Validation Report for Blue Source Canada ULC Noel Electrification Offset Project

Transcription

1 Validation Report for Blue Source Canada ULC Noel Electrification Offset Project Prepared for: Blue Source Canada ULC Suite 700, 717 7th Ave. SW Calgary, AB, T2P 0Z3 Intended User: Pacific Carbon Trust 976 Meares Street Victoria, BC, V8V 3J4 Prepared by: Stantec Consulting Ltd Mills Road Sidney, BC, V8L 5X4 Project Number: May 10, 2011

2 VALIDATION REPORT FOR BLUE SOURCE CANADA ULC NOEL ELECTRIFICATION OFFSET PROJECT Executive Summary Blue Source Canada ULC (Blue Source) retained Stantec Consulting Ltd. (Stantec) to conduct a validation of an Emission Reduction Project Plan (Project Plan) for the Apache Canada Ltd. Noel Electrification Project (Noel Project) located 50 km South of Dawson Creek, British Columbia. The fundamental assertion to be validated is that the Noel Project is estimated to result in a total reduction of 325,032 tonnes of carbon dioxide equivalent (tco 2 e) over a tenyear period between July 1, 2010 and June 30, In this work, Blue Source was responsible for data management and the collection of data used in the calculations, completion of the calculations, presentation of the information within the Project Plan, and for the supporting technical documents. Stantec is an accredited verifier with the American National Standards Institute (ANSI), a member of IAF, in accordance with ISO (accreditation ID #0805) and, as such, meets the qualification requirements of a validation / verification body (VVB) under ANSI Organizational Verification Scope 1: General. Stantec is compliant with the Pacific Carbon Trust (PCT) requirements to perform validation / verification services in British Columbia, as defined in the Greenhouse Gas Reduction Targets Act Emissions Offset Regulation (B.C. Reg. 393/2008) (the Regulation ). Stantec was responsible for planning and executing the validation in order to deliver a reasonable level of assurance opinion as to whether the Project Plan is presented fairly and in accordance with the validation criteria specified by the PCT. Descriptions of the validation criteria, procedures, findings, and conclusions are provided in this report. Based on the procedures undertaken and described in this report, it is our opinion that, the Project Plan materially satisfies the requirements of: The British Columbia Offsets Regulation (B.C. Reg. 393/2008); The Pacific Carbon Trust Guidance Document to the BC Emission Offset Regulation V.2 (2010); Meta-Protocol Introduction for Oil and Gas Emission Reduction Projects (2011); Meta-Protocol for Oil and Gas Emissions Reduction Projects Electrification Module (2011); and klt \\cd1186-f03\shared_projects\ \documentation\report\01 apache validation report\blue_source_apache_fnl_rpt_2011_may_10.docx E.1

3 ISO Part 2 Greenhouse Gases: Specification with guidance at the project level for quantification, monitoring and reporting of greenhouse gas emission reductions or removal enhancements (ISO ). Further, Stantec finds that the GHG assertion for the Noel Project is free from material discrepancies, fairly presented and substantiated by sufficient and appropriate evidence. klt \\cd1186-f03\shared_projects\ \documentation\report\01 apache validation report\blue_source_apache_fnl_rpt_2011_may_10.docx E.2

4 VALIDATION REPORT FOR BLUE SOURCE CANADA ULC NOEL ELECTRIFICATION OFFSET PROJECT Table of Contents EXECUTIVE SUMMARY E INTRODUCTION PROJECT DESCRIPTION GHG ASSERTION VALIDATION METHODOLOGY VALIDATION OBJECTIVES LEVEL OF ASSURANCE VALIDATION CRITERIA VALIDATION STANDARDS VALIDATION SCOPE MATERIALITY VALIDATION PLAN VALIDATION TEAM: QUALIFICATIONS, ROLES AND RESPONSIBILITIES STATEMENT OF COMPLIANCE WITH THE BC REGULATION VALIDATION ACTIVITIES OFFICE VISIT SUMMARY OF FINDINGS UNRESOLVED DISCREPANCIES CONCLUSION OPINION SUBMISSION DOCUMENTS CLOSURE LIST OF TABLES Table 3.1: Validation Team... 4 Table 4.1: Schedule of Validation Activities... 6 Table 5.1: Findings... 7 Table 5.2: Listing of Potential Concerns Identified during Validation Activities APPENDICES APPENDIX A APPENDIX B VALIDATION PLAN SUBMISSION DOCUMENTS klt \\cd1186-f03\shared_projects\ \documentation\report\01 apache validation report\blue_source_apache_fnl_rpt_2011_may_10.docx i

