Performance Overview

• 2011 SO₂ emissions intensity the lowest in Syncrude’s operating history
• Less than 10% of all 2011 ambient air exceedances in region attributed to our operations; zero in 2010
• $1.6 billion emissions reduction project nears completion for start-up in 2012

Our Commitment

Syncrude is committed to managing and monitoring air emissions to protect the residents and ecological health of the region. Syncrude appreciates that the Wood Buffalo region enjoys good air quality, and we will responsibly manage our operations toward maintaining this in the years ahead.

Regional Air Quality Continues to Be Above Average

The Wood Buffalo environmental association (WBEA) is a multi-stakeholder, not-for-profit, science-based monitoring organization that independently monitors air quality and terrestrial environmental effects in the region. WBEA is headquartered in Fort McMurray and comprises environmental non-government organizations such as the Pembina institute, the Fort McKay First Nation, government, health agencies and industry.

Monitoring results continue to show that the region's overall air quality compares very well to other regions of Canada, and better than cities like Edmonton, Toronto and Vancouver. The association notes that odours are the most common concern from residents, but occurrences have been decreasing.

In 2011, Alberta adopted the Air Quality Health Index (AQHI) scale which helps people better understand air quality and its connection to human health. This tool works on a scale from 1 to 10 to determine the health risk for the general population and for those with respiratory conditions. The lower the number is, the lower the health risks. WBEA's website calculates the AQHI for four areas within the local region – Fort Chipewyan, Fort McKay, Fort McKay South and Fort McMurray. Further communities will be added in the near future.

Regional Air Monitoring Stations

The WBEA appointed Dr. Kevin Percy as its new executive director in 2011. Dr. Percy brings with him over 35 years in air pollution research with the Canadian Forestry Service and from appointments with the International Union of Forest Research Organizations (IUFRO), the world's largest forest NGO. Syncrude welcomes Dr. Percy to his new position and thanks retiring director Carna MacEachern for her leadership and contributions.

In the fall of 2010, a partnership began between community members of Fort McKay and WBEA's Terrestrial Environmental Effects Monitoring (TEEM) program. In this joint venture, Fort McKay community members are engaged in an ongoing berry monitoring study, during which they will share their observations and pass on their traditional knowledge of regional berry health to WBEA.

Emissions from Syncrude of sulphur dioxide (SO₂) originate mainly from two fluid cokers built in the 1970s as part of our original plant. Emissions from a third coker is routed through a flue-gas desulphurization unit (FGD). Other sources of SO₂ include flaring and diverter stacks which are used only during coker unit or plant upsets.

Emissions of SO₂ were lower over the last two years due to a combination of coker outages and better reliability of the FGD unit. In 2011, emissions per thousand barrels produced were the lowest in our operating history.

When it is necessary to flare or divert gas, we take every possible action to reduce the duration of each incident. We will also decrease the amount of bitumen feed into the coker in order to minimize emissions. Through focused efforts to maintain stable and reliable operations, flaring has dropped by almost 50 percent over the last five years. We are optimistic this can continue.

Syncrude remained compliant with government regulations during the reporting period.

SO₂ All Sources (thousand tonnes per year)

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Our Emissions Reduction Project will continue our decrease in SO₂ emissions to around 60 percent of 2005 levels.

Investigating Flue-Gas Desulphurization Unit Performance

As part of the upgrader expansion in 2006, Syncrude introduced a flue-gas desulphurization (FGD) unit to capture and convert SO₂ emissions into ammonium sulphate which is then used to produce fertilizer at an on-site third party facility.

The unit uses a wet process to remove SO₂. As a result, a high amount of water vapour travels through the stack. SO₂ recovery is however excellent, reaching as high as 96 percent. SO₂ and other pollutants, such as ammonia, that were unrecovered in the process are emitted in trace amounts through the vapour.

In response to stakeholder concerns regarding the vapour plume, investigations are underway to assess the best technological or process solution to improve the unit's performance and further increase emissions recovery.

Syncrude Emissions Reduction Project Nears Start-Up

We recognize that local residents expect good air quality. Towards this, we have invested $1.6 billion on emissions abatement technologies which are expected to reduce SO₂ emissions to an annual average of less than 100 tonnes per day. Facilities will be tied into our two original coker units. We are thoroughly reviewing all aspects of the facility to ensure a smooth start-up and reliable operation. Start-up is scheduled for 2012.

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Around $1.6 billion is being invested to further reduce sulphur dioxide (SO₂) emissions from the Syncrude operation.

Nitrogen Oxide (NO_x) Emissions

A research study by Environment Canada published in Geophysical Research Letters in early 2012 reported that the level of nitrogen dioxide (NO_x) emissions from the oil sands industry is comparable to those of large power plants or medium-sized cities. Nitrogen oxide is created as a result of combustion required to provide power, heat and steam for process units, as well as from mining fleet vehicle emissions.

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NASA Observatory photo depicting nitrogen dioxide emissions in Western Canada and northwestern United States. Source: http://earthobservatory.nasa.gov/IOTD/view.php?id=77283

Our primary goals with respect to minimizing NO_x emissions are to move the maximum volume of material while consuming the least amount of fuel, and to have engines that continue to reduce emissions per litre of fuel consumed. To achieve these, we focus on fuel quality, engine selection, operating and maintenance practices, and mine plan efficiency.

The installation of NO_x/PM after-treatment devices on the medium-duty support equipment has resulted in a significant decrease (more than 8 percent) in the site-wide mobile NO_x emission intensity value over the last five years.

Other Air Emissions

Volatile organic compounds (VOCs) can contribute to poor air quality. Sources of VOCs at Syncrude include naphtha losses to our Mildred Lake tailings settling basin and hydrocarbon vapours from storage tanks.

To reduce naphtha losses, wastewater streams are directed through two Naphtha Recovery Units (NRUs), a technology developed by Syncrude in the mid-1980s. We remain within government regulations for naphtha losses and continue to examine how we can improve recovery in the future. Naphtha recovery over the reporting period averaged 85 percent.

A leak detection and repair program has been in place at Syncrude since 1992. As required by our government operating approval, this program was modeled to monitor for leaks according to the Canadian Council of Ministers of the Environment (CCME) Code of Practice. The system enables the identification and repair of vapour leaks, which minimizes VOC releases.

