JPME Hearing Opening Statement

Transcription

1 JPME Hearing Opening Statement Contents I. Introduction... 2 II. Company Overview and How we do Business... 5 III. Athabasca Oil Sands Project... 9 IV. Project Application and Need...15 V. Sustainable Development...21 VI. Consultation...34 VII. Project Benefits...45 VIII. Conclusion

2 Preamble Legal to introduce John and his qualifications to the panel. Mr. John Broadhurst is the Vice President of Heavy Oil Development for Shell Canada Energy. In this role, Mr. Broadhurst is accountable for the development of growth and business opportunities for Shell s Heavy Oil assets which include mining, upgrading, and in-situ developments. This includes new technology development and mine regulatory activities. Mr. Broadhurst is a chemical engineer with over 30 years experience at Shell and has held various roles in projects, operations and management, in areas of oil and gas processing, refining, upgrading and mining. I should also mention to the panel that Mr. Broadhurst is the Vice Chair of the Shareholder Steering Committee for Canada s Oil Sands Innovation Alliance (COSIA), Vice Chair and Board Member of CONRAD and a member of the OSLI Steering Committee. He will serve as the chairman of Shell s witness panel in this proceeding. His CV has been marked as Exhibit X in this proceeding as have the CVs of the other members of Shell s witness panel. Mr. Broadhurst will now introduce those witnesses as well as deliver Shell s opening statement. [JOHN BROADHURST] I. Introduction Good Afternoon Mr. Chairman, Joint Review Panel Members, Elders, ladies and gentlemen. Let me start by first introducing my colleagues on the panel who will be with me today and throughout these proceedings. Starting at my far left: Mr. Malcolm Mayes Mr. Mayes was previously the General Manager for our Jackpine Mine during the construction and startup of the facility and has intimate knowledge of our operations. Mr. Mayes has since become the General Manager of Shell s Heavy Oil In-Situ Operations in Canada. Mr. Mayes has held a variety of engineering, operations, business and commercial roles in both the upstream and downstream sectors of the oil and gas industry. Mr. Mayes has a Masters of Business Administration and Bachelors of Engineering degree. Mr. Jeff Roberts Mr. Roberts is currently the Albian mining operations Technical Manager. This is a recent change with Mr. Roberts previously having been the Mine Development Manager where has was responsible for the 2

3 development and long term planning of Shell s mineable oil sands leases. Mr Roberts has over 26 years experience in the oil sands mining industry and his experience spans mine operations, process operations, maintenance, and business planning and project development. He has a master s degree in civil engineering and has completed advanced Operations management studies at the Ivey School of Business. He previously chaired the Regional Municipality of Wood Buffalo s Economic Development Commission and Municipal Planning Commission and was a long term resident of Fort McMurray. And from my far right Ms. Linda Jefferson Ms. Jefferson is the Manager of Consultation and Global Indigenous Peoples for Shell Canada. She has almost 25 years of experience in Aboriginal relations and consultation, environmental and socioeconomic impact assessment activities across Canada. She joined Shell Canada in 2007 and has since worked closely with our Aboriginal and community stakeholders. Mr. Wayne Speller Mr. Speller is a Principal and Project Director for Golder Associates and led the consultant team that developed the Jackpine Mine Expansion environmental impact assessment. Mr. Speller is an environmental engineer with 13 years of environmental consulting experience. He is responsible for directing environmental impact assessments (EIAs) and approval compliance projects with a focus on projects in the Athabasca Oil Sands Region of Alberta. Mr. Bill Kovach Mr. Kovach is the Environmental Impact Assessment Coordinator for Shell Canada. Mr. Kovach is an environmental engineer with over 17 years experience in the energy industry spanning coal, power, gas midstream and oil sands. Mr. Kovach joined Shell Canada in 2004 as an Environmental Coordinator in the oil sands business supporting environmental compliance, reporting, stakeholder engagement, environmental program development, multi-stakeholder committee participation, and permitting. He has been intimately involved in the coordination and development of the environmental impact assessment for this project. Mr. Darrell Martindale Mr. Martindale until recently was the Manager of Environment for both the Muskeg River Mine and Jackpine Mine. In this capacity, Mr. Martindale was responsible for the environmental programs and regulatory compliance at these sites. Mr. Martindale has been part of previous Shell hearings and known to local 3

4 stakeholders having been an environmental liaison in their communities. Currently, Mr. Martindale is in charge of Shell s Heavy Oil Environmental Performance strategy and implementation. Mr. Martindale has global experience in mining reclamation and environmental management systems. He has a B.Sc. in Mineral Engineering and a M.Sc. in Agricultural Engineering and over 25 years in the Mining Industry. He also serves as Shell s representative on numerous regional environmental committees and on the Mining Association of Canada environment and initiative leader committees. Each of these panel members will be, as necessary, backed-up by experts in a variety of disciplines and knowledge areas. 4

