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Mariana Thornbury Project OSCA Application No. 1831433

EPEA Application No. 002-353243 Supplemental Information Request (2)

Submitted to:

Alberta Energy Regulator

Submitted by: PTTEP Canada Limited

April 2016

https://canada.pttep.com/

ii

บริษัทพีทีทอีีพแีคนาดาจํากดั PTTEP Canada Limited

Mariana Thornbury Project OSCA Application No. 1831433 EPEA Application No. 002-353243 Supplemental Information Request April 2016


TABLE OF CONTENTS

A. INTRODUCTION ..................................................................................................................................... 1

B. GENERAL ............................................................................................................................................... 2

C. SOCIO-ECONOMICS ............................................................................................................................... 6

D. GEOLOGY ............................................................................................................................................... 9

LIST OF TABLES

Table 2-1 (Updated D023 Application Table 5.3-6) Annual Regional Employment and Labour Income from Project Operations ....................................................................................................... 7

Table 2-2 (Updated D023 Application Table 5.3-4) Predicted Distribution of Operations Expenditures ......................................................................................................................... 8

APPENDIX

APPENDIX A McMurray Formation Shale to Sand Ratio Map – Figure 3-1


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ACRONYMS

ACO Aboriginal Consultation Office AER Alberta Energy Regulator CPDFN Chipewyan Prairie Dene First Nation CRDAC Conklin Resource Development Advisory Council EPEA Environmental Protection and Enhancement Act FMFN #468 Fort McMurray #468 First Nation FMM 1935 Fort McMurray Métis Local 1935 IRC Industry Relations Corporation MEG MEG Energy Corp. MNA Region 1 Métis Nation of Alberta Region 1 ORM 1949 Owl River Métis Local 1949 OSCA Oil Sands Conservation Act PTTEPCA PTTEP Canada Limited ROC Record of Consultation SAGD steam-assisted gravity drainage SESA Socio-Economic Study Area SIR Supplemental Information Request SOC Statement of Concern TK Tradtional Knowledge TLU Traditional Land Use TLUOS Traditional Land Use and Occupancy Study

UNITS OF MEASURE

cm centimetre


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A. INTRODUCTION

On May 29, 2015, PTTEP Canada Limited (PTTEPCA) submitted an Oil Sands Conservation Act (OSCA) Directive 023 Scheme Application (D023 Application), and Environmental Protection and Enhancement Act (EPEA) Approval Amendment Application (EPEA Amendment Application) to the Alberta Energy Regulator (AER), to approve the construction and operation of the PTTEPCA Mariana Thornbury steam-assisted gravity drainage (SAGD) Project (the Project).

On September 25, 2015, AER provided a Supplemental Information Request (SIR) to PTTEPCA. This SIR (1) was in respect of the two applications. PTTEPCA responded to SIR (1) in two submissions, with most responses provided on November 5, 2015, and final responses to SIR (1) question No.s 20 and 21 provided on February 29, 2016.

On March 29, 2016, AER provided SIR (2) to PTTEPCA in respect of the two applications. PTTEPCA hereby presents the questions posed by SIR (2) and PTTEPCA’s response to each question.


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PTTEPCA SIR (2) Responses

B. GENERAL

1) Provide an update on the status of stakeholder (public and industry) notification and consultation respecting the subject application, including:

a) An update on the concerns or objections respecting the subject application and the efforts to resolve them,

b) A complete list of all landowners that have received notification of the subject application, along with the lands they own.

Response

1a) PTTEPCA’s response to SIR (1) question No. 1, dated November 2015 provided an overview of PTTEPCA’s consultation and stakeholder engagement efforts up to September 30, 2015. Since that time, PTTEPCA has continued to meet with, and provide information to communities and stakeholders who have identified an interest in the Project. PTTEPCA continues to follow, and execute the consultation plan that was approved by the Aboriginal Consultation Office (ACO) in May 2015. This plan was revised following a change in the consultation area of the Chipewyan Prairie Dene First Nation (CPDFN) in September 2015, as a result of a new pre-consultation assessment conducted by the ACO. PTTEPCA revised and resubmitted its consultation plan to ACO, the ACO approved the revised plan in December 2015.