Significant efforts are also being made to reduce ambient air exceedences through reliability and stable operations, and less plant upsets. In 2011, there were 196 exceedences reported by air monitoring stations operated by the Wood Buffalo Environmental Association. Of these, 18 were attributable to Syncrude.

WBEA communication protocols inform Syncrude immediately of any ambient air exceedences. This notification triggers a site-wide investigation into any possible Syncrude sources that may be contributing to elevated readings. If one is identified, mitigative procedures are implemented to minimize air quality impacts. A follow-up report is submitted to regulators within seven days.

We conduct ongoing maintenance to heating and ventilation systems, air conditioners and cooler units to help prevent the release of ozone-depleting substances (ODS) to the atmosphere. Releases over the reporting period were investigated and repairs made to the source units. Currently, we are in the process of replacing all units with those that operate on non-ozone depleting refrigerant.

Odours

Local stakeholders report the presence of any odours to the 24-hour Alberta Environment hotline at 1-800-222-6514. Government authorities then notify local industrial operators of the complaint and require them to assess their operations for possible sources of odours and take remediating action. The regulator informed Syncrude of two odour complaints from the public during the reporting window; which we investigated and promptly resolved.

In the event of an operational upset or scheduled maintenance which could cause odours or affect air quality, we update the public through the Wood Buffalo Air Information Line. The line also provides the Alberta Environment hotline and Health Link Alberta telephone numbers for those residents who have environmental or health related concerns. The information line was developed by the Wood Buffalo Environmental Association and supported by its members. It is accessed by calling 1-866-685-3699.

Air Emissions

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Key Air Indicators

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Performance Overview

• Paid a creative sentence of $3 million related to 2008 waterfowl incident; significant improvements made to deterrent system
• 460 waterfowl die on Syncrude site as a result of regional freezing rain storm in October 2010; other oil sands operators also affected
• Initiated three-year study with Keyano College to investigate activity of large terrestrial mammals on our site
• Commenced songbird research through the Institute for Bird Populations Monitoring Avian Productivity and Survivorship (MAPS) program

Our Commitment

Syncrude's commitment to environmental stewardship encompasses specific programs aimed at ensuring our operations do not have a long-term, permanent impact on local ecosystems and, upon project completion, to re-establish a diversity of wildlife and fish habitats similar to those that existed prior to disturbance of the area.

Our Adherence to Mining Association Standards

As a member of the Mining Association of Canada, we adhere to the principles outlined in the Towards Sustainable Mining initiative. This includes a protocol on biodiversity conservation which Syncrude assisted to develop. As stated in the protocol, we recognize that "access to land and a company's social license depend upon responsible social, environmental and economic practices and that there is a strong business case for supporting biodiversity conservation. MAC members believe that mining, conducted in consultation with communities of interest, can co-exist with biodiversity conservation."

Biodiversity Planning and Reporting

Syncrude operations must adhere to environmental regulations, including the Alberta Environmental Protection and Enhancement Act, and Alberta Wildlife Act. As well, every 10 years, Syncrude must obtain operating approval by submitting a detailed plan outlining how the organization will steward to government requirements regarding environmental protection, reclamation and mine closure. Compliance reporting and amendments are submitted midway through the reporting period.

Our plan includes an overview on biodiversity establishment and monitoring. It outlines how we incorporate biodiversity into the various aspects of reclamation, including landscape formation, soil placement, vegetation, fish and wildlife.

Many of our practices lead to enhanced opportunities for biodiversity in the reclaimed landscape. For example, we place coarse woody debris in selected areas to provide cover for small mammals and nesting birds. Landforms are also designed with physical/topographical diversity to accommodate both terrestrial and wetland habitats.

Our reclamation specialists contribute to ongoing improvements in biodiversity planning and monitoring in the region through a specialized task group of the CEMA Reclamation Working Group.

Regional Involvement and Biodiversity Initiatives

Several programs and research initiatives have been established in northeastern Alberta to assess and monitor the cumulative environmental effects of industrial development at a regional scale. This work is undertaken by government and stakeholders such as Aboriginal communities, industry, environmental advocacy groups, and health organizations. Syncrude funds and/or provides staff expertise to the following:

Alberta Biodiversity Monitoring Institute (ABMI)

– measures and reports on the health of ecosystems in the province. Operating at arm's length from government, industry and environmental groups, it provides peer-reviewed data that will be used to improve resource management through the provincial government's Land-use Framework.

In 2010, the ABMI launched the Ecological Monitoring Committee for the Lower Athabasca region to oversee customized monitoring programs for rare species. This includes marsh birds, amphibians, owls, caribou and numerous plants. Among the collaborators are Alberta Innovates - Technology Futures, the University of Alberta, Royal Alberta Museum, Alberta Conservation Association and Environment Canada.

The Canadian Oil Sands Network for Research and Development (CONRAD)

– supports a broad range of research projects in environmental and reclamation science through its Environmental and Reclamation Research Group (ERRG). Research focuses on a variety of disciplines, from wildlife biology to hydrogeology and toxicology. Grants are typically used to fund university and research organizations aimed at improving existing practices.

Cumulative Environmental Management Association (CEMA)

– established to assess cumulative environmental effects from industrial development and provide recommendations to regulators on how to best manage these issues. It is governed by 44 members representing all levels of government, industry, regulatory bodies, environmental advocacy groups, Aboriginal communities, academic institutions and the local health authority. Since its inception, the association has delivered over 10 major management frameworks on ozone, acid deposition, trace metals, nitrogen, ecosystems and water. The association includes a reclamation working group and traditional environmental knowledge advisory committee through which Aboriginal stakeholders share biodiversity perspectives.

Regional Aquatics Monitoring Program (RAMP)

– an environmental monitoring program established in 1997 to assess the health of rivers and lakes in the oil sands region. RAMP collects and analyzes data from aquatic environments to better understand the oil sands area, and to identify and address the potential impacts of development.

