Context Magazine Volume 2/Issue 3 by The Canadian Association of Petroleum Producers

CAPP’s member magazine

Volume 2 . Issue 3 November 2014

Taking

safety to the next level

CAPP, Q What’s Up at

Regional Profile:

meet

McMillan, Quebec Tim CAPP’s new president

Table of

Leadership Profile:

Tim McMillan, CAPP’s new President

Contents

Volume 2 Issue 3 the safety issue

Page 18

Features

Enabling Zero Industry and CAPP move to create a step-change improvement in safety outcomes through process safety, product stewardship, safety culture and big data.

Page 20

Safety Innovations We highlight a few innovations being used to improve safety outcomes in Canada’s oil and gas industry.

Building a Safer 63 Industry and government collaborate to improve road safety for workers and the public on the once infamous Highway 63.

Departments

Safety Innovations Page 26

Building a Safer 63 Page 30

context . volume 2 . issue 3 . November 2014

Regional Profile: Quebec

In This Issue

CEO’s Message

Industry News

What’s Up at CAPP?

Leadership Profile: Tim McMillan, CAPP’s New President

Community

O&G 101: What is Process Safety?

Ask An Expert: TJ Larkin

36 Events

What’s Online at CAPP, Safety 101

In Closing: Brad Herald

capp.ca/context

Photographs: (top to bottom) Brian Buchsdruecker; Shutterstock; Courtesy Husky Energy; Courtesy Government of Alberta

enabling zero

regional profile

Oil and Gas Industry Regional Profile:

Economic Impacts:

Quebec While not a centre of oil and gas production, Quebec has a manufacturing industry that is a key supplier of materials, goods and services to the Canadian oil and gas industry. For example, it is estimated that Canada’s oil sands industry alone will have a $67 billion impact on Quebec’s GDP over the next 25 years (CERI, 2014). Meanwhile, the approved Line 9 reversal and proposed Energy East pipeline will provide access to an important new domestic market, with an opportunity to displace the 640,000 barrels per day of foreign oil currently imported into Eastern Canada. Access to the eastern shores of Canada will also enable Canadian crude oil to reach new export markets in Europe, Africa, India and the eastern United States. Quebec has no commercial scale extraction of oil or gas. Initial exploration suggests, however, the potential for significant gas resources within the Utica Shale in the St. Lawrence Lowlands; oil and gas within the Macasty shale on Anticosti Island; and offshore oil and gas in the Gulf of St. Lawrence. There is currently a moratorium on shale gas development in Quebec.

$67 billion in GDP; $12 billion in tax revenues:

The projected impact on Quebec’s economy of Canada’s oil sands industry over the next 25 years. (CERI, 2014)

191 companies

currently supply goods, materials and services to the oil sands industry. (CAPP)

Anticosti Island QUEBEC

Hardisty Moosomin

Gulf of St.Lawrence St.Lawrence Cacouna Seaway

ONTARIO

Québec City

Saint John

A Government of Canada Parliamentary report on future opportunities in the oil and gas industry documented Quebec’s significant resource potential:

The Utica Shale:

Located in the St. Lawrence Lowlands region of Quebec, the Utica Shale is estimated to have a natural gas resource potential of 120 trillion cubic feet (TCF), of which 18 to 40 Tcf is expected to be recoverable. Based on current consumption, 40 Tcf would meet Quebec’s domestic natural gas needs for over 200 years.

(CAPP)

N LI

NEW BRUNSWICK

NOVA SCOTIA

Energy East, Proposed Route Enbridge Line 9 The Utica Shale Potential Resources

The proposed TransCanada Energy East pipeline would transport crude oil across Canada from Hardisty, Alberta, to points in Quebec and New Brunswick.

Anticosti Island:

There is an estimate of between 19.8 and 48.2 billion barrels of oil in place OIL in the Macasty shale oil play on Anticosti Island.

St. Lawrence Seaway:

There is an estimated 39 Tcf of natural gas and 1.5 billion barrels of oil under the sea floor of the Gulf of St. Lawrence.

Photograph: CANADIAN PRESS/Francis Vachon

What’s New:

In October 2014, the federal government announced it had reached a tentative agreement with the government of Quebec to jointly manage offshore exploration and development. Quebec’s Liberal government led by Premier Philippe Couillard is moving forward with preliminary oil exploration work on Anticosti Island. The provincial government is conducting several environmental assessments on resource development and market access projects, and plans to table an industry-wide oil and gas framework by late 2015.

880,000

person-years of employment:

would be created over 25 years if the shale gas industry is developed in Quebec. (CERI, 2013)

Market Access Opportunity:

640,000 b/d:

The amount of crude oil that refineries in Quebec and Atlantic Canada currently import from foreign sources including

Algeria, Nigeria, Mexico, the U.S. and Norway. (CAPP) OIL

Note: Resource potential estimates total resources for which reasonable prospects exist for eventual economic extraction. This is distinct from reserves, which are known to be economically and technically feasible to extract.

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Upstream oil and gas development investment in Quebec since 2007.

Lévis Montréal

Resource Potential:

$260 million:

Quebec has a refining capacity of

400,000 b/d

with major refineries in Lévis (Valero) and Montreal (Suncor). (CAPP)

Quebecers on a daily basis consume:

56 million litres of oil

0.5 Bcf

of natural gas. (Statistics Canada, 2012)

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Contributors

The official member magazine for the Canadian Association of Petroleum Producers (CAPP) Volume 2 Issue 3

Moira Baird Moira Baird is a writer, editor and communications consultant based in St. John’s, Newfoundland. She has worked as a policy advisor for an oil and gas industries association, as a journalist covering the Newfoundland and Labrador offshore petroleum industry, and as a freelance writer for business magazines and trade publications. In this issue, she wrote “Taking Safety to Heart and Home” on page 25.

Brian Buchsdruecker Brian Buchsdruecker is a freelance photographer and the owner of Bookstrucker Photography (www.bookstrucker.com). Over the past ten years, Brian has had the opportunity to shoot everything from gourmet food cookbooks to aerials of gas plants in the field and corporate portraits. When Brian is not busy shooting, he can be found spending time enjoying the outdoors or off at the gym. In this issue, Brian photographs CAPP President Tim McMillan for the Leadership Profile on page 18.

context@capp.ca | www.capp.ca/context Publisher Jeff Gaulin, V.P. Communication CAPP Jeff.Gaulin@capp.ca Managing Editor Brenda Jones, Manager Member Communication and Special Events CAPP, Brenda.Jones@capp.ca Editor Andrew Mah, Member Communication Advisor CAPP Andrew.Mah@capp.ca Art Director Susie Wong, Blunt Strategic in cooperation with Radfactory House of Design Contributors Moira Baird, Elizabeth Booth, Kathryn Boothby, Brian Buchsdruecker, Brian Burton, Mark Cromwell, Matthew O’Connor Digital Communication Melissa Lampman, Digital Communication Advisor CAPP Melissa.Lampman@capp.ca Distribution and Member Updates Janine Vandenberghe, Administrative Assistant Janine.Vandenberghe@capp.ca

Mark Cromwell Mark was born a very young artist. Now, he is much older, as will happen, and he is still pursuing art as a full-time career. Mark has a BFA from the University of Calgary, and has been freelancing as an illustrator and painter in the Calgary area since 1991. You can see some of his portfolio at www.colorclub.ca. His work is featured in our regular Safety 101 Illustration—which this issue is on page 37.

Please contact for changes in contact names and delivery addresses. Context Concept, Strategy and Product Development Agnes Zalewski, Blunt Strategic CAPP Executive Team CEO Dave Collyer

Dave.Collyer@capp.ca

President Tim McMillan

Tim.McMillan@capp.ca

Vice President Ottawa and Eastern / Atlantic Canada Janet Annesley Janet.Annesley@capp.ca Vice President External Relations Bob Bleaney Bob.Bleaney@capp.ca

CONTEXT is printed on 100 Per cent Post‑Consumer Fibre, manufactured using Biogas Energy

Vice President Policy and Performance Alex Ferguson Alex.Ferguson@capp.ca Vice President Communication Jeff Gaulin Jeff.Gaulin@capp.ca Vice President Western Canada and Natural Gas Markets Brad Herald Brad.Herald@capp.ca Vice President Regulatory and General Counsel Nick Schultz Nick.Schultz@capp.ca

by using

1683 kg of recycled material we saved:

40.5 kwh of energy

74,584 litres of water

Publication Number: 2014-9203

1.85

Calgary 2100, 350 – 7th Ave SW, Calgary, Alberta T2P 3N9, Tel: 403.267.1100

tonnes of greenhouse gases

538 kg of solid waste 37 trees 4

Vice President Oil Sands and Markets Greg Stringham Greg.Stringham@capp.ca

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Offices

Ottawa 1000, 275 Slater Street, Ottawa, Ontario K1P 5H9, Tel: 613.288.2126 St. John’s 403, 235 Water Street, St. John’s, Newfoundland and Labrador, A1C 1B6, Tel: 709.724.4200 Victoria 310, 1321 Blanshard Street, Victoria, British Columbia, V8W 0B5, capp.ca/context Tel: 778.410.5000

In this Issue

The Safety Issue Safety is integral to the Canadian upstream oil and gas industry and the communities where we work. In this issue of Context we focus on this important industry value. Based on industry-wide performance data from the Responsible Canadian Energy progress report (release date: December 1st, 2014), our industry experienced an increase in fatalities in 2013. This occurred even though Total Recordable Injury Frequency (TRIF) has fallen during a period of significant industry growth. Any fatality is unacceptable, as is complacency— which is why our industry is resolute on continually improving its safety performance. In this edition of Context, we highlight some of the work underway to ensure the safety of our workers and the public. Enabling Zero focuses on a step change for industry performance through the promotion of safety culture and leadership, and the use of “Big Data”— aggregating multiple Workers Compensation Board databases—to identify trends that can be prevented with proper guidance and awareness. Our feature on Safety Innovations highlights a few of the recent innovations being adopted by our members, such as advanced helicopter flight suits to improve survival, and personal GPS devices to help protect workers in remote locations. A great example of engagement and collaboration on a major safety issue is profiled in Building a Safer 63, which describes how industry and the Province of Alberta are working together to help ensure the main access road to Fort McMurray is safe for workers and the public.

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Keep current on some of the activities CAPP is working on to benefit members in What’s Up at CAPP. We feature happenings through the last quarter in communication, policy and performance, oil sands and market access, Western Canada and Atlantic Canada. We also hope that you will take the opportunity to read the Leadership Profile featuring CAPP President Tim McMillan, who joined our organization in October of this year. Finally, this edition marks the sixth issue of Context that CAPP has published since the magazine’s inception in the spring of 2013. Context was developed for CAPP members to promote competitiveness and public confidence in Canada’s upstream oil and gas industry on multiple fronts. At this point, we would like to check-in with you, our readers, with an online survey to better understand what you like about the magazine and what could be fine-tuned. Enclosed in the magazine is a link to the online survey (www.surveymonkey.com/s/ contextmag) which we thank you in advance for completing by December 15th, 2014. Thank you for your support and enjoy this edition of Context. Brenda Jones Manager, Member Communication and Special Events, Canadian Association of Petroleum Producers

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CEO’s Message

Q&A:

Where We’ve Been and Where We’re Headed

We sit with CAPP CEO Dave Collyer and ask him to reflect upon his past six years at CAPP, and where he sees CAPP and industry heading in 2015. This will be Dave’s final message to members in Context: Dave Collyer will continue as CEO of CAPP for a transition period until his planned retirement at year-end, after which President Tim McMillan will become both President and CEO of the organization. In addition, Dave provides a summary of Q3 CAPP priorities from the perspective of competitiveness and public confidence. Q: The world was a different place six years ago. What were your key priorities when you took over at CAPP, and how have they changed over time? A: There is no question the world was a different place six years ago. The shale gas revolution was only in its formative stages, there was less contention regarding oil sands development and the conflict had not yet moved to pipelines, state-owned enterprise (SOE) investment in the Canadian industry was at a much lower level, the financial crisis was not yet upon us and we were in the midst of the Alberta royalty debate. While our industry is always operating in a rapidly changing environment, the pace of change has been escalating. CAPP must therefore stay very clearly focused on our two key deliverables that don’t change—competitiveness and public confidence—while adapting to changes in the external environment and to shifts in public policy priorities. The one constant is that our industry is now very much in the public eye, and that is not likely to change in the foreseeable future. Q: What accomplishment are you proudest of during your tenure at CAPP? A: I wouldn’t necessarily point to one accomplishment and none of them are mine alone. On the policy front, the two that stand out for me are resolving the Alberta royalty issue and regulatory reform at both the federal and provincial levels. Our industry has also moved a long way over the past six years in our communication and engagement activities and ensuring that

context . volume 2 . issue 3 . November 2014

communication is underpinned by a strong focus on performance so as to be credible, but there is much more to be done. And I think we have continued to build a strong organization that is very credible with our members and with our various external stakeholders and governments/regulators. Q: As always, there’s more to do. Give us some news headlines you’d like to see in 2015 arising from CAPP initiatives currently in progress. A: I’ll give you three: • First West Coast LNG project FID’d. • Keystone XL pipeline approved. • Alberta Energy Regulator transformation fully on track.