5 II. Company Overview and How we do Business Mr. Chairman and members of the Joint Review Panel, Shell Canada Limited, as project proponent and managing partner of Shell Canada Energy, is pleased to bring the Jackpine Mine Expansion Application before this panel for your review and consideration. We do this on behalf of the Athabasca Oil Sands Project joint venture owners Shell Canada Energy, Chevron Canada and Marathon Oil Canada. The Athabasca Oil Sands Project began with the start up of our Muskeg River Mine and Scotford Upgrader in 2002, representing the 1st mineable oil sands development in 25 years since the start up of Syncrude. Following Muskeg River Mine, we have recently started operations for the adjacent Jackpine Mine and Scotford Upgrader expansion. The planning and development of this Jackpine Mine Expansion Project has been underway for a long time. Some people may recall that in our Jackpine Mine Phase 1 Hearing Opening Statement back on October 6th, 2003, we highlighted that - the Jackpine Mine expands the overall capacity of Shell s Oil Sands development and also puts in place the necessary infrastructure to enable processing of ore from Leases 88 and 89 in the future. This is our Jackpine Mine Expansion. Mr Chairman, we are here today to seek the Panel s support for the next chapter in the Athabasca Oil Sands Project. Before describing the details of our plans, I want to begin by telling you about my company and why I am confident we can deliver this opportunity for our shareholders, the Province of Alberta and the people of Canada. I do this as someone who has proudly worked for Shell for over 31 years. I also have had the privilege of being one of the original developers of our Athabasca Oil Sands business. We started this process in 1996 with our current Lease 13 holdings and a blank piece of paper. We ve come a long way since then. From the beginning our approach has always been focused on developing Alberta s resource in a way that creates value for the people of Alberta and Canada plus our shareholders and accomplishes it in an environmentally and socially responsible manner. Also, with the integration with our Scotford complex, Shell markets a full range of petroleum products including heavy blends, light synthetic crude oil, transportation fuels, as well as petro-chemical products. This is full value delivery in Alberta. I am proud of what we ve accomplished together and expect to continue this positive development into the future with the Jackpine Mine Expansion. 5

6 With this background I d like to briefly discuss how we conduct our business and execute these large projects. This is very important to me and Shell as it guides our decisions and actions going forward: Foremost, Shell is a values driven company with global expectations for our people with respect to adhering to core principles around honesty, integrity and respect for people. These values provide the basis for our Shell General Business Principles which dictate our ethical business behavior. These are important as they set expectations for how we will make investment decisions. We do this in a way that incorporates economic, social and environmental development considerations. They also clearly articulate our priorities, for example, around Health, Safety, Security and the Environment, Local Communities, and Communication and Engagement. These reflect our public declaration of what you should expect from Shell. We also build these expectations into our contractual relations with our business partners. We believe that our stakeholders should expect to see the same level of commitment from any Shell activity, regardless of who conducts the work. For our employees, we have a very clear Code of Conduct that describes the behaviors Shell expects of all our employees in carrying out the business principles in our company. This includes how we engage with people, and our expectations around Health, Safety, Security, the Environment and Social Performance. This Code incorporates a range of practices to ensure ethical behaviour in our dealings inside and outside the company. At Shell we also value diversity and inclusiveness in our people. We believe this is critically important in an area with the rich cultural diversity we see in the Athabasca region. The Shell General Business Principles also clearly state our aim to create an inclusive work environment with equal opportunities for everyone. In addition to these global Shell expectations, we have developed local policies that further guide our actions in specific circumstances. Shell believes in a Good Neighbour Policy which has the objective of developing a mutually prosperous, long-term relationship with our neighbours living in close proximity to our oil sands operations. We use the following principles as a guide in developing such relationships. These are: o We will earn trust and respect at an early stage through honest, open and proactive communication. o We will, on an ongoing basis, involve our neighbours in decisions that impact them with the objective of finding solutions that both parties view as positive over the long term. o We will construct and operate our oil sands operations in an environmentally responsible and economically robust manner. o We will partner with and encourage local businesses; and 6

7 o We will ensure that the jobs created by our oil sands operations are filled by its neighbours whenever possible. To help make this happen we will work with our neighbours, contractors, educational institutions and other producers to develop the skills required. That is our approach to being a good neighbor. In terms of Health, Security, Safety, the Environment and Social Performance, we have our Royal Dutch Shell Commitment and Policy which outlines our commitments. They are: Pursuing the goal of no harm to people; Protecting the environment; Using material and energy efficiently to provide our products and services; Respecting our neighbours and contributing to the societies in which we operate; Developing energy resources, products and services consistent with these aims; Publicly reporting on our performance; Playing a leading role in promoting best practices in our industries; Managing health, safety, environment and social performance matters [HSSE & SP] as any other critical business activity; and finally Promoting a culture in which all Shell employees share this commitment. As part of this commitment, every Shell company is required to: Have a systematic approach to health, safety, environment and social performance management [HSSE & SP] designed to ensure compliance with the law and to achieve continuous performance improvement; Set targets for improvement and measures to assess and report performance; Have contractors manage health, safety, environment and social performance [HSSE & SP] in line with this policy; Engage effectively with neighbours and impacted communities; and finally Include health, safety, environment and social performance [HSSE & SP] in the appraisal of our staff. In this way, Mr. Chairman, we aim to achieve a level of performance that we can be proud of and to earn the confidence of our customers, shareholders and society at large, to be a good neighbour, and to contribute to sustainable development. We report transparently on our performance as a company in our annual Group Sustainability Report. In recent years we have also been producing an annual Oil Sands Performance Report 7

