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Informational Letter IL 96-07

18 April 1996

TO: Oil Sands Operators

EUB/AEP MEMORANDUM OF UNDERSTANDING ON THE REGULATION OF OIL SANDS DEVELOPMENTS

The Alberta Energy and Utilities Board (EUB) and Alberta Environmental Protection (AEP) have reached agreement regarding their respective roles and responsibilities in the approval and regulation of oil sands developments in the province. The details of this agreement are set out in the attached Memorandum of Understanding (MOU) which reflects the legislated mandates of both agencies and provides for the coordinated and efficient regulation of the province's oil sands industry.

A significant feature of the MOU is a new coordinated regulatory approval process that will be followed for major oil sands development applications which require approvals under both the Oil Sands Conservation Act and the Environmental Protection and Enhancement Act. Although separate approvals will continue to be issued by the EUB and AEP, the application processing activities will be integrated to ensure efficiency of process, consistency of disposition, and enhanced protection of the public interest.

Questions regarding the MOU can be directed to the EUB's Oil Sands Department (297-3382), AEP's Air and Water Approvals Division (427-5883), or AEP's Land Reclamation Division (427-6202).

[Original signed by]

Celine Belanger
Chair
Alberta Energy and Utilities Board

and

Peter Melnychuk
Deputy Minister
Alberta Environmental Protection

Attachment

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MEMORANDUM OF UNDERSTANDING

between the

ALBERTA ENERGY AND UTILITIES BOARD

and

ALBERTA ENVIRONMENTAL PROTECTION

with respect to

OIL SANDS DEVELOPMENTS

April 1996

ALBERTA ENERGY AND UTILITIES BOARD

ALBERTA ENVIRONMENTAL PROTECTION

TABLE OF CONTENTS

SUMMARY

1 PREAMBLE

2 HARMONIZATION OF EUB AND AEP ACTIVITIES

2.1 EUB Responsibilities

2.2 AEP Responsibilities

2.3 Shared Responsibilities

2.3.1 Approval of Oil Sands Developments

--- Applications

--- Land Reclamation

--- Water Use

--- Tailings Ponds/Dam Safety

--- Coke and Sulphur Storage

--- Storage, Disposal and Handling of Oily Wastes and Discards

--- Sulphur Recovery and Control of Sulphur Dioxide Emissions

2.3.2 Regulation of Oil Sands Developments

--- Compliance Monitoring and On-Site Project Surveillance

--- Emergency Response

--- Odour Complaints and Response

--- Liquid Spills

--- Flaring

--- Continuous Emission Monitors and Stack Surveys

--- Inter-Agency Information Exchange

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SUMMARY

This memorandum of understanding (MOU) is intended to provide regulatory staff, industry, and the public with a general overview of the roles and responsibilities of the Alberta Energy and Utilities Board (EUB) and Alberta Environmental Protection (AEP) with respect to the regulation of oil sands developments. The following definition of responsibilities reflects the legislated mandates of both agencies and provides for the coordinated and efficient regulation of the oil sands industry. The MOU does not address all aspects of the performance and operation of oil sands developments and should therefore only be considered a guide. Alternate approaches may be followed when appropriate and with the agreement of the EUB and AEP.

Any questions regarding the accord can be directed to:

Alberta Energy and Utilities Board Oil Sands Department 640 - 5 Avenue SW Calgary AB T2P 3G4 Phone: 297-3382

Alberta Environmental Protection Air and Water Approvals Division, or Land Reclamation Division 9820 - 106 Street Edmonton AB T5K 2J6 Phone: 427-5883 427-6202

1 PREAMBLE

Oil sands developments in Alberta are regulated by both the EUB and AEP. The EUB's legislative mandate for oil sands developments is defined by the Energy Resources Conservation Act (ERCA) and more specifically the Oil Sands Conservation Act (OSCA). AEP's authority is defined by the Environmental Protection and Enhancement Act (EPEA), the Water Resources Act (WRA), and the Public Lands Act (PLA).