[FID = final investment decision]

Q: What advice would you give to Tim McMillan as your successor? A: The external environment in which we are operating is ever changing and increasingly challenging. The leadership of CAPP has to continually be focused on how CAPP, on behalf of its members, can move to the next level of performance. As Wayne Gretzky would say, go to where the puck is going to be, not where it is. Q: Why are you retiring now? Any regrets? A: I’m proud of what has been accomplished at CAPP during my tenure and I have really enjoyed the role, but all positions have a “best before” date and all organizations benefit from leadership renewal and fresh ideas. I decided that after 30 years at Shell and six years at CAPP it was time to turn over the reins to my successor and take the intensity level down a bit. I plan to stay active through boards and perhaps some consulting work, so I hope I can continue to make a positive contribution to the industry going forward.

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CEO’s Message I don’t have any regrets... my philosophy has always been that all you can do is give your best every day and keep looking forward. Q: A final message to members. A: This is a great industry with tremendous future opportunities. I am convinced that we can successfully address the competitiveness and public confidence challenges before us if we demonstrate leadership on both the communication/engagement front and on the performance front, working together wherever possible and recognizing that we need to stay the course for the longer-term. CAPP is a strong organization that consistently delivers value to members and will definitely do its part to deliver results. However, we all own this challenge and I encourage everyone in the industry to step up and do their part. Finally, I’ve appreciated the support provided by CAPP staff and members. It’s been a privilege to have the opportunity to lead the CAPP organization.

Top 5 Competitiveness Priorities Heat Map

Priority 1. Fiscal Competitiveness

Balanced public policy with focus on industry competitiveness.

2. Environmental and Operational Regulation

Federal and AB reform proceeding as per plan.

3. Oil Market Access and Growth

Access to markets aligned with oil production growth.

4. Pipeline Tolls

TransCanada Mainline tolls remain within approved parameters.

5. Aboriginal Engagement and Consultation

Clarity and consistency in industry approach to engagement and consultation.

Sincerely, Dave Collyer,

Top 5 Public Confidence Priorities

CEO, Canadian Association of Petroleum Producers

Priority

Summary of Q3 Results

The following tables show CAPP’s “top five” Competitiveness and Public Confidence priorities for 2014 as agreed to by the CAPP Board of Governors, along with a broad description of key deliverables in each area. In addition, the “Heat Map” element of the tables identifies whether issue areas are intensifying, staying the same or diminishing over time. This is a high-level overview of CAPP’s accountability for results delivery to our members. In the Competitiveness area, issues are generally intensifying due to overall competitiveness pressure on industry and concerns over the pace of infrastructure development. Through the end of Q3, CAPP is generally on track in meeting its key deliverables. Progress in Q3 included actions to address operational approvals in Alberta and progress on AER transformation; regulatory approvals of Line 9 and Northern Gateway, ongoing crude-by-rail growth and balanced outcomes on recent policy announcements related to marine, rail and pipeline transportation of crude oil. On the Public Confidence front, issues have intensified with ongoing market access issues and recent actions on fracking in the Atlantic provinces. CAPP’s overall results are generally on track relative to the plan for 2014. Public opinion remains solid, with progress on safety, communication and outreach initiatives. Steps are being taken to accelerate oil sands outreach efforts in some regions and address forward plans for the RCE Program.

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Key Deliverable

Heat Map

Key Deliverable

1. Overall Public Confidence and Reputation

Maintain or enhance industry’s overall reputation with the Canadian public.

2. Industry Performance

A progressive Responsible Canadian Energy Program that facilitates continuous industry performance improvement.

3. Safety

Best practices framework for producer-owned pipeline safety and integrity.

4. Oil Sands Communication and Outreach

“Next level” communication and outreach program that maintains leadership on value chain approach.

5. Unconventional Natural Gas and Oil Communication and Outreach

Next phase of landowner/community engagement plan.

Heat Map Intensifying Unchanged Diminishing

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Industry News

In the news

Rob Dockery is Lead Pipeline Welding Instructor for UA Local 46 in Toronto.

In July, the United Association of Journeymen and Apprentices of the Plumbing and Pipe Fitting Industry, in collaboration with TransCanada Corp., launched a new pipeline training program across Canada. The program enables welders, pipefitters and apprentices to obtain advanced training and upgrading required to work in the pipeline construction industry.

by the Numbers

The latest numbers on expected economic benefits from Canada’s oil sands industry over the next 25 years (2014-2038) from the Canadian Energy Research Institute (CERI, 2014). 2038

$3.9 trillion

added to Canada’s GDP

19 million $574 billion

person years of employment

paid in federal taxes

Exceeding $600 billion paid in Alberta royalties

2014 Crude Exports to U.S. at Record High

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Canada’s exports to the U.S. as of + mid‑September 2014 had reached three million barrels per day. This represents a 20 per cent increase from the same period a year earlier.

Oil Sands Filter Gets U of A Student to Google Science Fair University of Alberta student Hayley Todesco was Canada’s only representative at the Google Science Fair in September. The firstyear microbiology student won a prize at the science fair for developing a filter that could potentially clean tailings 14 times faster than existing methods. Her project explored the use of slow sand filters to biodegrade toxic compounds called naphthenic acids found in tailings ponds. Learn more at www.googlesciencefair.com.

Book Review: Making the Case for Fossil Fuels CAPP Digital Communication Advisor Matt O’Connor reviews The Moral Case for Fossil Fuels by Alex Epstein, president and founder of the Center for Industrial Progress based in the United States. We should unapologetically use fossil fuels to enhance every aspect of our lives, including making them greener, argues author Alex Epstein in his book, The Moral Case for Fossil Fuels. Epstein’s book uses human life as the foundation for measuring positive and negative environmental impacts of using fossil fuels. From their early development until today, fossil fuels have increased life expectancy, reduced infant mortality, cured disease and even led to greener lifestyles, he says. Moreover, it has been the foundation for providing these improvements to a wide (and growing) portion of the global population. Epstein explains, “For something to be cheap and plentiful, every part of the process to produce it, including every input that goes into it, must be cheap and plentiful.” Walking the reader through a variety of third-party facts and graphs, along with illustrative stories and examples, Epstein’s book is able to convey his message to a wide audience with varying degrees of energy knowledge. He also motivates readers to use the information to talk about fossil fuels and find solutions to some of the environmental and social challenges. The Moral Case for Fossil Fuels is a useful tool and thought-generator. It makes the case that we need energy to advance environmental solutions and adapt to our climate, provide the necessities of life like clean drinking water and power for hospitals, and that we also need energy to find solutions to the issues we face.

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Photograph: (top right) Courtesy Hayley Todesco

Pipeline Training Program

Industry News

Innovation:

Photograph: Courtesy CCEMC

CCEMC Producing Results, Supporting Market Access The Alberta-based Climate Change and Emissions Management Corporation (CCEMC) is supporting projects that reduce GHG emissions from Alberta’s oil and gas operations and in the process, it’s supporting efforts to secure market access for Alberta energy.

CAPP’s Oil Sands Fact Book has been updated to include up‑to‑date data on economic benefits. This pocket‑sized book is designed to give you fast, easy access to a range of oil sands facts that will help you be a part of the energy discussion. You can download it electronically at www.capp.ca/UpstreamDialogue/OilSands/ Pages/

“The CCEMC projects in the oil and gas sector are incredibly important,” said CCEMC Chair Eric Newell. “Alberta’s ability to secure market access for our energy is partly dependent on our ability to find transformative technologies that will enable us to reduce absolute GHG emissions.”

Members of CAPP may also order hardcopies: email us at publications@capp.ca.

The CCEMC began operations in 2009 and funded its first projects the following year. CCEMC Chair, Eric Newell

In Alberta, facilities that are deemed large final emitters have a regulatory obligation to reduce their emissions intensity to a specified target. If they can’t meet their target, one compliance option is paying $15 per tonne into the Climate Change and Emissions Management Fund. The province provides a grant to the CCEMC from the fund and, even though the CCEMC is still a young organization, it has already invested more than $220 million in 88 projects. Through collaboration and partnerships, the CCEMC has leveraged about $6 for every dollar it invests, resulting in a total combined value of more than $1.6 billion in projects. It’s estimated these projects could reduce GHG emissions by 10.2 megatonnes by 2020, with additional emissions reductions expected as technologies are commercialized and broadly deployed in the marketplace. While the CCEMC funds projects across Alberta’s economy, nearly half of the CCEMC investment—just over $100 million—is in the oil and gas sector. This includes projects led by CAPP members such as ConocoPhillips, Encana, Husky Energy, Imperial and MEG Energy. More than 90 per cent of all CCEMC investments made support projects at the demonstration or implementation stage.

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For example, a CCEMC project led by Texas‑based Skyonic Corp. secured $12.5 million in additional funding from ConocoPhillips and Enbridge to develop its post-combustion technology. This technology captures carbon dioxide emissions and transforms them into valuable chemicals like hydrochloric acid and calcium carbonate.

RS UCE ROD DS P SAN A IL ’S O ODAY.C ADA ST CAN ILSAND O

“There are lots of bright ideas out there and it’s been great to see these projects attract support from industry,” said Newell. In situ extraction is one area where Newell sees potential for transformative change. One of the projects the CCEMC supports is enhanced solvent extraction incorporating electromagnetic heating (ESEIEH – pronounced ‘easy’) a new process for in situ bitumen extraction. If successful, this low-pressure process will eliminate water use, reduce GHG emissions, and reduce operating and maintenance costs. The project is led by a consortium of Suncor, Devon Canada, CNOOC Limited/Nexen Inc. and Harris Corporation. The CCEMC runs competitive processes, and makes new funding available through a request for proposals process every year. To learn more, visit CCEMC.ca.

The Climate Change and Emissions Management Corporation (CCEMC) receives funding via the Government of Alberta’s mandatory GHG reduction regulations for large emitters.

More than

$220

million

has been invested in 88 projects aimed at reducing GHG emissions. context . volume 2 . issue 3 . November 2014

What’s Up at CAPP?

What’s Up at CAPP

CAPP’s Strategic Outcomes CAPP strives to deliver for our members Improved Competitiveness In:

Fiscal

Environmental and Operational Policy and Regulations

Market Access and Growth

Pipeline Tolls

Aboriginal Engagement and Consultation

Updates on some of the activities

Workforce

and milestones we’ve been working

on for members, through the third

Enhanced PUBLIC CONFIDENCE to Develop and

quarter of 2014.