8 in response to a desire from stakeholders for us to report transparently on the environmental and social performance data associated with our Alberta oil sands operations. Our goal is to become the world s most competitive and innovative energy company and help the world meet its growing energy needs in a responsible way. As a global energy company, Shell explores for, develops, produces and trades in a range of energy resources. Shell is a company that has a diverse portfolio of energy sources, all of which will play an important role in meeting the world s energy needs. This global energy development strategy has a number of key focus areas for our company. These include: Developing new sources of oil and gas here Shell expects net capital investment of over $100 billion dollars between 2011 and We invest more than $1 billion a year on research and development more than any other oil company. Producing cleaner energy in 2012 more than half of Shell s hydrocarbon production will come from natural gas which emits 50-70% less CO2 than coal in electricity production. Alternate sources of energy Shell is one of the world s largest biofuels producers and is developing advanced biofuels from non-food sources. Smarter energy the largest proportion of emissions come from the end user and road transportation so Shell is advancing activities to support our customers in reducing road transport emissions and fuel costs. We recognize that meeting these challenges means addressing both technical and non-technical needs. By placing environmental priorities at the core of our business plans and decisions, we manage potential environmental impacts and opportunities and earn a license to grow our business. 8

9 III. Athabasca Oil Sands Project Mr. Chairman, I d now like to describe for you the remarkable progress I feel we ve made in the oil sands region. The Jackpine Mine Expansion application before you is an extension of the strong base of operations we ve built to date and aligned with our long term obligation to further develop our oil sands lease holdings. As noted, Shell Canada Limited, as project proponent and as managing partner of Shell Canada Energy, is bringing this application forward on behalf of the Athabasca Oil Sands Project. This is a joint venture consisting of 60% Shell Canada Energy, 20% Chevron Canada Limited and 20% Marathon Oil Sands L.P. The Athabasca Oil Sands Project joint venture participants own the Muskeg River Mine, the Jackpine Mine and the Scotford Upgrader. The Muskeg River Mine was originally operated by Albian Sands Energy Inc. as a wholly owned subsidiary of the Athabasca Oil Sands Project. However, as of January 1, 2009, the joint venture participants agreed to transfer the operatorship to Shell Canada Energy, which now operates the mines on behalf of the partners. Shell Canada Energy is an Alberta Partnership, with Shell Canada Limited as its managing partner. Albian Sands Energy Inc. has transferred all necessary regulatory permits and approvals to Shell Canada Limited as the holder of those permits on behalf of the operator, Shell Canada Energy. If this Project is approved, Shell Canada Limited will also hold all permits and approvals for the Jackpine Mine Expansion on behalf of Shell Canada Energy. Shell has a long history in the oil sands business starting in 1956 with the purchase of Lease 13. Shell investigated several development opportunities over the decades. This culminated in our regulatory approval in 1999 for development to start on the western portion of Lease 13 with our Muskeg River Mine. Shell produced its first commercial bitumen in 2002 and Muskeg River Mine achieved its design capacity of 155,000 barrels per calendar day in In 2006, Shell received approval to expand its production and facilities, and to extend the Muskeg River mining area to include the southern portions of Lease 13 and adjacent Lease 90. Our Muskeg River Mine has included new and innovative technologies such as paraffinic froth treatment and tailings thickeners, which have provided a strong platform to build from. We continue to focus on improving our technologies and incorporating key operational and technical learnings into our future plans. After extensive drilling to delineate the resource on the eastern half of Lease 13, Shell sought and received approval for the Jackpine Mine Phase 1 project in This new mine facility was originally conceived as a standalone operation, however, upon further engineering and business planning, Shell identified an 9

