in Alberta s Industrial Heartland district. Industrial Heartland Collaboration to Address Residents Issues (IHCARI) An ICARI subcommittee that provides a forum in which area residents, industries, municipalities and the provincial government work collaboratively to find fair and practical solutions to issues of concern. 46 Marathon Oil Canada Corporation

49 North Region Community Awareness and Emergency Response (NRCAER) A partnership of more than 40 community-minded industries, municipalities, chemical transporters and government agencies dedicated to emergency response and education initiatives in the industrial region northeast of Edmonton. Since 1991, NRCAER has been sharing best practices for co-ordinated response to industrial emergencies and natural disasters. NRCAER includes a shared call-in/call-out notification system that provides information to area residents and businesses. Fort Air Partnership (FAP) Includes representatives of the public, nongovernment organizations, industry, Alberta s Industrial Heartland Association, Capital Health and Alberta Environment. Established in 1997, the partnership s mission is to generate and provide comprehensive and credible air quality information to the public, industries and government. Oil Sands Fact Book 47

50 Glossary AOSP Athabasca Oil Sands Project, a joint venture among Marathon (20%), Shell Canada Energy (60%) and Chevron Canada Limited (20%). Carbon capture and storage where carbon dioxide is captured and compressed for cost-effective transportation via pipeline and storage in deep geological formations. Froth a mixture of bitumen and water that results from mixing excavated oil sands ore with warm water to separate the bitumen from the sand. It must be treated to remove the water and remaining sand and fine clay to produce clean, dry bitumen that is diluted and transported for further processing. Oil sands naturally occurring mixtures of sand, clay, water and a thick, heavy substance called bitumen. At room temperature bitumen is much like cold molasses and must be heated or diluted in order to flow through a pipeline. Tailings the waste product of the bitumen extraction process, tailings are composed largely of water that is mixed with sand, silt and clay particles from oil sands ore. They also contain toxic components such as trace amounts of hydrocarbons and naphthenic acid from the bitumen extraction process. Additionally, some of our tailings have a high clay content and high capacity to hold water, making them difficult to stabilize and reclaim. In situ recovery of bitumen in place, usually achieved through steam injection. Mining recovering bitumen from open-pit mines using large mechanical shovels that excavate the oil sands ore, which is then transported by huge trucks to processing equipment on the site. Upgrader upgraders crack bitumen s large heavy hydrocarbon molecules into lighter molecules by extracting carbon or by adding hydrogen. The result is high-grade light and medium synthetic crudes suitable as feedstock for conventional refineries that produce gasoline, diesel fuel and other consumer products. Oil sands are naturally occurring mixtures of sand, clay, water and a thick, heavy substance called bitumen Marathon Oil Company Canada Corporation