Canadian Energy Framework

Operate Through: Environmental and Social Performance Safety

Communication and Outreach

Eastern, Atlantic and Northern Canada Responding to Proposed Lancaster Sound NMCA In July, CAPP provided feedback to Parks Canada expressing concern regarding a proposal to designate a national marine conservation area (NMCA) in the Lancaster Sound area of Nunavut. This NMCA would remove more than 44,000 square kilometres of offshore hydrocarbon potential from Nunavut’s exploration portfolio. “The proposed NMCA is in an area of high prospectivity for oil and gas, and is adjacent to existing exploration permits,” notes Paul Barnes, Manager Atlantic Canada and Arctic at CAPP. “Several years ago, the Geological Survey of Canada analyzed existing seismic and geological data to assess potential petroleum resources in this area. They concluded that there is an active petroleum system with significant resources of both oil and natural gas in the region.” Also of concern is the fact that this area provides access to other areas of offshore interest via the Northwest Passage. As such, it could be key to facilitating future year-round exploration programs, and—with exploration success—future, year-round oil and gas production. The proposed NMCA would prohibit any oil and gas activity from occurring within the defined area, and also prevent directional drilling underneath the area from a drilling location outside of the area. “We respectfully requested that Parks Canada reconsider the proposed MNCA approach and engage in discussions with the Department of Fisheries and Oceans, other federal departments and the Nunavut government about using a Marine Protected Area designation for the Lancaster Sound area,” says Barnes. “This would allow for regulated protection of certain marine species while still allowing for oil and gas and other industrial related activities—with appropriate measures to protect marine life and its habitat.” 10

context . volume 2 . issue 3 . November 2014

The Geological Survey of Canada

estimates that potential petroleum resources in Lancaster Sound are comparable in volume to those of Jeanne d’Arc Basin (which includes the Hibernia oil field). The average in‑place crude oil resource is estimated to be

4.5 billion barrels 13.0 trillion cubic feet.

and the average in-place natural gas resource is estimated to be

(Note, these are potential resources, not proven reserves as there have been no exploratory wells drilled in the area.) capp.ca/context

What’s Up at CAPP? Resource Development Updates for Atlantic Canada Nova Scotia: A Missed Opportunity In September, following the publication of an independent review of hydraulic fracturing in the province, the Government of Nova Scotia announced a moratorium on “high volume hydraulic fracturing,” the definition of which will be included in to-be-published regulations expected in the next six months. CAPP expressed disappointment over the decision to government, media and stakeholders: “The government’s decision appears to be largely based on considerations other than the technical knowledge and experience of industry regulators and experts in Canadian jurisdictions where hydraulic fracturing has been used safely for many decades to develop natural gas,” said Dave Collyer, CEO of CAPP. “While the commercial viability of Nova Scotia’s onshore natural gas resource has yet to be fully proven, today’s announcement has the potential to preclude Nova Scotians from benefitting from the responsible development of this resource.”

Photograph: THE CANADIAN PRESS/James West

Newfoundland and Labrador: Starting an Independent Review The Government of Newfoundland and Labrador announced in October that it is appointing an independent panel to review the socio-economic and environmental implications of onshore hydraulic fracturing in the western part of the province. The five‑person panel is composed of academics representing the fields of environment, engineering and geology, economics and public health. The panel plans to collect information via: • Public and stakeholder consultation • A review of regulatory processes related to hydraulic fracturing in other jurisdictions • Identification of environmental risks to water, land and communities • Identification of best industry practices and procedures related to hydraulic fracturing • Review of the current regulatory process in Newfoundland and Labrador, and identifying needed changes consistent with other jurisdictions and best practices

The government ceased providing licenses for hydraulic fracturing in Newfoundland and Labrador in November 2013. The review panel’s final report is due within one year. New Brunswick: New Government Signals Moratorium New Brunswickers elected a Liberal majority government under the leadership of Brian Gallant on September 22. As part of their election platform, the Liberals have promised to impose a moratorium on hydraulic fracturing “until the risks to the environment, health and water are fully understood.” Meanwhile, Gallant and the Liberals have expressed strong support for the proposed Energy East oil pipeline, the construction of an oil export terminal in Saint John, and the conversion of the Canaport LNG terminal into an export facility.

We agree that a scientific, evidence‑based review of hydraulic fracturing will help build public understanding of the technology “CAPP will work constructively with the Liberal government on oil and natural gas issues,” notes Paul Barnes, Manager Atlantic Canada and Arctic. “Both are important to economic growth and job creation in a province with an unemployment rate well above the national average.” “However, we’re of the view that a moratorium on hydraulic fracturing is not warranted and that New Brunswick’s oil and natural gas resources can (and should) be responsibly developed using this technology,” adds Barnes. As appropriate, CAPP will encourage the government to take into account experiences in New Brunswick and other jurisdictions and the strong body of scientific evidence that indicates hydraulic fracturing can be done safely and responsibly, providing valuable natural gas, jobs and government revenues to communities. For more information, contact Paul.Barnes@capp.ca.

Paul Barnes, Manager Atlantic Canada and Arctic at CAPP.

“We are encouraged the independent panel will review regulations and best industry practices in jurisdictions that are using hydraulic fracturing,” says Paul Barnes, Manager Atlantic Canada and Arctic. “We agree that a scientific, evidence-based review of hydraulic fracturing will help build public understanding of the technology, and processes industry uses to explore for and develop onshore oil and natural gas resources.” “CAPP will be a participant in the consultation process, providing input as appropriate,” adds Barnes. “We’ll also encourage the review panel to conduct site tours of facilities where hydraulic fracturing takes place to gain a better understanding of how the industry works.” capp.ca/context

New Brunswick Premier Brian Gallant expresses strong support for the Energy East pipeline. context . volume 2 . issue 3 . November 2014

CAPP Engages Supporters in Quebec and Atlantic Canada Senior CAPP executives traveled to St. John’s, N.L., Halifax, N.S. and Moncton, N.B., on September 29, 30 and October 1, to meet with companies, governments and regulators, and to hold a series of roundtables with local business leaders and other stakeholders, such as educational institutes and One Ocean. Visiting from CAPP were C.E.O. Dave Collyer, CAPP’s new President Tim McMillan and new V.P. for Ottawa, Eastern and Atlantic Canada Janet Annesley. The purpose of the roundtables was for CAPP, local suppliers, oil and gas value-chain interests, and other stakeholders to discuss current issues, particularly challenges to growth such as public confidence, and opportunities to advance responsible development in the interest of each province. As the “new face” of CAPP, President Tim McMillan visited Quebec and New Brunswick in early November, meeting with local companies, industry stakeholders, government, and community residents. McMillan delivered the keynote address for the Quebec Oil and Gas Association dinner on November 3rd in Montreal where he

Offshore Workers and the Temporary Foreign Worker Program

McMillan also spoke at the Exploration, Mining & Petroleum Conference on November 4 in Fredericton, New Brunswick, where he discussed the opportunity for safe oil and gas development in the province. In both speeches, McMillan talked about the energy security and economic benefits the industry provides to communities, highlighting his own experiences as the former energy minister of Saskatchewan in how a strong energy industry can drive growth, create local jobs and revitalize communities. He also made a call to action for collaboration on advancing pride in the industry while making Canada an energy leader.

were designed to ensure employers put Canadian workers first. Find out more about these changes: http://www.esdc.gc.ca/eng/jobs/foreign_ workers/index.shtml

“The TFWP is important to the industry in Atlantic Canada,” notes Janet Annesley, Vice President Ottawa, Eastern and Atlantic Canada. “Given the nature of offshore work and the specialized global vessels and services required, there are often no qualified people to fill key positions within Canada.” CAPP has asked for special consideration on this basis, and suggested ideas on how to facilitate the TFWP for the offshore industry. “Government representatives were generally supportive of industry suggestions and implementation will be key,” says Annesley. For more information, contact Jill.Piccott@capp.ca.

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Tim McMillan calls on energy leaders in New Brunswick to help make Canada a global energy leader.

Changes to the Temporary Foreign Workers Program

CAPP and Atlantic Canada offshore members met with Service Canada and Citizenship and Immigration Canada on September 16 to discuss concerns with recent changes to the Temporary Foreign Worker Program (TFWP). Requirements in the TFWP to advertise all positions and restrict name changes on applications, plus lengthy processing timelines, are resulting in delays for the offshore industry.

provided a strong, positive vision of enhanced market access to and through Quebec, and discussed the province’s potential to be a significant player in “the shale gas revolution.”

Photograph: Sheri Somerville

What’s Up at CAPP?

Communication

Canada’s Energy Citizens 2.0: Join Now! The Canada’s Energy Citizens campaign was launched this spring to engage oil and gas industry supporters. “We want everyone who supports this industry—especially those of us who work in it—to sign up for this initiative,” says Christina Pilarski, Manager Campaigns at CAPP. The goal of the campaign is to help supporters become advocates— spreading the word about the numerous economic and social benefits the industry provides, and the commitment and innovation the industry is applying to meet environmental challenges. As well, Canada’s Energy Citizens can help increase public confidence in the industry by demonstrating the strong community of support for oil and gas. “We know there’s a high level of support for our industry among Canadians,” notes Jeff Gaulin, Vice President Communication at CAPP. “Unfortunately, too often, this quiet majority is drowned out by the loud protests of those who want to say ‘no’ to all resource development. This campaign is one opportunity for all of us to respond.” “If we’re not willing to stand up for our own industry, how can we expect others to?” adds Gaulin. To make it even easier to spread the word and share stories, the Canada’s Energy Citizens website has been revamped to include a “Get the Facts” blog post area. “The area features stories, myth‑busting factoids, infographics and great visuals,” notes Pilarski, “Plus, everything capp.ca/context

What’s Up at CAPP?

in this area is easily shareable. It’s a great way to start informed conversations about the industry.”

Hardave Birk is one of the Energy Citizens featured on the EnergyCitizen.ca Citizen Spotlight. Birk is a legislative assistant on Parliament Hill in Ottawa and declares he’s proud of Canada’s energy industry because it creates jobs for thousands of Canadians.

As well, the site now includes a Citizen Spotlight section highlighting ordinary people from all regions of the country who are willing to stand up for jobs, prosperity and resource development.

Illustration: Mark Cromwell; photograph: courtesy Hardave Birk

“If you’re reading this and you haven’t joined, sign up now. And if you have signed up, tell a colleague, tell a friend,” says Pilarski. Do it. Now. Visit EnergyCitizens.ca.

Get the Facts on Canada’s Natural Gas CAPP has launched a website: www.canadasnaturalgas.ca with information about how safe, responsible development of natural gas benefits Canada’s environment and economy. “It’s a valuable tool for anyone looking to learn more about supply and demand, economic benefits and environmental facts concerning Canada’s natural gas resources,” says Chris Montgomery, Manager of Exploration and Production Communication & Outreach at CAPP. “Information on the site explains the process of hydraulic fracturing and the practices used to ensure water resources are protected. It also has numerous quick facts one can use to advocate for safe, responsible development and dispel myths about natural gas extraction.” An example of the shareable content you’ll find at the new energycitizens.ca.

A Few Natural Gas Facts:

Meets 30 per cent of Canada’s energy needs Employs 172,000 Canadians Produces 50 per cent fewer GHG emissions than coal when used for electrical generation Visit www.canadasnaturalgas.ca

The site also has a section for news items about natural gas. “We really encourage members to submit their natural-gas news to us—so that we can share with and inform the public about the wide range of initiatives and innovations going on related to responsible natural gas development across our industry,” says Christina Pilarski, Manager Campaigns at CAPP. Members can also like the Facebook Page, and follow Canada’s Natural Gas on Twitter. www.facebook.com/CdnNatGas twitter.com/CdnNatGas

2 0 1 5 CAPP SCOTIABANK

INVESTMENT SYMPOSIUM Sponsorship Opportunities Available at the 2015 CAPP Scotiabank Investment Symposium.

April 8-9, 2015 Sheraton Centre Toronto Hotel, Toronto, Ontario.

CAPP is looking for sponsors for its 25th Investment Symposium. Leverage your brand with key decision makers at an event featuring leaders of both the oil and gas and investment communities. Last year’s event featured • 800 registrants • 89 presenting corporate companies • 230 institutional investors and 100 retail investors • 700 one-on-one meetings Don’t miss out on the oil and gas investment conference of the year.

Contact Brenda.Jones@capp.ca if you’re interested in being a sponsor.

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What’s Up at CAPP?

CAPP, TransCAER and Rail Regs Update Following the tragic events of Lac-Mégantic, CAPP made a commitment to Federal Minister of Transport Lisa Raitt to evaluate participation in the Transportation Community Awareness and Emergency Response (TransCAER) initiative. TransCAER was started in Canada in 1985 by the Chemistry Industry Association of Canada (CIAC). Today, it is led by CIAC and the Railway Association of Canada (RAC) and is viewed as integral for training and awareness related to the Transportation of Dangerous Goods (TDG) and for equipping communities and first responders with the knowledge and tools needed to respond to dangerous good incidents.

TransCAER in the Community

The Transportation Community Awareness and Emergency Response (TransCAER) initiative hosts dozens of outreach events across Canada each year. TransCAER’s Safety Training Tank Car is a unique classroom on wheels that plays a key role in these outreach efforts. Every March, the tank car journeys across Canada, making stops in communities where dangerous goods travel—from Courtenay B.C. to Halifax, N.S. At each stop, TransCAER members help to train fire fighters, police and emergency medical personnel so they are better prepared in the event of a transportation incident involving dangerous goods. Learn more at www.transcaer.ca.