5 VALIDATION REPORT FOR BLUE SOURCE CANADA ULC NOEL ELECTRIFICATION OFFSET PROJECT 1.0 Introduction Blue Source Canada ULC (Blue Source) retained Stantec Consulting Ltd. (Stantec) to conduct a validation of an Emission Reduction Project Plan (Project Plan) for the Apache Canada Ltd. Noel Electrification Project (Noel Project) located 50 km South of Dawson Creek, British Columbia. 1.1 PROJECT DESCRIPTION Apache Canada Ltd. (Apache) acquired the Noel gas field from BP Canada and became the sole owner of all Noel facilities effective July 1, The major infrastructure at Noel consists of five new Nodes connected by major trunk lines. The project boundary includes new compressor stations at Nodes 2, 3 and 5. The project involves the electrification of the plant equipment such as compressors and other equipment. This is an alternative method to a conventional gas plant, which drives electricity generation and compressors through the use of natural gas powered engines. In order to facilitate the site s electrical use, a 70 km transmission line was constructed to connect the new nodes to the BC hydro grid. In the context of the Noel Project, a node refers to an electrified natural gas compressor station connected to the BC Hydro grid. Node 3 was connected April 8, 2010, Node 5 was connected May 31, 2010 and Node 2 was connected September 3, The reduction in GHG releases to the atmosphere arises from using electricity from the BC Hydro grid in place of the natural gas, to drive the compressors. The reduction is realized because the electrical generation in BC has been deemed to have an emissions factor of 0 tonnes of carbon dioxide equivalent (tco 2 e) per MWh. Only emissions associated with the consumption of natural gas were included in the calculations of the baseline and project reductions. As described in the protocol, GHG emission sources excluded from the project boundary are electrical equipment at the compressor stations and electrical equipment required for back up generation. 1.2 GHG ASSERTION The fundamental assertion to be validated is that the Noel Project is estimated to result in a total reduction of 325,032 tco 2 e over a ten-year period between July 1, 2010 and June 30, klt \\cd1186-f03\shared_projects\ \documentation\report\01 apache validation report\blue_source_apache_fnl_rpt_2011_may_10.docx 2

6 VALIDATION REPORT FOR BLUE SOURCE CANADA ULC NOEL ELECTRIFICATION OFFSET PROJECT 2.0 Validation Methodology 2.1 VALIDATION OBJECTIVES The purpose of this validation is to evaluate key assertions, data sources, methods, and procedures for the Noel Project pertinent to compliance with ISO , applicable guidance and the Regulation. 2.2 LEVEL OF ASSURANCE As required, this validation was conducted to express a reasonable level of assurance. 2.3 VALIDATION CRITERIA Stantec has conducted sufficient and appropriate procedures in order to express an opinion as to whether, in material respects, the Project Plan is in accordance with the requirements of: The British Columbia Offsets Regulation (B.C. Reg. 393/2008); The Pacific Carbon Trust Guidance Document to the BC Emission Offset Regulation V.2 (2010); Meta-Protocol Introduction for Oil and Gas Emission Reduction Projects (2011); Meta-Protocol for Oil and Gas Emissions Reduction Projects Electrification Module (2011); and ISO Part 2 Greenhouse Gases: Specification with guidance at the project level for quantification, monitoring and reporting of greenhouse gas emission reductions or removal enhancements (ISO ). Further, Stantec has conducted sufficient and appropriate procedures in order to express an opinion as to whether the GHG assertion is free from material discrepancies, fairly presented and substantiated by sufficient and appropriate evidence. 2.4 VALIDATION STANDARDS The validation was performed in accordance with the following standards: ISO Part 3 Greenhouse Gases: Specification with guidance for the validation and verification of greenhouse gas assertions (ISO ); and ISO 14065:2007- Requirements for greenhouse gas validation and verification bodies for use in accreditation or other forms of recognition (ISO 14065). klt \\cd1186-f03\shared_projects\ \documentation\report\01 apache validation report\blue_source_apache_fnl_rpt_2011_may_10.docx 3

7 VALIDATION REPORT FOR BLUE SOURCE CANADA ULC NOEL ELECTRIFICATION OFFSET PROJECT. 2.5 VALIDATION SCOPE The validation is for the life of the project: July 1, 2010 to June 30, MATERIALITY The PCT has set a limit of 5% for quantitative material discrepancies. Qualitative discrepancies are at the professional judgment of the validation body. The validation body s professional judgment is based on whether the errors, omissions or misrepresentations would affect the decision making of the intended users of the information. 2.7 VALIDATION PLAN A copy of the validation plan is provided in Appendix A. The activities described therein were executed during the course of the validation. The sampling plan, a subset of the validation plan, is outlined along with the final results in the Summary of Findings section of this report (Table 5.1). 3.0 Validation Team: Qualifications, Roles and Responsibilities The validation team is outlined below in Table 3.1. Full details of the qualifications of the project team are included in the validation plan located in Appendix A. Table 3.1: Validation Team Name Role Responsibilities Vicki Corning, B.Sc, P.Eng. Senior Review Review validation plan for adherence to ISO and regulatory compliance as well as technical soundness. Mike Murphy, PhD, P.Eng. Senior Review Review validation report for adherence to ISO and regulatory compliance as well as technical soundness. Graham Harris, M.Sc. Peer Review Independent review of validation plan for consistency with Stantec templates, adherence to ISO , BC Emissions Offset Regulation, and Pacific Carbon Trust Guidance compliance and technical soundness. Independent review of validation report for consistency with Stantec templates, adherence to Lauren L. Jones B.Sc., M.B.T Peer Review ISO , BC Emissions Offset Regulation, and EP(GHG) Pacific Carbon Trust Guidance compliance and technical soundness. Lead and delegate validation duties (including Cathy Crawford P.Eng. Lead Validator attending site visit). Signing Authority on validation documents. klt \\cd1186-f03\shared_projects\ \documentation\report\01 apache validation report\blue_source_apache_fnl_rpt_2011_may_10.docx 4

