Premier of Alberta

Office of the Premier, 307 Legislature Building, Edmonton, Alberta, Canada T5K 286

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MAR -4 2014
The Honorable John Kerry Secretary of State United States Department of State 2201 C Street NW Washington, DC 20520 USA Dear Secretary Kerry: At each stage of the comprehensive review of the Keystone XL Pipeline (KXL), Alberta has respectfully sought to contribute to the State Department's work. I appreciate the opportunity to contribute comments to your deliberations during the National Interest Determination phase of this process, including a technical analysis of several key issues, which is included as an addendum under cover of this letter. While KXL has become a high-profile issue in the context of Canada-U.S. relations, it is one part of a large and evolving North American energy network. Alberta agrees with the State Department's finding that oil sands production and Bakken crude will continue to grow and reach markets in the coming years. North American policy-makers now have an opportunity to set policies that will encourage the safe and efficient transportation of our growing energy resources. From Alberta's perspective, KXL approval would create positive outcomes in the following areas: Transportation Safety Approval of KXL will reduce the risks associated with the transportation of crude across North America. Alberta believes that rail transportation is safe and has an important role to play in linking producers to consumers, but a pipeline built to rigorous standards is clearly preferable to other transportation options in terms of safety and environmental risk, including greenhouse gas (GHG) emissions. We agree with Secretary Moniz that it is preferable to pursue more pipeline infrastructure to enhance the reliability of North America's energy transportation infrastructure. This has implications for communities across Canada and the U.S. and must be a fundamental consideration for decision-makers.

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-2Shared Efforts to Address Climate Change Through Further Collaboration Alberta and the U.S. share similar challenges as major and growing producers of hydrocarbons that are committed to emissions reductions and responsible development. However, our increased independence from off shore oil sources also gives North America an opportunity to lead in the reduction of GHG emissions from the production of fossil fuels. As the only major oil supplier to the U.S. that has a regulated price on carbon, I would like to re-affirm Alberta's willingness to work with U.S. partners to reduce emissions from the oil and gas sector. Alberta remains strongly committed to partnerships and aggressive pursuit of innovations that advance emission reductions and responsible environmental management. For example, our government: • invested $1.3 billion in two commercial-scale carbon capture and storage (CCS) projects, set to start operations in 2015, and ensured that learning generated from the projects is proactively distributed to the global CCS community; • utilized a portion of our Climate Change and Emissions Management Fund, which has collected nearly $400 million through our industrial carbon levy, to support a Grand Challenge open to companies and researchers around the world seeking new opportunities to utilize carbon as a commercial product; and • actively participates in the World Bank Global Gas Flaring Reduction Partnership to combat a critical source of emissions from energy development around the world. Few significant fossil fuel producers in the world have put a price on carbon, committed such significant funding to technology on a per-capita basis and taken steps to proactively share innovation. I am proud of Alberta's story and confident that our policies will deliver results that are aligned with U.S. priorities domestically and internationally as we all seek to pursue responsible fossil fuel development. A positive decision would allow us to move past the recent focus on specific projects and re-engage on the broader question of how to work together to reduce GHG emissions and position North America as the most sustainable source of fossil fuels. Creating the Certainty Required to Build Needed Infrastructure Canada and the U.S. are seeing significant transformations in our energy markets that form the basis for increased competitiveness, trade and economic opportunity for our two countries. As many have observed, maximizing the benefits of our new production will require significant investment in infrastructure to link new and growing supplies to markets. Alberta agrees with President Obama's view that in today's economy, firstclass jobs flow to first-class infrastructure. Approval after rigorous study would re-affirm a commitment to regulatory certainty, supporting the creation of opportunity across our continent and grasping the full possibilities created by our growing energy production .