Efficient and consistent regulatory processes are necessary to ensure that both agencies fulfil their mandate to protect the environment and the public interest. Consideration of oil sands development proposals requires a complete understanding of all associated social, economic, technical, and environmental issues. Applicants and stakeholders are entitled to a decision making process that is procedurally fair and that results in final decisions regarding all fundamental aspects of the proposal. This ensures that all interested parties know whether, and on what terms and conditions, an oil sands development may proceed.

Given that decisions made under either the OSCA or EPEA could impact upon each other, this MOU has primarily been developed to ensure that the administration and application of these Acts are conducted in a complementary manner that achieves the objectives of efficiency of process and consistency of result. Specifically this MOU describes the respective roles and responsibilities of the EUB and AEP in the consideration of oil sands development applications and the ongoing regulation of projects.

2 HARMONIZATION OF EUB AND AEP ACTIVITIES

Energy resource management and environmental protection issues are interrelated. Legislation requires that both the EUB and AEP consider the environmental effects of development proposals requiring their approval. Consequently, there is a need to ensure, without fettering the discretion of any statutory decision maker, that:

• the approval and regulatory activities of the EUB and AEP are harmonized, and
• the decisions of the EUB and AEP are consistent.

To achieve this, the EUB and AEP have agreed to the roles and responsibilities set out in the pages that follow.

2.1 EUB Responsibilities

In carrying out its mandate regarding the approval of oil sands developments, the EUB has primary decision making authority regarding:

• the determination of whether a project is in the public interest (having regard for the social, economic, and environmental effects of the project),
• the conservation of energy resources including the resource recovery technology,
• the location of the development and layout of facilities,
• the design of produced water recycle systems for in situ developments,
• the storage and disposal of oilfield wastes resulting from in situ developments, and
• the sub-surface disposal of produced fluids and solids.

In carrying out its mandate regarding the regulation of operations at oil sands developments, the EUB has primary responsibility for:

• ensuring the stability of overburden dumps and mine pit walls,
• specifying requirements for the abandonment of wells and removal of surface facilities,
• specifying and monitoring the recovery efficiencies for oil sands, bitumen, sulphur, and other products and by-products,
• specifying and monitoring the efficiency of produced water recycle systems,
• specifying the requirements for the management of oilfield waste produced at in situ developments,
• specifying the analytical equipment and methods for measuring the volume, composition, and conditions of all process streams necessary for the determination of material and energy balances, and
• specifying the content and frequency of production and operations reports to the EUB.

2.2 AEP Responsibilities

In carrying out its mandate under the EPEA, WRA, and PLA regarding the approval of oil sands developments, AEP has primary decision making authority regarding:

• the designation of projects subject to the Environmental Impact Assessment (EIA) process and the management of that process,
• the conservation and reclamation requirements for all surface disturbances,
• the pollution prevention, pollution control, and waste management systems,
• the allocation of water resources,
• the use and protection of potable water systems, and
• access to public lands and the management of the associated land use planning process.

In carrying out its mandate regarding the regulation of operations at oil sands developments, AEP has the primary responsibility for:

• specifying the acceptable levels of emissions to air, water, and land based on appropriate pollution control technology,
• specifying the ambient environmental quality in the zone of influence of emissions,
• specifying the efficiency and monitoring the performance of pollution control and waste management systems,
• specifying the analytical equipment, methods and frequency for measuring emissions,
• specifying the required ambient and environmental effects monitoring,
• specifying monitoring and reporting of water use, and
• specifying environmental reporting frequencies and formats.

In carrying out its mandate regarding the enforcement of the EPEA legislation as it applies to oil sands developments, AEP will:

• monitor compliance with environmental requirements,
• review alleged non-compliance reports submitted by the operators,
• investigate incidents involving public complaints and industry non-compliance,
• conduct compliance reviews on investigation files that have sufficient evidence of contravention, and
• determine appropriate enforcement response and carry out enforcement actions.

2.3 Shared Responsibilities

2.3.1 Approval of Oil Sands Developments

Applications

The EUB and AEP are committed to making timely, consistent decisions and to coordinating their respective application processing activities and schedules to achieve a comprehensive and streamlined regulatory process. Historically, the timing of applications to the EUB and AEP has been such that an approval by the EUB (with the authorization of the Lieutenant Governor in Council) typically preceded approvals by AEP. Through the EUB's referral process, AEP contributes to the review of applications to the EUB and frequently participates in public hearings conducted by the EUB. Before making a decision under the EPEA on a related matter, an AEP director (as a statutory decision maker) must consider any written decision by the EUB and may consider any information that was placed before the EUB in relation to that decision. Accordingly, the EUB and AEP will coordinate their respective application processing activities and schedules in the manner described below.