Wood Buffalo Environmental Association (WBEA)

– a multi-stakeholder environmental monitoring program that operates similar to, and works jointly with, RAMP. WBEA monitors and reports on air quality in the region and the effects of air quality changes and deposition on terrestrial resources. The association operates 15 ambient and 20 passive air-monitoring stations throughout the region.

These regional initiatives, research projects and biodiversity monitoring programs all use multi-stakeholder and interdisciplinary strategies to monitor the environment and provide recommendations to government for environmental sustainability. The objectives of each of these regional programs include understanding the natural condition of wildlife habitat, reclaiming wildlife habitat, and maintaining biodiversity in the region.

Wildlife Movement and Corridors

We do not view our active mining operations suitable for wildlife. We discourage wildlife movement through the area and do not have any crossing structures or corridors on our developed leases. Wildlife presence is also discouraged in active areas to decrease interactions with staff.

As well, in constructing access roads and right-of-ways, we follow existing linear corridors to the greatest extent practical in order to reduce vegetation clearing and habitat fragmentation.

Our operations are not located within the range of Alberta's woodland caribou herds or the proposed protection zones of the draft Recovery Strategy for the Woodland Caribou, Boreal Population. As such, we do not participate in multi-stakeholder groups formed to research and monitor this issue. However, we do keep informed of policy development at the provincial and federal levels regarding any potential impact on our business or land closure requirements.

In 2009, Syncrude, in partnership with the CONRAD Environmental and Reclamation Research Group, commenced a research program into wildlife habitat effectiveness and connectivity in the Athabasca river valley. The program finished Phase 1 and found no current evidence of wildlife corridors within the river valley. The program has moved into Phase 2 and has expanded to include wolves.

There will be no habitat barriers on our reclaimed lands at mine closure.

Wildlife Protection

Syncrude operates within a large tract of wilderness in northern Alberta's boreal forest and employs a number of strategies to deter wildlife from our sites. These include our waterfowl protection plan, and restrictions on the handling of food and food waste.

We are required by law to report sightings and wildlife incidents occurring on our site to regulators. We are also responsible for reporting those that occur off our site on adjacent highways and roads, such as collisions with vehicles. These are included in our overall number of incidents. In situations where distressed wildlife is found, the animal is assessed and appropriate action is taken under the guidance of Alberta Sustainable Resource Development officials.

Regular reminders are communicated to employees and contractors outlining the danger of feeding wildlife and improper disposal of refuse. Other measures used to deter wildlife include regular garbage pick-up and scare cannons. In addition, in 2010, we reached an agreement with the regional municipality to start transporting non-hazardous waste to the municipal landfill. This has reduced the number of seagulls and predators, such as bears, wolves and coyotes, attracted to this area.

In terms of non-avian wildlife mortality incidents, including those related to natural causes, there were 16 in 2010 and 12 in 2011.

Waterfowl and Bird Protection

Measures are in place to protect local birds and deter migrating waterfowl from our site. For example, no vegetation is cleared during the migratory songbird nesting and rearing season unless survey and field checking indicate an absence of nesting activity.

We also follow a number of procedures to deter waterfowl and other birds from coming in contact with bitumen on our process ponds and tailings areas. Propane-fired cannons and effigies are placed in the water and on the shoreline of ponds. Monitoring occurs on a full-time basis throughout the migration period and, if necessary, pyrotechnic flare guns, airhorns and boat movement are also used. Radar monitoring systems, similar to those used at airports, are also in place which automatically activate our deterrent system when birds are detected in the area.

In 2011, we continued to improve the program through the deployment of floating and shore-based modules equipped with falcon effigies and sound effects, propane cannons and strobe lights. As well, we tested Hyperspike acoustic devices capable of projecting precise, directional sound towards areas of bird activity detected by radar. Field studies are underway regarding the effectiveness of laser deterrents.

Significant progress is also being made in the development and implementation of technologies to accelerate tailings ponds reclamation. See the Tailings Management chapter for more detail.

Avian Incident Tracking

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Includes all bird and waterfowl mortalities related to oiling. Incidents are reported to the Alberta Government Sustainable Resource Development department.

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Falcon effigy

Update on 2008 and 2010 Waterfowl Incidents

In 2008, over 1,600 birds landed on a settling basin during spring migration and died after becoming coated in bitumen. In 2010, Syncrude was convicted on environmental charges and agreed to a creative sentencing which resulted in the payment of $3 million, of which more than $2 million now supports three environmental initiatives:

• University of Alberta Research on Avian Protection Project (RAPP) to study migratory bird populations in the region and the effectiveness of bird-deterrent technologies;
• an Alberta Conservation Association habitat conservation project in the Cooking Lake Moraine area; and
• development of wildlife management courses at Keyano College.

Syncrude has always accepted responsibility for this incident and, as outlined above, we have taken considerable measures to prevent a similar occurrence. However, despite these efforts, another incident did occur in October 2010 when a freezing rain storm made it difficult for birds to fly. Birds landed and were sighted on oil sands operations throughout the region, including Syncrude. Birds appeared exhausted and were easily approachable. Regulators were contacted immediately.

Our deterrent system was fully operational at the time and additional staff and resources deployed. Sadly, 460 waterfowl were lost. A full investigation into the incident was completed by Syncrude and the Alberta government. At the time of this report's preparation, we await the results of the government investigation.

Both of these incidents were deeply disappointing. We hope further learnings can be achieved through RAPP and the funding provided by our creative sentence.

Wildlife Monitoring

There are a number of initiatives underway to monitor wildlife throughout the oil sands region, including Syncrude reclamation areas. For example, we continue to support the Alberta Biodiversity Monitoring Institute and the projects developed through the Ecological Monitoring Committee for the Lower Athabasca Planning Region. As well, through CEMA's Wildlife Task Group, we participate in the Early Successional Wildlife Monitoring Program on Reclaimed Plots in the Oil Sands program.

In addition, during consultations on a permit change to our sand storage facility, we were asked by our Aboriginal stakeholders to investigate the presence of large terrestrial mammals on the site and compare it with surrounding areas. In response, we initiated a project with Keyano College to study the area over a three-year period, ending in 2012.