10 optimized integration plan for the Jackpine Mine resource using the infrastructure at the Muskeg River Mine. The desire was to consolidate light hydrocarbon froth treatment activities at the Muskeg River Mine site, which could be readily accommodated through the Muskeg River Mine Expansion approval. The benefits of this integration included construction execution efficiency, operational flexibility and technological innovation. In 2006 Shell received approval for this integration in the Muskeg River Mine Expansion application and in 2009 an amendment to the Jackpine Mine Phase 1 approval was received. We refer to this integrated development with Muskeg River Mine as Expansion 1 and it represented our first step in the staged, and adaptive, growth plan for the Jackpine Mine. This expansion added 100,000 barrels per calendar day capacity by opening the mine pit and tailings area at Jackpine Mine and transferring the bitumen froth to Muskeg River Mine s new high temperature froth treatment plant. Construction of Expansion 1 began in 2007 with commissioning activities starting in To accommodate the additional 100,000 barrels per day of bitumen production capacity, an expansion was added to the downstream Scotford Upgrader, which started up in This increased the production capacity at the Upgrader to over 250,000 barrels per calendar day. Shell is very proud of the Expansion 1 project it was a world-class start up that delivered exceptional safety performance, was free of process safety incidents and would deliver value for the people of Alberta and Canada and our shareholders. Let me share with you some highlights of the construction of this project: Between Scotford, Jackpine and Muskeg River Mine, at the peak of construction over 10,000 people worked on the project at Scotford and over 6,500 at Albian. Over nearly 5 years, more than 34,000 different people worked on the project at Albian and more than 45,000 at Scotford men and women from every province and territory in Canada making this Canada s largest construction project. Apprentices made up 40% of the workforce at Jackpine and 30% of the workforce at Scotford, helping train the workforce of the future. We brought more women to the work site by working with Women Building Futures a Canadian organization that empowers women to succeed in nontraditional careers. At Jackpine Mine, women made up 30% of the workforce. At one stage we achieved over 43 million manhours without a lost time incident a record at the time in Shell and in 2011 Shell was awarded CAPP s Health and Safety Performance Award in recognition of this achievement. 10

11 Mr. Chairman, we recognized that the increased workers required to support our projects can have impacts on the region and so we took steps to mitigate these. In 2007 we constructed an airstrip at site that continues to transport workers, equipment and supplies. We also constructed Albian Village onsite that houses over 2,400 people in hotel style accommodations and reduces traffic and other demands on regional services. Shell has come a very long way in ten years. During this time Shell Albian Sands also demonstrated leadership in some key environmental areas. Shell was the first oil sands operation to have an environmental management system that is ISO certified. In 2003, we were the first company to utilize a bird activated RADAR based bird deterrent system on the MRM External Tailings Facility. This was part of our commitment to Fort McKay to reduce the amount of noise generated by randomly firing propane scare canons and to improve bird deterrent performance. We have a strong waste management program which has allowed us to control the waste generated on our leases and successfully reduce wildlife interactions. All of what I ve just described shows Shell s strong track record on delivering major projects safely and effectively in the region. I also believe Shell has demonstrated that we deliver on our commitments and that we have the experience and resources necessary to help develop Alberta s oil sands resources responsibly and efficiently. Shell is more than just an energy company. Shell is also part of the Fort McMurray community. Our Social Investment in the region, which is fully supported by Shell s Joint Venture partners, puts a priority focus on education, developing employability skills and retention of Aboriginal culture. In addition, we engage in community initiatives that position the region of Wood Buffalo as an excellent place to live and raise a family. Some examples of our social investments include: The Fort McKay Elder and Day Care Centre. After a fire, Shell and the community rebuilt the Fort McKay Elder & Child Care Centre in Shell contributed over $4 million to fund this 8,700-squarefoot facility. The Inner City Health Initiative. Shell provided $1.2M over three years to the Inner-city Health Project. As a result, for the first time some of the barriers the homeless face in trying to access health care programs can be addressed. This program is important because it is meeting a real but often hidden need in the community. In 2011, Shell announced an investment of $1 million to the Fort McMurray Catholic Board of Education to support the new Father Patrick Mercredi Science and Technology Centre. 11

12 Also in 2011, Shell and its Joint Venture owners also committed $900,000 over a three-year period to support safety initiatives in Albian, Scotford and Quest project stakeholder communities. In 2010, Shell announced a $2 million investment in Keyano College. This funding provided support for specific Aboriginal, environmental and technical training programs, a new centre to conduct contractor safety training and a new Fort Chipewyan campus which opened in Shell donated a D7 Crawler Tractor to Keyano s, Equipped for the Future, initiative. Shell provides $1,000 Community Service Fund grants to the not-for-profit organizations with which Shell employees or retirees regularly volunteer. Over the last two years, this resulted in $75,000 in grants to not-for-profit organizations in the regional municipality. Shell matches employee and retiree donations to United Way. During 2010 and 2011, the Shell employee campaigns raised more than $1.7 million for the United Way of Fort McMurray, including the Shell matching contribution. We are also pleased to have contributed to the purchase of an MRI for the Fort McMurray hospital. Shell has also financially supported the Fort Chipewyan cardiovascular health and improvement program, a young mothers program, and Paspew House in support of cultural programs for children of homes with domestic violence. We are also very proud to highlight that on October 20th, Shell, on behalf of the Athabasca Oil Sands Joint Venture owners, announced a $2.5 million commitment to support the expansion of MacDonald Island Park, now known as Shell Place. This investment will support a new stadium and much-needed shared office space and common rooms for not-for-profit organizations at a reduced cost, to enable them to better meet the social needs of this growing community. We are proud to say that 40% of the Shell Albian Sands employees say they volunteer, and the list of volunteer organizations they support reflect the demographics and diversity of our workforce. Common activities include sports and coaching; school and children s activities; immigrant and cultural organizations; churches and mosques; and Shell events such as the Community Clean-up and Family Day. Shell s employees also serve on many volunteer boards and committees. Mr. Chairman, it is critically important to us that benefits from our projects extend to our Aboriginal communities. Shell s socio-economic studies have highlighted a number of benefits to Aboriginal people in the Regional Municipality of Wood Buffalo. For example: 12