For major developments (i.e. new commercial projects or significant amendments to commercial projects) the use of an integrated approach is desirable given that applications are required under both the OSCA and EPEA. The integrated approach that will be followed for these applications is outlined in the generalized process diagram shown in the attached figure.

Applications to the EUB and AEP for a major oil sands development will be filed concurrently with each agency. When appropriate, a single, integrated document will be prepared which includes all the information required under both the OSCA and EPEA (including the EIA). Where applicable, the application will also include information required under the WRA. Applications for access to public land, required under the PLA, will usually be made to AEP separately. Although the EUB and AEP have jointly developed guidelines on application content, additional discussion with both agencies is encouraged to clarify content and help ensure that all required information is contained in the initial filing.

Upon receipt of an application, the EUB and AEP will appoint lead coordinators who will be available to consult with the applicant and other stakeholders regarding the application process. The EUB and AEP, through these coordinators and in consultation with the applicant, will assume responsibility for developing a schedule with deadlines for information filing and the deficiency process. The coordinators will monitor the application process relative to this schedule and will advise all parties of any potential delays and associated schedule adjustments.

In situations where AEP staff have significant environmental concerns regarding a development proposal (or a fundamental aspect of a proposal) and are not likely to issue an approval given those concerns, AEP will inform the EUB and the applicant of those concerns. This will allow the applicant an early opportunity to clarify or revise the application.

All applications require consultation between the applicant and affected stakeholders. Both agencies encourage that stakeholder consultation begin well before the filing of applications. Stakeholder consultation is the responsibility of the applicant and may include meetings with local groups and organizations and conducting open houses. In situations where they may be of assistance, EUB and AEP staff will participate in the stakeholder consultation process subject to staff availability and provided that the applicant continues to take the lead role.

Publication of a notice advising that an application has been filed is a requirement under the EPEA. The EUB may also, at its discretion, issue a "Notice of Filing" and/or a "Notice for Objection". Where there is a decision to hold a public hearing before an EUB panel, a "Notice of Hearing" will be issued. The placement of a notice under the EPEA and an EUB "Notice of Filing" will usually occur shortly after the filing of an application (i.e. once it has been determined to be sufficiently complete to commence a review under the EPEA) and will generally take the form of a joint notice (in accordance with the EUB/AEP MOU on joint notice).

An EUB "Notice for Objection" is not normally issued until all information has been filed by an applicant and the application has been judged sufficiently complete for adjudication (i.e. following any deficiency process). Such notice may not be required in cases where the EUB is satisfied that:

• the public is not materially affected by the project,
• public objection to the application is unlikely, or
• the concerns of all potential interveners have been resolved.

In the event the need for a public hearing appears likely, the EUB will consider holding a pre-hearing meeting to support an efficient and procedurally fair approval process. Items that could be addressed at a pre-hearing meeting may include one or more of the following:

• identification of interested parties,
• local intervener funding (eligibility and amount),
• scope of issues to be considered at the hearing,
• consideration of how issues are best addressed at the hearing and by whom, and
• consideration of a timetable for the filing of interventions and evidence and the commencement of the hearing.

Should the EUB decide that the application is in the public interest, authorization of the Lieutenant Governor in Council is required to grant the approval. It is therefore most important that the EUB has all the relevant issues and information placed before it. The integration of the EUB and AEP regulatory approval processes will help to ensure that this takes place.

In situations where AEP staff have significant concerns regarding an application to the EUB (and the EIA) or a fundamental aspect of an application, but are prepared to recommend approval pending resolution of its concerns, they will inform the EUB and the applicant in writing when the concerns are identified. In the event of an EUB hearing, AEP may decide to take an active role in the proceedings, the nature of which will be determined having regard for the environmental issues identified. If there are significant issues of interest to AEP, its role could include:

• cross-examination only,
• cross-examination and argument, or
• presenting evidence, cross-examination, and argument.