Further research began in 2011 with the Institute for Bird Populations' Monitoring Avian Productivity and Survivorship (MAPS) program. This program monitors numbers, habitat development, bird reproduction and survivorship in reclaimed areas and compares it with natural habitats. Preliminary results indicate a healthy presence of songbirds in our reclaimed areas. Studies will continue in 2012.

We also monitor the wildlife that has returned to our reclaimed land to ensure restoration practices are creating attractive habitat for species to return. Regulators require this data as part of the government certification process.

Parks and Protected Areas

Syncrude's operations are not located on, or adjacent to, any protected area, park or nature reserve. There are however a number of protected parks and areas throughout the boreal forest of northeastern Alberta, including Wood Buffalo National Park – the largest national park in the country and a UNESCO World Heritage site – located approximately 200 kilometres north.

Performance Overview

• Energy intensity averaged 1.27 million BTUs per barrel
• Greenhouse gas emissions intensity averaged 0.104 tonnes CO₂e per barrel
• Paid $38 million to Alberta Government Climate Change and Emissions Management Fund over reporting period

Our Position

The global need for energy is growing and all sources, including conventional oil, oil from oil sands and renewable energy forms, will be needed. As a contributor to this energy mix, Syncrude recognizes public concerns related to the greenhouse gas emissions (GHGs) stemming from oil sands development and believes every sector of our economy needs to do its part to help Canada realize its objectives in reducing our carbon footprint.

Our focus on energy efficiency and conservation will minimize the growth of GHGs that stem from production of synthetic crude oil at our operations. We will achieve this through operational reliability, as well as continued investment in research to develop incremental and breakthrough technologies that reduce our GHG emissions per barrel.

Energy Efficiency Stewardship

Syncrude has a long history of energy conservation. For example, our operations incorporate extensive cogeneration processes in order to recover waste heat for reuse. We also developed oil sands hydrotransport and low energy extraction. These processes enabled us to move away from the energy-intensive draglines and bucketwheel reclaimer system, and reduce extraction water temperatures by around 50 percent.

These types of step-change advancements not only improve our energy efficiency, while correlating directly to lower greenhouse gas emissions, they also provide significant benefit to the bottom line. As we continue to pursue the next generation of oil sands technologies and reliability improvements, energy efficiency remains a key factor when evaluating capital and maintenance projects.

As part of our adoption of ExxonMobil processes, Syncrude is currently implementing new operations management systems – the Operations Integrity Management System (OIMS) and the Global Reliability System (GRS) – to improve reliability and environmental performance. Regarding specific energy efficiency projects, our current focus is on improved monitoring of Key Energy Variables (KEVs), which typically are instrument tags or process parameters that panel operators and contact engineers can use to identify energy conservation opportunities. Additional initiatives include optimizing furnace operations, reducing flaring and repairing steam leaks. Our 2012 energy use target is 1.24 million BTUs per barrel.

Energy management is a component of variable incentive compensation for executive and senior leaders. It is also incorporated into our Impact 21 program in which employees are financially rewarded for achieving goals in operational performance areas. For further information, see discussion on Management Systems.

Energy Use

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Syncrude generates its own electricity and is a net exporter to the Alberta grid. In fact, we exported an average 237,000 MWh annually over the last two years – enough to supply the city of Calgary's electrical needs for 10 days.

Energy Conservation

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Greenhouse Gas Emissions

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Alberta Carbon Tax and Off-Set System

The Alberta Specified Gas Emitters Regulation, established in 2007, set aggressive intensity targets for Large Final Emitters of carbon dioxide. It requires Syncrude to reduce per barrel emissions of greenhouse gases by 12 percent from the average of per barrel emissions between 2003 and 2005. If Syncrude does not meet this target in any reporting year, we must purchase offset credits or pay into a government fund dedicated to the development of emissions reduction technology. Both these options are assessed at $15 per tonne of CO₂ that is in excess of reduction targets.

Syncrude did not meet the reduction target for 2010 or 2011. We offset the remainder by purchasing $16 million and $22 million respectively in Government of Alberta Technology Fund Units.

Monitoring Development of Federal Regulations

To date, the Canadian government has pursued a sector-by-sector approach to climate change regulation, beginning with the electricity and transportation sectors. No broad climate change legislation has been introduced yet that focuses on the oil sands sector.

Syncrude believes every sector of our economy will need to do its part to help reduce our nation's carbon footprint, and the oil sands industry should neither receive preferential or detrimental treatment in any legislation. The evolution of climate change policy in Canada and North America is actively monitored by our Joint Venture participants, and developments are reported through the Syncrude Management Committee.

Creating and Sharing Best Practices

Toward sustained progress in energy conservation and reduced GHG emissions, Syncrude draws on the experience and expertise of others through its participation in the following external groups:

• Canadian Industry Program for Energy Conservation (CIPEC). This collaboration between government and business is aimed at improving the energy efficiency of industries across the country. Syncrude is one of two oil sands industry members.
• Mining Association of Canada, Towards Sustainable Mining (TSM). Syncrude reports its progress on energy and greenhouse gas emissions management annually. Results are externally verified once every three years.
• Integrated CO₂ Network (ICO₂N). This industry association represents a cross-section of western Canada's industrial CO₂ emitters; Syncrude is a Tier 2 member. ICO₂N provides input to government policy about carbon capture and storage (CCS) and advocates for CCS as a part of Canada's climate change plans. The group is also helping shape a regulatory framework for CCS.

Oil Sands Emissions Comparable to Other Crude Oils

An independent study by IHS CERA estimates the well-to-wheels life-cycle GHG emissions of crude oil from the oil sands are in the same range as those of the other crude oil products refined in the United States. The studies found that direct greenhouse gas emissions from oil sands are similar to other heavy oils and about six percent higher than emissions from the U.S. crude supply average.

About 20 to 30 percent of GHG emissions from a barrel of oil are created during the production, refining and transportation to market of the product while 70 to 80 percent comes from consumption.

Well-to-Wheels Greenhouse Gas Emissions for Oil Sands and Conventional Crude Oils

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Source: IHS CERA
Results of a meta-analysis of 13 publicly available life-cycle studies.

As an integrated mining and bitumen upgrading operation, Syncrude's greenhouse gas emissions profile most closely correlates to Mining SCO on the above chart.