13 Implementation of initiatives with First Nations aimed at mitigating certain project specific environmental, socio-economic and cultural impacts; Implementation of Good Neighbour Agreements with Metis; increased wages and benefits; increased employment and business opportunities; increased access to education and training opportunities; increased access to a broader range of local services and amenities such as emergency, health and social services; and increased industry support for community programs and infrastructure through financial and in-kind contributions to social groups, education institutions, and health care providers. Mr. Chairman, these efforts are part of the reason why Aboriginal people and communities in the oil sands region lead many other Aboriginal communities in terms of income, community well-being index, and housing quality and quantity That said, we do recognize that there are aboriginal groups who have and continue to express concern about oil sands development. Over the course of the previous years we have listened to them and other neighbours to understand, and where possible address, their issues and concerns about our development plans through individual meetings, multi-stakeholder committees, workshops, open houses and presentations. We believe that working with stakeholders potentially affected by our operations is the best way to develop solutions allowing local communities to access opportunities and share in the benefits of oil sands development. Shell has set the goal of increasing Aboriginal participation in its workforce and has supported a number of initiatives and programs to assist Aboriginal businesses and workers in overcoming barriers to contracting and employment opportunities, including: employing a full time Aboriginal Business Advisor, who facilitates Aboriginal employment and contracting opportunities with Shell; instituting a fly-in/fly-out program for employees and contractors residing in Fort Chipewyan; working with the Northeastern Alberta Aboriginal Business Association; supporting Aboriginal scholarships through contributions to the National Aboriginal Achievement Foundation, supporting the Banff Aboriginal leadership program and environmental education of Aboriginal students in the region; 13

14 ACTUA - bringing Science and Technology camps and workshops to Fort Chip and Fort McKay; initiating an Aboriginal Talent strategy for Shell Canada; delivering drilling rig and driver training in Fort Chipewyan; supporting 2 Diversity Recruiters in Calgary and a Diversity Talent Advisor whose responsibilities include implementation of the Aboriginal Talent strategy; sponsoring delivery of the Building Environmental Aboriginal Human Resources program (BEAHR) in Fort Chipewyan. Supporting environmental education of Aboriginal students in the region through annual scholarships, funding for environmental training and opportunities for graduates of environmental programs. Providing ongoing support for the Sunchild E-learning initiative in Fort McKay; and Supporting the Alberta apprenticeship system. Shell has offered 48 internships at Albian since 2007 through the Careers Next Generation program. All of these benefits flow from the investments that Shell has made to date in the oil sands region. 14

15 IV. Project Application and Need Mr. Chairman, I ve only provided a brief overview of the many benefits that Shell has been able to bring to the Region of Wood Buffalo, Alberta and Canada from our operations to date. However, the objective of this hearing is to examine Shell s plans for the future. It is Shell s job, and my job, to develop Alberta s oil sands resources responsibly, in line with our obligations to the Crown, as well as to create wealth for Alberta and Canada and value for our shareholders. The Oil Sands Conservation Act is clear in the expectation of ensuring the orderly, efficient and economical development of the oil sands resources of Alberta in a way that effects conservation, prevents waste and is in the public interest. This is to be done while ensuring the observance of safe and efficient practices. To continue to fulfill these responsibilities, approval to develop the leases contained in this application is required to allow for efficient, sustainable and orderly mine planning. Shell has investigated several alternatives to developing the oil sands resources underlying the Jackpine Mine Expansion and has concluded that the development plan described in this application represents the most practical, economic and sustainable means of extracting the resource. Currently, there are no viable or realistic alternatives, such as insitu extraction, to this project. This extension, integration and optimization of the current Jackpine Mine, will allow for the continued development of these resources in an efficient, economic and environmentally acceptable manner. It s important to recognize that the oil sands make a significant contribution to the energy security of the world. Oil sands are an important source of energy that provide the means to educate and develop people and communities. The oil sands are an economic engine for Alberta and Canada and with global energy demand expected to double by 2050, the opportunity for oils sands to contribute significantly to the prosperity of Alberta and Canada is considerable. Shell recognizes the need for our energy developments to be coupled with continuous improvement in environmental management. Our role is to ensure that we extract and deliver the resource profitably and in an environmentally and socially responsible way. We seek a high standard of performance, maintaining a strong long-term and growing position in the competitive environments in which we choose to operate. In line with the above, the Jackpine Mine Expansion Project is the culmination of over 6 years of work to develop a project which is: 15