In the latter two cases, AEP will provide argument as to its position on the matter. In cases where AEP has evidence that it believes the EUB should have when making a decision, AEP will provide a panel to present the evidence at the hearing. This procedure will make certain that the EUB has all the relevant views and data before it and will afford the applicant and other interested parties an opportunity to speak to all of the evidence used by an EUB panel in arriving at its decision.

As appropriate, AEP will also present information (through its witness panel) regarding the applications for EPEA and WRA approvals. This information will clarify, for the EUB hearing panel, AEP's statutory requirements and any issues that arise in the EPEA/WRA applications.

This enhanced role of AEP at the hearing (i.e. through its presentation of evidence on environmental issues and AEP statutory issues of interest to the EUB) should assist the EUB and help ensure that there is a common understanding of the information before the EUB. This should also ensure consistency between the EUB and AEP decisions.

For less complex developments, and particularly those projects where the need for approval by either the EUB or AEP is unclear (such as some types of plant modifications), early communication by the proponent with both agencies is essential to establish approval requirements and thus avoid unnecessary delays in the application process. If it is established that an application under both the OSCA and the EPEA is required, the integrated approach, or an appropriate modification of it, will be followed. In such cases, the scope, content and detail of environmental requirements (such as the need for an EIA), and other technical information required for the applications will be jointly determined through a consultative process involving the proponent, EUB and AEP.

Land Reclamation

Land reclamation aspects of all oil sands developments, including primary crude bitumen wells and oil production sites, are regulated under the EPEA. Specifically, AEP is responsible for:

• site inspections prior to construction,
• reviewing lease construction practices,
• surveillance and enforcement of land conservation and reclamation requirements,
• setting reclamation certification criteria, and
• issuing reclamation certificates.

At the same time, reclamation planning and final landscape objectives are important components of the EUB's obligation to consider whether an oil sands development is in the public interest. In recognition of these joint responsibilities, the EUB and AEP will therefore work cooperatively to ensure that reclamation criteria and standards are clear and meet the objectives of both agencies.

As members of the Conservation and Reclamation Review Committee, the EUB staff will assist AEP in reviewing reclamation and lease construction practices and initiating on-site meetings with the operator. EUB and the AEP will also consult with respect to site specific matters and concerns. Where oil sands developments are the subject of an application to and hearing before the EUB, decisions regarding land reclamation matters may form an important component of the EUB's determination of whether the project is in the public interest. Both agencies will therefore seek to ensure that, without fettering the discretion of any statutory decision maker, the decisions rendered by the EUB and AEP regarding land reclamation matters, are consistent with each other.

Water Use

AEP must approve the use of any water source, other than produced water, for all oil sands schemes. Applications for the necessary permits required under the WRA will be submitted to and considered by AEP who may, on its initiative, consult the EUB respecting the need for and appropriateness of the volumes of water requested.

Tailings Ponds/Dam Safety

The EUB will be responsible for issuing project approvals that address the conceptual planning and preliminary engineering design of tailings ponds.

Applications for construction of tailings ponds (including detailed geotechnical designs) will be submitted to the AEP Controller of Water Resources. AEP's Dam Safety Branch will be the lead agency responsible for coordinating the application review and issuing any approvals.

The EUB and the Dam Safety Branch will coordinate their abandonment approvals for a project. AEP's approved reclamation plan for the oil sands development will address the standard of reclamation required for tailings ponds.

Coke and Sulphur Storage

The EUB is responsible for ensuring that coke and sulphur by-products are stored so that future recovery is maximized. AEP is responsible for ensuring that the storage of these materials does not result in significant environmental impacts (e.g. the control of any associated effluents).

Applications for the approval of facilities for the storage of coke or sulphur will be coordinated by AEP. Applications will be submitted to AEP, who will refer them to the EUB for review and comment. The EUB will consider matters such as location of storage facilities, future recovery, and conservation in its review of the design of the facilities and will advise AEP of any concerns. A single approval will be issued by AEP following the resolution of all EUB and AEP concerns.

Storage, Disposal, and Handling of Oily Wastes and Discards

Approval for containment and disposal of oily wastes associated with in situ oil sands developments is the responsibility of the EUB.

