Developing a Regulatory Framework for Unconventional Oil and Gas Development

1. The Mission of Canada to the EU
Shale Gas: Sharing Canada’s Regulatory and Industrial Experiences
January 22, 2013 – Brussels
Developing a Regulatory
Framework for
Unconventional
Oil & Gas Development
George Eynon PGeo
Board Member

2. URF – Unconventional Oil & Gas
Regulatory Framework
• Regulating Unconventional Oil & Gas
in Alberta
Discussion Paper Nov 2012
• Hydraulic Frac’ing Directive
Draft for comment Dec 2012
• Directive 059 update
• www.fracfocus.ca
frac fluid content reporting
• Hydraulic frac’ing animation
on website
• Proof of Concept project
to be undertaken 2013
• Implementation also
via hearing Decisions

3. ERCB operational organization
 Applications
 Field Surveillance & Operations
 Oil Sands & Coal
 Geology, Environment & Economics
 Alberta Geological Survey
 Law
 Regulatory Development
 SEO: Stakeholder Engagement Office
 Information & Systems Services
 Corporate Services

4. A new single regulator…
Responsible Energy
Development Act
Cradle-to-Grave oversight
All current ERCB functions
+ Front-end public lands
approvals
+ Water use approvals and
groundwater protection
+ Back-end reclamation and
remediation
= the Alberta Energy regulator
to be proclaimed mid-2013

5. Regulations already in-place
• Groundwater protection
– Directives 027 wellbore construction
– Directives 008 & 009 casing & cementing
• Fluid handling & disclosure
– Directives 055 & 056
storage, management, handling & disposal
– www.FracFocus.ca frac fluid reporting
• Water use & management
– Directive 059 reporting requirements
• Flaring & Venting
– Directive 060 limitations, gas conservation

6. Strong Foundation…
Dir 008: Surface Casing Depth Requirements
Dir 009: Casing Cementing Requirements
Dir 020: Well Abandonment…
Dir 027: Shallow Fracturing Restricted Operations
Dir 029: Applications and Hearing Process
Dir 031: Guidelines for… Cost Claims
Dir 035: Baseline Water Well Testing…
Dir 038: Noise Control…
Dir 044: Surveillance - Water Production in Wells
Dir 050: Drilling Waste Management…
Dir 051: Injection and Disposal Wells…
Dir 055: Storage Requirements
Dir 056: Energy Development Applications…
Dir 058: Oilfield Waste Management…
Dir 059: Drilling & Completion Data Filing…
etc…

7. Strong Foundation…
Comprehensivesafety, environmental,
and technical requirements…
Well design
Casing and cementing
blowout controls
Well completions
shallow frac’ing
Pipeline specs & operations
leak detection and controls

8. Strong Foundation…
Surface casing & conductor pipe
base of ground water protection; wellbore isolation
minimum depth requirements
minimum casing standards
conductor pipe cemented full length
surface casing centralized & cemented full length
Production, intermediate & liner
design requirements dependant on fluids, temperatures
Special cements may be required [foam, thermal…]
cement volumes based on hole size + 20%
all strings centralized
cement flow returns visually monitored
cement tops verified by logs
liners cemented full length

9. Strong Foundation…
Facilities design and
operations
flaring, venting, and
emissions
Waste management
drilling wastes
production and
flow-back water
oilfield wastes from
operations

10. Strong Foundation…
Produced fluids & waste disposal
safe disposal if not reused
disposal via injection wells
deep saline aquifers
CCS & EOR
sequestration at depth
resource conservation
in situ oilsands…
CHOPS, CSS, & SAGD
THAI & solvents
requirements re:
injection pressures and
volumes, caprock integrity…

11. Strong Foundation…
Compliance assurance…
Surveillance
inspections, audits, response to
complaints
Enforcement
commensurate with risk level
Industry-Community
local organizations:
air-shed/watershed monitoring and
protection
Reporting
publically on ERCB web-site

12. Development process for new regulations
 Identify key operational hazards
 Assess associated risks
 Evaluate alternatives
 Create draft directive
 Internal staff/executive review
 Board review
 External consultation

13. Narrowing the scope
Identify key
operational
hazards

14. Discussion of risk

15. Inter-wellbore communication
Event
Pressure/fluid event with offset energy well
Causes
High-density subsurface development
Lack of systematic prevention planning;
Consequences
Uncontrolled release of fluids: surface/subsurface
Fluids migration into non-target formations
Production delays
Varying level of impacts to statutory objectives
Assessment
High-risk: based on number of occurrences
and severity of potential consequences

16. Loss of well integrity
Event
Cement or casing damage – not fit for purpose
Causes
Frac’ing down well using single barrier system
Cyclical high pressure/volumes: mechanical
stresses
Consequences
Loss of containment and zonal isolation
Migration of fluids into non-target formations
Production delays
Varying level of impacts to statutory objectives
Assessment
Moderate-risk: based on serious concerns with
current operational practices – no confirmed events

