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News Release October 22, 2002

FOR IMMEDIATE RELEASE

EUB APPROVES, WITH CONDITIONS, TRUENORTH OIL SANDS APPLICATION

Calgary, Alberta (October 22, 2002) The Alberta Energy and Utilities Board (EUB) today issued Decision Report 2002-089, which approves an application by TrueNorth Energy Corporation (TrueNorth) to construct and operate an oil sands mine and bitumen extraction facility, subject to a number of conditions. The proposed Fort Hills Oil Sands Project (Fort Hills) is to be located about 90 kilometres north of Fort McMurray, within the Regional Municipality of Wood Buffalo.

The approval of Fort Hills is subject to 15 conditions, related to a number of issues, including project water management and surface disturbance. The EUB also expects that TrueNorth will adhere to all commitments made during the consultation process, in the application, and at the hearing, on matters such as mitigation and monitoring.

EUB approvals for large-scale, long-term oil sands projects typically have multiple conditions. Other provincial and federal approvals are still required before TrueNorth can proceed with construction.

Fort Hills includes an open-pit, truck-and-shovel mine, two bitumen-processing trains, infrastructure associated with the mine and facility, water and tailings management plans, and an integrated reclamation plan. The project is designed to produce approximately 30,000 cubic metres (190,000 barrels) of bitumen product per day.

The Fort Hills application was considered at an EUB public hearing held in Fort McMurray July 2-10, 2002. The EUB carefully considered all of the evidence pertaining to the application and found that the proposed project is in the public interest.

The Alberta Energy and Utilities Board ensures that the discovery, development, and delivery of Alberta's resources take place in a manner that is fair, responsible, and in the public interest.

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This news release, backgrounder, and Decision 2002-089 are available on the EUB Web site at http://www.ercb.ca.

For more information, please contact:

Bob Curran, Senior Advisor
EUB Communications
Phone: 403-297-3392
Fax: 403-297-3757
Email: bob.curran@gov.ab.ca

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Backgrounder

EUB APPROVES, WITH CONDITIONS, TRUENORTH OIL SANDS APPLICATION

The Application

TrueNorth Energy Corporation (TrueNorth) applied for approval to construct and operate an oil sands mine and bitumen extraction facility, the Fort Hills Oil Sands Project (Fort Hills), east of the Athabasca River, approximately 90 kilometres (km) north of Fort McMurray, within the Regional Municipality of Wood Buffalo.

The proposed project is a large surface mining operation with significant scope, and its potential land, water, air and other environmental impacts required thorough examination.

The project includes an open-pit, truck-and-shovel mine, two bitumen-processing trains, infrastructure associated with the mine and facility, water and tailings management plans, and an integrated reclamation plan. The project is designed to produce approximately 30,000 cubic metres or 190,000 barrels of bitumen product per day.

In a separate but related application, TrueNorth also applied for approval to construct and operate an electrical power plant and a transmission substation that would be located at the project site. The cogeneration plant will consist of two 80-megawatt gas-turbine generators, each fitted with a heat recovery steam boiler.

The Review Process

1. Under a coordinated application process adopted by Alberta Environment (AENV) and the EUB, TrueNorth filed a joint Application and Environmental Impact Assessment with both agencies in June 2001. A joint notice of filing by the EUB/AENV was issued the following month.
2. A number of areas in the project application required clarification and TrueNorth submitted supplemental information to the EUB/AENV over a period of several months ending in the spring of 2002.
3. In May 2002, the EUB issued a notice of hearing to commence in Fort McMurray, Alberta on July 2, 2002. The public hearing took place July 2 July 10.
4. This project's review timeline by the EUB has been similar to other oil sands applications of comparable size and scope. The interveners on the Fort Hills application include a number of provincial and federal government agencies, First Nations groups, local individuals and associations, non-government organizations and a number of other participants. A complete list of interveners is provided in Decision 2002-089.

Although the oral portion of the hearing ended July 10, the Department of Environment (Environment Canada) and Fisheries and Oceans Canada (DFO) provided written submissions on September 6, 2002. Participants at the hearing were asked to respond by September 20, 2002, to provide written comments on this submission. The EUB carefully considered the federal government submissions and associated responses in its deliberations.

