Decision 24027-D01-2019

Imperial Oil Resources Limited

Time Extension for Kearl Cogeneration Plant Phase 2 and Phase 3 Completion Dates

February 13, 2019

Alberta Utilities Commission Decision 24027-D01-2019 Resources Limited Time Extension for Kearl Cogeneration Plant Phase 2 and Phase 3 Completion Dates Proceeding 24027 Application 24027-A001

February 13, 2019

Published by the: Utilities Commission Eau Claire Tower, 1400, 600 Third Avenue S.W. Calgary, Alberta T2P 0G5

Telephone: 403-592-8845 Fax: 403-592-4406

Website: www.auc.ab.ca

Alberta Utilities Commission Calgary, Alberta

Imperial Oil Resources Limited Decision 24027-D01-2019 Time Extension for Kearl Cogeneration Plant Proceeding 24027 Phase 2 and Phase 3 Completion Dates Application 24027-A001

1 Decision summary

1. In this decision, the Alberta Utilities Commission must decide whether to approve an application from Imperial Oil Resources Limited for a time extension to complete Phase 2 and Phase 3 of the Kearl cogeneration power plant in the Kearl Project area. After consideration of the record of the proceeding, and for the reasons outlined in this decision, the Commission finds that approval of the time extension request is in the public interest.

2 Introduction and background

2. Imperial Oil Resources Ventures Limited, pursuant to Approval 21562-D02-2016,1 has approval to construct and operate a 219-megawatt power plant, designated as the Kearl Power Plant, in the Kearl Oil Sands Project area. Imperial Oil Resources Ventures Limited, pursuant to Order 21562-D03-2016,2 has approval for the Kearl industrial system designation.

3. Imperial Oil Resources Limited (Imperial), pursuant to Section 19(1) of the Hydro and Electric Energy Act and by Application 24027-A001, registered on November 2, 2018, applied to the Commission seeking a time extension to complete construction of the Kearl Power Plant at the Kearl industrial complex. Phase 1 was completed in 2015. Imperial requested to extend the Phase 2 completion date from December 31, 2018 to December 31, 2021, and the Phase 3 completion date from December 31, 2022 to December 31, 2025.

4. On December 19, 2018, the Commission granted Imperial an interim extension of Approval 21562-D02-2016 until a final decision is made on the application, under Subsection 8(5) of the Alberta Utilities Commission Act.

1 Power Plant Approval 21562-D02-2016, Proceeding 21562, Application 21562-A001, May 17, 2016. 2 Industrial System Designation Order 21562-D03-2016, Proceeding 21562, Application 21562-A001, May 17, 2016.

Decision 24027-D01-2019 (February 13, 2019) • 1 Time Extension for Kearl Cogeneration Plant Phase 2 and Phase 3 Completion Dates Imperial Oil Resources Limited

3 Discussion

3.1 Time extension 5. Imperial stated that it was requesting additional time to complete the project and to evaluate the configuration and timing for future phases. Imperial explained that the following reasons have resulted in delays to the Phase 2 and Phase 3 completion dates:

• Imperial is optimizing operational activities and stabilizing production to attain current design capacity while evaluating development options for future capacity which may occur over the period of 2025-2027.

• Imperial is planning the timing and configuration of future cogeneration for its mining and steam-assisted gravity drainage projects, following the release of the Carbon Competitive Incentive Regulation in December 2017.

• Imperial is considering the provincial policy initiatives and incentives regarding carbon strategy, capacity market design, implementation plans and the possible impacts to the electricity market and cogeneration operations.

6. Imperial stated that the steam and power requirements of the Kearl Oil Sands Project are being re-evaluated and that it anticipated making a decision in 2019 confirming the business case for additional steam and power. Imperial added that after making that decision, potential upgrades to the entire generation system would be subject to a subsequent amendment application.