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-3Efficient Delivery of Energy Resources My government is committed to opening new markets for all of Alberta's exports, but we remain deeply committed to the U.S. as the natural market for our international exports. As the Final Supplemental Environmental Impact Statement (FSEIS) shows, KXL will have little impact on oil sands production levels but could have implications for the cost of transporting crude into the U.S. market. Alberta believes it is in the interest of producers and consumers to create the most efficient transportation link between our province and natural markets within the U.S. Commitment to Responsible Development and Partnership Alberta continues to take a comprehensive approach to managing the environmental impacts of activities taking place on our landscape to ensure the environmental, social, health and economic outcomes Albertans expect and demand are achieved. This approach includes setting cumulative triggers and limits for ambient environment and monitoring, evaluating and reporting on environmental conditions relative to these triggers and limits in a scientifically sound and transparent manner. The Alberta Energy Regulator ensures that the province is at the forefront of pipeline safety and industry performance through rigorous regulatory enforcement, and Alberta government departments continue to support the regulator with the policies and research necessary to keep pace with growing production and increasing expectations. All of our regulatory development and research is available to be shared with agencies in the U.S. and around the world. Oil Trade and Commitment to Open Markets Alberta continues to be the largest exporter of crude oil and natural gas to the U.S. and, as the FSEIS clearly shows, growing Alberta production will continue to make its way to U.S. markets over the coming decades. Unlike some other major suppliers of crude to the U.S., Alberta remains committed to open energy trade. Consistent with the North American Free Trade Agreement, our energy trade is governed by market dynamics, not geopolitical agendas. This contributes to energy security for the U.S. and economic certainty for U.S. consumers and investors. Canada is the largest export destination for 35 U.S. states, and more than 8 million American jobs depend on trade and investment in Canada. Between 2011 and 2035, development of Alberta's oil sands will contribute an estimated $141 billion to $382 billion to the U.S. economy; create or preserve an average of 62,720 to 160,360 jobs per year in the U.S.; and support wages between $2.7 billion and $7.2 billion per year. There are more than 2,400 companies in the U.S. that currently supply goods and services to the Canadian oil sands and industry. The oil sands are just one example of why a dollar spent on Canadian exports yields 90 cents in return spending on American goods and services.

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U.S. Final Supplemental Environmental Impact Statement for Keystone XL

GOVERNMENT of ALBERTA TECHNICAL SUBMISSION
The Province of Alberta, Canada has conducted a comprehensive review of the Final Supplemental Environmental Impact Statement (FSEIS) for the Keystone Pipeline Project released on January 31,2014 by U.S. Department of State.

ALBERTA ENERGY Carbon Lifecycle Intensity
Alberta has found the FSEIS lifecycle assessment (LCA) methodology explained in Appendix U has improved upon the previous analysis in the March 2013 Draft SEIS (Appendix W), and enhances the analysis of relevant carbon lifecycle research available for crude oils. The consistent use of incremental analytics provided a strong foundation in the Draft SEIS, matching incremental greenhouse gas (GHG) emissions to expected incremental supply effects. It is not surprising then that additional analysis into the uncertainty of process efficiency and US reference crude trends only serves to reinforce the conclusions reached in the earlier work. Alberta recognizes that LCA research in areas of Flaring, Fugitive Emissions and Venting (FFV) emissions is still in a preliminary state, and while this is good reason for inclusion of a detailed FFV uncertainty analysis in the LCA section, Alberta respects the State Department's decision to focus analysis on areas with greater certainty. Going forward, Alberta will continue work to improve global technical understanding ofthe impact ofFFV emissions by efforts like our active involvement in the World Bank: Global Gas Flaring Reduction Partnership (GGFR). As the state of LCA for crude oils pathways continues to evolve, further work may serve to refine the results, including exploring the range of uncertainties. For example, future assessments may want to include a detailed FFV uncertainty analysis in the LCA section. Alberta will continue to further global technical understanding of the impact of FFV as part of crude LCA as demonstrated by our active involvement in the GGFR.

Energy Market Scenarios
The Government of Alberta has extensively reviewed the various market scenarios contained in the FSEIS and has generally come to the conclusion that its contents align very closely with our understanding of the existing and emerging market dynamics in the Western Canadian Sedimentary Basin. Many of the infrastructure trends we are currently witnessing, particularly the remarkable growth of crude-by-rail in our region, are well articulated in the FSEIS. It also demonstrates strong understanding of, and appreciation for, the current regional situation and how it relates to continental and international energy markets, where crude oil remains a largely fungible commodity.

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Given the robust understanding demonstrated in the report that this project represents the most efficient, reliable and safe means of moving energy that will otherwise utilize other means of getting to market, Alberta remains hopeful that the pipeline project will be decided on in a timely fashion for the benefit of both countries.