PTTEPCA continues to work with Aboriginal Communities and other stakeholders that have filed

Statement of Concerns (SOCs) regarding the Project and this response summarizes efforts up to April 12, 2016. Since receiving SOCs in July 2015, PTTEPCA has taken the opportunity to meet with each Aboriginal Community and stakeholder that has raised a concern in order to gain a better understanding of potential site specific concerns and issues. PTTEPCA is now in the process of preparing formal written response to each SOC. Through the formal responses to the SOCs and further dialogue with stakeholders, PTTEPCA is working to have all SOCs formally withdrawn.

Chipewyan Prairie Dene First Nation

PTTEPCA met with the CPDFN in December 2015 to discuss the Project, CPDFN’s SOC, the collection of Traditional Land Use (TLU) information and other consultation matters. PTTEPCA also held a conference call with CPDFN in January 2016 to discuss providing further consultation capacity funding to assist in CPDFN’s review of the project application. Apart from this additional consultation capacity funding, PTTEPCA continues to provide funding to the CPDFN Industry Relations Corporation (IRC).


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PTTEPCA is working with CPDFN to come to a mutually acceptable Traditional Knowledge Sharing Agreement to allow CPDFN to move forward with the collection and provision of Project-specific TLU information. Once this TLU information becomes available, PTTEPCA will include it as part of its Project application and Record of Consultation (ROC) for the Project.

PTTEPCA continues to provide both CPDFN and the ACO bimonthly consultation summaries as

part of its consultation efforts.

PTTEPCA has had frequent communication with CPDFN regarding the Project, and continues to work with CPDFN to address its concerns. Through continued dialogue, PTTEPCA is working to have the CPDFN SOC formally withdrawn.

Fort McMurray #468 First Nation

PTTEPCA met with Fort McMurray #468 First Nation (FMFN #468) in December 2015 and again in February 2016, to discuss the Project, FMFN #468’s SOC, and other consultation matters. The meeting held in February 2016 included leadership from both PTTEPCA and FMFN #468’s Chief and Council.

As a result of the Traditional Knowledge (TK)/TLU screening report provided by FMFN #468 to PTTEPCA in September 2014, PTTEPCA agreed to fund a Traditional Land Use and Occupancy Study (TLUOS). As part of the TLUOS collection, FMFN #468 Knowledge Holders conducted a field visit to the Project area in October 2015. FMFN #468 Knowledge Holders conducted ground-truthing and provided additional TK information.

PTTEPCA was provided with a copy of this study at the end of February 2016. PTTEPCA has reviewed the material in the TLUOS and notes that FMFN #468 has identified specific mitigations and requests. PTTEPCA will continue to work with FMFN #468 to implement specific mitigations, where reasonable and feasible. PTTEPCA submits that with mitigations in place, the Project will have a negligible impact on the exercise of Traditional and Aboriginal rights. PTTEPCA has provided a copy of the study to the ACO to be included as part of its ROC for the Project and will provide this study to the AER under a separate cover letter.

PTTEPCA continues to provide consultation capacity funding to the FMFN #468 Industry Relations Corporation, in order to assist with FMFN #468 review of the Project.

PTTEPCA continues to provide both FMFN #468 and the ACO bimonthly consultation summaries as part of its consultation efforts.


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PTTEPCA has had frequent communication with FMFN #468 regarding the Project, and continues to work with FMFN #468 to address its concerns. Through continued dialogue, PTTEPCA is working to have the FMFN #468 SOC formally withdrawn.

Conklin Resource Development Advisory Committee

PTTEPCA met with the Conklin Resource Development Advisory Committee (CRDAC) in December 2015 and again in February 2016, to discuss the Project, the CRDAC’s SOC, TLU collection and other consultation matters.

PTTEPCA has provided funding for a desktop TLU review that was conducted by the CRDAC and its consultant. The CRDAC provided a copy of the report related to this TLU to PTTEPCA in January 2016. PTTEPCA has reviewed the material in this report and believes that based on the information provided by the CRDAC that the development of the proposed Project is compatible with continued Traditional Use practices by CRDAC members, and will have a negligible impact on the practice of Aboriginal rights, with the mitigations presented in the Project application in effect.