“TransCAER members work with municipalities, emergency responders and residents in communities along transportation routes—to make sure they are informed about the products being moved through their area, and are prepared to respond to potential incidents,” notes Vicki Ballance, Manager, Alberta Regulatory Affairs at CAPP.

CAPP’s participation sends a strong signal of the upstream industry’s commitment to product stewardship and the safety of the public.

Vicki Ballance, Manager Regulatory Affairs at CAPP.

Following Board approval in September, CAPP has committed to establishing a CAPP TransCAER task force that would support member participation in TransCAER. CAPP member companies participating in the initiative are expected to provide human and educational material resources—for example participating in regional and national meetings, attending collective outreach events and initiatives along transportation routes. “One example of potential assistance that CAPP and members will be able to provide is hydrocarbon product training and educational materials from the first responder perspective,” notes Ballance. “The Canadian Association of Fire Chiefs (CAFC) has expressed an interest in these kinds of materials. “CAPP’s participation sends a strong signal of the upstream industry’s commitment to product stewardship and the safety of the public,” she adds. Meanwhile, CAPP continues to provide feedback on the need for harmonized tank car standards between Canada and the United States to facilitate cross-border traffic. CAPP is working closely with the American Petroleum Institute (API) to ensure alignment on both sides of the border. For more information, contact Vicki.Ballance@capp.ca. 14

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OSCA Survey Demonstrates Members’ Community Commitment The Oil Sands Community Alliance (OSCA) recently completed an annual survey of industry contributions to Aboriginal peoples of the Regional Municipality of Wood Buffalo and County of Lac La Biche. The survey found that in 2013, oil sands and resource development related companies made significant contributions to Aboriginal communities.

OSCA Survey Findings

In 2013, industry made the following contributions to Aboriginal communities: • Community donations: $6.2 million • First Nations consultation costs: $10.1 million • Métis agreements and consultation costs: $1.6 million • Total paid out value of contracts: $1.97 billion

“These numbers indicate industry’s strong commitment to consultation, community engagement and the creation of business and employment opportunities for Aboriginal communities in the area,” says Reegan McCullough, OSCA Executive Director. OSCA was recently formed from the Oil Sands Developers Group (OSDG); it was created to renew industry’s focus on socio-economic issues and proactively address changes in the communities where oil sands developers operate. OSCA has four focus areas: Aboriginal, community well-being, infrastructure and workforce. For more information, visit www.oscaalberta.ca. capp.ca/context

Photograph: Bruce Bunting, Nexen Energy ULC, Courtesy TransCAER

Oil Sands and Market Access

What’s Up at CAPP?

Policy and Performance Providing Clarity on the Supreme Court “William Decision”

The RCE Progress Report Arrives in December On December 1st, 2014, CAPP releases its annual Responsible Canadian Energy progress report. This year’s report articulates both industry’s contribution to Canada’s economic prosperity, as well as its performance in four RESPONSIBLE CANADIAN key areas: people, air, water and land. ENERgy

The Supreme Court of Canada made a landmark decision in the case of Tsilhqot’in Nation versus the British Columbia government (also known as the “William decision”) this June. The decision granted Aboriginal title to 1,750 square kilometres of land in central British Columbia to the Tsilhqot’in Nation.

“The report covers a range of environmental and social metrics,” notes Alex Ferguson, Vice President Policy and Performance at CAPP. “It provides a uniquely industry-wide perspective of how industry is doing in its commitment to produce energy in a responsible manner.”

“It was a significant decision in that it is the first time the Supreme Court of Canada confirms that Aboriginal title exists,” says Brian McGuigan, Manager Aboriginal Policy at CAPP. “Also key is that it establishes law applicable to non-treaty lands.”

2014 Progress rePort

The report highlights both achievements and challenges for industry. An achievement revealed in this year’s report is a 27 per cent decrease in fresh water withdrawal per barrel of production for oil sands in situ operations from 2009 to 2013. Another achievement is the employment of 780,000 workers across Canada (direct, indirect and induced). A challenge is the increase in GHG emissions that accompany a growing industry.

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Fresh water withdrawal per barrel of production for oil sands in situ operations

In encompassing Aboriginal groups that have not signed treaties, the decision has its greatest impact in British Columbia, Atlantic Canada and parts of the Yukon and Northwest Territories.

A wide range of opinion has been published regarding the impact the decision will have on future resource development in these regions. According to McGuigan, the greatest impact it has is providing additional guidance and clarity regarding Aboriginal title in British Columbia and Canada. “The decision reaffirms the Crown’s duty to consult with Aboriginal groups and provides additional clarity about the circumstances in which consent is required,” says McGuigan. “Notwithstanding the decision, we continue to support a collaborative approach amongst governments, Aboriginal groups and industry.”

fell 27%

The report is a key tool in becoming informed about data and trends related to industry performance, and can also provide useful comparisons relative to individual company sustainability reports. The report also helps to inspire performance improvement by disseminating information on leading practices through a variety of case studies and industry guidelines.

(2009 to 2013)

H2O

“It’s also important to remember that while the report comes out just once a year, it’s part of a broader initiative—the Responsible Canadian Energy Program. The program includes ongoing updates on performance and work with members on the development of best practice guidelines and strategies,” says Ferguson. “The program is really about driving continual improvement by creating a mindset that the only way to do business is the responsible way.”

Alex Ferguson, Vice President Policy and Performance at CAPP.

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To view or download the 2014 Responsible Canadian Energy progress report, visit www.capp.ca/rce on or after December 1, 2014.

It was a significant decision in that it is the first time the Supreme Court of Canada confirms that Aboriginal title exists. CAPP published a key messages document and detailed memo on the decision that was distributed to members on the Aboriginal Affairs Committee as well as the B.C., Oil Sands and Alberta EPGs. The documents highlighted the key findings of the decision and the potential impact on members operating on non-treaty lands. CAPP also continues ongoing and extensive member consultation in developing robust and effective Aboriginal engagement strategies and policies. For more information, contact Brian.McGuigan@capp.ca.

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What’s Up at CAPP?

Western Canada Feedback on Revenue Transparency Legislation

AER Transition Update: Winter Drilling

The federal government has introduced legislation detailing mandatory reporting requirements for Canadian extractive companies. The Extractive Sector Transparency Measures Act is included in the omnibus Bill C-43, and will cover extractive companies (i.e., companies engaged in a commercial-level oil, gas or mineral extraction) that have two of the following three criteria: at least $20 million in assets, $40 million in revenue and employ on average 250 or more employees

With the approach of the 2014/15 winter drilling season, the AER has implemented a new application processing system. This system took effect September 15th, 2014 and was designed to ensure that the regulatory issues of the previous winter are not repeated.

The purpose of the act is to “implement Canada’s international commitments to participate in the fight against corruption.” It will require extractive industry companies to report payments by select categories exceeding $100,000 made to any level of foreign or domestic governments. However, reporting of payments to Aboriginal governments will be delayed by two years after the act comes into force. Ben Brunnen, Manager Fiscal and Economic Policy at CAPP.

“CAPP was consulted on mandatory reporting standards several times over the past year,” notes Ben Brunnen, Manager Fiscal and Economic Policy at CAPP. “We were successful in moderating the potential scope of this reporting initiative, particularly in deferring reporting requirements to Aboriginal governments.”

We are concerned about the administrative complexity of this legislation and in ensuring we have equivalency of reporting standards with other jurisdictions, particularly the United States Some work remains to be done, however. In Canada, provincial and municipal governments already report and make transparent oil and natural gas royalty, tenure, tax and other revenues. “We are concerned about the administrative complexity of this legislation and in ensuring we have equivalency of reporting standards with other jurisdictions, particularly the United States,” notes Brunnen, “We are working with National Resources Canada to draw upon existing reporting practices that will have the required level of transparency while minimizing administrative burden.”

The new process appears to be expediting application consideration and decision-making, but a sizeable backlog remains and needs to be addressed. CAPP is encouraged by these recent actions. “The AER has told us that they are now fully staffed for peak load, and applications submitted after September 15th have experienced a 50-80 per cent process time reduction” says Vicki Ballance, Manager Alberta Regulatory Affairs at CAPP. The new process appears to be expediting application consideration and decision-making, but a sizeable backlog remains and needs to be addressed. The AER continues to work through a backlog of approximately 900 Public Lands Act (PLA) applications that were submitted prior to the introduction of the new application processing system. To manage this backlog, the AER has allocated staff and has made it clear that older applications will not take a back seat to the ones that were submitted after September 15th. The AER has stated that the goal is to be through this backlog by the end of November, 2014. An area of special concern voiced by CAPP was delays created by confusion over Aboriginal consultation requirements—namely who to consult and the adequacy of consultation. The Alberta government responded with the release of the First Nations Consultation Guidelines on July 28th. “The Aboriginal Consultation Office (ACO) and AER are cooperatively developing joint operating procedures for administration and coordination of ACO and AER operations,” says Ballance, “CAPP will be following up and providing feedback as needed to ensure this alignment provides companies the clarity they need.”

CAPP will continue to provide feedback to the federal government on how to establish reporting standards that are effective at creating transparency without impairing industry competitiveness. For more information, contact Ben.Brunnen@capp.ca.

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What’s Up at CAPP? To measure progress and help quickly identify and address issues, the AER has committed to weekly reporting of the following performance metrics: 1) number and type of applications received; 2) number and type of decisions made; 3) length of time to process applications by type. For more information, contact Vicki.Ballance@capp.ca.

• •

Saskatchewan Update: CAPP’s New President and the “Cooling Off” Period Former Saskatchewan Energy Minister Tim McMillan recently joined CAPP, becoming the association’s new president effective October 1st, 2014. To avoid the potential for conflict of interest, McMillan will be observing a one year “cooling off” period. During this time, McMillan will have no involvement on CAPP engagement with the Saskatchewan government. “Myself and Siân Pascoe, Saskatchewan Regulatory Affairs Advisor at CAPP, will be the top of the pyramid when it comes to CAPP government relations and regulatory work related to Saskatchewan,” says Brad Herald, Vice President Western Canada and Natural Gas Markets. Items currently on the CAPP agenda related to Saskatchewan include providing input on the development of a well-abandonment directive that would build upon learnings gained from the Alberta model. For more information, contact Siân.Pascoe@capp.ca. B.C.’s LNG Tax and Environmental Legislation In October, the British Columbia government released details of its much anticipated LNG tax framework. It also introduced legislation designed to ensure B.C. will have “the cleanest liquefied natural gas facilities in the world.” As well, the government introduced a new B.C. corporate income tax credit that is available to any LNG income taxpayer with a permanent establishment in B.C. This credit will be calculated based on the natural gas acquired for an LNG facility and will have the effect of reducing the provincial corporate income tax rate from 11 per cent to as low as eight per cent for that company. The government’s environmental legislation sets a GHG emissions intensity benchmark of 0.16 tonne carbon dioxide equivalent per tonne of LNG produced. This will include all facility GHG emissions from the point where gas enters a facility to where it is loaded onto ship or rail to go to market. LNG proponents will have the flexibility to meet the benchmark through facility design or increasing the use of clean electricity. As well, if reducing facility emissions is not immediately economically feasible, proponents have the option to invest in B.C.-based emissions reduction projects (offsets) or contribute to a technology fund at a rate of $25 per tonne of carbon dioxide equivalent. “Industry appreciates the added clarity and certainty that these announcements provide,” says Chris Montgomery, Manager Natural Gas Communications and Outreach at CAPP.

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•

Features of the LNG income tax include:

3.5 per cent of net income from liquefaction activities at LNG facilities in B.C., starting on January 1, 2017 During the period when net operating losses and capital investment are being deducted, a net operating income tax rate of 1.5 per cent will apply, creditable against the 3.5 per cent tax. The net income tax rate will increase to five per cent in 2037.

The 3.5 per cent tax rate is a reduction from the rate of 7.0 per cent the government initially proposed in the spring. “That change is a positive step which recognizes that shifting market conditions globally for LNG and natural gas in general,” notes Ben Brunnen, Manager Fiscal and Economic Policy at CAPP. “However, we continue to have concerns about how these announcements will add costs and impact our ability to compete in the global LNG market.”