8 VALIDATION REPORT FOR BLUE SOURCE CANADA ULC NOEL ELECTRIFICATION OFFSET PROJECT Name Role Responsibilities Daniel Hegg, B.Com., M.Sc. Karen Thompson Project Manager and Senior Validator Validator Lead sampling plan execution and working paper completion. Lead sampling plan execution and working paper completion and attend the Blue Source office visit. Mike Mutrie, EIT Junior Validator Assist with sampling plan execution and attend the Blue Source office visit. 3.1 STATEMENT OF COMPLIANCE WITH THE BC REGULATION The Regulation requires a validation / verification body (VVB) to be accredited by a member of the International Accreditation Forum (IAF) in accordance with ISO through a program developed under ISO Stantec is an accredited verifier with the American National Standards Institute (ANSI), a member of IAF, in accordance with ISO (accreditation ID #0805) and, as such, meets the qualification requirements of a validation / verification body (VVB) under ANSI Organizational Verification Scope 1: General. Stantec is compliant with the PCT requirements to perform validation / verification services in British Columbia. It should be noted that Stantec s accreditation under Organizational Verification Level: Scope 1 does not directly apply to the work completed; however, Stantec is currently undergoing ANSI accreditation for validation of GHG emission reductions from industrial processes (Project Level: Scope 2) with respect to a separate project. By having this project level scope witnessed by ANSI, Stantec has permission from the PCT to proceed with any validations that would fall under Project Level: Scope 1 GHG Emission Reductions From Fuel Combustion, or Scope 2 GHG Emission Reductions From Industrial Processes. 4.0 Validation Activities Details of the validation activities undertaken are set out in the validation plan included in Appendix A. The validation and sampling plan for this project were developed considering our assessment of the validation risk for the engagement. In the case of the Noel Project we assessed the validation risk as medium 1. Details of this assessment are included in the validation plan in Appendix A. Described below are details of the office visit, which was conducted after the validation plan was issued. The final schedule for the validation activities is presented in Table Possible risk ratings are high, medium and low. These are based on inherent, control and detection risks as evaluated by the project team. klt \\cd1186-f03\shared_projects\ \documentation\report\01 apache validation report\blue_source_apache_fnl_rpt_2011_may_10.docx 5

9 VALIDATION REPORT FOR BLUE SOURCE CANADA ULC NOEL ELECTRIFICATION OFFSET PROJECT Table 4.1: Schedule of Validation Activities Activity Responsible Party Date 1. Kick-off Call with Blue Source Stantec/Blue Source March 17, Receive Client Documentation Blue Source March 17, 2011 March 25, Initial Desktop Review Stantec March 28, Internal Conference Call Desktop Assessment Review 5. Provide Validation Plan to Blue Source (including additional data requests) Stantec March 28, 2011 Stantec March 31, Office Visit (Apache) Stantec/Blue Source April 19, Internal Site Visit Follow-up Conference Call Stantec April 21, Draft Validation Report Stantec May 5, Address Follow-up Items Stantec/Blue Source May 5-6, Finalize Validation Report and SOV form Stantec May 7, 2011 *Italicized dates are anticipated dates and are dependent on responses and documentation from Blue Source. 4.1 OFFICE VISIT An office visit was performed on April 19, 2011 by Cathy Crawford (Lead Validator) and Karen Thompson (Validator) at the Apache head office located at Ave SW, Calgary, AB. The office visit involved interviews with Russell Browne, Apache Environmental Coordinator; and Kendra Sakaguchi, Blue Source Project Analyst. The sampling plan contained in the validation plan (Appendix A) includes a review of the Noel Project s records and comparisons of site data (raw data) to calculation spreadsheets provided for the validation program. Interviews with the staff members listed above were conducted to further assess procedures for various aspects of project operations, data management, data storage and transfer. The office visit involved a review of confidential purchase information, Authorization for Expenditure (AFE) forms, data collection, tracking, retention and transfer procedures. Activities associated with operations, record keeping, meter data management and emissions sources were reviewed to better understand the calculations, data treatment and data management. klt \\cd1186-f03\shared_projects\ \documentation\report\01 apache validation report\blue_source_apache_fnl_rpt_2011_may_10.docx 6

10 VALIDATION REPORT FOR BLUE SOURCE CANADA ULC NOEL ELECTRIFICATION OFFSET PROJECT Through interviews, site drawings, site photos and orthophotos, the site boundaries were also evaluated by the validators to confirm their appropriateness. The validators confirmed the emission sources and evaluated the potential for additional sources that were excluded. 5.0 Summary of Findings A summary of the key findings from this validation is shown in Table 5.1 Table 5.1: Findings Parameter Data and Frequency Sampled Result Project Eligibility Project Ownership Baseline Approach Evaluation Baseline Selection Project Plan for the Noel Project was reviewed and office visit completed. Transfer agreements between Apache and Blue Source were reviewed. Reviewed the quantification protocol, the Project Plan and financial additionality spreadsheets for the Noel Project to assess whether Blue Source demonstrated that they completed a reasonable evaluation of baseline alternatives and selection of baseline scenarios. An office visit was also completed to assess the project boundaries. The quantification protocol, the Project Plan and the financial / technological barriers identified for the Noel Project were reviewed to assess whether Blue Source selected a baseline that represented the most plausible scenario. Satisfactory. The Noel Project consisting of Nodes 2, 3 and 5 is located 50 km South of Dawson Creek, British Columbia Satisfactory. Ownership of the environmental attributes and the transfer, thereof, has been adequately demonstrated. Satisfactory. Blue Source has completed a baseline scenario analysis. Blue source completed an analysis of baseline alternatives, of which a projection-based baseline was used to determine project based emission reductions. Satisfactory. The baseline condition is the use of natural gas engines to power compressors and electricity generators. These gas-driven engines are expected to provide the same level of service (i.e. energy for compression and electricity to operate auxiliary equipment at low voltage) as in the project condition. Sufficient and appropriate evidence was provided to support the selection of baseline equipment. klt \\cd1186-f03\shared_projects\ \documentation\report\01 apache validation report\blue_source_apache_fnl_rpt_2011_may_10.docx 7

