RESPONSIBLE CAREThe verification also focused on continual improvement performance objectives and...

RESPONSIBLE CARE®

Verification ReportNexen Inc.

October 4 - 8, 2010

Canadian Oil and Gas Division

Disclaimer

This report has been produced by a team, convened by the Chemistry Industry Association of

Canada (CIAC), to provide advice to the member-company and assist it in meeting its

Responsible Care® commitments. The material in this report reflects the team's best judgment in

light of the information available to it at the time of preparation. It is the responsibility of the

CIAC member-company that is the subject of this report to interpret and act on the report’s

findings and recommendations as it sees fit. Any use which a third party makes of this document,

or any reliance on the document or decisions made based upon it, are the responsibility of such

third parties. Although CIAC members are expected to share the results of this guidance

document with interested parties, the Association, its member-companies, their employees,

consultants and other participants involved in preparing the document accept no responsibility

whatsoever for damages, if any, suffered by a third party as a result of decisions made or actions

based on this report.

Responsible Care® is a registered trademark of the Chemistry Industry Association of

Canada.

Nexen Inc. Canadian Oil & Gas Division In-Place Verification Page 2

EXECUTIVE SUMMARY This Responsible Care-in-Place verification was conducted on October 4-8, 2010. The verification was based on visits to the organization’s head office in Calgary as well as facilities at Fort Assiniboine and Medicine Hat, Alberta and Fort Nelson, British Columbia. Information was compiled through interviews, documentation reviews and inspections at these locations. The in-place verification was conducted by a three person team appointed by the Chemistry Industry Association of Canada (CIAC), supplemented by four local community members, representing each facility. The team used the top-down questioning approach described in the “Responsible Care-in-Place Protocol”. The questions focused on the management processes present rather than detail, and tested for the existence of effective management systems to ensure understanding of the Responsible Care codes and ethic. The verification also focused on continual improvement performance objectives and that adequate levels of resources were available for the Responsible Care commitment. Based upon this verification the team considers that Nexen Inc. Canadian Oil and Gas Division has achieved the required standard for Responsible Care In-Place certification, and that the CIAC officially recognize this verification with an award at the next suitable occasion. As well as in the body of the report, a listing of Improvement Opportunities and Best Practices is included in Section 3. Dave Mack Verification Team Leader December 17, 2010


1. INTRODUCTION

In this report, comments and recommendations of the verification team are shown in italics. Any comments on improvements the team considers as value-adding to the organization’s continual improvement of their management systems are identified as “Improvement Opportunities”. Positive comments on performance, which may be considered as being indicative of leading industry practice or which goes beyond the requirements of Responsible Care-in-Place implementation, are underlined. These are identified as “Best Practices” Objective Each partner company of the CIAC must commit to the guiding principles and codes of practice of Responsible Care as a condition of partnership in the association.

The Responsible Care-in-Place protocol was developed by the association's members and others to confirm, for the CIAC and the public, the existence of a satisfactory system or process which ensures that the guiding principles and codes of practice of Responsible Care are in place and practised within the organization.

Each partner company must therefore undergo Responsible Care-in-Place verification before its commitment can be formally recognized as complete.

It should be noted here that "completion" in this sense does not indicate that nothing further needs to be done, but rather that a key milestone has been reached in a process of continual improvement.

1.1 Verification Criteria The six codes of practice of Responsible Care contain altogether 151 individual requirements which partner companies must meet for Responsible Care to be in place. More information on what is expected is given in the documents Guidelines for Completion of Responsible Care Implementation issued on February 20, 1992 and Community Awareness Code Guidelines for Completion issued on February 25, 1994.

The verification principles are set out in the Responsible Care-in-Place Protocol approved by the association's board of directors on February 9, 1994 and updated in March 2005. For the purposes of examination, a portion of the 151 code requirements are sampled in depth. These items are grouped into seventeen management systems, each of which is examined using a series of questions. Some of the questions are sent to the company in advance of the verification visit, so that supporting documentation, etc. can be available for prompt examination if desired. Additional questions are asked at the discretion of the team during the visit.

Questions are generally of the following nature:

does the organization have an effective management system in place to ensure understanding of Responsible Care?

what is the process to determine and communicate the acceptable level of performance?


what is the process for assessing the performance of the system and effecting follow-up to meet or exceed the acceptable level of performance?

what is the process for ensuring up-to-date documentation? do sufficient resources appear to be, or are thought by employees to be, in place?

The findings for each of the seventeen management systems are described in section 2 of this report, and include comments derived from the supplementary questions where appropriate.

1.2 The Verification Team The verification team for Nexen Inc. Canadian Oil and Gas Division consisted of the following persons:

Name Affiliation Representing Dave Mack Consultant Industry (Team Leader) Alec Robertson Consultant Industry Keith Purves External Member Public & Community at Large James Childs Community Representative Fort Nelson Mary Anne Lehman Community Representative Fort Assiniboine Brenda Doupe Community Representative Wetaskiwin/Camrose Barry Rudd Community Representative Medicine Hat

1.3 Process The verification was conducted by a pre-meeting at the Calgary head office on September 09, 2010, followed by verification team visits on October 4-8, 2010.