Did You Know? World LNG liquefaction capacity is expected to more than double, from

41 to 83 Bcf/d, between 2013 and 2019?

Learn more about Canada’s LNG opportunity: Download CAPP’s report: “An Overview of the World LNG Market and Canada’s Potential for Exports of LNG” at http://bit.ly/1AVQcMq “There are other factors that determine B.C.’s overall competitiveness,” adds Brunnen, “From an upstream perspective, our feedstock costs are high compared to our competitors, and we are challenged by the cost of exploring for and developing the resource in a geographically and geologically challenging environment where there is little existing infrastructure.”

The proposed LNG tax isn’t necessarily the determining factor in project viability. We need to consider fiscal terms as an integrated package. “The proposed LNG tax isn’t necessarily the determining factor in project viability,” notes Brunnen, “We need to consider fiscal terms as an integrated package.” CAPP will continue to work with the B.C. government and others on a range of fiscal measures to enable competitiveness in light of the challenges and encourage the levels of investment needed to kick‑start the industry. “These could include an increase in funding for B.C.’s Infrastructure Royalty Credit Program, another look federally at having LNG facilities recognized as manufacturing facilities to allow for an accelerated capital cost allowance, and/or other fiscal incentives,” says Brunnen. For more information, contact Ben.Brunnen@capp.ca. context . volume 2 . issue 3 . November 2014

leadership Profile

Tim McMillan,

CAPP’s new President

Photograph: Brian Buchsdruecker

Discusses his move from politics to the oil and gas industry, and CAPP's priorities for 2015.

McMillan recently moved to Calgary where he lives with his wife and their two daughters.

In October, 2014, Tim McMillan joined CAPP as our new president. In January, 2015, McMillan will also become CAPP CEO after Dave Collyer’s planned retirement. Industry Questions: Q: What attracted you to the oil and gas industry? A: Several things. I grew up in an area that was heavily influenced by the oil industry. My family’s been involved in the oil industry for most of my life. But what attracted me right now is the fact that this is arguably the most important industry in our country. It affects almost every citizen in our country—not just because we’re putting gasoline in our vehicles and heating our homes with natural gas, but on an economic basis. Canada is a resource country and oil is our largest resource. It helps to create hundreds of thousands of jobs for Canadians 18

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all across the country, while providing the economic growth that helps fund our schools, hospitals and quality of life. Q: You have a diverse background—you have a degree in economics, you’ve hiked to the Mount Everest Base Camp, you’ve operated an oilfield service company and been Minister of Energy for the Saskatchewan government. What are a couple of experiences you think have helped prepare you for the challenges you’ll face as a prominent voice for Canada’s oil and gas industry? capp.ca/context

leadership Profile

A: An experience I could certainly pull from politics is listening to people. Not a lot of people are going to come into your MLA office and tell you their concerns— real Canadians aren’t. But in politics, the good politicians are in community halls and the even better ones are going doorstep to doorstep, knocking on doors. It’s amazing what Canadians will tell you when you’re standing on their doorstep. I think that experience of reaching out and listening to Canadians is something that will serve me well in this new role. From running my own business, I’ve learned the importance of working with quality people and that there’s really no substitute for hard work. There are no shortcuts. I think the same is true of CAPP and its representation of this industry. We’ve got some very big challenges ahead of us. But with good people and doing what we know needs to be done such as meeting Canadians on their doorsteps, we’re going to be successful. Q: Looking into 2015, what do you see as the biggest priorities for CAPP and the Canadian oil and gas industry? A: As the energy sector continues to grow in importance in Canada, how we communicate to all Canadians the importance of this industry and the way this industry operates in communities across the country must be a priority. My experience has been that the energy sector is very engaged in the communities in which we operate, and that we operate in a very safe and responsible manner. It’s an industry that knows there are no shortcuts to environmental responsibility or safety, and we can’t just take for granted that all Canadians know this about our industry. We need to continue to be proactive and communicate that widely. Another priority is market access. We are world leaders in the production of oil and natural gas. For a long time, a large portion of that has gone to one customer south of the border. We find ourselves capp.ca/context

today in an environment where producers are looking for new markets—both within Canada, and offshore east and west. Achieving this access, growing Canada’s energy industry, will provide benefits to all Canadians. Q: What do you think is the greatest opportunity in the oil and gas industry that not enough people are aware of? A: When we look at the need for skilled workers in Canada’s energy sector, it is a substantial need. I think we have a duty as an industry to communicate to young people across the country that there are great opportunities in their future—a diverse range of well-paying, skilled and engaging jobs—and they should think very seriously about a career in this industry. It would be surprising for many Canadians to know how much opportunity there really is.

From 2010 until his appointment as President of CAPP, Tim McMillan held several strategic cabinet portfolios in the Government of Saskatchewan, including Minister of Energy and Resources and Minister of Rural Health. He has an economics degree from the University of Victoria, and his past experiences include working as an IT professional overseas, as a landowner operating his family farm, and as an entrepreneur, founding and operating an oilfield services company.

Quick Hits Favourite restaurant in Calgary: Carino Japanese Bistro Top travel tip: Take less than you think you’ll need. Current book you’re reading: I listen to a lot of podcasts. Currently, one I’m working my way through: “The British History” series of podcasts.

We’re demonstrating the leadership needed to allow other Canadians to confidently speak up and support us. Q: What is the most important thing you’ve learned about leadership? A: I’ve learned that leadership is usually demonstrated. If you’re asking someone to take a stand, and you’re not willing to take that stand yourself, you won’t be successful. For example, I think as an industry, we have been very proactive about speaking out about what a great industry this is. We’re demonstrating the leadership needed to allow other Canadians to confidently speak up and support us. Another example is worker safety. We’ve been leaders even amongst other industries in Canada. When you look at incidents in oilfields in the 1970s, there used to be a lot of safety issues. Our industry leaders didn’t tolerate this and so they changed it. Today, improving the safety culture remains a core value of the industry.

The Personal Side: Q: Who personally inspires you? A: This is perhaps an unlikely source: CBC commentator Rex Murphy. Rex is somebody who has a great feel for his fellow Canadians’ values. He believes that the energy industry is an important one and he’s not afraid to say it. I admire his ability to knowledgeably and passionately speak up publicly on disparate issues in a calm and thought provoking way. Q: Name an interest or accomplishment that might surprise people to know about you? A: A lot of people when they get into their midlife go through a bit of a crisis. Some buy red sports cars. I had the lamest midlife crisis. I bought a 1977 Volkswagon Mini-Bus and drove it from Florida to Canada last summer, camping on the way as our family summer vacation. context . volume 2 . issue 3 . November 2014

Feature Story

Industry and CAPP move to create a step-change improvement in safety outcomes through process safety, product stewardship, safety culture and big data. By Brian Burton

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Feature Story

Safety often gets reduced to numbers. Really, it’s about people—about getting every worker home safely every night. But numbers measure progress and zero is the only success. Zero incidents, zero injuries and, most especially, zero fatalities. Any other number is a step, forward or back, on the road to zero. The numbers tell a certain story. For example, from 2009 to 2013, hours worked in the Canadian oil and gas industry increased a remarkable 49 per cent, mostly as a result of large numbers of major expansion projects, each involving hundreds or thousands of workers. Many of those projects were conducted within or adjacent to operating facilities, introducing a multitude of outside people and heavy equipment to already complex worksites handling hazardous hydrocarbons. And, of course, industry growth meant hiring new workers; in many cases inexperienced recruits who must be trained and placed into existing work teams. Yet, despite the dramatic increase in risk exposure and the rise in operational complexity, oil companies have achieved a 11-per-cent improvement in total recordable injury frequency (TRIF) over the five years ending Dec. 31, 2013, says Claudette Fedoruk, Health and Safety Analyst with the Canadian Association of Petroleum Producers (CAPP). “It’s something of an accomplishment to bring down TRIF while introducing new, often green workers to the sites. It’s a testament to the attention companies have placed in their occupational safety training and management systems,” says Fedoruk. At the same time, Fedoruk notes industry leaders are dissatisfied. “We’ve plateaued,” she says. “That’s not a lot of change over five years,” at least, not in the eyes of member companies, many of whom have declared zero injuries as the ultimate goal of their safety management programs. What’s more, Canada’s safety performance lags capp.ca/context

behind a number of international peers. For example, Canada ranks below the international average in both fatalities and recordable injuries (see table: International Performance Comparison). “We’re at a crossroads and we need a step-change in safety performance. That’s how they see it.”

International performance comparison Performance

Canada*

International**

Fatality rate per 5,000 workers

2.61

2.12

Total recordable rate per 500 workers

2.63

1.6

* 12 companies reporting; ** 80 countries considered

We’re at a crossroads and we need a step-change in safety performance. And, while company safety programs are successfully pushing down on the overall rate of injury, she says, the severity of safety incidents is somehow moving in the opposite direction. After recording four fatalities in 2012, the industry saw eight workers lose their lives on the job in 2013. In 2014, there have already been eight work-related deaths, as of the end of September. Understanding these fatalities, and doing what can be done to prevent future occurrences, is an urgent priority for industry and CAPP.

Using Big Data to Spot the Trends “CAPP’s role is to help facilitate or enable zero to be possible,” says Brad Herald, Vice President Western Canada and Natural Gas Markets, “Ultimately achieving zero is in the hands of individual member companies, but CAPP hopes to assist by providing some key tools and guidance.” One initiative CAPP has begun in cooperation with Enform is the compiling of individual workers’ compensation board (WCB) claims records for all the companies within the oil and gas

producing sector, as well as the seismic, drilling, pipeline and services sectors in Saskatchewan, Alberta and British Columbia. “We want to see if the data from across the industry will identify common causes that aren’t apparent from individual companies’ data and, therefore, can’t be seen and addressed at the company level,” he says. Data Scientist for CAPP, Dr. Troy Jones, has worked closely on the project, which reconciles more than 80,000 individual injury reports from the three provincial WCBs into a single data set, accessible by a program that’s user-friendly for the health and safety professionals of the industry. The result is that the industry will have access to a single, comprehensive data set on every type of injury and the

TRIF: Total Recordable Injury Frequency is the total rate of all injuries requiring medical aid and/or resulting in lost time or restriction of activities at work, and/or resulting in fatality. It’s calculated as the number of incidents per 200,000 worker hours. context . volume 2 . issue 3 . November 2014

Feature Story

“Harmonized reporting would allow us to spot trends as they happen, wherever they happen.”

surrounding circumstances of every incident. Each company in the energy sector will be able to analyze its own performance for any type of injury and compare itself with its peer group. Small companies will have analysis they would never have been able to extract from their own numbers alone, and larger companies will be able to spot and respond to industry-wide trends. “If a company has experienced a fatality due to a single-vehicle rollover, they’ll be able to see whether that’s a common problem in the industry,” Jones explains. “They’ll also be able to see how many were younger workers and how many happened late in the day, when fatigue might have been an issue. They can see if, for instance, there were another 20 rollover cases that caused serious injuries—or 200.” With this information, he says, CAPP can work with Enform, the industry’s safety association (see sidebar), to do further analysis and develop and deliver industry guidance aimed at preventing rollovers— or any other identified trend. “Now we’re talking about moving from a reactive focus to a proactive approach,” he says. Equally importantly, Jones says, provincial workers compensation boards can compare numbers and identify whose regulations are most effective in preventing any particular type of injury, potentially leading to improved safety and regulatory harmonization. The new system has been tested over several months and Jones says he expects it to be available to all members of CAPP before year end. “It’s an important first step,” Fedoruk notes of the database. However, she has a more ambitious long-term objective: harmonizing and extending the data sets of the three main oil and gas producing jurisdictions at the WCB level. 22

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Claudette Fedoruk, Health and Safety Analyst at CAPP

“While the database has the potential to tell us some important things, it’s also limited in certain ways. Key is the fact that we can’t combine the records between provinces due to differences in incident criteria and reporting process,” notes Fedoruk. CAPP plans to work with the different jurisdictions to create a harmonized approach that uses the best-of-the-best reporting standards. “Harmonized reporting would give us an extremely robust, very large, real-time data set that would allow us to spot trends as they happen, wherever they happen,” says Fedoruk. At the same time, industry will look to expand what data is collected for a given incident to include details that could prove important in determining causative factors, and ultimately help in developing guidelines for prevention. “In some cases, the incident reports don’t give us key information like where an incident occurred or what the worker was doing at the time of the injury,” says Fedoruk. Brent Harrison, VP of Health and Safety for Encana, says even the largest companies stand to make important gains from CAPP’s data harmonization project.