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Diluted Bitumen and Potential Releases (Spills)
Overall, the FSEIS examination of diluted bitumen (dilbit) as it pertains to pipeline integrity and spill response considerations is both comprehensive and very comparable to what Alberta has observed with decades of experience transporting this form of crude oil. The information presented in the report helps highlight potential knowledge gaps in the transportation of diluted bitumen. Both Alberta and Canada are currently pursuing research on dilbit flammability, biodegradation, and spill behavior in a marine environment, to name just some of the ongoing research currently underway. Once complete, our intent is to distribute this information to ensure incident responders on both sides of the border are able to make informed decisions in the event of a release of diluted bitumen into the environment.

Pipeline Integrity and Oil Sands
Alberta was very pleased to see the results of the US National Academy of Sciences study incorporated in the FSEIS. This study definitively concluded that dilbit does not have unique or extreme properties that make it more likely than other crude oils to cause internal degradation to transmission pipelines from corrosion or erosion and that dilbit has density and viscosity ranges that are comparable with those of other crude oils. It is notable that the US spill incident data detailed in the report indicates that pipelines carrying dilbit are not more prone to failure than other pipeline systems carrying conventional crude oils. The FSEIS did note the relative age of some of the Alberta data used for comparison. More recent data is now available as the Alberta Energy Regulator (AER) has finalized an updated pipeline performance report entitled Pipeline Performance in Alberta 1990-20 II. Reviewing crude pipeline incident rates in Alberta for the period I990-20 II is particularly notable as oil sands-derived crudes were a very small portion of the energy moving through Alberta pipelines in 1990, but it had become by far the predominant source of crude oil moving through Alberta pipelines by 2011; yet rates of internal corrosion related incidents in Alberta have actually declined in recent years.

Carbon Capture and Storage
The Government of Alberta is investing $I.3 billion over I5 years in two large-scale carbon capture and storage (CCS) projects in the oil sands sector. Combined, these two projects will help Alberta to reduce its GHG emissions by 2.76 million tonnes per year- the equivalent of taking 550,000 cars off of the road. The Alberta Carbon Trunk Line project will capture carbon dioxide from an oil sands refinery and fertilizer plant, and then transport it through a

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240 kilometre pipeline to enhanced oil recovery projects in central Alberta. The Sturgeon Refinery will be the first refinery in Canada to have built in carbon capture. This project will store approximately 1.68 million tonnes of carbon dioxide per year. Alberta's other large-scale CCS project, the Quest Project, will capture carbon dioxide from an oil sands refinery and transport it 80 kilometres, where it will be permanently stored over two kilometres below the earth's surface. The Quest Project will store approximately 1.08 million tonnes of carbon dioxide per year. Both projects will begin to come on line in 2015. Recognizing the need to reduce greenhouse gas emissions, both the United States and Alberta have invested human and capital resources into developing CCS projects. Alberta and the United States have collaborated on a number of initiatives related to CCS development, including: the United States-Canada Clean Energy Dialogue, the Carbon Sequestration Leadership Forum, the Interstate Oil and Gas Compact Commission and the Plains C02 Reduction Partnership. Alberta's investment in large-scale CCS projects continues to be an unparalleled investment in CCS for a jurisdiction Alberta's size. Through the sharing ofleamings from these funded projects, Alberta's CCS development program will help the global CCS community to bring down the costs of CCS. ALBERTA ENVIRONMENT AND SUST AINANLE RESOURCE DEVELOPMENT

Integrated Resource Management System ORMS) and Alberta's Monitoring Agency
Alberta is committed to being stewards of our natural resources in ways that safeguard the environment, keep our economy strong, and grow vibrant communities. That is why we have adopted an Integrated Resource Management System -a System that enables the establishment and achievement of the environmental, economic and social outcomes Albertans expect from resource development while maintaining the social licence required to continue to develop our resources. The System is broadly defined, incorporating the management of all resources inclusive of energy, minerals, forestry, agriculture, land, air, water and biodiversity. It is founded upon the province's cumulative effects management approach- the management of the combined effects of past, present and foreseeable future activities on the environment, economy and society over time and in a particular place. As such, it recognizes the finite capacity of our air sheds, watersheds, land-base, ecosystems, and takes early action to manage cumulative impacts. Core elements of the System include: • Clear social, economic and environmental outcomes that provide common goals and management context for all parties operating on Alberta's landscape; • A comprehensive policy assurance program that advances the public interest through both regulatory and non-regulatory tools designed to fit the unique circumstances of the place;

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• • • A robust performance measurement program that enables the measurement, evaluation and reporting of social, economic and environmental conditions relative to stated outcomes; Strong relationships with partners and stakeholders built through meaningful engagement and inclusivity; Continuous improvement of all aspects ofthe System to ensure we learn from our experiences, leverage the expertise and lessons of others, and innovate our way forward; and Systematic and timely adaptation in response to changing conditions and new information.