Discard sites at mines are approved by the EUB with respect to the need, location, design, and performance. AEP approves the associated land disturbance and reclamation as part of the overall reclamation plan. The EUB will ensure that appropriate communication with AEP takes place to deal with these matters.

Sulphur Recovery and Control of Sulphur Dioxide Emissions

The EUB specifies sulphur plant recovery requirements in its approvals for oil sands operations. It is therefore responsible for monitoring the sulphur recovery efficiency of the plant and specifying the measurement necessary to provide sulphur balance reports. It is recognized that the EUB approval of a sulphur recovery technology and certain other processing technologies (e.g. fluid coking and coke-fired boilers) can significantly influence the potential magnitude of sulphur dioxide (SO₂) emissions and will indirectly establish SO₂ emission levels for particular sources. AEP is, however, ultimately responsible for specifying emission limits for all SO₂ sources at approved facilities and for specifying SO₂ emissions monitoring for the sulphur recovery plant and any other sources at oil sands developments.

In recognition of this interrelationship, the EUB and AEP will therefore work cooperatively to establish acceptable process technologies, sulphur plant recovery requirements, and SO₂ emissions control requirements that meet the objectives of both agencies.

2.3.2 Regulation of Oil Sands Developments

Both the EUB and AEP have responsibilities regarding the ongoing regulation of oil sands operations. The manner in which these responsibilities are discharged will emphasize coordination to ensure that regulatory processes are thorough and efficient.

Compliance Monitoring and On-Site Project Surveillance

Either the EUB or AEP may take the lead regulatory role when addressing operating issues at oil sands developments. The EUB has the primary responsibility for operating issues related to resource recovery, energy efficiency and product disposition matters. AEP has the primary responsibility for issues related to overall environmental performance, environmental impacts, emissions, and compliance with its approvals. Both agencies will review and analyse reports from the operators for their respective areas of responsibility. In further addressing these matters, AEP will rely on inspections and investigations, while the EUB will primarily rely on an audit process.

On-site inspections will be conducted by AEP's Land and Forest Service, Land Reclamation Division, Pollution Control Division, and Air and Water Approvals Division. These routine inspections will be done to assess compliance with approval requirements, to evaluate environmental practices, and as part of pollution prevention and abatement activities.

AEP's Pollution Control Division will be responsible for any investigations at oil sands developments. These investigations will be conducted by AEP for evidence that substantiates or disclaims an alleged contravention to its legislation or approvals and will only be initiated based upon reasonable grounds that a contravention has occurred.

AEP will advise the EUB of environmental non-compliance issues. Immediate notification will occur in the event of major incidents where EUB assistance may be required or where the incident impacts on the EUB's resource management responsibilities. Less severe events will be reviewed with the EUB on a frequency to be decided by the staff.

For integrated mining projects, the EUB has concluded that the most efficient means of carrying out its monitoring responsibilities may be to develop operating criteria that can be easily measured and checked. Periodic reports on compliance will be required and audits will then be conducted to ensure compliance with these criteria and other EUB regulations. Results from the compliance and auditing process would be available to the public. In addition, EUB staff will continue with limited routine surveillance to ensure operator adherence to "good housekeeping" practices regarding on-site environmental problems (tank dykes, small spills, etc.) for which it has responsibility.

For in situ projects, the EUB will carry out project surveillance consistent with its responsibilities under the OSCA, the Oil and Gas Conservation Act, and other relevant requirements and guides (e.g. IL 94-5, Alberta Recommended Practices, etc.). For this purpose, inspections will usually be done in cooperation with facility operators during which time any deficiencies and appropriate remedial actions will be discussed with the relevant facility personnel.

EUB and AEP staff will consult respecting chronic operational or environmental problems that occur at a project and may jointly conduct related on-site activities or assist each other in exercising their respective responsibilities. When practical, the EUB and AEP will also coordinate general site inspections and visits to minimize any operator inconvenience or disruption at project sites.