11 VALIDATION REPORT FOR BLUE SOURCE CANADA ULC NOEL ELECTRIFICATION OFFSET PROJECT Parameter Data and Frequency Sampled Result Project Barriers Project Boundaries Quantification Methodology Reviewed whether the analysis of baseline and project scenario provided sufficient evidence of barriers. The financial, social, technological barriers and supporting costing evidence were reviewed. An office visit and interview with the Noel Project owner was also completed to discuss barriers. Reviewed whether the baseline boundaries are materially complete and comparable to the project boundaries. Interviews with staff, and a review of site drawings, equipment specs, site photos and orthophotos was completed to assess project boundaries and the inclusion/exclusion of relevant SSRs. Reviewed whether the same accounting principles and quantification methods were used for the project and the baseline. Reviewed if functional equivalence has been demonstrated and justified. Satisfactory. Stantec reviewed the additionality model and technological barriers supplied by Blue Source. Blue Source provided an additionality analysis to support the claim that the project scenario (without financial support) is less economically attractive than the baseline. A net-present value (NPV) sensitivity analysis was included by Blue Source to demonstrate that offsets incrementally improve the NPV of the project; albeit, that the NPV remains negative (-$15,586,515). Technological barriers, including project implementation and timing, lengthy regulatory process, longer lead times to design, construct and commission the facility and build transmission lines were reviewed and found to represent a significant barrier. Satisfactory. Stantec has completed a review of the SSRs selected in the Project Plan and confirmed that the SSRs selected are relevant to the protocol. Satisfactory. The Noel electrification project reduces GHG emissions by using electricity instead of natural gas to power compressors and other equipment at the Noel gas production facilities (Nodes 2, 3 and 5). Quantification of reductions, removals and reversals of relevant SSRs for each GHG has been completed using methodologies identified in Section of the electrification module. Stantec reviewed and re-calculated the offsets estimated for Blue Source and confirmed the estimation is reasonable based on the information and assumptions provided. The validation team concluded that functional equivalence has been adequately demonstrated. klt \\cd1186-f03\shared_projects\ \documentation\report\01 apache validation report\blue_source_apache_fnl_rpt_2011_may_10.docx 8

12 VALIDATION REPORT FOR BLUE SOURCE CANADA ULC NOEL ELECTRIFICATION OFFSET PROJECT Parameter Data and Frequency Sampled Result Emission Reductions Data Retention Project Risk Reviewed whether the calculation of the emission reductions has been completed in accordance with the protocol. Reviewed whether the Project Plan included a monitoring plan, data QA/QC controls and GHG information management system. Reviewed whether material risks, assumptions, limitations and uncertainties have been identified and adequately disclosed. Reviewed whether the magnitude of emissions/removals and the associated uncertainty has been assessed in the Project Plan. Satisfactory. Quantification of the reductions for each of the GHGs was completed using the methodologies outlined in Section of the Electrification Module for fossil fuel powered equipment. The Higher Heating Value (HHV) and calculated CO 2 specific emission factor has been obtained/ calculated using a 3 rd party gas analysis for the facility. The site-specific CO 2 emission factor calculation is based on Equation 3 of the CAPP Guide (2003) 2, equation A1 of the Meta-Protocol. Carbon dioxide ( kg/m 3 ) HHV (36.86 MJ/m 3 ) The validation team confirmed that the natural gas emission factors for CH 4 and N 2 O were sourced from Table A.1 of the protocol. When this emission factor was analyzed, it was found that it was comprised of emissions from two GHGs: methane ( kg/m 3 ) nitrous oxide ( kg/m 3 ) Prorated loads were provided to Blue Source using engineering design load lists. They were used to determine loads that would not have existed in the baseline. Baseline efficiencies of equipment were determined by selecting higher (more conservative) equipment efficiency or target thermal efficiencies of equipment outlined in Appendix A of the Electrification Module. Electricity usage information provided from the project condition has been estimated by averaging electricity consumption for Nodes 2, 3 and 5. Satisfactory. Blue Source has demonstrated that there are data monitoring and contingency procedures for determine the fractional change in fuel consumption where project-specific data was not available. Data collection procedures and QA/QC procedures have been identified within the Project Plan. Satisfactory. Blue Source supplied an uncertainty analysis of risks, limitations and uncertainties associated with the project. The project has been assessed as having a low uncertainty value. 2 Adapted from Calculating Greenhouse Gas Emissions. CAPP klt \\cd1186-f03\shared_projects\ \documentation\report\01 apache validation report\blue_source_apache_fnl_rpt_2011_may_10.docx 9