1.4 Key organization contacts during the process were as follows:

Name Location Title Aaron Chaffey Fort Assiniboine Analyst HSE&SR Al Seredynski Calgary

COG Production Engineer (well optimization / workovers)

Bill Arling Calgary Manager Environment

Bill Gourley Calgary Team Lead Social Responsibility Blaine Sebry Calgary General Manger – Production Operations & RC

Executive Contact Bob Cargill Fort Nelson/Fort Assiniboine PSM/MOC & Small Project Coordinator (Shale

Gas & CBM Bus. Units) Brent Jessiman Calgary Regional Manager HSE&SR & RC Brian McAusland Calgary Manager Responsible Care Brock Johnson Fort Nelson Operations Manager (In-boarding) Bruce Bunting Fort Nelson/Fort Assiniboine Safety / Environmental Coordinator (Shale Gas

& CBM Bus. Units) Cam Foss Medicine Hat Operations Manager Carolyn Kenney Calgary Environmental Engineer Catherine Hughes Calgary Sr. VP Ops Tech / HR Claire Serdula Calgary Environmental Engineer Dale Dechief Fort Nelson/Fort Assiniboine Operations Manager (Out-boarding)


Name Location Title Darcie Park Calgary Manager Sustainability Reporting Darlene Hanley Calgary Senior Executive Assistant (ISN support) Dave Girard Calgary VP COG HR David Guss

Calgary Manager Process Safety & Corporate Audit

David White Calgary Manager Well Construction Eamonn O’Brien Calgary Senior Safety Manager Elizabeth Oldfield Calgary Analyst Social Responsibility Eric Miller Calgary Sr. VP General Council / Security Garry Mann Calgary General Manager Health, Safety & Environment Gary Nieuwenburg Calgary Executive VP – Canada Greg Denham Calgary Sr. Abandonment and Reclamation Coord. James Duxbury Calgary Responsible Care Analyst Jim Shaw Calgary Mgr. Community Affairs Katrisha Gibson Calgary GM Natural Gas & Power Marketing Kelly Kowalchuk Calgary VP HSE&SR Kent Wirth Medicine Hat Foreman Production Med Hat Kevin Bremner Calgary Manager Tech Services Supply Management Kirk Albertson Fort Assiniboine Foreman Production CBM Leanne Sandau Fort Nelson Administrative Assistant Lisa Graul Calgary Manager Environment Lyle Stang Calgary Manger Safety Lynn McQueen Calgary Analyst Social Responsibility Lynn McQueen Fort Assiniboine Analyst Social Responsibility CBM W5 Marci Marshall Medicine Hat Administration Co-ordinator Marie Sopko Calgary Manager Occupational, Health & Industrial

Hygiene Mark Futrell Medicine Hat PSM/MOC & Small Project Coordinator Martin Mueller Calgary VP & Chief Compliance Counsel Marvin Romanow Calgary President & CEO Nathan Meier Medicine Hat Safety / Environmental Coordinator Nyssa Carruthers Calgary Emergency Management Technician Perry Kuzma Calgary Sr. Staff Advisor Security Pierre Alvarez Calgary VP Corporate Relations Rick Cloutier Calgary Manager Operations Procurement Sandi Mourisseau Calgary Corporate Relations Sean Britton Fort Assiniboine Operations Manager (In-boarding) Shad Watts Calgary Director CCRA Shawna McEwen Calgary Analyst – HSE&SR Compliance Systems &

COG Integrity Leader Sheryl Buxton Fort Assiniboine Administration Co-ordinator CBM W5 Shyla O’Connor Calgary Admin Coordinator– Marketing HSE Tanis Palmer Fort Assiniboine Administration Co-ordinator CBM W4 Terry Hellman Fort Nelson Foreman Shale Gas Trish Cubitt Calgary Admin Assistant COG Production / Operations Warren Korol

Calgary Manager Facilities Engineering Shale Gas (expertise - Cornerstone MS)


1.5 Nexen Inc. Canadian Oil and Gas Division Background Information Nexen is a Canadian based energy company with operations around the world, including the North Sea, the Gulf of Mexico, offshore West Africa, Canada, Yemen, and Colombia. With more than 4,000 employees worldwide, the primary offices are located in Calgary, Alberta, Dallas Texas, Uxbridge and Aberdeen in the United Kingdom. The company was formed in Canada in 1971as Canadian Occidental Petroleum Ltd., when Occidental Petroleum Corporation combined its Canadian crude oil, natural gas, sulphur and chemical operations into one company. Nexen operates four distinct divisions (i.e., Synthetic Oil, Canadian Oil & Gas, U.S. Oil & Gas and International Oil & Gas). The Canadian Oil & Gas division, the subject of this verification, includes conventional natural gas production operations in Alberta, Saskatchewan and northeastern British Columbia. There are also coal bed methane production operations in north central Alberta and shale gas production operations in northeastern British Columbia.