A Perspective on GHGs

The oil sands account for approximately seven percent of Canada's total GHG emissions and 0.1 percent, or 1/1000th, of global emissions.

Performance Overview

• Surpassed reclamation target for 2011
• Planted over 600,000 shrub and tree seedlings
• Topsoil material placed in fen wetland research area as part of reclamation of former East Mine

Our Policy

Syncrude will ensure the land disturbed by our operation is returned to a stable, safe condition that is capable of supporting biologically self-sustaining communities of plants and animals. Our long-term vision is to create a landscape that sustains an integrated mosaic of land uses that meet stakeholder expectations.

Our policy adheres to the Alberta Environmental Protection and Enhancement Act which requires Syncrude to return the land we use to a productive capability equivalent to that of the pre-disturbance landscape.

Reclamation Plan Provides Outlook to 2080

Syncrude is required by Alberta legislation to submit a reclamation and closure plan every 10 years, with a mid-term update provided five years after the submission. We provided our update to regulators in 2011. This plan is separate from, but consistent, with our ERCB Directive 074 submission which outlines our tailings management plan.

The reclamation plan outlines in detail the various elements involved in closure of our operation up to end-of-mine life for our Mildred Lake site and Aurora North site, around 2080 and 2050 respectively. It includes information on our regulatory framework, regional planning, consultation, landform design, water management, soil conservation and management, materials balance, forest resources and timber salvage, upland vegetation, wetland reclamation, biodiversity establishment and monitoring, and reclamation monitoring and research.

The closure plan also provides an overview and update on modelling and activities to improve and develop reclamation science, addressing key issues such as landform evolution, water management, salts and their effects on soils, vegetation and surface water, and ecosystem design for establishing natural plant and animal communities.

Reclamation Progression

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Creating a Self-Sustaining Landscape

Our reclamation goals are to ensure the final reclaimed landscape:

• has capability equivalent to that existing prior to development,
• is integrated with the surrounding area,
• establishes boreal forest upland and lowland communities,
• yields water suitable for return to the natural environment, and
• is planned in direct consultation with local, directly affected stakeholders, such as neighbouring Aboriginal communities and the Regional Municipality of Wood Buffalo.

Performance objectives include that the land will be suitable for commercial timber production, extensive areas are returned to a natural state and suitable for traditional land uses (hunting, trapping, fishing and harvesting of traditional plants), and wildlife habitat is deemed to be within the natural variability in the region.

To ensure a regional approach to reclamation, and to foster the use of reclamation best practices, Syncrude regularly consults with other operators and openly shares the results of our environmental research.

Ongoing Reclamation Activities

Reclamation of our former East Mine area is ongoing. This area is approximately 11.5 square kilometers in size and is bordered by Highway 63 south of our main plant site and upgrader. It was part of our original operation when Syncrude began production in 1978. Reclamation began in 2000 using composite tails technology.

In our former West Mine area, also part of our original operation, reclamation will begin in late 2012 using the method of capping fluid fine tails with water.

Further discussion on reclamation of these areas can be found in the Tailings chapter.

Mine Financial Security Program

Alberta's new Mine Financial Security Program for oil sands mines and coal mines was introduced in 2011 through amendments to the Environmental Protection & Enhancement Act. The two primary purposes of the program are to incent ongoing reclamation as soon as practical and to ensure adequate security in the event of premature mine closure or abandonment. It accomplishes those objectives through a series of measures, including:

• The retention of financial security posted by all oil sands and coal operators prior to 2011 under the old Reclamation and Remediation Regulation, totalling approximately $1 billion, to provide care and custody security.
• The requirement to prepare and file three-year reclamation plans once lands are available to be reclaimed, and to impose financial penalties if reclamation is not performed in accordance with those plans.
• The requirement for each project to generate at least $3.00 in net revenue for every $1.00 of reclamation liability and to post security in the event project revenues fall below that ratio.
• At 15 years from end-of-mine life, the requirement for each project to determine the remaining reclamation costs (including post-closure reclamation and monitoring expenses). The project must also post financial security equal to 10 percent of that amount in each of the first 10 years, so that closure liabilities will be fully secured five years prior to end-of-mine life.

If a project operator defaults in any of the security requirements, the government will have the ability to implement appropriate enforcement measures, including the seizure of mine site assets. This program was developed over several years through an extensive consultation process with input from various financial experts and industry associations, including the Alberta Chamber of Resources (of which Syncrude is a member), with a view to ensuring the development of the province's mine resources without exposing Albertans to undue risk.

Each Syncrude owner is liable for its share of financial security regarding the operation's closure obligations. Currently the Province holds letters of credit in the amount of $205 million in respect of the Syncrude Project.

Research on Soil Containing Hydrocarbons

Pre-disturbed soil conditions in the area of our Aurora North Mine have resulted in unique vegetation communities which Aboriginal stakeholders expect us to return after mining. The soil also contains extensive naturally occurring petroleum hydrocarbons, such as "tarballs", which may present unique reclamation challenges. In 2010, construction began on a 40-hectare watershed research project to evaluate these challenges and the most effective salvage and soil cover design strategies for reclamation. The study is a multi-disciplinary, collaborative project involving research scientists from Syncrude, the University of Alberta, University of Saskatchewan, consultants and industry partners through the Canadian Oil Sands Network for Research and Development (CONRAD).

Watershed Research

Research continues on a number of watersheds established on our reclaimed land. Syncrude contributes financial grants to Canadian and U.S. universities to conduct research on these watersheds. This supports the long-term data collection, instrument maintenance and database management of soil, climate and hydrology monitoring of these areas.

Research results are used extensively in closure modelling, landscape and soil cover design, and revegetation practices. For example, the construction experience from the fen pilot project will contribute to the reclamation plans of the remaining East Mine area. Additionally, the results from these watersheds inform updates of all the reclamation guidance documents in the region as well as the knowledge base of reclamation practitioners at Syncrude and other oil sands operators.