PTTEPCA has had frequent communication with the CRDAC regarding the Project, and continues to work with the CRDAC to address its concerns. Through continued dialogue, PTTEPCA is working to have CRDAC SOC formally withdrawn.

Fort McMurray Metis Local 1935

PTTEPCA met with Fort McMurray Metis Local 1935 (FMM 1935) directly in December 2015 and again in February 2016 to discuss the Project, FMM 1935’s SOC, the collection and use of TLU information, potential employment and contracting opportunities and other consultation matters.

PTTEPCA is working with FMM 1935 to come to a mutually agreeable Scope of Work and process for the inclusion of FMM 1935 TLU information into the Project review and development. Apart from direct meetings with FMM 1935, PTTEPCA has had numerous phone calls and emails with FMM 1935 as part of PTTEPCA’s consultation efforts with the group. PTTEPCA will continue to meet with and provide FMM 1935 with Project information, over the coming months in an effort to mitigate potential issues and concerns. Through continued dialogue, PTTEPCA is working to have FMM 1935 SOC formally withdrawn.


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Metis Nation of Alberta Region 1

PTTEPCA provided the Metis Nation of Alberta Region (MNA Region 1) with a copy of the SIR (1) responses in November 2015. Since the initial meeting between the parties in September 2015, PTTEPCA has attempted to meet with the MNA Region 1 leadership multiple times to follow up, however due to scheduling conflicts these attempts have been unsuccessful. PTTEPCA will continue to provide the MNA Region 1 with Project information and updates and will meet with them, as requested, over the coming months in an effort to mitigate potential issues and concerns. Through continued dialogue, PTTEPCA is working to have the MNA Region 1 SOC formally withdrawn.

Owl River Metis Local 1949

PTTEPCA had a follow up meeting with Owl River Metis 1949 (ORM 1949) leadership in April 2016 to discuss the Project, ORM 1949 SOC’s, and in order to gain a better understanding of site specific concerns and issues. PTTEPCA will continue to meet with and provide ORM 1949 with Project information, over the coming months in an effort to mitigate potential issues and concerns. Through continued dialogue, PTTEPCA is working to have ORM 1949 SOC formally withdrawn.

MEG Energy

In September 2015, PTTEPCA met with MEG Energy Corp. (MEG) at MEG’s request to discuss PTTEPCA’s proposed water disposal scheme and the potential impacts to MEG’s bitumen resource recovery at its adjacent leases. MEG followed up with a letter on October 26, 2015, copied to the AER, reserving judgement until the responses to SIR (1) were reviewed. PTTEPCA’s SIR (1) response was provided to MEG in December 2015, subsequent to submission to the AER.

A second meeting was held in February to discuss potential mitigations, and PTTEPCA is in the process of following up. PTTEPCA will continue to meet with and provide MEG with Project information and updates and will meet with them as requested, over the coming month in an effort to mitigate potential issues and concerns. Through continued dialogue, PTTEPCA is working to have the MEG SOC formally withdrawn.

1b) All lands associated with the Project are owned by the Crown. No private landowners are

affected by the Project so no notifications are required.


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C. SOCIO-ECONOMICS

2) Section 5.3.2, Table 5.3-4, Page 5-17 & SIR Response Question B.4, Page 13-15.

PTTEPCA lists in table 5.3-4 that they will be spending $348M annually on diluent, sourced 100% within the region. However, in the SIR 1 response, PTTEPCA notes that “synthetic crude sourced from local upgraders is not a preferred diluent for the Project CRP because the density of synthetic crude (approximately 860 kg/m3) is outside the CPF’s optimum range. At the present time, a pipeline connection to a regional upgrader is not contemplated.”

a) Discuss how will the adjustment from regional purchase to purchase from Edmonton and

Fort Saskatchewan area or future purchase from the Gulf States affect the project economic benefits to the region and province?

b) Update Table 5.3-4 to reflect that the diluent expenditures will be “Elsewhere in Alberta”.