13 VALIDATION REPORT FOR BLUE SOURCE CANADA ULC NOEL ELECTRIFICATION OFFSET PROJECT 5.1 UNRESOLVED DISCREPANCIES No unresolved material discrepancies remain in the final documentation reviewed by Stantec. A list of potential discrepancies identified during the review of the offset report and supporting data is provided in Table 5.2. Table 5.2: Listing of Potential Concerns Identified During Validation Activities Potential Discrepancy Resolution Status Section 3.8 of the Project Plan states that emission reductions should be 262,659 tco 2 e for the life of the project. By summing the table provided emission reductions should be 262,656 tco 2 e. This error is considered immaterial as it accounts for 0.01% of the total assertion. This has been identified as a rounding error. Blue Source has updated the Project Plan to reflect total emission reductions of 262,656tCO 2 e. Satisfactory. Since this error was discovered, a revised project plan and calculation tool has been supplied by Blue Source. The Noel Project is estimated to result in a total reduction of 325,032 tco2e over a ten-year period between July 1, 2010 and June 30, Reference to pump conversion previously included in the original Project Plan is still included in the current Project Plan. The calculation tool does not calculate offsets attributed to pump conversion. This error is considered immaterial. The discrepancy does not affect the final offset assertion. Units on the additionality tab show kg/m 4 and kg/m 5 on both the additionality tab and the fuel equipment tab. Reference to pump conversion has been removed from the Project Plan. None. Satisfactory. Immaterial. Units are incorrect in the calculation tool, but do not affect the final offset calculation as the factors provided represent kg/m 3. In general, incorrect units are not considered an issue on which a materiality decision can be reached. This is considered a typing error. klt \\cd1186-f03\shared_projects\ \documentation\report\01 apache validation report\blue_source_apache_fnl_rpt_2011_may_10.docx 10

14 VALIDATION REPORT FOR BLUE SOURCE CANADA ULC NOEL ELECTRIFICATION OFFSET PROJECT 6.0 Conclusion 6.1 OPINION Based on the procedures undertaken and described in this report, it is our opinion that, the Project Plan materially satisfies the requirements of: The British Columbia Offsets Regulation (B.C. Reg. 393/2008); The Pacific Carbon Trust Guidance Document to the BC Emission Offset Regulation V.2 (2010); Meta-Protocol Introduction for Oil and Gas Emission Reduction Projects (2011); Meta-Protocol for Oil and Gas Emissions Reduction Projects Electrification Module (2011); and ISO Part 2 Greenhouse Gases: Specification with guidance at the project level for quantification, monitoring and reporting of greenhouse gas emission reductions or removal enhancements (ISO ). Further, Stantec finds that the GHG assertion for the Noel Project is free from material discrepancies, fairly presented and substantiated by sufficient and appropriate evidence. 6.2 SUBMISSION DOCUMENTS A copy of the Statement of Validation for the validated Project Plan is provided in Appendix B. klt \\cd1186-f03\shared_projects\ \documentation\report\01 apache validation report\blue_source_apache_fnl_rpt_2011_may_10.docx 11

15 VALIDATION REPORT FOR BLUE SOURCE CANADA ULC NOEL ELECTRIFICATION OFFSET PROJECT 7.0 Closure Stantec has undertaken all assignments in its role as an environmental engineering consulting firm using professional effort consistent with the British Columbia Offsets Regulation (B.C. Reg. 393/2008) and The Pacific Carbon Trust Guidance Booklet V.2 (2010). The assessment represents the conditions in the subject area at the time of the assessment. Stantec did not conduct direct GHG emissions monitoring or other environmental sampling and analysis in conjunction with this validation report. Per our Project Agreement with Blue Source Canada Stantec s liability is limited to the amount of Stantec s fees for undertaking this validation. Stantec disclaims liability for use by any other party and for any other purpose. Because of the inherent limitations in any internal control structure it is possible that fraud, error, or non-compliance with other laws and regulations may occur and not be detected. Further, the validation was not designed to detect all weaknesses or errors in internal controls as the validation has not been performed continuously throughout the period and the procedures performed on the relevant internal controls were on a test basis. Any projection of the evaluation of control procedures to future periods is subject to the risk that the procedures may become inadequate because of changes in conditions, or that the degree of compliance with them may deteriorate. Stantec will retain all project documents for a minimum of ten (10) years. A copy of our internal working papers can be confidentially provided to the PCT on request. This report, entitled, Validation Report for Blue Source Canada ULC Noel Electrification Project" was produced by Daniel Hegg, B.Comm, M.Sc. (Senior Validator) and Karen Thompson (Validator). This report was peer reviewed by Lauren Jones EP(GHG) and senior reviewed by Mike Murphy, PhD, P.Eng. Respectfully Submitted, STANTEC CONSULTING LTD. STANTEC CONSULTING LTD. Daniel Hegg, B.Com., M.Sc. Lauren L. Jones, M.B.T., B.Adv.Env.Sc, EPt (GHG) On behalf of Cathy Crawford, P.Eng. Peer Reviewer Lead Validator Phone: (403) Phone: (403) lauren.jones@stantec.com cathy.crawford@stantec.com klt \\cd1186-f03\shared_projects\ \documentation\report\01 apache validation report\blue_source_apache_fnl_rpt_2011_may_10.docx 12

16 VALIDATION REPORT FOR BLUE SOURCE CANADA ULC NOEL ELECTRIFICATION OFFSET PROJECT APPENDIX A VALIDATION PLAN klt \\cd1186-f03\shared_projects\ \documentation\report\01 apache validation report\blue_source_apache_fnl_rpt_2011_may_10.docx

