As a part of the Institute's strategic focus on assisting CCS projects through knowledge sharing, three North American roadshow events will help the industry share project experiences and knowledge about CCS. Taking place in the US and Canada, the three events include: • Austin, Texas on November 8, 2011; • Calgary, Canada on 10 November, 2011; and • Washington, D.C. on 19 January, 2012. The first roadshow focused on sharing project experiences and knowledge from the projects in North America but also brought in projects from Europe (Don valley) and Australia (Callide) so that regionally diverse experiences could be shared amongst a global audience. Attendance at the event was around 30 to 35 which allowed open and frank discussions around technical, management, and regulatory issues and how these challenges can impact on a project’s advancement and decision making processes.

1. Project Pioneer
CCS in the Power Sector
Global CCS Institute / Carbon Management Canada
Calgary Regional Meeting
Calgary, Alberta
Nov 10, 2011
Don Wharton
VP Policy and Sustainability
TransAlta Corporation

2. 2

3. Overview
1. Pioneer status & details
2. Some early lessons
3. Knowledge initiatives
4. Policy issues
3

4. Pioneer – A World-Scale CCS initiative
About Project Pioneer
 Post-combustion retrofit to new
Keephills 3 coal-fired plant, 50 kms
west of Edmonton
 World-scale demonstration project
operating by 2015
 Captures 1 million tonnes/year of CO2
 Delivery of CO2 to both enhanced oil
recovery (EOR) and deep saline
storage basins
Keephills 3, Summer 2011
A partnership of companies and
governments with expertise across the
CCS value chain.
Knowledge transfer 4

5. Progress
Project Goals
 Amine-based capture technology finalization imminent  Drive down capital and
 Front End Engineering Design work to be completed by Jan, 2012 operating costs through intense
focus on systems integration
 Design and consultation for EOR transport pipeline underway
and optimization across all
 Permit applications in process, work with regulators on filling regulatory CCS components
gaps
 Form strategic partnerships to
 Ongoing dialogue to advance CCS awareness via public build best-in-class CCS
presentations, knowledge exchange and research projects
 Commercial negotiations with CO2 purchasers underway
 Advance the regulatory
 Preparing for project sanction decision in Mar, 2012 framework for approving and
permitting CCS
Partnership Model projects, particularly CO2
• $1.3B - Project, capital and operating over 10
storage
years, before revenues  Aggressively pursue
• $340M – Federal investment knowledge exchange, both
• $430M – Alberta investment outward from Project Pioneer
to others, and inward from the
• Industry partners cover rest and secure offsetting
global effort.
revenues from EOR and emission reductions
5

6. Transportation & Storage Considerations
Two-pipelines are anticipated – one to aquifer storage and one to EOR injection.
Why?
Sequestration Enhanced Oil Recovery
• Base-load power plants • Highly valuable revenue source
need continuous from CO2 sale
unconstrained storage • Tremendous opportunities within
capacity mature oilfields of Western
• Long term, capacity for Sedimentary basin
EOR uptake could be • Additional return to Province in oil
overwhelmed royalties
• Experience with aquifer • Experience with CO2 management
storage is important and recycling in EOR projects
6

7. Two Storage Options
7

8. Test Injection Well
8

9. Integration Work
A focus of Pioneer is to drive down costs across the entire CCS system
through optimization and integration with the existing power plant. This
includes:
 Steam cycle optimization for regeneration
 CO2 pressure management optimized to pipeline requirements
 CO2 purity optimization based on intended usage
 Modularization of equipment
 Process and component simplification
 Supplier customization
 Aquifer injection well scheme optimization
 Water use reduction
9

10. Dealing with the Hard Financial Question
Project must deliver a minimum return on industry cost of capital, cognizant
of higher than normal risk.
All income and cost components must work in order for projects to proceed.
Impacts
Costs Development + Construction
Capital
+ CCS
Operating
+ on
business
Emission
- Revenues EOR sales + reduction
value
= Project financial evaluation
10