Response

2a) As discussed in the SIR (1) response to question No. 4, PTTEPCA expects that the diluent from regional providers is not preferred diluent for the Project. Therefore, PTTEPCA has revised its assessment and determined that 100% of the diluent required for the Project will be supplied from Fort Saskatchewan or Edmonton via pipeline, rail or truck.

The provincial economic assessment includes the economic effects that the operation of the Project may have on the Province of Alberta, which includes the regional economic effects. Therefore, the change in diluent expenditures from regional to provincial will not change the provincial economic assessment.

This adjustment of diluent expenditures from the region to the Province will decrease the economic expenditures in the region (Table 2-1 (Updated D023 Application Table 5.3-6)). The adjusted annual regional employment and labour income from the Project operations will change from $79 million in labour income to $26 million and from 550 person-years on employment to 168 person-years (Table 2-1), with a reduction in indirect and induced employment generated in the Socio-Economic Study Area (SESA).


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Table 2-1 (Updated D023 Application Table 5.3-6) Annual Regional Employment and Labour Income from Project Operations

Average Annual Expenditure ($

millions)

Provincial Multiplier (5)

Labour Income ($ millions)

Employment (Person-years)

Direct Operations Personnel

N/A N/A 6 21

Head office staff

N/A N/A 3 9

Ongoing Project’s operations and maintenance

13 36 5 40

Sustaining SAGD wells

10 36 4 25

Total Direct N/A N/A 18 95 Indirect Fuel Gas 46 14 6 45 Total Indirect 46 N/A 6 45 Induced N/A N/A 2 29

TOTAL N/A N/A 26 169

2b) Table 2-2 (Updated D023 Application Table 5.3-4) is updated to reflect that diluent expenditure will be ‘elsewhere in Alberta’.


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Table 2-2 (Updated D023 Application Table 5.3-4) Predicted Distribution of Operations Expenditures

Major Component

Total Operations

Cost ($ millions)

% of Total Operations

Costs

Regional Elsewhere in Alberta

Elsewhere in Canada Foreign

% $ millions % $

millions % $ millions % $

millions Operations personnel

23 4 25 6 45 10 15 4 15 4

Head Office Staff

15 3 25 4 45 7 15 2 15 2

Ongoing operations and maintenance

51 10 25 13 70 36 5 3 0 0

Sustaining SAGD wells

50 9 20 10 75 38 5 3 0 0

Fuel gas 46 9 100 46 0 0 0 0 0 0 Diluent 348 65 0 0 10

0 348 0 0 0 0

TOTAL 533 100 N/A 79 N/A

439 N/A 12 N/A 6

Notes: Values may not add up to totals due to rounding for presentation purposes. N/A not applicable SAGD steam-assisted gravity drainage


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D. GEOLOGY

3) SIR Response Question 20 & 21, Page 10.

PTTEPCA states that “the two small faults observed in the Wabiskaw A Shale Unit (depth 431.8m) at the well 1AA/10-30-79-11W4/0 may have resulted from differential vertical stresses related to the irregular Devonian topography of the Cooking Lake erosional subcrop on the Pre-Cretaceous Unconformity”.

a) Describe the mechanism which created the differential vertical stresses resulting in the

observed faults, with reference to the geology in the area. Provide data to support your interpretation.

b) If the mechanism that created the faults is due to differential compaction of varying lithologies, such as compaction of McMurray muds and/or Wabiskaw muds draped over the Cooking Lake erosional subcrop edge, provide a shale to sand ratio map(s) of the McMurray and/or Clearwater (including the Wabiskaw) for the development area. To support PTTEPCA’s interpretation, use a 75API cutoff on the gamma ray log or the equivalent of a 60% Shale Volume cutoff.