17 Stantec Consulting Ltd th Street SE Calgary AB T2A 7H8 Tel: (403) Fax: (403) March 31, 2011 File: Mr. Jamie Callendar, Engineering Project Manager Blue Source Canada. First Alberta Place, th Ave SW, Suite 2210 Calgary, Alberta T2P 3R5 Reference: Validation Plan for the Noel Electrification Offset Project Plan Stantec Consulting Ltd. ( Stantec ) was retained by Blue Source Canada ULC ( Blue Source ) to validate the emission reduction project plan provided for the Noel Electrification Project located in the Noel field, 50 km south of Dawson Creek, British Columbia. The emission reduction project plan is being submitted under the Greenhouse Gas Reduction Targets Act Emissions Offset Regulation B.C. Reg. 393/2008 (the Regulation ). Stantec has completed the initial desktop review of the project plan provided for the Noel Electrification Project. The scope of the engagement and the planned validation procedures for the Noel Electrification Project, based on the initial desktop review, are provided in this validation plan. 1 VALDIATION OBJECTIVES The purpose of this validation is to evaluate key assertions, data sources, methods, and procedures for the Noel Electrification Project pertinent to compliance with ISO and the Regulation. Stantec considers completeness, conservativeness, consistency, accuracy, and transparency as criterion to facilitate the assessment as to whether the project plan and greenhouse gas (GHG) assertion are presented fairly and substantiated by sufficient and appropriate evidence. 1.1 LEVEL OF ASSURANCE Sufficient procedures will be conducted in order to express a reasonable level of assurance opinion as required by the Regulation. 1.2 VALIDATION CRITERIA The objective of this validation is to assess whether the GHG data and information in the project plan are presented fairly, in all material respects and are in accordance with the requirements of: The British Columbia Offsets Regulation (B.C. Reg. 393/2008); The Pacific Carbon Trust Guidance Booklet V.2 (2010); The Blue Source Meta-Protocol for Oil and Gas Emission Reduction Project v.1.1 (2010); and, ISO Part 2 Greenhouse Gases: Specification with guidance at the project level for quantification, monitoring and reporting of greenhouse gas emission reductions or removal enhancements (ISO ). An independent opinion as to whether the project plan and GHG assertion are presented fairly and substantiated by sufficient and appropriate evidence will be provided in the validation statement.

18 March 30, 2011 Page 2 of 11 Reference: Validation Plan for the Noel Electrification Project 1.3 VALIDATION STANDARDS The validation will be conducted in accordance with: ISO Part 3 Greenhouse Gases: Specification with guidance for the validation and verification of greenhouse gas assertions (ISO ); and ISO 14065:2007- Requirements for greenhouse gas validation and verification bodies for use in accreditation or other forms of recognition (ISO 14065). Where necessary, Stantec will also rely on the International Standard for Assurance Engagements (ISAE) 3000 for additional technical guidance on audit procedures. 2.0 VALDIATION SCOPE The period to be validated under the Regulation is July 1, 2010 to June 30, PROJECT DESCRIPTION Stantec understands that the project may be described in the following manner. The reasonableness of this project description will be subject to validation by Stantec. The Noel field is located 50km south of Dawson Creek, British Columbia. Apache acquired the Noel gas field from BP Canada and became the sole owner of all Noel facilities effective July 1, The major infrastructure at Noel consists of five new Nodes connected by major trunk lines. The project boundary includes new compressor stations at Nodes 2, 3 and 5. The project includes two components: electrification and pump conversion. These two project components are asserted to result in greenhouse gas (GHG) reductions in the project condition through the avoidance of fossil fuel combustion and avoided methane emissions from venting. Estimated emissions reductions for the electrification component are a result of a decision to install electricity transmission infrastructure as grid electricity in BC is considered a less GHG intensive source of energy than natural gas. In order to facilitate the site s electrical use, a 70 km transmission line was constructed to connect the new Nodes to the BC hydro grid. Node 3 was connected April 8, 2010, Node 5 was connected May 31, 2010 and Node 2 was connected September 3, The estimated capital cost of this installation has been identified as $40 million Canadian dollars. The Noel Electrification Project is expected to reduce emissions by 267,185 t CO2e for the period of July 1, 2010 to June 30, In addition to the electrification component, solar chemical injection pumps were installed at various well sites in the Noel field in December of These pumps inject three types of chemicals: surfactant, corrosion inhibitor, and methanol. These chemicals are injected to reduce friction, prevent pipeline corrosion, and prevent line freezing. GHG reductions in the project condition are attributed the avoidance of natural gas fuel combustion and a reduction in venting. Since their installation in 2009, several solar chemical injection pumps were removed from operation due to power sizing issues. These pumps were replaced with convention pneumatic pumps and would have been excluded from offset quantification. For the electrification component, only emissions associated with the consumption of natural gas were included in the calculations of the baseline and project reductions. For the pump conversion component of the project SSRs associated with-on site electricity generation and vented emissions have been included in the project boundary.

19 March 30, 2011 Page 3 of 11 Reference: Validation Plan for the Noel Electrification Project For the electrification component of the project GHG emission sources excluded from the project boundary are electrical equipment at the compressor stations and electrical equipment required for back up generation. Emissions related fluid production and/or processing, downstream fluid processing, low non-emitting pumps and high/low GHG intensive pumps have been excluded from quantification. To date Stantec has not received an estimation of offsets associated with pump conversion or evidence to support that offsets have been generated for the project. As such, Stantec will not be including offsets from pump conversion in this validation plan. 2.2 ASSERTION The fundamental assertions to be validated are that: a) the estimated emission reductions of 267,185 tonnes of carbon dioxide equivalent (tco 2 e) for the period July 1, 2010 to June, 30, 2020 is reasonable; b) the information provided in the project plan and supporting documents is complete and accurate; and c) adequate disclosure regarding risks, assumptions, uncertainties, and limitations of the emission reductions has been provided in project documentation. Specific validation procedures are based on the assessment of the above assertions, as well as the assessment of any missing data or information, or unclear or questionable methods. 2.3 MATERIALITY The PCT has set a limit of 5% for quantitative material discrepancies. Qualitative discrepancies are at the professional judgment of the validation body. Stantec will plan and execute the validation accordingly. 3.0 SAMPLING PLAN The sampling plan is intended to facilitate the assessment of completeness, conservativeness, consistency, accuracy, and transparency of the GHG information and confirm the GHG assertions as identified in the project plan. The validation team establishes and modifies the sampling plan to confirm that sufficient and appropriate evidence is available to support the information and the GHG assertion made in the project plan. Further, any material discrepancies that contribute to the GHG assertion, if they exist, would be assessed. A description of Stantec s validation procedures can be found in Section VALIDATION SCHEDULE The validation schedule is presented in Table 1.