11. Partnership Discussions
 Scope of involvement - full partners or limited?
 Structure for decision making?
 Return expectations?
 Risk tolerances – how to accommodate variations?
 Roles – who leads?
 Transfer agreements – who owns what?
 Work – done internally or externally?
 Technology choices – handling preferences
 Information and knowledge – how transparent?
11

12. Commercial Learnings (to date)
Some commercial-related issues have become evident:
1. Government is an investor - As soon as possible seek out differences between
industry and government objectives and resolve.
2. Partner portfolio approach addresses challenges – A diversity of expertise & risk
tolerance helps overcome barriers.
3. Non-commerciality of CCS requires new thinking – Partners may have a variety of
drivers for participating…project needs to accommodate them all.
4. The business case will be highly sensitive to policy – Small changes in policy can
have potentially fatal impacts on project economics
5. Staged decision making is crucial – High learning curve on almost all project
elements…frequent commercial re-evaluation is necessary.
12

13. Agreements with Governments
Both governments and industry are learning about the commercial elements of
prototype CCS projects. Funding agreements are evolving. Alberta and federal
agreements are separate.
Some important areas of negotiation:
 Disbursements allocation – front end capital req’mts vs back end performance
 Disbursements timing - schedules and termination dates
 Risk of under-performance – who bears it
 Project schedule risk
 Knowledge transfer requirements and IP rights
13

14. Knowledge Transfer
Project Pioneer is undertaking an aggressive program of knowledge transfer, both
inwards and outwards.
Knowledge Transfer Elements
Capacity Building Reputation Support Relationships Education
Case studies, factsheets, surveys, expert workshops, design & operational reports, economic assessments
Partnership with the GCCSI
 $5M AUS funding agreement signed in Dec, 2010
 Facilitates delivery of some 15 public knowledge products in 2011-12
 Products designed to encourage exchange
14

15. Public Research on CCS
Conducted a baseline CCS public opinion
survey in 2010, again in 2011:
71%
 Awareness of CCS – 65% in Alberta Interested in
 Good support for CCS – 64% learning more
about CCS
 Perceived value of CCS tied to positive
economics and environmental impacts
 Perceived concerns of CCS tied to health and
safety and cost to implement
 76% see CCS having same level or less risk to
other energy infrastructure 62%
Support
 Focus by industry to reduce GHG’s seen as a
top priority continued use
of coal with
 61% support for govt. funding to enable CCS CCS
15

16. Public Outreach Activities
Public consultations and communication on
Pioneer are ongoing, and include:
 Open houses with neighbours
 Land discussions along EOR pipeline
route
 Brochures and factsheets
 Website
 Media interviews and activity
Open Houses
Most recent open house
Tuesday, Nov 8/11
Factsheets
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17. Work with the Institute
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18. Dealing with Policy & Regulatory Uncertainty
Will GHG policy create a fiscal environment in which CCS is Will the detailed regulatory requirements be
comparable with other compliance alternatives – whether clear enough that CCS investment decisions
driven by market mechanisms and a price on carbon, or by can be made.
prescriptive regulation.
 Proposed GHG policy for Cdn electricity sector  Bill 24 has helped Alberta projects regarding
would provide no value to early GHG reductions, liability and pore space.
or those beyond proposed standards.  Not clear yet how federal regulatory
 EOR price untested. Policy driver will influence requirements will be dealt with
future market prices.  Still lots of regulatory details to be tested –
 Differentiated sector-based approaches could how much can existing regs be adapted and
create illiquid CO2 markets if they exist at all. what needs to be built.
 Future US/Canada alignment could mean two  Ultimately CCS investors need to be
steps for policy clarity. convinced that they have a reasonable
chance of permitting their project.
Timing and predictability of policies will determine industry’s
risk assessment and investment calls. 18

19. Thank You
Contact:
Don Wharton
VP, Policy and Sustainability
TransAlta Corporation
Calgary, Alberta, Canada
403-267-7681
don_wharton@transalta.com