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A number of key components of IRMS have been or are being realized as follows: Clear outcomes Within the IRMS, the Government of Alberta works with Albertans and other stakeholders to set integrated social, economic and environmental outcomes for resource development. These outcomes are informed by an assessment of cumulative impacts and are translated into integrated provincial policies and land-use plans accordingly. Regional plans represent a key vehicle for setting and achieving outcomes. They are future focused, collaboratively developed, and legally enforceable. Amongst other things, they establish firm environmental limits and related management triggers for air, land, water and biodiversity. Regional planning is well underway within Alberta, with seven regional plans targeted for completion. The Lower Athabasca Regional Plan came into effect on September 1, 2012 and is focused on the oil sands area of northern Alberta. Amongst other things, it sets environmental management triggers and limits for air and surface water quality, and interim management triggers for regional groundwater quality. It establishes six new conservation areas, bringing the total conserved land in the Lower Athabasca Region (the region where oil sands development primarily occurs) to 22 per cent, or two million hectares (~4.9 million acres), while also ensuring continued economic growth. Integrated policy assurance Alberta's policy assurance framework for resource development is effective and efficient, ensuring the orderly development of the province's natural resources while promoting public safety, sustainable environmental management practices, and resource conservation objectives. Alberta has stringent requirements that include sound environmental standards and environmental assessment processes. Alberta has a comprehensive regulatory system for environmental management that is guided by a number of key pieces of legislation including the Environmental Protection and Enhancement Act (EPEA), Water Act, Public Lands Act, and for oil sands development, the Oil Sands Conservation Act. A primary tool used to ensure large industrial projects in Alberta such as oil sands developments occur in a responsible manner is the EPEA approval. Approvals under EPEA lay out conditions for the construction, operation and reclamation of large activities in Alberta in accordance with guiding legislation, regulation, policy, planning and guidance. Conditions include aspects such as limits on releases to the

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environment (air emissions and water effluent discharge for example), monitoring and reporting requirements, and expectations for participation in multi-stakeholder initiatives. These conditions are enforced through a compliance and enforcement program. Prior to any oil sands facility being built, the operator must obtain approvals that ensure achievement of environmental standards and management objectives set out in regulations, policy and plans. Projects undergo a thorough environmental assessment that ensures adequate information is provided by the proponent to make a decision on an activity. The public is given an opportunity to provide input at various stages of the process. The Alberta government has recently enhanced its regulatory system through the Responsible Energy Development Act and development of the new Alberta Energy Regulator (AER) for coal, oil sands, and upstream oil and gas. The AER will maintain the province's strong commitment to environmental management and public safety, while ensuring responsible resource development and conservation. The AER will also greatly improve the efficiency and effectiveness of resource regulation by eliminating duplication. Alberta's Ministry of Environment and Sustainable Resource Development will continue to engage with Albertans and stakeholders on policy development. Science-based environmental monitoring system that provides trusted, accessible data The Government of Alberta, working with key partners and stakeholders, measures, evaluates and reports on our progress in relation to defined outcomes and uses this information to inform both short and long term decision-making. Indicators and perfonnance measures are established for social, economic and environmental parameters with monitoring plans that are designed and implemented accordingly. Robust environmental monitoring, evaluation and reporting are foundational to the IRMS. Alberta is building the most comprehensive environmental monitoring program in Canada with the establishment of a new arm's-length environmental monitoring agency. The agency will ensure integrated and coordinated monitoring of land, air, water and biodiversity; develop scientifically credible standards and operating procedures for environmental data collection and analysis; and provide open and transparent access to scientific data and information on Alberta's environmental condition and trends. The Alberta Environmental Monitoring, Evaluation and Reporting Agency is expected to be operational in April2014, starting first with monitoring for the Lower Athabasca Region and then assuming broader provincial programs. Legislation to enable the Agency, Protecting Alberta's Environment Act, was passed in December 2013.While the new agency is being established, environmental monitoring in the oil sands region continues to be enhanced through a joint Government of Canada and Government of Alberta program announced in February 2012the Joint Canada-Alberta Implementation Plan for Oil Sands Monitoring.