20 March 30, 2011 Page 4 of 11 Reference: Validation Plan for the Noel Electrification Project Table 1: Validation Schedule Activity Responsible Party Date 1. Kick-off Call with Client Stantec / Blue Source March 17, Receive Client Documentation Blue Source March 25, Initial Desktop Review Stantec March 28, Internal Conference Call Desktop Assessment Review Stantec March 28, Provide Validation Plan to Client (including additional data requests) Stantec March 31, Blue Source Office Visit Stantec April 5, Internal Site Visit Follow-up Conference Call Stantec April 8, Draft Validation Report Stantec April 12, Address Follow-up Items Stantec / Blue Source April 14, Finalize Validation Report, SOQ, SOV, COI form Stantec April 15,2011 * Italics denote estimated completion dates based on the proposed schedule. 3.2 VALIDATION TEAM The validation team is outlined below in table 2. Table 2: Validation Team Name Role Responsibilities Daniel Hegg, B.Com., M.Sc. Vicki Corning, B.Sc, P.Eng. Graham Harris, M.Sc. Cathy Crawford P.Eng. Karen Thompson Mike Mutrie, EIT Project Manager, Senior Validator Senior Review Peer Review Lead Validator Validator Junior Validator Lead sampling plan execution and working paper completion Review validation deliverables for adherence to ISO and regulatory compliance as well as technical soundness Review validation deliverables for consistency with Stantec templates, adherence to ISO , ISO 14065, BC Emissions Offset Regulation, and PCT Guidance compliance and technical soundness Lead and delegate validation duties, Signing Authority on validation documents Lead sampling plan execution and working paper completion and attend the Blue Source office visit Assist with sampling plan execution and attend the Blue Source office visit Team Cameos Senior Reviewer - Vicki Corning, B.Sc, P.Eng. Ms. Corning has a degree in chemical engineering and has since gained technical and management expertise in many environmental services in the field of atmospheric emissions. Ms. Corning is a Climate Services Regional Discipline Leader for Canada East, and has completed over 30 verifications under the Alberta regulatory system, including for gas pipeline systems, gas plants, oil refineries and a SAGD facility.

21 March 30, 2011 Page 5 of 11 Reference: Validation Plan for the Noel Electrification Project Ms. Corning has worked with clients in a variety of different industries in Canada and the US including: gas processing plants, oil refineries, pipeline operations, electrical generating stations (coal, gas, co-generation), manufacturing plants construction projects, and pulp mills. Ms. Corning has managed the preparation of several policy reports on renewable energy for the New Brunswick Department of Energy and has presented key messages of this work to several groups. Ms. Corning has also delivered course material on GHG inventory and data management techniques through a contract with the Canadian Standards Association. Peer Reviewer - Graham Harris, M.Sc. Graham has ten years of experience in managing and delivering high-quality energy and carbon solutions for buildings and industry. Graham has carried out numerous GHG emissions management inventories and compliance reports for oil and gas, power, and university clients to the CSA and AENV. Graham has verification experience in various sectors including coal mining, fertilizer manufacturing, and pulp, and paper, upstream gas, refining, petrochemical, and agricultural. His work experience includes the application of ICLEI protocols for municipal government carbon management, World Business Council for sustainable development protocols for GHG accounting, and offset project protocols for no/low tillage and acid gas injection under the SGER in Alberta. He has also prepared numerous GHG action plans using the CSA guidelines for the GHG challenge registry. Graham has a BSc in Environmental Management, a MSc in Energy & Sustainable Building Design and has completed the CSA ISO GHG verification training course. Project Manager, Senior Validator - Daniel Hegg, B.Comm, M.Sc. Mr. Daniel Hegg is a Climate Services Consultant with Stantec and holds a Bachelor of Commerce degree specializing in Accounting/Auditing and a Master of Science in Geography, both from the University of Victoria. With a background in financial auditing, Daniel is a career GHG emissions auditor and climate consultant, serving private sector clients. Daniel s current work at Stantec focuses on applying his knowledge of climate change markets to the development of an emerging climate change service line for the British Columbia region. This work includes the participation in the verification of GHG baselines and inventories as a senior verifier, developing GHG reduction and management strategies, providing carbon market intelligence for public and private sector clients, validating and verifying carbon credits, and providing due diligence services on carbon credits for clients wishing to participate in either compliance and/or voluntary markets. Lead Validator - Cathy Crawford P.Eng. As an Energy Management Consultant with Stantec, Cathy has provided expertise and assistance regarding emissions estimates/calculations for air quality assessments and regulatory reporting. She has been involved with; GHG verifications, National Pollutant Registry Inventory (NPRI) reporting, Canadian Association of Petroleum Producers (CAPP) reporting, Directive D39 reporting of the annual Dehydrator Benzene Inventory List and a number of Fugitive Emissions Management Plan (FEMP) surveys and reports. Cathy has completed the CSA training on ISO GHG verifications and has participated in and/or led numerous project and facility verifications in Alberta. Validator - Karen Thompson, MBDA Ms. Thompson is an energy management and GHG emissions consultant with a background in the utility industry. She has completed the CSA Greenhouse GHG ISO course, and has knowledge of assurance methodologies and ISO principles. Karen has assisted with the verification of carbon offset credits created under the Alberta Offset System, providing assurance to Alberta Environment regarding the stated carbon offset data. Her emissions quantification experience includes collection and calculations for Canadian Association of Petroleum Producers (CAPP) Stewardship, National Pollutant Registry Inventory (NPRI), Section 71 and fugitive emissions management planning and reporting.