“We can only get better at the same rate as the industry does, because we all pull from the same pool of contractors,” Harrison says. Contractors do most of the high‑exposure fieldwork and therefore sustain most of the lost-time injuries. A wider view of cause and effect will help to improve practices in the field and reduce everyone’s exposures, he says. He also notes that looking at contractor incidents can give the energy industry ideas for improvements drawn from other sectors. As one example, Harrison notes that both oil companies and municipal governments use hydrovac contractors. “What if the City of Calgary, for instance, has a better hydrovac safety record than we do? What can the energy industry learn from that?” Enform President and CEO Cameron MacGillivray notes that his organization sees the value of this big data approach and has been working closely with CAPP to expedite data access. Enform is a central figure given that it holds the legal authority to access WCB data across all three western provinces, from producers, drillers, geophysical companies, pipeliners and service companies. MacGillivray says the ability to analyze the entire mass of injury records will move the industry from conducting reviews of past incidents to spotting trends and heading them off. capp.ca/context

Feature Story Process Safety, Risk Severity Analysis and Product Stewardship Another key step-change that’s been identified within the industry is the integration of process safety measures and management systems. “We also want to look at the numbers from a process safety perspective to see how asset integrity—engineering design, operations and maintenance safety procedures—may play a role in the severity of incidents. We know good process safety leads to fewer fatalities, injuries, fires, spills and releases and we want to identify common hazards and define best practices that can help to eliminate incidents,” says Fedoruk. An important step begins in 2015 when CAPP starts collecting and analyzing data on process safety incidents. Reporting these events will be a new requirement for members under CAPP’s Responsible Canadian Energy (RCE) program. “We’ll be collecting Tier 1 and Tier 2 process safety incident data for events occurring in 2014,” notes Fedoruk. Companies who are members of the International Association of Oil and Gas Producers (OGP) will already be collecting this information. For those who haven’t,

“Thirty years ago, it was all about luck. ‘Thank goodness that guy wasn’t standing there when that happened.’ Now, the procedures say he doesn’t stand there.” Process Safety Indicator Pyramid

TIER

TIER 1: LOPC Events of Greater Consequence TIER 2: LOPC Events of Lesser Consequence TIER 3: Challenges to Safety Systems TIER 4: Operating Discipline & Management System Performance Indicators

Source: API LOPC = Loss of Primary Containment

CAPP will have a New Process Safety Event Reporting Guide published and distributed to members by the end of 2014.

Photograph: (right) Courtesy Encana

As with the WCB big data analysis, process safety data collection will help spot safety issues that might not be apparent in the data of a single company. Brent Harrison cites the example of industry’s rapid conversion to multi‑fracking of horizontal wells, noting that there is increased potential for loss-ofpressure-containment incidents that can be especially dangerous. He says Encana’s own analysis has already shown that a large proportion of near-hit incidents indicate the need for changes in procedures, and Encana has implemented several. “Thirty years ago, it was all about luck. ‘Thank goodness that guy wasn’t standing there when that happened.’ Now, the procedures say he doesn’t stand there.”

In the future, Harrison predicts, CAPP’s data analysis will provide many more such procedural improvements. The ability to analyze process safety data across the entire industry and develop and implement resulting best practices will be a major driver of safety improvement in the near future. (For an explanation of what process safety is, see our Oil and Gas 101 article on page 32.) Also on CAPP and industry’s agenda is a focus on what are called “high consequence incidents”—incidents leading to serious injuries and fatalities. This work may help to shed light in the recent rise in numbers of fatalities in 2013 and 2014. Companies will look at these incidents on a case-by-case basis—identifying what went wrong and what could be done differently to prevent such outcomes moving forward. With access to industry‑wide data, CAPP and Enform will be able to take a wider perspective to see if there are systemic solutions that can be brought forward. “We’ll be looking at these tragic incidents to identify trends and clusters, and to articulate any guidelines that could help to prevent them in the future,” says Fedoruk. An example of this applied approach is worker fatalities around Beam Pumps. “Our industry has tragically had seven fatalities in the past five years related to a worker being struck by a Beam Pump,” notes Fedoruk. “By identifying this problem and working collectively to prevent it through greater awareness, a Safe Beam Pump Operation Guide is being developed by our safety association, Enform. We hope to have the guide published in Q1 2015 to assist in preventing additional worker fatalities.”

Brent Harrison, Vice President of Health and Safety for Encana capp.ca/context

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Photograph: Courtesy Enform

Feature Story Another piece of the safety improvement formula for CAPP and industry is product stewardship. In light of public concerns over pipelines safety and high-profile incidents like the tragic train car derailment in Lac-Mégantic, CAPP and industry are placing increasing emphasis on what the upstream industry can do to ensure the safe transportation of its products. “We’re involved in rail, pipeline and marine safety,” notes Brad Herald. “Working with our partners in transportation and government, we’re

companies who supply contractor services to oil and gas operators. “We’re expected to be flat out all the time, twenty-four/seven, three-sixty-five—and to be constantly faster and cheaper,” Delaney says. That pressure is multiplied by seasonality, a phenomenon in which most of a year’s work is crammed into a few months when roads and fields are frozen. In 2013, TRIF rates for contractors were almost double that of employees of oil and gas companies (RCE, 2014).

We have derived an acute sense of the competitive advantage strong safety performance brings. looking to apply risk management principles across our entire product supply chain and life cycle.” One example is the creation of a High Consequence Area (HCA) task group at CAPP. The group will identify sections of pipeline that have the highest risk for a spill causing significant environmental and public safety impacts (an example being waterway crossings). The intention is to develop a CAPP Best Practice Guide for these HCAs.

Enform, Our Safety Association In 2015, Enform marks its tenth anniversary as the safety association for Canada’s upstream oil and gas industry. To date, Enform has issued more than 250,000 safety training certificates to energy-industry workers and seen the range of safety-incident rates drop 50 to 85 per cent from those recorded in 2003. “We’ve made some really good progress,” says Enform President and CEO Cameron MacGillivray, while acknowledging more work needs to be done. Enform helps companies achieve their safety goals by: identifying and promoting shared best safety practices; developing and issuing safety guidelines; providing professional safety training and advice; and performing safety audits. In addition, MacGillivray attributes improved safety performance to constant communications aimed at helping companies to embed safety consciousness into their corporate cultures. “A lot of the issue on safety is down to sharing information,” he says, noting that Enform issues an average of 30 safety alerts per year, providing details of safety incidents to all member companies with the aim of avoiding similar events. Enform also brings top safety experts from around the world to annual safety conferences, and convenes open forums for its members to discuss safety issues.

Tying it All Together: Safety Culture

Delaney notes progress has been made in contractor/operator relations and initiatives to improve the industry’s safety performance but feels more work needs to be done. “That’s a task for all sectors of the industry,” he adds.

Ultimately, endeavours like big data, severity analysis, and the development of safety guidelines are only effective when safety is seen as a priority among management and the workers on the ground.

Harrison agrees that there is room for improvement, but feels that most companies are on the right track, and that’s because there’s really not much choice in the matter.

Indeed, many companies have identified safety culture as a priority, developing high priority initiatives promoting safety awareness among all on-site workers (see sidebar “Building Safety Culture” in our Safety Innovations feature, page 29).

“A key reason for that is that for many companies like us, the business drivers of cost, quality and safety are now so interdependent that examples of faster and cheaper and ‘get it done’ are harder and harder to find,” Harrison says. “At Encana we have derived an acute sense of the competitive advantage strong safety performance brings, and the full realization that the only way to sustained business improvements is through safe work.”

“We recognize that for all of this to come together, we’ll need buy-in from across industry and at all levels,” says Brad Herald. “From what I’ve seen, there’s a lot of interest in the projects we’re working on—we all want to see our workers go home safely every day. To the extent that we can enable a future with zero safety incidents, we’re willing to do the work to make that happen.”

“Safety culture and safety leadership shapes all the decisions within a company,” says Brad Herald. “It’s the environment which either enables or limits strong safety performance.” One challenge, however, is identified by Patrick Delaney, Vice President Health and Safety for the Petroleum Services Association of Canada (PSAC). PSAC’s members consist of many of the 24

This is in part because contractors are exposed to more of the high-exposure fieldwork. However, Delaney feels that the economic impacts of seasonality and price cyclicality are borne disproportionately by the service sector, leading to a “just‑get‑it‑done” mentality that doesn’t support thorough safety planning and safe execution.

Cameron MacGillivray, President & CEO at Enform

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Community

Taking Safety to

Heart and Home Offshore worker finds a strong safety culture at work inspires him to be a safety leader in his community. By Moira Baird Having worked in the offshore oil and gas industry for the past 17 years, Walter Walzthoni has discovered that safety here is more than a slogan—it’s a way of life. That’s what inspired him three years ago to join the Central Avalon Ground Search and Rescue (CAGSAR). When he’s not on a three-week shift rotation on Hibernia, he’s available for searches, teaching safety programs and fundraising for equipment.

Safety is important to Hibernia’s Chef Coordinator Walter Walzthoni, including when he’s out climbing, such as on a recent trip to the 3,500 metre summit of Glockturm mountain in Austria.

For the past year, Walzthoni has also been a member of the Hibernia platform’s high‑angle rescue team, which is trained to rescue fellow crew members in distress who are working at heights or who have fallen into hard-to-reach areas.

“We have a safety culture offshore,” says Walzthoni, “For me, it’s about giving back to the community a little bit.” Walzthoni grew up near Innsbruck, Austria. He arrived in Canada in 1987 seeking new experiences. He started out working as a chef in Alberta before moving to Newfoundland and Labrador a few years later. By 1995, he was working at Bull Arm, where the Hibernia gravity base structure was built. He is currently the Chef Coordinator on board the Hibernia production platform.

Photograph: Courtesy Walter Walzthoni

Walzthoni notes that kitchens provide plenty of opportunities for workplace injuries, food-borne illnesses and food allergy reactions. The risk associated with any illness or injury is magnified when one is in a remote location—and so plenty of effort is made offshore to avoid them all. Each work day for Walzthoni and the nine‑person kitchen staff begins with a toolbox talk, essentially a safety chat on the issue of the day: proper lifting techniques, knife safety, or proper food safety temperatures. Safety is also an integral component of everyday life working and living on an offshore platform. Muster drills are held every Sunday, and one of Walzthoni’s jobs is to track reports from each muster station and ensure everyone is accounted for. capp.ca/context

An avid outdoorsman, woodworker and rock climber, Walzthoni brings this robust offshore safety culture mentality wherever he goes. Walzthoni notes, “I don’t do things now the way I used to years ago.”

“The whole safety culture offshore becomes part of you. I don’t do things now the way I used to.” “On some days we just do a head count, on other days we do a person-down exercise, or a person overboard or fire or a gas detection…it’s a different scenario every week,” he notes. Each job on the platform is preceded by a “Step Back” moment in which crew members take a few minutes to see if they have the right tools and personal protective equipment for the work. There are also weekly safety meetings to discuss issues raised by the crew and any incidents that occurred.

For example, before he starts his chainsaw, he first dons safety glasses, hard hat, boots and safety chaps—a collection of protective clothing he once rarely considered using. Walzthoni, who recently climbed the 3,500-metre Glockturm Mountain in the Alps, takes similar precautions when rock climbing, ensuring his harness, carabiners and ropes are in good working order. Meanwhile, as a member of CAGSAR, Walzthoni is ready to help out on search and rescue requests that occur near his community. He also teaches the Hug-a-Tree and Survive program to young children, instructing them to stay put, rather than wander around, if they get lost in the woods. Another program, aimed at teenagers, teaches basic wilderness survival skills, such as how to check ice thickness, what equipment to bring, and the importance of travelling with a buddy. For Walzthoni, it’s all a chance to bring his safety awareness and training home. “The whole safety culture offshore grows on you and becomes part of you,” he says. context . volume 2 . issue 3 . November 2014

Feature Story

Safety

Innovations

We highlight a few innovations being used to improve safety outcomes in Canadaâ&#x20AC;&#x2122;s oil and gas industry. By Kathryn Boothby and Andrew Mah

Photographs: Courtesy Husky Energy

Husky Energyâ&#x20AC;&#x2122;s Gaelle Halliday tests out the new helicopter flight suit at the Offshore Safety and Survival Centre in Foxtrap, NL.