16 Economically robust for Albertans and Canadians and the shareholders of our AOSP owners; Provides net benefits to the community and manages social impacts in a proactive way; and Maximizes the value of the resource with no unacceptable long-term environmental effects upon closure and reclamation. This conclusion is based on an unprecedented amount of substantiating information which has undergone scrutiny and independent review since filing our Application in late During this time, the development of the Jackpine Mine Expansion has evolved. In 2007, Shell s original plan called for a more rapid pace of development by adding 100,000 barrels per day increments to its existing operation. However, changes to the world economy in 2008 resulted in us re-evaluating the pace and slowing the execution by moving to a series of de-bottlenecking projects in the near term. Shell s current approach to its oil sands lease holdings is to stage the overall development through a combination of both large expansions and smaller projects. In this manner, the stages can be scaled and executed in a way that balances the pace of development with execution capability and risk, providing the least cost, highest value development of the resource base. We look for opportunities to produce more barrels and improve our operational efficiency within the capacity of the significant infrastructure in place or in smaller investments which optimize capital resources and operating costs. While this slower pace of development is different than what was originally contemplated, to be clear, the ultimate scope of the expansion is unchanged. Shell intends to build out the Jackpine Mine as described in its updated 2011 development plan and in a manner that optimizes the value creation from the resource base. One result of Shell s staged development approach as I ve described is that regulatory approvals have been sought, and granted, for various aspects of Shell s overall development. Whereas the previous regulatory applications provided discrete windows on Shell s Athabasca Oil Sands development plans, the current Jackpine Mine Expansion amendment application and new Pierre River Mine application are intended to provide a comprehensive long term view of Shell s development plans in the region. This broader picture is consistent with, and responds to, the interests of government and public stakeholders who have all expressed interest in full disclosure and transparency of longer-term development plans. This approach also responds to Shell s need for regulatory certainty and flexibility for large capital projects in order to manage operational challenges, social and environmental impacts, and economic volatility. The regulatory process and frameworks in which we operate are indicative of a development setting that is subject to change, and will no doubt change. As examples, key regulations such as the ERCB Directive 74, the Lower Athabasca Regional Plan (LARP) and the Joint Canada-Alberta Implementation Plan for Oil Sands Monitoring did not exist when we first applied for the Jackpine Mine Expansion. 16

17 I would now like to address the specifics of the application before you today. Shell is applying to the ERCB and Alberta Environment and Sustainable Resources for an amendment and renewal of the Jackpine Mine approvals in order to extend the current Jackpine operation mine development area and increase to an average nominal capacity of 300,000 barrels per day of bitumen production. The additional mining area and equipment, processing facilities and other infrastructure will extend the life of the mine to The mining development plan previously approved under Jackpine Mine Phase 1 has been modified to allow for a contiguous development from Lease 13 in a northerly direction to incorporate the leases 88, 89, AT36, 15 and 631. Updated and expanded tailings management, water management, reclamation and closure plans for Jackpine Mine are also included in the application. The Jackpine Mine Expansion will utilize a truck-and-shovel mining system, with relocatable ore crusher stations similar to those being used at the Muskeg River Mine and the first phase of the Jackpine Mine. The Jackpine Mine Expansion fleet will require additional trucks and shovels to meet the expanded mine ore capacity requirements, and to remove additional waste material as the mine progresses through higher wasteto-ore ratio areas. The mine plan will support three processing trains, each with a nominal production capacity of 15,900 m3/cd or 100,000 bbl/cd. A total of 6,536 million tonnes of oil sands will be mined with 573 million cubic metres (3.6 billion barrels) of bitumen recovered during the life of the expanded Jackpine Mine. That is a lot of resources, and value, for Alberta. The selection of the bitumen extraction process for the Jackpine Mine Expansion is based on producing a diluted bitumen product that will meet pipeline specifications, downstream processing and market requirements. The process and facilities will: Provide a safe operating environment; Use existing proven technologies and, where appropriate, enhancements to improve efficiency; Produce a high-quality bitumen product suitable for a range of upgrading processes; and Meet or exceed bitumen recoveries according to the ERCB s Interim Directive Mr. Chairman, with respect to that last point, Shell acknowledges that historically, we ve had challenges meeting the bitumen recovery targets at Muskeg River Mine. However, we want to assure the panel that meeting these targets is a top priority for our current operations. The design for our Jackpine Mine in 2006 included several improvements over the Muskeg River designed to improve bitumen recovery, including: 17