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The Joint Canada-Alberta Implementation Plan for Oil Sands Monitoring, currently in year two of three, has improved our ability to detect changes and identify cumulative impacts across the region and the outcomes to date are: • Monitoring has been enhanced to increase geographic coverage; • The number of monitoring sites have been doubled; • The frequency of sampling has been significantly increased; • Sampling is occurring for more substances using more sensitive detection methods; and • Data associated with this enhanced environmental monitoring is reported and made publically accessible on the Joint Oil Sands Monitoring (JOSP) Information Portal launched in April2013. (www.jointoilsandsmonitoring.ca) Strong relationships with partners and stakeholders The Government of Alberta continues to build and maintain strong relationships with key partners and stakeholders to enable the successful implementation of the IRMS. This includes early and meaningful engagement on the setting of outcomes, on policy development, and on land-use planning processes. Alberta has a number of long-standing multi-stakeholder organizations it can leverage toward relationship building and engagement on environmental and resource management. These include the Cumulative Environmental Management Association in the oil sands area, the Alberta Water Council, and the Clean Air Strategic Alliance which is celebrating its 20th Anniversary this year. An Aboriginal Consultation Office was established on November 1, 2013 to provide leadership, advice and professional expertise to regulatory authorities, proponents and First Nations. The Office will provide certainty that Alberta is meeting its legal duty to undertake aboriginal consultation; ensure all participants have a clear understanding ofthe consultation process and their role(s) within it; and support regulatory processes for land management and resource development that is efficient, effective and fair. Regional Planning: Land-Use Framework and Land-Use Secretariat The Land-Use Framework identifies seven regions for which regional plans will be developed. The regions are based on watershed and municipal boundaries in relation to existing land-uses so the plans can focus on individual regional circumstances in order to meet the particular economic, environment, social outcomes in each region. The Government of Alberta is already implementing a number of innovative strategies under the Lower Athabasca Regional Plan to improve cumulative effects management of oil sands development. Among these is the undertaking of a regional strategic assessment in the south Athabasca oil sands area, where the majority of future oil sands development will occur using in situ methods. This assessment work is being undertaken in collaboration with the Government of Canada and uses state of the art modelling to assess potential cumulative effects to environmental, social, and economic values across a range of in situ oil sands energy development scenarios. The information gathered will be used to support an Aboriginal and stakeholder-informed subregional planning process that will guide future development.

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Another product of the Lower Athabasca Regional Plan was the establishment of ambient triggers and limits for air and surface water quality. Annual reporting on the status of air and surface water quality will ensure that the cumulative effects of development in the Lower Athabasca Region are routinely monitored and evaluated against established triggers and limits in environmental management frameworks. As additional frameworks on biodiversity, groundwater, surface water quantity and tailings are implemented, a full suite of monitoring, evaluating and reporting will be in place in the region. A key component of environmental management frameworks is a commitment to undertake a proactive management response if ambient conditions begin to trend in an undesirable direction. This ensures that the limits, or upper boundaries in the system, are not surpassed, and that environmental quality remains within acceptable limits. In early 2014, environmental status and management response reports will be released for air and surface water quality management frameworks. This tangible action demonstrates the Government of Alberta's cumulative effects management system is working as intended. A landscape management plan and a regional parks plan for the Lower Athabasca region are also under development and are expected to be completed in 2014. The Lower Athabasca Regional Plan also includes objectives and strategies for inclusion of Aboriginal peoples in land-use planning in the region to address potential conflicts, in a manner supportive of Aboriginal traditional uses, such as the exercise of treaty rights. Lower Athabasca Regional Plan The following is a list of the priority deliverables for the Lower Athabasca Regional Plan: • Air and Water Framework Annual Reports • Lower Athabasca Regional Plan Annual Report • Finalization of the conservation areas • Release of the Lower Athabasca Regional Parks Plan • Release of Biodiversity Management Framework • Release of Landscape Management Plan • Release of Regional Strategic Assessment for the Athabasca Oil Sands Area • Release of Tailings Management Framework • updated Surface Water Quantity Management Framework • Release of Groundwater Management Framework Reclamation The Environmental Protection and Enhancement Act requires the reclamation of land used for industrial activities. The Lower Athabasca Regional Plan adopted a progressive reclamation strategy and it includes a suite of initiatives and tools to improve financial security and environmental performance within the oil sands mining sector. There are three key components: 1) An updated mine financial security program; 2) Enhanced reclamation reporting; and 3) Clarification of the reclamation certificate program.