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Feature Story New Standard for Helicopter Flight Suits

A new passenger transportation suit is being designed for those who travel by helicopter to offshore platforms and rigs in the Atlantic offshore industry. The new suit is the first to meet the latest Canada General Standards Board (CGSB) standard, and combines technological advances with the operator’s commitment to continuous improvement. “We operate in some severe conditions so our flight suits need to be designed to meet certain thermal and protective requirements,” says Gaelle Halliday, Logistics Co-ordinator with Husky Energy in St. John’s, N.L. Halliday is co-ordinating the roll out of the suits for operators offshore Newfoundland and Labrador; a colleague from ExxonMobil is doing the same for the Nova Scotia offshore. “The new suit reflects some of the advances in technology that have occurred since the previous standard, including less bulky thermal insulation and a double seal at the neck and wrists.”

a number of innovative features for improved comfort and safety that include:

•

• •

•

• The suit was developed by British manufacturer Survitec. Halliday and her team worked with Survitec to fine‑tune the product following initial tests in the U.K and Canada. Workers from offshore facilities helped out, engaging in cold-water pool testing under realistic conditions including the wind, rain and wave situations one might encounter offshore Atlantic Canada. The effectiveness of the suit was also tested in rafts, jumping from heights, and in underwater helicopter escape scenarios.

•

Lightweight Gore-Tex material for improved thermal insulation, body temperature regulation, comfort and flexibility; Yellow colour for better visual detection; Neck and wrist seals with integrated hood and mitts, providing a double seal for improved watertight integrity; Neoprene boots with less aggressive tread for improved safety, better fit, and no buoyancy; Inflatable buoyancy element with inflatable spray hood and thermal head protection; Increased HUEBA stowage;

•

Air release values at ankle and shoulder to vent residual air during immersion scenarios; U-shaped shoulder-to-shoulder main zipper, making it easier to get on and off; 32 suit sizes, including seven girth and two height ranges, for better fit and comfort.

The suit meets the new standard released by the Canadian General Standards Board in 2012. (However, it is important to note that existing suits meet all previous standards and are still approved for use.) Workers and training facilities will start using the new suits March 1, 2015 offshore Nova Scotia, and April 1, 2015 offshore Newfoundland and Labrador.

“Offshore workers are the primary end users of the suit, so it was important to get their feedback early in the process,” Halliday says. “While the overall design parameters were already established, we wanted worker input on placement of auxiliary equipment such as the HUEBA (Helicopter Underwater Emergency Breathing Apparatus). Worker feedback also led to changes in the design of the floatation device.” Currently in the final fitting and manufacturing stages, the suit has Offshore workers helped test the passenger flight suits under cold-water conditions. capp.ca/context

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Photograph: Courtesy Alberta Innovates-Technology Futures

Feature Story

ce.

A slurry flow loop is used to test the effects of different variables on pipeline wear performance.

MARIOS, which stands for Materials and Reliability in Oil Sands, is an industry‑directed consortium that uses applied research and development to create improved materials and equipment for oil sands operations. The goal is to develop technologies to reduce downtime and improve operational reliability and productivity. An example of the consortium’s work is ongoing research into hydrotransport slurry lines—the pipes that carry bitumen and water for processing, and move tailings to tailing ponds at oil sands mining sites. According to MARIOS Program Director, John Wolodko, these pipelines can wear down in as little time as three months due to abrasion from the slurry and tailings, which have the effect of “liquid sandpaper” on the system. Through field tests, lab tests and a pilot scale slurry flow loop (an in-house pipeline network where the effects of different variables—such as ore composition and pipeline material—on wear performance can be tested), MARIOS has developed 28

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one of the most extensive databases with respect to the reliability and wear rates of different materials and pipe configurations. By applying these learnings, Canadian Natural Resources Limited, one of the members of MARIOS, reported a 73 per cent reduction in wear rate, resulting in savings of $4.8 million a year. What does this have to do with safety? “Anything you can do to prevent an unexpected failure is essential to personnel and public safety,” says Wolodko. Moreover, reduced wear rate means a reduced need to rotate or replace the pipes, which means you are exposing workers to less overall risk. The MARIOS initiative was launched by Alberta Innovates –Technology Futures (AITF) and includes membership by oil sands producers as well as supply chain providers. Other projects being researched include the development of overlay materials for mining shovel teeth and truck linings that have improved wear and corrosion resistance, optimized guidelines for arc welding, and a catalog of corrosion and scaling issues associated with in situ plants. For more information, visit www.marios-aitf.com.

Personal GPS Devices Protect Workers in Remote Locations In Canada’s oil and gas industry, workers in the field are frequently required to work in remote, wilderness locations. The ability to stay in contact with these workers, and even to detect if they’ve had a fall or been incapacitated, could make the difference between help arriving in time or not, should a safety incident occur. “Minimizing the Loner IS is a GPS location device that time it takes to enables employers to reach people in an monitor the safety of emergency can make workers. all the difference,” says Brendon Cook, chief technology officer and co-founder of Blackline GPS. Blackline has created an award-winning product designed to be carried by lone workers out in the field. The Loner IS is a GPS location device that enables employers to monitor the safety of employees through a combination of automatic and manual capp.ca/context

Photograph: Courtesy Blackline GPS

MARIOS Brings Reliability to Asset Integrity

Photograph: Courtesy Chevron

Feature Story

safety alert features. For example, built-in accelerometers and gyroscopes are able to measure movement and determine if a fall has occurred (if a fall is detected, the worker has a certain time to confirm they are safe before an alert is sent to responders). The device also can be configured for periodic check-in, where vibration and visual requests remind a worker to check-in by pushing a button. Workers are also able to make manual calls for help and use a silent alert in sensitive situations If a safety incident occurs, the Loner IS device communicates the employee’s identity, precise location and type of alert to monitoring personnel who can then manage a pinpoint emergency response. The device is already being used in the oil and gas industry, including a number of producer member companies, as well as service companies like J.B. Water & Vacuum Services (JBVW). JBVW Operation Manager Darryl Addison notes: “We need communication with lone field workers should an incident occur, particularly during the approaching busy winter months. It’s about ensuring that everyone makes it home safely at the end of each day. With the Blackline system, if a worker gets injured or incapacitated, or a truck becomes stuck in difficult terrain stranding an employee, both the supervisor and headquarters are notified of an alarm and the precise location within seconds.” For more information, visit www.blacklinesafety.com.

Workers on Chevron’s Margaree A-490 exploration well followed a “zero is attainable” campaign.

Many CAPP member companies are engaged in these types of broad employee engagement safety programs. A sampling from submissions to the 2014 Responsible Canadian Energy (RCE) awards program include: •

•

Member Companies Build Safety Culture Part of safety innovation is finding new ways to bring safety issues and awareness to the forefront with employees— moving beyond purely functional safety orientations and information dissemination to programs that activate and inspire positive safety attitudes. Such programs are key to enhancing a robust and comprehensive safety culture throughout an organization. capp.ca/context

•

Chevron’s “Zero is Attainable” campaign was used during the operation of Chevron’s Margaree A-490 exploration well in the Orphan Basin offshore of Newfoundland and Labrador. Proper planning, teamwork and a “do it right—once, the first time” execution philosophy led to 306,176 person hours worked (from well planning to completions) without any recordable incidents. Enerplus’ “Positive Attitudes to Controlling Hazards” (PATCH) program teaches workers, contractors and other stakeholders the step‑by-step approach to hazard management: from recognition and anticipation to control and mitigation. To date, 98 per cent of Enerplus field employees and over 20 per cent of office employees have taken the training. Perpetual Energy’s “Triple Zero” paradigm shift in safety accountability

•

and performance has a goal of zero lost-time injuries, zero vehicle accidents and zero spills. To achieve progress, the company created an effective hazard identification system and risk matrix. Perpetual positively reinforced good reports, has a company-wide safety orientation program, and implemented self- and peer-audit processes. Shell’s Turnaround Goal Zero program was a response to poor safety performance at the Shell Scotford Upgrader in 2010. The program included safety workshops for workers, supervisors and site leaders, weekly health and safety meetings and daily feedback to workers to improve safety culture and performance. During the turnaround, Shell reduced recordable injuries from twelve to two.

Learn more:

Learn more about these initiatives and others in the RCE Awards 2014 booklet: http://bit.ly/1yiWPD9

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Building a

safer

Industry and government collaborate to improve road safety for workers and the public on the once infamous Highway 63. By Elizabeth Chorney-Booth

Road safety is an ongoing issue in and around the oil sands region. Among the more notorious roadways when it comes to accidents is Alberta’s Highway 63. Highway 63 begins at Grassland and is used to take supplies, labour, goods, and community members north towards Fort McMurray. The 240-kilometre stretch of highway has been known for its congestion, its inefficiency, and most importantly, the high number of fatal accidents that are often the result of head-on collisions, caused by passenger vehicles trying to get around the many slower-moving and wide-load commercial vehicles sharing the road. “You needed to be very cautious,” says Will Gibson, Media Relations Advisor at Syncrude Canada Ltd. Both for work and as a coach of a competitive soccer team, Gibson has driven the highway many times over the past ten years, and has seen drivers frustrated by slow-moving traffic take dangerous chances. See an update of twinning progress for Highway 63 at http://www.transportation.alberta.ca/4942.htm 30

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As a vital lifeline to Fort McMurray from the rest of the province, the volume

and mixed usage of the road has long outgrown the capacity of the single-lane highway, which is something that has been of great concern to members of the oil industry, government officials, and the citizens of Fort McMurray. With so much at stake, from both an economic and a safety point of view, groups representing both industry and the community have been clamoring for improvements to the highway for years. Thankfully, relief for commuters on Highway 63 is in progress. In October, Alberta Premier Jim Prentice announced the signing of the final contract to complete the twinning of a large portion of the highway for the amount of $71 million. Taking previous contracts into account, in all, nearly $425 million of the 2014 budget was allotted to twinning Highway 63. To date, more than 20 per cent of the 240 kilometre twinning project has been completed. If construction stays capp.ca/context

Photographs: Courtesy Government of Alberta

Feature Story

Feature Story on schedule, 70 per cent of the twinning will be completed by the fall of 2015, with the remainder finished by fall of 2016. The twinning will not only allow for a greater volume of traffic to smoothly travel Highway 63, but will also make it easier and safer for passenger vehicles— be they carrying oil sands workers or families just trying to get home to Fort McMurray—to share the road without the temptation to take unnecessary risks. In additional to completing the Highway 63 twinning project, the recently announced contract will also bring a new commercial vehicle inspection station, intersection improvements, and more rest areas. “Safety is number one and always is,” says Alberta’s Minister of Transportation, Wayne Drysdale. “It’s a long distance and there’s a lot of wide industrial load on [Highway 63] so the traffic backs up behind them and then people take chances they shouldn’t take. That’s where you get the head-on collisions and the fatalities. When you have a separation and a passing lane it will pretty much eliminate all the head-on collisions.” “It’s really gratifying to see how much progress had been made,” says Gibson, noting that the twinning has already made a big difference for highway users like himself. However, he notes that driver behaviour must also improve. Dianne Farkouh of the Oil Sands Community Alliance (OSCA) agrees. OSCA has joined with a number of organizations to work towards making improvements to the highway’s safety record, and participated in a consultation process with Fort McMurray-Wood Buffalo MLA Mike Allen, who put together the report Towards a Safer 63, released in 2012. In addition to the recommendation to twin the highway, that report also highlighted the need for enforcement of speeding and other driving infractions, and recommended that industry make moves to change driver culture while the government takes care of the infrastructure and enforcement. Farkouh says that a holistic approach is necessary capp.ca/context

Ongoing construction will see the stretch of Highway 63 between Grassland and Fort McMurray fully twinned by 2016.