7. Imperial submitted that the evaluation of power system upgrades defer the immediate need for Phase 2 implementation, and that in the short term, it would continue to supply its electricity needs for Kearl through a combination of the existing Phase 1 of the power plant and power purchases from the Alberta Interconnected Electric System.

8. Imperial stated that a participant involvement program was conducted as part of its public consultation program for the Kearl Oil Sands Project in 2005. Imperial submitted that it regularly consults and engages with various Indigenous groups, and that no concerns were raised regarding the project’s proposed time extension.3

9. Imperial further stated that the request for a time extension does not affect the approved design or change the assessed environmental impact. Imperial also stated that noise impacts, air emissions and land use are consistent with the original application and current approvals.

10. Imperial provided an updated noise impact assessment that it had submitted to the AUC for review in Proceeding 2522,4 for an expansion to the Kearl Main 9900S Substation, which is located within the Kearl Oil Sands lease boundary.5 Imperial explained that, with the exception of Imperial’s North Sands Lodge work camp, there are no new dwellings within 1.5 kilometres of the project. Imperial further explained that it remains compliant with the daytime and

3 Exhibit 24027-X0006, AUC Proceeding 24027 IR 1 to 3 Response Dec 13 2018, PDF page 2. 4 Proceeding 2522, Alteration of Kearl Main 9900S Substation. 5 Exhibit 24027-X0008, Attachment 2 AUC Proceeding 2522 NIA.

2 • Decision 24027-D01-2019 (February 13, 2019) Time Extension for Kearl Cogeneration Plant Phase 2 and Phase 3 Completion Dates Imperial Oil Resources Limited

nighttime permissible sound levels defined in Rule 012: Noise Control because the energy operators in proximity to the project have not changed, the sound environment around the project is not expected to have changed and there have been no changes to equipment configuration.6

11. Imperial confirmed that the project’s wildlife surveys remain current and do not require further updating. In October 2018, Imperial received an approval from the Alberta Energy Regulator under the Environmental Protection and Enhancement Act to allow for the continued development and operation of the Kearl project. Imperial submitted that it regularly engages with Alberta Environment and Parks (AEP) regarding wildlife survey and collection through on-site inspections, annual permit applications, and monthly and annual wildlife reports. Imperial added that all inspections and reports have been satisfactory to AEP.

12. Imperial confirmed that a historical resources impact assessment for the Kearl main plant site was conducted in 2004 and that no historical resource deposits were identified and no further pre-development assessment was recommended for the area. Imperial emphasized that Historical Resources Act approval was not required as there are no lands with assigned historic resource values near the project area.7

3.2 Ownership change 13. On December 18, 2018, Imperial submitted a notice of company reorganization confirming that, effective January 1, 2017, Imperial Oil Resources Ventures Limited would amalgamate and continue as Imperial Oil Resources Limited.8

14. On December 31, 2016, Imperial Oil Resources, an Alberta limited partnership, was dissolved. On January 1, 2017, its two partners, Imperial Oil Resources Ventures Limited and Imperial Oil Resources Limited; and McColl-Frontenac Petroleum ULC were amalgamated and continued as Imperial Oil Resources Limited.

15. In response to additional information requests, Imperial filed copies of its Declaration of Dissolution of Partnership document and Certificate of Amalgamation. Imperial confirmed that it is incorporated under the Alberta Business Corporations Act, that it is a wholly owned subsidiary of Imperial Oil Limited and that ExxonMobil Properties has a 29.04 per cent interest in the Kearl cogeneration facilities.

4 Findings

16. Imperial has provided information on the need, nature and duration of the requested time extension. Based upon the information provided, Imperial has demonstrated that the requested time extension is of a minor nature and would not materially affect any technical aspects of the power plant.

17. The Commission is satisfied that, based on Imperial’s ongoing community consultation program, potentially affected stakeholders were notified of the requested time extension and that no outstanding objections or concerns were identified.