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The updated mine financial security program uses an asset-to-liability approach. It requires approval holders to post an Outstanding Reclamation Deposit when the extent of reclamation carried out does not meet targets in the current Mine Reclamation Plan. The Outstanding Reclamation Deposit is intended to provide an immediate and continuous incentive to reclaim lands that are ready-to-claim throughout the life of the project. The enhanced reclamation reporting system identifies key milestones to better track activities: cleared, disturbed, ready for reclamation, soils placed, permanent reclamation, temporary reclamation and certified. Results are updated annually by operators and are available to the public through State of the Environment reporting and the Oil Sands Information Portal at www .osip.alberta.ca The clarification of the reclamation certificate program will be informed by completion of An Administrative Guide to the Oil Sands Mine Reclamation Certification Process and a preliminary criteria and indicators framework for oil sands mine reclamation developed by the Cumulative Environmental Management Association and recommended to the Government of Alberta in January 2013. DRAFT South Saskatchewan Regional Plan (SSRP) The draft South Saskatchewan Regional Plan was released in October 2013. Throughout November 2013, government conducted public and stakeholder consultation sessions on the draft plan. The Land Use Secretariat and other Government of Alberta ministries continue to engage with stakeholders, municipalities and First Nations to encourage their participation in the consultations of this draft plan. The draft plan's strategies and actions focus on the following initiatives: • Developing an Air Quality Management Framework • Developing a Surface Water Quality Management Framework • Continued flood hazard mapping • Evaluating and enhancing land-use policies • Supporting development of municipal flood-hazard mitigation plans • Greater recognition of stewardship and conservation efforts of landowners and leaseholders (e.g. sustainable grazing practices) • Managing sales and conversion of intact grassland • Managing surface disturbance • Enhancing conservation tools • Consistent management of Green Area - public land use zones • Legislatively protected conservation areas • Enhanced protection for the Castle area • Restoring flood-damaged areas • Designating recreational lands Finalization of the SSRP is targeted for June 2014.

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Regional planning for other regions includes: • Initiating the North Saskatchewan Regional Plan in spring 2014 and finalizing it in 2015, and • Initiating pre-planning on the Lower and Upper Peace, Upper Athabasca, and Red Deer Regional Plans in 2014.
Air and Climate Change Policy

Alberta's climate change strategy takes action on three fronts: 1) Conserving and using energy efficiently- Alberta has demonstrated action through energy efficiency rebate programs, a "greening government" initiative, and a $2 billion investment in public transportation. 2) Implementing carbon capture and storage -Alberta has invested $1.3 billion in two major carbon capture and storage projects for an estimated 2. 76 Megatonne reduction per year. 3) Greening energy production -Alberta is developing an Alternative and Renewable Energy Framework, and has also enabled microgeneration and incented biofuels through the Renewable Fuels Standard and bioenergy credit programs. The Specified Gas Emitters Regulation The Specified Gas Emitters Regulation is the backbone of our climate change management system by setting a price on carbon and mandating greenhouse gas emission reductions. Through this Regulation, we have seen a reduction of about 7 Megatonnes per year off of business as usual, totaling a cumulative reduction of 40 Megatonnes off of business as usual since the Regulation came into force in 2007. Alberta recognizes the importance of investing in innovation and technology to achieve shortand long-term greenhouse gas emission reductions. Through the Specified Gas Emitters Regulation, facilities can pay $15 per tonne of carbon dioxide equivalent to the Climate Change and Emissions Management Fund as a way to comply with the regulation. To date, the Fund has accumulated CAD $398 million, and more than CAD $213 million has been invested through an arms-length Corporation to 51 clean technology projects. In addition, CAD $7 million has been invested in adaptation research, CAD $8 million to biological solutions projects, and CAD $35 million has been committed to the Grand Challenge. The Grand Challenge Climate Change and Emissions Management Corporation (CCEMC) launched the CCEMC Grand Challenge: Innovative Carbon Uses. The international challenge aims to identify new, carbon-based products and markets from captured C02 emissions. It is expected to identify multiple technologies that could provide significant reductions in greenhouse gas emissions by transforming carbon from a waste and liability into an asset. The challenge runs over three phases: • Round one included the global launch with new submissions accepted between February 21,2013 and July 31,2013. In February 2014,20 awards for $500,000 were granted.