22 March 30, 2011 Page 6 of 11 Reference: Validation Plan for the Noel Electrification Project Junior Validator - Mike Mutrie, EIT Mike is a mechanical engineering graduate who joined the Stantec Sustainable Solutions Team (S3) in Within his mechanical engineering program, Mike focused on sustainable buildings and energy efficiency. He has worked with Stantec on a number of energy modeling projects and verifications. Mike has completed the Canadian Standards Association (CSA) ISO course for GHG verification. 4.0 RISK ASSESSMENT Overall risk assessment is a process conducted by the Stantec validation team based on an assessment of inherent risk, control risk, and detection risk. In this case, the overall risk has been assessed as medium 1, based on our preliminary assessment. Stantec assesses risk throughout the validation and will adjust our validation plan and sampling plan accordingly to meet the assurance requirements of the validation and maintain an acceptable level of risk. The rationale for the assessment of overall risk as medium is provided in the following sections. 4.1 INHERENT RISK Inherent risk is the risk of error that occurs as a result of the lack of capacity by staff; the size/complexity of the organization or GHG project; the industrial sector; and/or, the technologies or processes being applied in the organization or GHG project. We regard this risk as medium due to: Blue Source developed the Meta-Protocol for Oil and Gas Emission Reduction and thus should have good working knowledge of the protocol requirements and emission calculations; This is the first validation that the Noel facility has undertaken with a new protocol and therefore there is some likelihood that various factors such as data collection, management and reporting to Blue Source will be overlooked, preliminary in nature or be incorrect; and It is expected that limited historical consumption information will be available for baseline development and project forecasting as the Noel facility was only energized in CONTROL RISK Control risk is the risk that the proponent s control system will not detect and rectify a discrepancy. When assessing the Noel Electrification Project GHG information system and its controls for sources of potential errors, omissions and misrepresentations, the following were taken into consideration: Selection and management of the GHG data and information; Processes for collecting, processing, consolidating and reporting GHG data and information; Systems and processes that ensure the accuracy of the GHG data and information; Design and maintenance of the GHG information system; Systems and processes that support the GHG information system; and, Results of previous assessments, if available and appropriate. We currently regard this risk as high due to: The Noel compressor facilities are new and were energized in 2010,it is therefore expected that limited data will be available for baseline development; 1 Possible risk ratings are high, medium and low. These are based on inherent, control and detection risks as evaluated by the project team prior to engaging in verification activities.

23 March 30, 2011 Page 7 of 11 Reference: Validation Plan for the Noel Electrification Project No previous assessments have been completed for the project; The type of GHG management system used by the project proponent is not currently known by the Stantec validation team; Data is obtained from the Noel facilities and transferred to the Blue Source offset quantification system, there is a potential for erroneous data transposition within the calculation tool and quality control of data transfer has not been described; and Blue Source has identified that there are data quality management and QA/QC procedures in place but have not elaborated on the specific procedures and the offset quantification tool is fairly new. As such there is a potential for incorrect formulas and or incorrect emission factors. 4.3 DETECTION RISK Detection risk is the risk that Stantec will not identify a material discrepancy. We regard this risk as lowmedium due to: Our quality management procedures. We are committed to providing exceptional service to Blue Source in accordance with our ISO9001 accreditations. We believe that quality is a basic principle and that quality management is an integral part of all our work. We take systematic approach to quality management to ensure compliance with requirements and to achieve continual improvement. The cornerstone of our quality management system is an entrenched process of Senior Review which ensures all our deliverables have been vetted by the most senior and expert people in our firm. Level of assurance. The reasonable level of assurance applied in this validation (as required by the Reporting Regulation) mandates that Stantec perform increased sampling to meet the assurance requirements, however, the level of assurance still increases the risk to Stantec as the risk based validation approach means that not all information can be reviewed. Stantec will design the sampling plan to target all potentially material items in the GHG information to minimize detection risk. 5.0 VALIDATION PROCEDURES 5.1 VALIDATION PLANNING AND DESKTOP REVIEW Upon receipt of the project plan, GHG assertion, quantification methodology and relevant supporting documentation, the validation team assessed that the information provided was adequate to commence the validation (as per ISO Guidance). That is: Project title; Project location and dates; Project roles and responsibilities; Clear and detailed description of baseline selection process; Clear and detailed description of baseline activity; Detailed methodology used to quantify the baseline and project, including all calculation sheets, equations, identification of source for all data (e.g. invoices, etc) and a clear explanation of the method used to carry out the calculation; Clear and detailed description of emission reductions or removal enhancements expected from the project for the time period to be validated ( );