If construction stays on schedule, 70% of the twinning will be completed by the fall of 2015, with the remainder finished by fall of 2016. when looking at the safety problems that come with Highway 63. “It’s a complex issue. Industry has worked a number of different strategies around traffic management,” Farkouh says. “It has to be a collaborative effort between everyone using the road.” A group called Coalition for a Safer 63/881 (which also advocates for safety improvements on Highway 881 which goes from Fort McMurray to the oil sands sites) shares Farkouh and Gibson’s view that efforts to keep the highways safe go beyond physical improvements. The group asks drivers to take a pledge: promising to stay sober on the road, to avoid driving when tired, to respect the speed limit, to focus on the road rather than their phones, and to resist the urge to pass unsafely, as well as keeping up the maintenance of their vehicles and taking weather conditions into account while driving. Coalition for a Safer 63/881 also maintains a website that offers weather updates, road reports, and contacts with local RCMP detachments. The group has a list of industry-partners, including many major oil companies, that work towards achieving the organization’s goals.

Jude Groves, the Director of Health, Safety, and the Environment for Diversified Transportation, a company that busses workers up to the oil sands job sites, says that companies also need to look at the highway as part of their worksite. “Something that’s clearly been identified as part of the package of having to work on the oil sands sites is transportation to and from the location, whether its by bus or by plane,” Groves says. Many larger oil sands companies have taken the initiative, banning private vehicles and requiring workers go to and return from the operations sites via company-provided shuttles and buses. These kinds of changes, along with twinning of the highway will take a great deal of pressure off of both commercial and personal drivers. “We’re still playing catch-up,” Farkouh says. “[The area’s] grown very quickly and it takes a while for infrastructure to catch up. You want to make it efficient as possible without over building or under building, and that takes collaboration, information, and cooperation.”

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O&G 101

Oil and Gas 101: What is Process Safety?

ou may have heard of the term “process safety.” It is regarded by many as a key focus area moving forward, to further enhance the existing rigorous safety standards in Canada’s oil and gas industry.

Process safety is defined as “a disciplined framework for managing the integrity of operating systems and processes handling hazardous substances.” Basically, it amounts to preventing and mitigating three kinds of incidents: spills, fires and explosions. A major process safety incident is sometimes simplified to the following description: a catastrophic loss of containment. Process safety involves ensuring sound design principles, operating practices and maintenance procedures for all equipment used to contain, process and transport materials such as chemicals and petroleum products. While the focus is on equipment, the prevention of spills, fires and explosions has a clear connection to maintaining the safety of both workers and the public.

A Process Safety Example The following is an example of a process safety incident report involving some rigid tubing that failed due to vibration from a nearby compressor. It highlights a common type of process safety issue and how reporting, evaluation and taking action are essential parts of managing process safety.

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Personal Safety

Process Safety

Applies to:

all workplace scenarios in any industry

industries involving chemical, petroleum and energy processes

Negative outcomes:

slips, trips and falls

spills, fires and explosions

Scale of outcome:

an incident typically may result in harm to an individual

potential for a large number of injuries if incident is severe

Prevention through:

PPE, personnel safety orientation and awareness

design for safety, equipment monitoring and maintenance

Primary focus:

keeping people safe (the worker)

integrity of industrial processes (the system)

Personal Safety vs Process Safety A convenient way of defining process safety is by comparing it with personal safety. Also known as occupational safety, personal safety is what we commonly think of in reference to workplace safety. While convenient for definition purposes to separate the two, both personal and process safety are intertwined and overlap. For example, one of the critical outcomes of process safety is the prevention of spills, fires and explosions that can result in human injuries—a serious compromise of personal safety. A comprehensive safety culture needs to consider both personal and process safety as part of an integrated approach.

Barrier Control and installation of small bore pipe work procedure. What Happened • Small bore tubing failed suddenly causing a loss of containment of high pressure gas. • Tubing was subject to vibration from compressor, and suffered a fatigue induced failure. • Gas did not ignite (fortunately)—it was detected by fire and gas system which resulted in a process shutdown and production loss of 8 hours production worth US $1 million. • This was “only” a production loss but could have caused a fire or explosion! Why did this happen? Vibration tolerated—no systematic assessment of risk of loss of containment caused by vibration. Vibration induced failures to tubing can be predicted. We should: • Report vibration in process pipework (operator’s daily walkarounds). Do you know of pipework subject to vibration? If so, please complete a Hazard Card. Source: Enform

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O&G 101

process safety =

“A disciplined framework for managing the integrity of operating systems and processes handling hazardous substances.” Driving Process Safety Improvement Some of the most infamous safety incidents in industry are the result of, at least in part, process safety failures. These include the Macondo offshore explosion in the Gulf of Mexico in 2010, and the Lodgepole Well blowout in Alberta in 1982. Properly evaluated and assessed, these unfortunate incidents can lead to key learnings and improvements. For example, the Lodgepole Well blowout led to new guidelines for drilling sour wells and the development of safety-driven Industry Recommended Practices (IRPs) by Enform.

. Commit to Process Safety:

Process safety needs to become part of the safety culture with an understanding of what this means from workers, management and other stakeholders.

. Understand Hazards or Risks:

Understanding the processes and identifying within them where the hazards are and the associated level of risk.

A goal of industry is to improve process safety before a major accident event occurs—indeed, preventing that event from ever occurring. Increased measurement and scrutiny of minor incidents and near miss incidents would be one way to drive continual improvement. This presents a challenge to industry as such incidents tend to be less visible and more complex to measure. The implementation of process safety management (PSM) systems can help deal with this challenge. A variety of PSM systems exist, however all have four essential pillars:

. Manage Risk:

Encompasses a wide range of elements, including operating procedures, safe work practices, asset integrity and reliability and emergency response.

. Learn from Experience:

Including incident investigation, measurement and metrics, auditing and management review.

As well, CAPP is spearheading process safety initiatives through the incorporation of new process safety metrics as part of the Responsible Canadian Energy Program. Learn more in our feature story “Enabling Zero” on page 20.

Key Terms: Asset Integrity: Is achieved when facilities are structurally sound and perform the processes and produce the products for which they are designed. Major Accident Event (MAE) or Major Incident: An incident that results in multiple fatalities and/or serious damage. capp.ca/context

Links and Resources CAPP: http://www.capp.ca/library/publications/industryOperations/ pages/pubInfo.aspx?DocId=251323 Enform: http://www.enform.ca/safety_resources/process-safety.aspx context . volume 2 . issue 3 . November 2014

Ask An Expert

Tips for Truly Effective Safety communication

Q: How can I make my communication the best one? A: The best safety communication has a large central graphic (illustration, photo, or drawing) with several small callout text boxes. Each text box points to the part of the illustration it explains. Graphics are known to increase comprehension. Communication employing meaningful graphics have between 200 per cent and 600 per cent higher comprehension than a text-only message. Changed safety behaviour occurs in:

2% of employees who read a safety email or poster

70% of employees who have a face-to‑face conversation with their supervisor.

context . volume 2 . issue 3 . November 2014

Q: Why don’t we do more communication like that? A: It takes the senders more up-front time to do this kind of communication. Unfortunately, most safety communication is made to be easy for the senders and hard for the receivers. This makes no sense. Q: What is the most important thing every safety professional needs to know about communicating safety? A: Your goal is not “sending out the message”; instead it is “reducing accidents”. The communication most likely to reduce accidents is: 1. Between a supervisor and frontline work crew; 2. Face-to-face informal conversation; 3. Concerning the safest way to do a job they are just starting. Q: If the most effective communication is between a supervisor and his/her employees, what role does a safety or safety communication professional play? A: Our job to give the supervisor relevant information that is easy to talk about in informal, face-to-face conversations. To that end, avoid giving supervisors materials consisting of large blocks of solid text. A graphic-based communication with callout text boxes that describes a safety procedure relevant to the task the supervisor and team are starting will provide the supervisor with a critical communication tool. The topic could be: “confined space”, “working at height”, “H2S”, whatever.

Q: Why is supervisor communication so important? A: Studies have shown: two per cent of employees who read a safety email or see a safety poster are likely to change their behavior. However, 70 per cent of employees who have a face-to-face informal conversation with their supervisor are likely to change their behaviour. The numbers are not close.

Photograph: Courtesy TJ Larkin

Q: As a safety communication consultant, what is the most frequent question safety professionals ask you? A: How to get a message through when everyone is overloaded. The answer is easy. Your communication must be the best looking and the most useful. If it is, they’ll read it. If not, they’ll delete it. Remember, the average safety manager at a site receives 50 safety emails a day. He or she spends an average three seconds on each one. You want people to look at your communication? It better be the best looking and most useful message they get.

TJ Larkin is a safety communication consultant whose clients include: Boeing, BP, ExxonMobil, GM and Monsanto. TJ (with Sandar Larkin) wrote the McGraw‑Hill bestseller: Communicating Change, and the Harvard Business Review paper, “Reaching and Changing Frontline Employees.” The latter sold more than 40,000 reprints. Larkin has a Ph.D in Communication from Michigan State University and a Masters in Sociology from the University of Oxford. Learn more at www.larkin.biz. Many of Larkin’s tips are practical suggestions that can be applied for better communications in general.

capp.ca/context

Ask An Expert

Q: Any other tips for safety communicators? A: I have seven quick tips that you can immediately apply to safety writing for improved readability and comprehension. 1. The optimal line length for text (i.e., your column width) is nine centimetres. 2. For online reading, use the Verdana font. It’s been tested as the most preferred and easiest to read. 3. Avoid all caps. With all caps, words lose their shape and are harder to read. 4. Avoid bolded text. Again, bolded words are harder to read. 5. Keep your writing to an about Grade 8 reading level. You can test the reading level of a block of text in Word: Google “Word Flesch‑Kincaid” to find out how. 6. Use bullet points to break up and organize text and ideas. 7. Use graphics. Graphics increase comprehension. An example of effective safety communication employing a large central graphic and callout text material describing an incident or procedure. This safety communication is based on an accident investigation conducted by WorkSafeBC.

Good

Readability Readers use the shape to help identify the word.

Bad

readability All caps has no shape. Losing the shape of a word makes it harder to read.

Communication employing meaningful graphics have between 200 per cent and 600 per cent higher comprehension than a text‑only message.

Custom Larkin Safety Illustrated

Custom Larkin Safety Illustrated - Storage Tank Explodes

Contractor Killed - Storage Tank Explodes

Contractor was using a high-pressure water hose to clean a storage tank.

Advice for Supervisors

Sampling Result Not Communicated

Be the Demanding Supervisor

H2S contractor found an explosive atmosphere inside the storage tank.

During the investigation, the tank-cleaning contractors said they followed safer procedures at other sites. At other sites supervisors demanded safer work. At this site, the supervisor did not require the safer procedures. Experience is a Dangerous Teacher

To prepare for cleaning, tank was:

The tank was a pressure vessel used to separate solids and liquids from natural gas.

• isolated from the wellhead

Tank had filled with sand, water, frac chemicals, etc. Cleaning contractors and their vacuum trucks were on site to clean the tank.

• the inside of the tank was measured for possible explosive atmosphere

While the contractor was leaning inside the open hatch (hosing sand toward the drain) the tank exploded.

The Air Sampling Contractor from another company (an H2S safety monitoring company) did a safety test of the atmosphere inside the tank.

The explosive force blew the contractor away from the hatch slamming him into a neighboring tank. It was this impact that killed him.

Illustrations: Courtesy TJ Larkin

The supervisor at this site was very experienced. He had supervised tank cleaning this way many times before. This time, however, the tank exploded.

The H2S safety contractor: • stood on the oil drum • held his personal monitor in his hand • then, extended his arm through the open hatch to sample the inside atmosphere Monitor recorded a LEL of 16% and alarmed for an explosive atmosphere. The supervisor and another contractor were also severely burned. The explosive force also blew out through the front open hatch near where they were talking.

H2S contractor told the supervisor about this high reading. There is no record of anyone telling the cleaning contractors about the high reading.

H2S contractor did the air sampling by holding a personal monitor in his hand and then extending his arm into the open hatch. This sampling method: • missed any light vapors (natural gas) that may have collected at the top of the tank (above the hatch) • missed any heavier vapors (condensate vapors) that may have collected lower in the tank (below the hatch) Contractor needed to use a wand or extension that enabled three sample readings: low, medium, and high levels inside the tank.

capp.ca/context

www.Larkin.Biz

But, this dangerous result was not communicated to the cleaning contractors. Worse, the dangerous result was not posted at the tank hatches.

We don’t know where the spark or flame came from. Two possibilities are: 1. Static electricity between the vacuum truck and tank (truck was not bonded or grounded to the tank). 2. Flashback flame from the flare stack. Valve between the flare and tank was closed, but the closed valve did not seal properly leaving a ¼ inch gap still open.