18 a longer conditioning pipeline; primary separation cell design improvement, including improved feed distribution and froth under wash; and increased flotation capacity. As a result of the above, we expect that the Jackpine Mine will meet the ERCB s resource recovery requirements in 2012 and as I ve indicated, we will strive to meet the targets at the Jackpine Mine Expansion. The crusher units, conveyor, storage silo and rotary breakers are all similar to the existing ore handling facilities for the Muskeg River Mine and will be integrated with the existing Jackpine Mine Phase 1 where appropriate. The warm water primary extraction process will consist of a primary separation cell, supplemented by primary and secondary flotation cells. Froth produced from primary extraction will be cleaned in a high-temperature froth treatment plant. A paraffinic solvent will be used to remove the water and solids from the bitumen froth. The bitumen produced from this process will contain low levels of solids and water that are comparable to that produced by the low-temperature paraffinic froth treatment process. Shell constructed a high-temperature froth treatment facility, as part of the Muskeg River Mine Expansion approval, after extensive pilot work and found that bitumen recovery was equivalent to low-temperature froth treatment but with lower energy intensity. With more efficient energy integration, less energy is required to the process. This high temperature froth treatment is a prime example of Shell s innovation in reducing energy intensity. The following are also required to support the expanded mine and production: Additional power and steam requirements will be met by amending the approved 160 MW natural gas fired cogeneration plant to three 85 MW natural gas fired cogeneration units, and the approved 2 boilers of 1,300 GJ/h to 3 boilers of 675 GJ/h. Additional tailings storage with a new area, referred to as the North External Tailings Disposal Area included at the southern end of Lease 88 Construction of 2 new bridges required for the movement of mine equipment Mr. Chairman, the development of the Jackpine Mine Expansion proposes the diversion of the Muskeg River, Wapasu Creek and other smaller unnamed watercourses in the proposed project development area. I believe the designs we provide for these diversions will allow Shell to maximize recovery of the bitumen resource, 18

19 maintain connectivity between the upper and lower portions of the watershed and maintain the existing fish community in the important lower reaches of the Muskeg River. The diversion of the Muskeg River has been a major topic of discussion in our ongoing dialogue with stakeholders. In May 2011, we provided information on a modification to our proposed Muskeg River diversion plans resulting from our ongoing consultation efforts. I m referring to the Muskeg River Diversion Alternative Mine Plan which subsequently became our Application Case. As described in the 2007 application, Shell had two diversions proposed for the upper sections of the Muskeg River. The first, a temporary diversion, proposed utilizing a pipeline system to convey flows through the project area for a portion of the project s operational period. The second, a permanent diversion, was to occur following mine operations. It proposed re-establishing the river through a pit lake containing mature fine tailings. This permanent diversion would occur once it was established that the water quality of the pit lake would be consistently suitable for release to the river. However, over the course of extensive consultation activities, Fort McKay First Nation, Mikisew Cree First Nation, the Athabasca Chipewyan First Nation and our Metis neighbours all indicated concerns with the proposed impacts to the Muskeg River. They were concerned about potential impacts to navigability of the river and associated access to Traditional use areas in the upper reaches. Some felt the concept of displacing this river through a pipeline during operations would adversely affect the spirit of the river. They also shared concerns about Shell s ability to maintain water quality in the river when pit lake viability had yet to be demonstrated in an oil sands setting. We had several discussions on this topic. We listened to the concerns expressed by our Aboriginal neighbours and worked to develop an alternate plan that would be more acceptable to them. Today Shell is putting forward a development plan that temporarily diverts the Muskeg River by way of an open channel during project operations and re-establishes it at closure in a pit lake free of mature fine tails. While this expansion will involve new mining areas, equipment and infrastructure, much of this expansion will be based on the successful operations and technology currently being employed at JPM and MRM. Shell has learned a great deal through the design, execution and operation of the Muskeg River Mine, and this knowledge is being incorporated into the design and execution strategy for this expansion. To implement the proposed development, Shell will require: 19

20 An amendment to ERCB approval 9756C for the additional mining, and processing facilities A renewal and expansion of the 10 year operating EPEA approval to include necessary modifications and additions to: o An oil sands plant and utilities o A hazardous waste storage facility o Wastewater and storm water systems o Bulk petroleum storage facilities o A water supply, treatment and distribution system A renewal and amendment to the Jackpine Mine Water Act approval and associated license; and Other ancillary approvals for the design of new tailings impoundment structures Further, Shell will require amendments and approvals from various Federal, Provincial and Municipal departments including: A new authorization under the Fisheries Act, section 35(2) for impacts on fish habitat in the new project area. A river crossing approval under the Navigable Waters Protection Act for bridge and utilities crossings An amendment or new Mineral Surface Lease under the Public Lands Act for the new project area An amendment to the development permit under the Municipal Government Act; and Historical resource clearances under the Historical Resources Act. Assuming this Joint Review Panel determines that the Jackpine Mine Expansion is in the public interest, Shell looks forward to working with all of these regulators on the detailed regulatory approvals that are necessary for this project to advance. 20