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• • Round two will be accepting more comprehensive submissions from March 2015 to July 2015, where original winners can further develop their ideas, and new applicants are still being accepted into the challenge. The awards event will take place in March 2016 where five grants will be awarded for $3 million each. Round three will be accepting only previous winners of the challenge for submission of comprehensive proposals in 2017 with the final grant of$10 million being awarded in an awards event in March 2018. This challenge has the potential to further not just Alberta's clean energy goals, but also the world's.

Climate Change Strategy Alberta's 2008 Climate Change Strategy sets provincial emission reduction targets for 2020 and 2050. Recognizing that we are halfway to 2020, Alberta has embarked on a renewal of the Climate Change Strategy to explore policy and program options to ensure we achieve our commitments. This renewal includes an update to the Specified Gas Emitters Regulation that is set to expire September 2014. There are several factors to be considered in the renewal of the Climate Change Strategy, including: • Establishing regulatory stability through affirming clear targets and objectives; • Allowing for cost-effective reductions through a flexible, market-based system; • Achieving emission reductions in the short and long-term through investment in research, innovation and technology; • Achieving reductions across the economy, including large industry, agriculture, transportation and more; and • Working with other jurisdictions to establish consistent measures and reporting methods and enhanced dialogue to further the collective goal of reducing greenhouse gas emissions. Key policy questions to be addressed in the renewal of the Regulation include the price of carbon, the stringency of reduction of greenhouse gas emissions required by regulated facilities, and the threshold or size of facilities that fall within the regulation. Alberta is also evaluating linkages to other provinces and states as part of this review and update - as regional approaches in North America are evolving. Oil Sands Information Portal Alberta recognizes the importance of being transparent and providing credible, timely information to stakeholders and the public. Alberta's Oil Sands Information Portal (found at www.osip.alberta.ca) is a map-based website that provides information on the environmental management of oil sands, ranging from air quality, to water use, to tailings size, to greenhouse gas emissions. Air Quality Management Air quality in the Fort McMurray area is monitored 24 hours a day, 365 days a year at approximately 16 monitoring sites. Air quality in the oil sands region is rated to be of Low Health Risk- the best air quality level - 96 per cent of the time.

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Wetlands In September 2013, Alberta released a new provincial wetland policy, which focuses on wetland values. Under this new policy, wetlands across the province, including those in areas of oil sands development, will be more effectively managed through planning processes which will consider the functions and benefits they provide. In particular, development requirements will be guided by the following policy elements: • • • • Wetlands of the highest value are protected for the long-term benefit of all Albertans; Wetlands and their benefits are conserved and restored in areas where losses have been high; Wetlands are managed by avoiding, minimizing and, if necessary, compensating for impacts; and Wetland management considers regional context.

This new policy will help to conserve, restore, protect, and manage Alberta's wetlands to sustain the benefits they provide to the environment, society, and the economy. Water Management Oil sands operators recycle large volumes of water and use saline water where possible. Technology and experience are making operations more efficient all the time. Alberta has strong regulatory tools and policies in place to ensure water use in the oil sands is sustainable. For example, there are strict limits on water use from the Athabasca River by oil sands mines. The Athabasca River Water Management Framework sets mandatory limits on withdrawals from the lower Athabasca River that maintains flows at or near the naturally fluctuating flow conditions in order to maintain biodiversity. The current cumulative withdrawal rate of oil sands projects from the Athabasca River is less than 1 per cent of the long-term average annual flow of the Athabasca River, and less than 3 per cent of the long-term average winter flow from January to March. In 2012, oil sands water usage was 0.6 per cent of the long-term average annual flow. Updates are being finalized to this current management system to further tighten the water management requirements, particularly during periods of low flow, for both current and new oil sands developers. Tailings Management Managing tailings ponds, which are components of oil sands mining operations, is a priority for Alberta. The Alberta Energy Regulator has aggressive criteria for reducing the growth in volume of fluid fine tailings and achieving trafficable deposits that enable reclamation activities to proceed. In 201 0 Suncor successfully reclaimed Pond 1, providing assurance that reclamation of tailings ponds is indeed feasible. Work is underway to develop a more comprehensive tailings management framework, which will consider the full life cycle of tailings, to promote and drive more progressive reclamation, which is a key focus of the Lower Athabasca Regional Plan.