17. Frac’ into non-saline reservoir
Event
Establish a communication pathway
Migration of fluids into a non-saline aquifer
Causes
Lack of systematic planning; emphasizing
prevention
Operating proximal to the BGWP & non saline
aquifers
Consequences
Impact on quality and/or quantity of water resources
Assessment
Low operation risk: no confirmed events
High-risk to public confidence in regulatory system

18. Problem statements
Too many inter-wellbore events
21 since 2009 - low to moderate impacts
Widespread use of single barrier
1000% increase in HZ wells since 2009
70% of all frac’s HZ wells in 2011
Frac’ing above/proximal to BGWP
Introduces elevated risk element
200m vertical depth cf BGWP exposed
Significant ‘risk perception’ issue
Low ‘real operational risk’
Limited assurance risks
being appropriately managed

19. Regulatory outcomes
Reduce risks of causing
interwell communication event
Reduce frequency of events
Alleviate consequences by effectively managing
response
Maintain well integrity during frac’ing
Reduce possibility of communication
pathway to non-saline aquifer
Augment ERCB monitoring/assurance
Ability to assess beyond ‘simple compliance’

20. Regulatory alternatives
Prescriptive
high level of certainty; clear minimum
standard; minimizes discretion
inflexible; rules tend to multiply; slow to
change;
Performance-based
provides flexibility; promotes innovation; cost
effective
can be difficult to enforce; smaller companies
struggle; KPI’s can be problematic
Others
Economic regulation; Self-regulation;
Information disclosure

21. “the best laid plans of mice and men…”
• Even the most improbable
events can occur…
– Caltex/Crew well n. Alberta
– series of errors and omissions
– perf’d & frac’d at wrong depth
– guns went off @ 137m; did not
notice
– cont’d to 1487m and conducted ‘frac’
– Fluid into shallow zone above BGWP
– Missed all the signals
• Almost always operator error!

22. Alternatives: Interwell communication
Specify regulatory
Prescribe planning Prescribe Planning
outcomes:
approach – tightly Approach –
allow licensee to
defined IRP-24 Loosely Defined
choose process
Likely effective at Probably effective at Probably effective at
Satisfy Outcomes reducing risk reducing risk reducing risk
Incremental cost, Incremental cost, Incremental cost,
Industry Impacts
more effort more effort more effort
Alignment with URF yes yes yes
Compliance
Complex Very complex Very complex
Assurance
ERCB Impacts Significant Very significant Very significant
Public Response Receptive Less receptive Less receptive

23. Alternatives: Wellbore integrity
Prescribe standard Specify regulatory
Prescribe standard: with exemption to outcomes:
dual barrier system select technically allow licensee to
equivalent option choose standard
Likely effective likely effective Likely effective
Satisfy Outcomes maintaining WBI maintaining WBI maintaining WBI
Incremental cost; may
Incremental cost; Incremental cost;
Industry Impacts not be commensurate
commensurate to risk commensurate to risk
to risk
Alignment with URF No Yes yes
Compliance Assurance Less complex More complex Very complex
ERCB Impacts Insignificant Significant Very significant
Public Response Receptive Receptive Less receptive

24. Alternatives: Non-saline communication
Prescribe planning
Prescribe Planning Specify regulatory
+ revised shallow
+ revised shallow outcome: licensee
BGWP with 100m
zone fixed at 600m to choose process
buffer
Likely prevent Likely prevent
Likely prevent
Satisfy Outcomes communication communication
communication
Commensurate to Not commensurate
Commensurate to
Industry Impacts risk; incremental to risk, incremental
Risk; incremental
cost cost
cost
Alignment with URF yes yes Yes
Compliance
More Complex Complex More complex
Assurance
ERCB Impacts Very significant Significant Very Significant
Public Response Receptive Receptive Less Receptive

25. ERCB approach
WELL INTEGRITY
Options for well design
dual barrier system or technically equivalent
single-barrier with well integrity testing
INTERWELL COMMUNICATION
Risk assessment/planning process
continual improvement clause
parts of Directive 027 at shallow depths
NON-SALINE AQUIFERS
Redefine ‘shallow depths’
above BGWP plus a 100m vertical buffer
COMPLIANCE ASSURANCE

26. Related ERCB regulatory development
URF
Unconventional Oil & Gas Regulatory Framework
• Project/play area full development plans;
• Consultation with municipal/rural authorities
• and local residents
• Collaboration with other producers locally
• Coordinated road use, water use, etc
Flaring & Venting
• Flaring or Incineration
• Combustion/destruction efficiencies

27. What now?
 Consult with CAPP…
 Revise draft directive…
 Assess economic impact…
 Finalize analysis…
 Complete compliance assurance strategy…
 Conduct broader external consultation…
 Identify resource needs…

28. Questions?
Developing an ERCB
Hydraulic Fracturing
Regulatory Framework
George Eynon PGeo
Board Member
george.eynon@ercb.ca
www.ercb.ca