Bioengineering Helps Control Erosion

In early 2011, we explored the use of large machinery to assist in our bioengineering activities around erosion control. A wood harvester – one of only six in North America – was sourced and used to harvest willow and poplar while still dormant. These species have the ability to shoot roots and stems from cuttings and were intended to become live stakes and bundles called “live fascines.” The fresh tops of aspen and spruce trees, left after removing the limbs from merchantable timber, were also formed into bundles and placed. By using both the live and dead material, we are able to slow down the flow of water on the reclaimed landscape.

Over 8,000 live stakes of balsam polar and various species of willows, and over 300 dead bundles, were harvested to create 55 live fascines that will continue to grow. The effectiveness of using the wood harvester is under evaluation.

Rough Mulching Aids Reclamation Efforts

A new salvaging technique developed by Syncrude is helping to avoid soil compaction on reclamation areas and create diverse microsites for plants and animals.

Before soil salvage, the tops and stumps of non-merchantable trees are recovered using a method called "rough mulching." This adds large pieces of woody debris into the cover soil. When soil is being placed, this coarse material creates surface roughness. This, in turn, creates microsites and moisture traps for vegetation and erosion control. There is also faster self-establishment of native plant species from the seed bank and various propagules present in the soil.

This technique was piloted for three years on small-scale projects, and then integrated into all reclamation activities starting in 2011.

Tree and Shrub Seedlings Planted (cumulative)

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Oil Sands Reclamation

Oil Sands Mining Active Footprint (hectares)

Families Dig Tree Planting Day

Each year, Syncrude hosts a family Tree Planting Day for staff. In 2011, over 150 people participated in planting 600 white spruce and various indigenous shrubs on an area undergoing reclamation.

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Performance Overview

• Founding member of the Oil Sands Tailings Consortium to share research and development of tailings management technologies
• Performed commercial-scale demonstration of underwater placement of composite tailings to increase fines capture
• Investing almost $2 billion on commercial-scale centrifuge plant
• Site preparation begins for $800 million composite tails plant at Aurora Mine

Our Position

We recognize stakeholders' interest regarding the pace of reclamation and are vigorously pursuing strategies to accelerate our reduction of fluid fine tailings volumes and dry tailings into a more solid form which can then be incorporated into our reclaimed landscapes. In addition, we will continue to share knowledge and actively work with industry partners and the scientific community towards further solutions.

Adherence to Mining Association Standards

As a member of the Mining Association of Canada, we adhere to the principles outlined in the Towards Sustainable Mining (TSM) initiative. This includes guidance on managing tailings facilities in a safe and environmentally responsible manner through the entire life cycle – from site selection and design, through construction and operation, to eventual decommissioning and closure. Syncrude's performance results are reported annually. These are externally verified every three years and reviewed by the TSM Community of Interest Advisory Panel.

What Are Tailings?

At Syncrude, tailings are a byproduct of our process to extract bitumen from oil sand. Tailings are composed of a mixture of water, sand, clay, fine solids, residual hydrocarbon and salts – all of which are naturally found in oil sands deposits.

Tailings are placed in large landforms commonly referred to as settling basins or tailings ponds. Tailings ponds serve two uses – one, as the recycled water source for our plants and, two, as a containment area which enables tailings to segregate prior to further dewatering for use in reclamation activities.

The primary tailings management challenge is the long period of time it takes for some solid components to settle. While the sand settles rapidly, clay and fine solids (together called fluid fine tailings or FFT) can take decades to settle on their own.

Tailings Dam Safety

Settling basins are dam structures licensed and regulated through Alberta Environment, Alberta Environment Dam Safety Branch and the Energy Resources Conservation Board (ERCB). Designs comply with Alberta Dam Safety Branch standards, and guidelines of the Canadian Dam Association (CDA) and Mining Association of Canada.

All designs are reviewed by an external geotechnical review board (GRB). CDSA guidelines also require a dam safety review to be conducted for each structure by an independent external consultant every five to seven years. In addition, staff conduct formal inspections each quarter and informal inspections throughout the year. Regulators also conduct their own inspections, typically on an annual basis. Procedures are tested in simulations and table top exercises.

Around 3,000 instruments are in place to monitor our tailings structures and up to $11 million is spent annually on their maintenance and installation.

Interceptor ditches and sumps collect and pump seepage or precipitation run-off back into the pond. We also maintain a network of surface water sampling points and groundwater monitoring wells to ensure tailings water does not impact local watercourses. For example, there are 170 wells throughout the Mildred Lake mine site area monitoring environmental compliance.

Transforming Tailings Into Reclaimed Landscapes

We believe our multi-pronged approach to tailings management will enable us to meet the long-term intent of the Energy Resources and Conservation Board (ERCB) Directive 074. This Directive, established in 2009, specifies performance criteria for the reduction of fluid tailings and the formation of trafficable deposits. Our submission was one of the first to be approved by the ERCB.

As we work towards achieving our plan, three technologies are now being deployed: water capping, composite tails and centrifuging. At the same time, we continue to research additional methods while also participating in the Oil Sands Tailings Consortium which exchanges findings amongst industry operators.

Water Capping

Water capping involves the placement of a layer of water over a deposit of fluid fine tails to form a lake. Syncrude began researching this technology in the 1980s and has demonstrated its viability through laboratory testing and 11 test ponds of various sizes. Results have shown these lakes will evolve into natural ecosystems and, over time, support healthy communities of aquatic plants, animals and fish.

We are commissioning the industry's first commercial-scale demonstration of water-capped end pit lake technology in late 2012. It will be used to evaluate the large-scale viability of water capped tailings as a remediation strategy for both fluid fine tailings and oil sands process-affected water. It will be monitored intensively for about 20 years following commissioning to demonstrate that the lake is developing into a viable ecosystem and to prove that this technology can be used on other oil sands leases. It is anticipated that long-term monitoring will continue after this demonstration period is complete.

Composite Tails

Composite Tails (CT) combines fluid fine tails with gypsum and sand as tailings are deposited in a mined-out area. This mixture causes the tailings to more quickly settle and release water. CT is then capped with sand and soil, enabling the development of landscapes that support grass, trees and wetlands. This technology is now being used at the Mildred Lake site and will be implemented at the Aurora North Mine starting in 2013.