Concerning the review process as whole, the EUB determined that the primary issues to be considered with respect to the project application were:

• Need for the project,
• Mine Planning and Resource Conservation,
• Tailings Management,
• Bitumen Extraction,
• Water Management,
• McClelland Lake Wetland Complex (MLWC)
• Environmental Effects, such as rare plant species and vegetation communities, wildlife, NOx emissions and acidification, and green house gases,
• Reclamation,
• Abandonment Liability,
• Cumulative Environment Effects of Oil Sands Development, and
• Socio economic effects and public consultation.

Decision 2002-089

• The EUB carefully considered all of the evidence pertaining to the applications and found that TrueNorth Fort Hills application is in the public interest for the reasons set out in Decision 2002-089. The approval of Fort Hills is subject to 15 conditions, related to a number of issues, including project water management and surface disturbance. For example, the Board will condition its approval to limit the amount of disturbed land at any one time to 5,000 hectares.

The EUB expects the TrueNorth will adhere to all commitments it made during the consultation process, in the application and at the hearing on such matters as mitigation and monitoring.

The EUB notes that projects of this type and size typically have numerous conditions attached to their approvals. Previous oil sands mine approvals have had between 12 and 16 conditions. The EUB approval also requires an Order in Council from the Alberta government. In addition, TrueNorth must still obtain other provincial and federal approvals before beginning construction of the Fort Hills project.

Much of the testimony heard at the public hearing concerned the MLWC. The EUB assessed the bitumen underlying the wetland complex and concluded that the estimated one billion barrels represents a significant resource that should be recovered as part of Fort Hills, provided it can be done in a manner that minimizes damage to the rest of the complex. The EUB weighed the benefit of recovering the bitumen underlying the MLWC against the direct environmental impacts and has concluded that in the broader context, it is in the public interest to approve mining within the MLWC, subject to establishing the appropriate mitigation plan

With respect to TrueNorth's application for approval to construct and operate an electrical power plant and a transmission substation that would be located at the project site, the EUB has approved the cogeneration portion but has deferred its decision concerning the substation connections. The EUB is satisfied with the proposed power plant, but notes if TrueNorth decides to proceed with the construction of the plant it will be doing so at its own risk pending resolution of the outstanding issues related to the substation and the construction of additional transmission facilities out of the Fort McMurray area. With respect to the substation, the Board will defer consideration of this portion of the application pending resolution of the issues raised by the Transmission Administrator.

Oil Sands in Alberta

Oil sands are immobile, solid-like materials found at varying depths consisting of mixtures of sand, clay, water, and bitumen. Bitumen is what developers are after the thick, heavy oil with the consistency of molasses, contained in the spaces between sand grains. Near-surface deposits are mineable with huge truck and shovel operations. Deeper oil sands deposits are recoverable by in situ methods that facilitate the flow of bitumen towards wells in order to be pumped to the surface. Reserves of Alberta's in situ bitumen are roughly five times the size of those of the mineable deposits.

Alberta's oil sands exist in three main areas: the Peace River, Athabasca, and Cold Lake. In total, these areas cover about 80,000 square km, with surface mining confined to sections just north of the city of Fort McMurray.

Although these "non-conventional" reserves, as oil sands resources are often called, present challenges to recovery techniques, these challenges have been steadily and successfully addressed over the years. A comparison of conventional and non-conventional oil production clearly shows a trend towards non-conventional sources. Currently about 50 per cent of Alberta oil production comes from non-conventional sources such as the oil sands areas, the highest this percentage has been in Alberta's history. This percentage is expected to continue to grow.

Oil Sands and the Environment

Environmental impacts associated with oil sands development are an ongoing concern that the EUB and other regulators must deal with. These potential impacts include surface disturbances, air emissions, water quality and flows, impacts to fish and wildlife habitat, and the overall health of the northeastern boreal forest. In response to these challenges, the Cumulative Environmental Management Association (CEMA) was created, bringing together many regional stakeholders from industry, First Nations, environmental groups and government agencies.

CEMA's goal is to create an effective process for managing cumulative environmental effects. CEMA is working to define environmental capacities in the region by reviewing all existing data, research, and traditional knowledge, and making recommendations for further monitoring or research if required. To ensure environmental thresholds are not exceeded, CEMA is also developing management plans to provide recommendations to regulators. It is a challenging task, but an extremely important one for Alberta and the entire industry.

The EUB supports CEMA, as it represents the kind of commitment and long-term planning necessary for the sustainable development of the oil sands in this important Alberta region.