Emergency Response

In all cases the facility operator must take immediate action to implement its site specific Emergency Response Plan. Where major technical setbacks occur (e.g. plant fire, drilling blowout, or mine-wall failure), the EUB adopts a direct on-site surveillance role and notifies AEP, Occupational Health and Safety, and other government agencies of actions taken. Where an accident or major operational upset leads to large-scale environmental problems, AEP will be involved immediately to ensure that the operator has put in place the appropriate monitoring and takes specific actions that will prevent serious environmental damage. For such events, the actions of government and the regulatory bodies are coordinated through an Emergency Response Plan. Initially, the EUB acts to ensure vital emergency measures are being taken having regard for public safety, worker safety, integrity of the facility, and protection of nearby areas. Although the EUB assumes a lead coordinating role for government agencies, environmental, community health, and occupational safety experts will also have input to the planning and carrying out of the response program.

Odour Complaints and Response

AEP will take the lead role in responding to public odour complaints received through its 24-hour emergency number. AEP also coordinates the Fort McMurray region Odour Response Program developed through the Fort McMurray Regional Air Quality Coordinating Committee (RAQCC). The program involves follow-up to odour complaints by:

• tracking sources (through mobile monitoring and review of air quality monitoring data),
• liaising with industry to establish plant operation status,
• ensuring that industry takes steps to mitigate the sources of emissions, and
• reviewing and sharing information with the public in the communities.

The EUB will assist RAQCC as an external resource by providing pertinent technical analysis on odour sources and control.

Liquid Spills

EUB Field Surveillance is responsible for ensuring that on- or off-site spills of unrefined products (i.e. crude bitumen, condensate, diluent, synthetic crude, and produced water) are properly contained and recovered. It will also ensure that any resulting waste is collected and properly disposed of. Industry notification procedures and requirements are described in Informational Letter IL 94-5.

AEP is responsible for ensuring that adverse environmental impacts associated with unrefined product spills are minimized and properly mitigated. AEP is also responsible for ensuring that on- or off-site refined product and chemical spills are properly contained and recovered.

Flaring

The EUB and AEP each have regulatory responsibilities regarding flaring at in situ and mineable oil sands developments. Emissions from flaring, such as SO₂, will be addressed in approvals issued by AEP who has a responsibility for the environmental aspects of flare emissions. The EUB will consider the resource conservation aspects of flaring.

For mineable oil sands developments, the OSCA requires that operators inform the EUB when flaring exceeds a specified energy value or duration. EUB approval may also be necessary for non- emergency flaring that exceeds a specified energy value. Because these requirements are often a duplication of AEP's approval, the EUB will not require approval of flaring or require notification and reporting for flaring events at mineable oil sands developments. AEP will be responsible for flaring at these facilities and will notify the EUB of significant events. The EUB will, however, provide AEP with technical assistance and advice regarding flaring proposals and incidents upon request.

For joint EUB/AEP approved in situ operations, AEP's Pollution Control Division will be the primary contact regarding flaring. AEP will, in turn, notify the appropriate EUB field office. Generally, for in situ operations, reporting to AEP's Pollution Control Division is required when a facility exceeds an AEP approval condition or when flaring has occurred that has the potential to cause an adverse effect. Reporting to the appropriate EUB field office may be required when flared volumes exceed EUB specified limits, when the duration exceeds 24 hours, or when flaring results in smoke or odours. In the event that the notification of both EUB Field Surveillance and AEP is required, the organization initially notified will notify the other.

Continuous Emission Monitors (CEM) and Stack Surveys

AEP has responsibility for specifying the requirements for CEM on appropriate emissions sources. AEP is also responsible for monitoring the performance of CEM and related stack surveys.

The EUB may specify measurement requirements for the determination of sulphur balances and sulphur recovery efficiency in the sulphur plant. The EUB will, however, rely on AEP to ensure that the SO₂ emission measurement is accurate. AEP will advise the EUB when major problems arise which could affect this measurement.

Inter-Agency Information Exchange

In the past, the EUB received copies of operator reports required by the EPEA approval. The operators will no longer be required to file these reports with the EUB. Instead, the EUB will require the operators to make this information available to its staff upon request. Alternatively, the EUB may approach AEP for the required information when it is more appropriate.

By mutual agreement, EUB and AEP staff will, upon request, exchange information or data compiled regarding their areas of respective jurisdiction.

FLOWCHART: Approval Process for Major Oil Sands Projects