CT is being used to reclaim our former East Mine. Placement began in 2000 and was complete in 2011. Sand capping to established closure drainage is ongoing. A 54-hectare fen wetland research project is already under construction at the northwest end of this area. Soil and woody debris have been placed and locally-collected seeds spread throughout the area. Vegetation planting on the fen will be complete in 2012-13, at which time active research will begin on hydrology, wetland and terrestrial plant response, and climate conditions. A 65-hectare area directly east of the fen project will be permanently reclaimed in 2015.

Fens are an important type of peat land found in the boreal forest. This large-scale reconstruction effort is the first of its kind in the world and underscores our commitment to return the land we disturb to a condition similar to that prior to disturbance.

We are also working to improve CT deposition and increase fines capture through a technique which places CT under a layer of water in the mined-out area. Sand is then added and the water later pumped out and recycled. This leaves a landform base which can be capped with soil, and reclaimed. Results from a commercial-scale test are being evaluated.

Centrifuged Tails

We have successfully piloted the use of centrifuges to remove the water in fluid fine tails. This technology produces a soft, clay-rich material that can be used as the landform foundation in oil sands reclamation areas. We are planning to implement this technology in two stages – a commercial-scale demonstration plant beginning operations in 2012 and a $1.9 billion full-scale commercial plant in 2015.

The Quest for New Solutions

We are currently researching a number of additional technologies, which could be used to supplement existing remediation methods and reduce bitumen in tailings ponds. These include:

Accelerated Dewatering

Also referred to as rim ditching, accelerated dewatering is based on methods used in the Florida phosphate industry. It involves depositing fine tailings in a shallow containment structure and removing the water from the surface as it is released. Initial tests have shown a reduction in FFT volume by 50 percent in three to five years. Further study continues on a larger scale.

Overburden Mixing

This method proposes mixing fluid fine tails with overburden, and placing the resulting material into mined-out pit areas for incorporation into reclamation landscapes. Research is underway to better understand water absorption into the overburden clays.

CO₂ Addition

Microbes living in our tailings ponds have reduced fluid fine tails volume by more than 25 percent over the past 15 years through bio-densification. Syncrude researchers are now studying how to mimic microbial activity and replicate this process through the direct addition of CO₂ into fluid fine tails.

Thickened Tails

Under evaluation for over a decade, this technology accelerates the settling of the fluid fine tailings by adding an organic thickening agent after bitumen extraction. The released water is still warm and can be recycled immediately back into the process. The thickened tailings are transferred directly to a mined-out area and deposited on a thin slope which allows excess water to drain and be recovered. Reclamation can then follow. This technology could reduce energy needs, speed up reclamation and result in smaller tailings ponds.

Bitumen Removal From Tailings Streams

Our extraction process recovers around 90 percent of the bitumen in the oil sand. The remaining bitumen is lost to the tailings stream and enters the settling basin. Recovery of this bitumen represents a significant economic opportunity and addresses key stakeholder and environmental concerns regarding potential risks to waterfowl. Bitumen recovered from either the tailings stream directly or from existing tailings areas would then be processed into crude oil product.

Collaboration Key to Advancements

We work collaboratively with other operators through the Oil Sands Tailings Consortium (OSTC) which was established in 2010. Through this group, we are sharing the results from our past efforts and cooperating on research and development activities going forward. This initiative foregoes intellectual property rights on technologies and makes $400 million of past industry research available to all parties. It will be managed through the Canadian Oil Sands Innovation Alliance (COSIA).

Annual Fines Capture

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Directive 074 Commitment

As of 2015, Syncrude expects to meet the conditions outlined in the Energy Resources and Conservation Board (ERCB) Directive 074 which requires a minimum 50 percent tailings fines capture. The ERCB approved our plan in 2010, allowing us to construct facilities and implement the proven technologies necessary to ensure full compliance by 2015.

We surpassed our fines capture targets during the reporting period, achieving 15.7 versus 7.2 percent in 2010 (Q3 and Q4 only as per Directive) and 18.8 versus 8.2 percent for 2011 (full calendar year), for the Mildred Lake site. Fines capture at the Aurora mine operation commences in 2013 with the start-up of a commercial-scale composite tailings facility.

We are investing significant capital and resources to attain future targets, and are committed to the long-term intent of the Directive.

Performance Overview

• 88 percent of water used in 2011 was from recycled sources
• No reportable spills to local water bodies
• Water treatment research continues; coke byproduct filters tailings water and removes napthenic acids
• University research chair established to explore additional methods of cleaning tailings water

Our Commitment

Water is essential to Syncrude's operation and plays a key role in our production processes. We recognize that water is a limited resource that must be managed carefully. Our commitment is to take prudent steps to manage and conserve the water we use and to protect the health of regional water bodies, including groundwater.

Syncrude's water management practices are based on the objectives of minimizing the withdrawal of fresh water from the Athabasca River, maximizing reuse of process-affected water, and responsibly managing its storage.

Using Water Wisely

The Athabasca River is our main source of fresh water. It provides about 15 percent of our total water needs. Water imported from this river is used to cool process water, generate steam and as potable water. The remaining 85 percent of water used is recycled from our settling basins, also known as tailings ponds, and used in bitumen extraction processes. In 2011, 88 percent of the water used was recycled from these sources.

Our water license, granted to Syncrude in the 1970s, permits us to withdraw 61.7 million cubic metres of fresh water annually. In 33 years of operation, we have always operated well within these limits. Currently, we withdraw about 0.2 percent of the river's average annual flow. At the river's lowest flow – during the winter – our withdrawal is about 0.5 percent.

We are committed to water conservation and have historically demonstrated continuous improvements. In fact, we have reduced the water intensity of our processes by about 60 percent from levels in the early 1980s. Today, we require about two cubic metres of fresh water to produce a cubic metre of crude oil.

Syncrude has been in operation for over three decades. Throughout those years, many considerable gains were made in water conservation. Now, work is underway to define a water strategy going forward. This will examine how we can continue to make improvements in our processes over the short-term while engaging our research department towards developing new technologies that will further minimize our import of fresh water in the future.