21 V. Sustainable Development Mr. Chairman, I would now like to talk more about Shell s commitment to sustainable development. Shell is an international company with operations in many countries throughout the world. We participate in the search for and development of conventional and alternative sources of energy to meet the world s growing demand. While doing so, Shell contributes to sustainable development by balancing short and longterm interests and integrating economic, environmental and social considerations into our business decisions. Sustainability depends on our ability to build resilience into our plans and operations. Shell needs to be able to tackle future challenges so that it, in turn, can continue to make a positive contribution to its shareowners and society. In the decades to come, energy from all sources will be needed to meet the rising global demand. Analysis conducted by Shell and shared in our 2011 Sustainable Development Report predicts that energy demand could double from 2000 to Even with strong government support, it is unlikely that renewable energy sources could meet more than 30% of this demand. Fossil fuels could address this energy gap, but greenhouse gas emissions must be significantly reduced to avoid serious climate change. Shell, globally, is helping to meet this challenge by doing what we can today. That includes increasing the proportion of lower carbon natural gas in our global product mix, advancing development of carbon capture and storage, helping to commercialize biofuels and working on our own energy efficiency and innovation. We set a cost of carbon dioxide in our project processing designs of $US40/tonne, above current market, to incent our businesses in their CO2 management decision making. Canada s oil sands are one of the most significant hydrocarbon energy resources. They can play an important role in the global energy mix, providing a reliable source of energy and acting as an economic engine that will continue to drive employment, training and business development across Canada and beyond. However, they must be developed responsibly. At Shell, we are sharpening our efforts to reduce the potential impacts of our heavy oil operations on the environment and we are determined to take a leadership role when it comes to innovation and meeting environmental and social challenges responsibly. We are proud of the advances we have made to date. Examples include: Advancing Quest, our carbon capture and storage project, with the participation from both the provincial and federal government it will capture and safely store deep underground more than 1 million tonnes of 21

22 CO2 per year, beginning in This also contributes to our global knowledge and helps advance other capture and storage projects. Commercializing Shell EnhanceTM, our high temperature froth treatment process to improve our energy efficiency Investing over $200 M since 2005 in tailings research and taking a leadership role in establishing the Oil Sands Tailings Consortium (OSTC), which I will discuss in greater detail in a few minutes. We also understand the public expects us to continue to improve our environmental and social performance. In our 2011 Oil Sands Performance Report we describe our environmental aspirations for our Heavy Oil business. These include CO 2 intensity targets less than the North American average for a barrel of crude oil consumed, zero river water withdrawal for new mining operations, and achieving a net neutral disturbance footprint. Today, we don t know everything it will take to achieve these goals, but we believe to aggressively drive performance improvement it is important to have high aspirations. When I look back on the history of the oil and gas industry I see a pattern of repeated innovation, of development and application of new technology and of continuing to learn and improve that gives me confidence in our ability to achieve these aspirations. They are already being integrated as key considerations in our business planning. To help us with these aspirations, Shell was part of launching the Canada s Oil Sands Innovation Alliance (COSIA) earlier this year. This is a consortium of energy companies focused on accelerating the pace of improvement in environmental performance in Canada's oil sands through collaborative action and innovation. We also note that the Alberta Government is active in advancing a common approach to enhanced environmental management through vehicles like the Provincial Energy Strategy, Responsible Actions Plan and the Lower Athabasca Regional Plan (known as LARP). Now, we would like to talk more about Shell s approach to sustainable development in progressing the Jackpine Mine Expansion Project. As I stated earlier, contributing to sustainable development means integrating economic, environmental and social considerations to balance short and long-term interests in our business decisions. The challenge for us in developing the Jackpine Mine Expansion project was to provide benefits for our shareholders, local communities, Alberta and Canada, and to do it in a way that was environmentally and socially responsible. As you know, Mr. Chairman, Shell has prepared a comprehensive and robust environmental impact assessment to support this Application. I m going to ask Bill Kovach to provide an overview of this assessment. 22

23 [BILL KOVACH] Thank you John. Mr. Chairman, the environmental impact assessment, or EIA, was prepared in accordance with the requirements of the Terms of Reference issued by [then] Alberta Environment in This considered recommendations from both Provincial and Federal government departments, as well as other interested parties including Aboriginal groups and non-government organizations. The EIA was deemed to be complete by Alberta Environment in October of 2010; 2 years ago. During the course of this regulatory review, Shell has responded to over 1500 questions from regulators through multiple rounds of supplemental information requests. In parallel, Shell responded to several rounds of additional information requests from federal regulators and questions from stakeholders in statements of concern and technical reviews. This culminated in responses to 48 Supplemental Information Requests from the Joint Review Panel itself including a complete update of Shell s cumulative effects assessment to account for the intervening five years of regulatory review and the filing of a new assessment case to account for changes that have occurred in the region prior to any industrialization. As part of this review, we considered information we gathered as part of our ongoing dialogue with our neighbours, such as traditional use studies and assessments by our Aboriginal neighbours on the effects to their communities. In fact, Shell funded many of these studies and assessments. This has been a very comprehensive regulatory application process. Taking all of this information into account, we are confident in our project designs, proposed mitigations and our residual impact predictions. These conclude that no likely significant adverse effects to ecological resources due to the Jackpine Mine Expansion are anticipated. With this background, l would like to discuss some of the specific environmental disciplines evaluated in the EIA. Air Quality The Jackpine Mine Expansion project will have air emissions from its natural gas-fired cogeneration units and boilers, from its diesel-fired mobile equipment fleet, and from fugitive sources. As this project does not include an upgrader, the contribution to regional NO X and SO 2 emissions is anticipated to be small; less than 1%. 23