Response

As discussed in the SIR (1) Question No. 21 response, PTTEPCA observed two small faults with an apparent displacement of 5 to 10 centimetres (cm) in the 1AA/10-30-079-11W4M well. Although PTTEPCA cannot offer a definitive mechanism which imparted the differential stress that induced faulting, PTTEPCA stated that the faults may have resulted from differential vertical stresses related to the irregular Devonian topography of the Cooking Lake erosional subcrop on the Pre-Cretaceous Unconformity. As stated in Section 8.1.1.5, Page 8-5 of the D023 Application, PTTEPCA has found no indication of sinkhole karsting, salt collapse or any other structural events preceding the deposition of the McMurray Formation that would account for these faults.

PTTEPCA has investigated two possible mechanisms, both involving differential compaction, which are detailed below in response to SIR (2) Question No.s 3(a) and 3(b) using all the available well data, 3D seismic and stratigraphic interpretation at PTTEPCA's disposal.

3a) In the response to SIR (1) Question No. 21, PTTEPCA presented a map (Figure 21-4d) showing that the NW - SE trending sub-crop edge of the Devonian aged Cooking Lake Formation is present in the Thornbury Lease approximately 525 metres west of the 1AA/10-30-079-11W4M well. The change in relief across the sub-crop edge (9 metres, estimated from seismic), from the clean carbonate of the Cooking Lake Formation to the more argillaceous carbonate of the underlying Beaverhill Lake Group, Waterways Formation, may have led to differential compaction in the overlying unconsolidated McMurray Formation sediments that imparted differential stress to the Wabiskaw Member which was sufficient to cause small cm scale fault displacements at the 1AA/10-30-079-11W4M well.


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The increase in topographic relief across the Cooking Lake Formation erosional sub-crop may have played a role in early McMurray Formation channel development and the associated sand deposition. The lower relief above the Beaverhill Lake Group could have provided marginally more accommodation space to the east of the sub-crop that would have affected local drainage patterns. As a result, early McMurray sand deposition on the east side of the sub-crop would generally be in thicker sand bodies than the west side of the sub-crop where thinner sand bodies were deposited in a more regional setting. Based on the lower relief of the Beaverhill Lake substrate relative to the Cooking Lake substrate, the early focus of McMurray channel sand deposits east of the subcrop may have been repeated with regressive systems tract B1 Valley incisement, and followed by valley fill with transgressive systems tract sand rich estuarine channel deposits during subsequent McMurray time. Based on an Incised Valley Fill model, greater accumulation of sand would occur within incised valleys in contrast to lesser volumes of sand accumulation that would occur outside of the valley incision.

3b) In response to SIR (2) Question No. 3(b), PTTEPCA has generated the requested sand/mud ratio map for the area, presented as “McMurray Formation Shale to Sand Ratio Map – Figure 3-1” in Appendix A. Generally, the greatest proportion of sand in the Project Area exists east of the Cooking Lake Formation subcrop edge with significantly finer grained deposition occurring west of the sub-crop edge. The map provides corroborative evidence that differential compaction of sand rich McMurray Formation deposits east of the Cooking Lake Formation sub-crop may have played a role in imparting differential stress to the Wabiskaw Member of the Clearwater Formation. The combination of: 1) topographic variability across the clean carbonates of Cooking Lake to the relatively more argillaceous carbonates of the Beaverhill Lake Group and; 2), the higher proportion of sand within the Thornbury Lease, may be contributing factors to mechanisms that generated the stress, which has manifested as strain with the small cm scale fault displacement observed in the Wabiskaw Member in the 1AA/10-30-079-11W4M well. However, because the small cm scale displacement of the faults is below geophysical resolution with seismic, PTTEPCA finds it unlikely that a single mechanism that caused the faults can be determined at this time.


APPENDIX A McMurray Formation Shale to Sand Ratio Map

Figure 3-1

T79

T80

In Situ Development AreaIn Situ Project Area

R11

No data/bad data

2015 Wells

Area wells

McMurray Formation Shale to Sand Ratio Map – Figure 3-1Technical: B. Hollands

Drawn: A. Bassett

Date: April 11, 2016

In Situ Development Area

In Situ Project Area

Subsurface Drainage Area

No data/ Bad data

Area wells

2015 wells

Contour Interval: 0.5

R12

Cooking LakeFormation Subcrop

1AA/10-30-079-11W00

CPF

Based on 75 API Gamma Ray Log Cutoff

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