Water Use Intensity

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Process Water Recycled

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Releases to the Environment

Alberta Environment prohibits the release of any water that does not meet quality regulations. Syncrude does not discharge process-affected water, waste water or any industrial run-off into local water bodies. The only discharges to the Athabasca River are treated sanitary sewage similar to that discharged by municipalities, diverted clean surface (muskeg) water and basal water from the Aurora Mine via Stanley Creek, and clean surface water from a gravel pit.

During the reporting period, there were no spills to local water bodies. However, there were four occurrences in 2011 when water discharges from Aurora did not meet government quality standards; three related to elevated Total Suspended Solids and one of elevated Biochemical Oxygen Demand. We reported these incidents to regulators. The water was natural and did not contain any process constituents. It was similar to water quality during spring run-off or periods of heavy rain.

Advances in Tailings Water Treatment

We recognize that, by not releasing water, we are creating an increasing storage challenge that is not acceptable to our stakeholders. As well, from a reclamation perspective, it is necessary to build a final landscape with a hydrology that connects seamlessly to the surrounding environment. Towards this, we have conducted research on tailings water treatment using coke, a byproduct of our process. The treatment is similar to using a home water filter. The coke, which is almost pure carbon, acts as a filter that captures contaminants and, most importantly, naphthenic acids. Bench-scale research shows the treated water is able to support aquatic life. We are running a pilot-scale plant in 2012 which will answer further technical questions and provide the design requirements for possible commercial-scale implementation.

Furthermore, Syncrude announced funding in 2011 towards a new research chair at the University of Alberta that will explore additional methods of tailings water treatment. Led by Dr. Mohamed Gamal El-Din, the five-year funding will help identify, evaluate and develop new management solutions. Approximately one dozen graduate students, as well as two postdoctoral fellows, will be working on projects through this chair.

Our Support for a World-Class Regional Water Monitoring System

Alberta Environment monitors the Athabasca River and its tributaries at 11 sites in the region. In addition, the Regional Aquatics Monitoring Program (RAMP) does extensive monitoring of climate and hydrology, water quality, benthic invertebrate communities, sediment quality, fish populations and fish health, and lakes sensitive to acidity in the Lower Athabasca region. RAMP's 2010 and 2011 technical reports are available on-line.

According to regulators, monitoring stations downstream of oil sands operations do not detect any industrial impacts when compared to historical readings of naturally occurring compounds. Because the river cuts through the oil sands deposit, bitumen is often exposed along the banks and then seeps into the water.

In 2010, the Royal Society of Canada commissioned an Expert Panel of Canadian Scientists to review and assess evidence relating to several perceived environmental impacts of the oil sands, including regional water supply. According to their assessment, current evidence does not suggest a threat to the viability of the regional aquatic ecosystem. However, stakeholders remain concerned about downstream impacts.

To address ongoing concerns, a government-sponsored contaminant load study is currently underway that is examining how air particulates, land disturbance and drainage may affect water quality. Also, in early 2012, the Alberta and Canadian governments announced a joint implementation plan for integrated environmental monitoring in the oil sands region. The plan builds on monitoring already in place and outlines a phased, adaptive implementation approach to monitoring over the next three years. Through the Canadian Association of Petroleum Producers, we are providing our input on this new system and support a credible, transparent and science-based approach that can guide us effectively on responsible water management in the future.

Water Use

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Water Perspective

In 2010, the oil sands industry represented about seven percent of the total provincial allocations for fresh water.

Waste Management Guidelines

Syncrude is committed to the proper handling and disposal of waste materials from our operations. The objectives of our waste management program are to continually reduce the quantity of waste generated, and to examine each waste stream with the view to reduce, reuse or recycle materials where possible. Syncrude also aims to ensure compliance with all applicable legislation regarding the disposal and recycling of waste materials. We recognize that many waste materials contain substances that could contaminate the environment and pose risk to human health if they are not properly managed.

We Reduce waste through the use of an inventory management system that records and accounts for raw materials and process chemicals on-site. Waste reduction is also achieved through process changes, operational changes and equipment modifications. Through these means we endeavour to use less hazardous substitutes for toxic materials, change procedures that generate waste, and look for new methods or technologies to better capture hazardous waste.

We Reuse waste by finding new uses for it (for example, oily rags collected from Syncrude laboratories and shops are cleaned and reused). As well, our asset recovery program redistributes materials such as protective clothing and janitorial equipment.

We Recycle waste by gathering used materials so they can be reclaimed and reprocessed by recyclers. Examples include paper, vehicle batteries, scrap metals, catalysts and beverage containers. Used lubricating oil is recycled on site.

By Practicing the 3Rs, Syncrude:

• Saves on raw material and production costs
• Reduces waste disposal cost
• Assumes less risk of liability for future cleanup
• Reduces movement of waste on public roads
• Encourages resource conservation and recovery
• Demonstrates environmental leadership

Waste Minimization Strategy

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Waste Management

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Recycling Programs

• Hazardous Waste Roundup – Syncrude annually holds a round up to collect hazardous wastes on our site. The wastes are transported offsite and sent to approved recycle and disposal facilities. In 2011, over 17 tonnes of waste was collected. Items included paint, solvents and flammable liquids.
• Oil Filters - these are shipped offsite and the used oil in the filters is recovered.
• Used Motor Oil - used motor oil is recycled on site and processed into Syncrude crude oil.
• Other Waste Hydrocarbons and Solvents - These are recycled on site and reprocessed into Syncrude crude oil.
• Cardboard and Paper - Recycling bins are located throughout Syncrude to promote recycling.
• Cell Phones - All cell phones, cell phone batteries and chargers are collected on site and sent for recycling.

• Beverage Containers - Beverage containers are returned to a recycling depot and all cash from container deposits is donated to the United Way.
• Printer Cartridges - Used printer cartridges are sent back to the vendors for recycle.
• Fluorescent Tubes - Fluorescent tubes are crushed and the crushed glass is sent to a retort for mercury recovery; the aluminum end caps are separated and recycled.
• Aerosols - Any gases remaining in aerosols are disposed of or recycled appropriately and the metal containers are recycled.
• Electronics - all discarded computers and related equipment, and other electronics, are sent for offsite recycling.
• Plastic and Steel Drums - Reusable drums are returned to the original suppliers for recovery of residual deposits and recycling of the drums.