6 Exhibit 24027-X0006, AUC Proceeding 24027 IR 1 to 3 Response Dec 13 2018, PDF pages 4 and 5. 7 Exhibit 24027-X0006, AUC Proceeding 24027 IR 1 to 3 Response Dec 13 2018, PDF page 6. 8 Exhibit 24027-X0010, Notice of company reorganization.

Decision 24027-D01-2019 (February 13, 2019) • 3 Time Extension for Kearl Cogeneration Plant Phase 2 and Phase 3 Completion Dates Imperial Oil Resources Limited

18. Having regard to the nature of the application and Imperial’s confirmation that there are no concerns from potentially affected stakeholders, the Commission is satisfied that a hearing into the proposed time extension is not required and that it is unnecessary to issue a notice of application.

19. The Commission has determined that the ownership change of the Kearl Power Plant and the Kearl industrial system designation from Imperial Oil Resources Ventures Limited to Imperial Oil Resources Limited would not materially affect any technical aspects of the Kearl Power Plant and the industrial system designation. In accordance with the requirements of Section 23 of the Hydro and Electric Energy Act, Imperial is incorporated under the Business Corporations Act. Based upon the information provided, the Commission is satisfied that Imperial is eligible to hold the industrial system designation order and power plant approval in its name.

20. The Commission notes that an amendment to Order 21562-D03-2016 would be required in order to reflect the requested time extension of the power plant facilities forming part of Imperial’s Kearl industrial system designation.

21. The Commission considers that material delays in project timelines that require project amendments can significantly alter the impacts of a project and may result in a project no longer being considered to be in the public interest. However, based on the circumstances and location of this project in this amendment application, the Commission finds that a time extension would not result in significant changes to the impacts affecting local landowners and third-party facility owners in the area, or the environment.

22. Based on the foregoing, the Commission considers the requested time extension to be in the public interest in accordance with Section 17 of the Alberta Utilities Commission Act. The Commission grants Imperial an extension of the construction completion dates to January 31, 2022, for Phase 2 of the project and January 31, 2026, for Phase 3 of the project.

23. The Commission notes that this is the third time extension application for the Kearl Power Plant. The power plant’s original construction completion date was stipulated as December 31, 2014, for Phase 1; December 31, 2016, for Phase 2; and December 31, 2020, for Phase 3. Phase 1 was built after one time extension; however, the Commission has granted two subsequent approvals extending the construction completion dates for Phase 2 and Phase 3 of the power plant, as well as an amendment to alter the capacity of the power plant. This time extension results in project construction completion dates for Phase 2 and Phase 3 that are five years after the original application approval dates.

24. The Commission considers that, in the event that Imperial comes forth with a subsequent application to substantively vary the design or specifications of the power plant, or comes forth with requests for additional time extensions, the Commission will re-evaluate at that time what requirements must be met for ensuring that any new project development remains in the public interest. Such re-evaluation could result in the requirement for Imperial to file updated participant involvement program information, noise impact assessment or environmental assessment.

4 • Decision 24027-D01-2019 (February 13, 2019) Time Extension for Kearl Cogeneration Plant Phase 2 and Phase 3 Completion Dates Imperial Oil Resources Limited

5 Decision

25. Pursuant to sections 11 and 19 of the Hydro and Electric Energy Act, the Commission approves the application and grants Imperial Oil Resources Limited the approval set out in Appendix 1 – Power Plant Approval 24027-D02-2019 to construct and operate the Kearl Power Plant.

26. Pursuant to Section 4 of the Hydro and Electric Energy Act and sections 2(1)(d) and 117 of the Electric Utilities Act, the Commission approves the application and grants Imperial Oil Resources Limited the approval set out in Appendix 2 – Industrial System Designation Order 24027-D03-2019 for the Kearl industrial complex.

27. The appendices will be distributed separately.

Dated on February 13, 2019.

Alberta Utilities Commission

(original signed by)

Tracee Collins Commission Member

Decision 24027-D01-2019 (February 13, 2019) • 5