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Biodiversity The Alberta Biodiversity Monitoring Institute (an ann's length agency that uses world class, peer reviewed scientific protocols for its work) reports that the Athabasca Oil Sands Area has a species intactness index of 94 per cent (20 13 ).

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APPENDIX 1: Summary of Funded Climate Change and Emissions Management Corporation (CCEMC) Projects -Alberta Environment and Sustainable Resource Development Round 6: Four energy efficiency projects funded for a total of$9.6 million from CCEMC. Project: Electrical Power Generation from Multiple Waste Heat Sources CCEMC Funding: $4,881,763 Project Value: $14,868,020 Estimated to Reduce: 162,197 tonnes of C02e by 2020 Genalta Power is developing a waste heat to power project in central Alberta that will address multiple, economically-challenging waste heat opportunities with an integrated design approach that will reduce operating costs and GHG emissions and increase power reliability at the plant, providing enough electrical power from waste sources to keep the plant running during grid interruptions, dynamically-matching generation capacity with electrical demand to avoid costly outages and downtime. The MIS'fTM (multiple-input single-turbine™) waste energy recovery system will be the backbone of the installation providing emission-free power from multiple uneconomic waste energy sources. By offsetting grid generated power, this project will reduce GHG emissions by 400,000 tonnes over 20 years and employ over 50 people in engineering and construction as well as supporting two long term positions. Project: Reducing the Energy and Emission Intensity of Producing a Barrel of Oil Sands Bitumen - ORC waste heat recovery. CCEMC Funding: $1,951,581 Project Value: $5,854,695 Estimated to Reduce: 24,219 tonnes of C02e by 2020 The project involves the installation of an Organic Rankine Cycle (ORC) turbine to harness lowgrade waste heat from the glycol cooling process. The ORC turbine uses the waste heat to generate electricity. The project will generate an estimated 5 to10% ofthe facility's power requirements, offsetting the requirement for grid electricity and reducing GHG emissions.

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Round 7: Eight renewable energy projects funded for a total of $46.8 million from CCEMC. Project: Implementation of High Solids Anaerobic Digestion Technology at the Edmonton Waste Management Centre. CCEMC Funding: $10,000,000 Project Value: $30,695,174 Estimated to Reduce: 198,570 tonnes of C02e by 2020

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This project will see the diversion of 40,000 tonnes per year of organic solid wastes to the new High Solids Anaerobic Digestion Facility located at the Edmonton Waste Management Centre. This facility will generate renewable energy from biogas produced through processing of the organic fraction of municipal solid wastes, reducing greenhouse gas emissions by displacing fossil fuel sources, and avoiding landfill methane emissions through enhanced waste diversion activities. It represents a joint approach between the City of Edmonton and the University of Alberta and will focus on processing residential and industrial, commercial, and institutional organic solid waste materials into renewable energy and value-added products. During construction this project is anticipated to create up to 50 jobs, and approximately I 0 jobs will be directly and indirectly generated during the operation of the High Solids Anaerobic Digestion Facility. Project: Wintering Hills Wind Power Project- Battery Storage Demonstration Pilot CCEMC Funding: $9,207,063 Project Value: $18,414,126 Estimated to Reduce: No reductions until deployment. Suncor Energy, in conjunction with Teck, is proposing to install a 3 megawatt I 6.9 megawatt hour battery at the existing Wintering Hills Wind Power Project to test the feasibility of shifting power from off-peak periods to on-peak periods and participation in ancillary energy service markets. Wind power is an intermittent form of renewable energy and battery storage has the ability to make the power supply available as needed instead of as generated. A battery could also provide quick power ramp-up and ramp-down service, as well as help balance the electrical grid. In all of this, the project has the potential to reduce GHG emissions by permitting zero emitting renewable energy generation to reliably interconnect to, and operate within, the grid and by displacing fossil fuel generation facilities as an electrical grid balancing source.

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