2. FINDINGS

The headings which appear below are brief summaries of each topic item rather than the detailed questions actually used during the verification. For more information on the actual questions and the verification protocol please contact the CIAC’s Responsible Care office at (613) 237 6215, fax (613) 237 4061

2.1 Set Organization and Responsibilities 2.1.1 Organization and personal involvement - CIAC Executive Contact Background: The implementation of Responsible Care has been established as a key objective within the Canadian Oil & Gas Division of Nexen and is part of the organization’s identity. This is clearly aligned with the organization’s health, safety, environment and social responsibility key objectives. The Responsible Care ethic is well understood and guides the division’s day to day functional and business decisions including relationships with the community. At the executive level of the organization a clear commitment was evident to the promotion of the Responsible Care ethic throughout the organization. The CIAC Executive Contact, who is the General Manager of Production Operations, has related personal goals in this regard. The Executive Contact plays an active role in monitoring Responsible Care implementation progress through regular stewardship meetings and day to day involvement. A functional manager who reports to the Executive Contact has the overall accountability for Responsible Care implementation. This manager is supported by an individual assigned to oversee the entire implementation activity, others who focus on specific codes of practice, and an administrator to manage documentation. The Executive Contact attends the CIAC Western Leadership Committee meetings.


Improvement Opportunity:

1) Establish a process to ensure continued promotion and support for Responsible Care throughout the organization and to sustain the current momentum into the future.

2.1.2 Overall Responsible Care Management System Background: A comprehensive health, safety, environment and social responsibility management system has been established, based upon a plan-do-check-act continual performance improvement cycle.

Planning elements include: o Legal and other requirements; o Hazard and Risk Identification; and o Objectives and targets.

Doing elements include: o Preventive and protective measures; o Emergency prevention, preparedness and response; o Competence and training; o Communication and awareness; o Procurement and contracting; and o Management of Change.

Checking elements include: o Monitoring and measurement; o Incident investigation and analysis; o Internal audits; and o Preventive and corrective action.

Acting elements include: o Management review; and o Continual improvement.

The overall management system has been supplemented by a series of specific operational standards which address environment, occupational safety, transportation/product stewardship, process safety, and community involvement, all of which have been clearly cross referenced to the Responsible Care Codes of Practice. Although all of these standards have been given a high priority for implementation in all areas, specific emphasis has been placed on process safety. Given its scope and complexity, a risk based approach has been used to identify implementation priorities. There is a plan in place to have all aspects of process safety management implemented in all areas by 2013. Improvement Opportunities:

i) Establish and implement a plan and schedule to ensure for timely review and implementation of new standards in all areas, and their incorporation into local procedures.

ii) Expedite implementation of the process safety management program according to, or earlier than, the current plan to have this completed by 2013.

Best Practices:

i) The entire Responsible Care management system structure with supporting standards and procedures, including its roll out and implementation throughout


the organization, which incorporates a process for end user input to maximize understanding and acceptance of the standards.

ii) The clear emphasis in the Responsible Care management system, and the explanation therein, on the plan-do-check-act continual performance improvement cycle.

iii) The process safety management system currently being implemented. iv) The “communities of practice” forums where best practices can be shared across

the organization. 2.1.3 Staff responsibilities and performance Background: Roles & responsibilities are well defined from the senior management through to the grass roots level. Through a computerized process referred to as “Performance Excellence and Action through Knowledge” business goals and objectives are arranged and tracked. These include Responsible Care related objectives. Each level of management sets their goals and objectives as records in the process. The direct reporting employees of these managers then set their goals and objectives therein to align with management. This keeps groups working to the same end. There is a documented policy for performance and career communication, and there is an incentive bonus program in place which includes an element of safety and environmental performance. There is also an employee recognition program in place to recognize those who make significant contributions to the success of the organization. Improvement Opportunities:

i) Follow-up to ensure that all contract operators are receiving performance evaluations.

ii) Consider including contract operators in the safety and environmental performance aspect of the incentive bonus program.

2.1.4 Organization and personal involvement - Site Managers Background: The managers of all field production operations report directly to the General Manager of Canadian Oil and Gas Production Operations, who is also the CIAC Executive Contact. As well as being responsible for natural gas production, related cost control, and personnel in their individual business units, those field production operations managers have direct accountability for the implementation of Responsible Care within their sphere of control. They are supported in this by divisional and field co-ordinators who focus primarily on all aspects of Responsible Care Code of Practice compliance. At the field level of the organizational commitment to the Responsible Care ethic was evident at all levels. Improvement Opportunity:

i) Review the organization’s policy for diversity in the workplace and promote hiring practices in all areas that are representative of local demographics. It was observed that field personnel were predominantly male caucasian.


2.1.5 Employee understanding of Responsible Care Background: Through interviews and informal discussions with employees across the organization a good understanding of the Responsible Care was evident. Most field employees were able to articulate how the ethic in some way related to their day to day work activity. Best Practice:

i) The emphasis placed on promoting the understanding of the Responsible Care ethic and management systems as well as the acceptance of personal responsibilities and accountabilities for implementation throughout the organization.

2.2 Meet and Exceed Laws and Regulations Background: Oil and gas operations are extensively regulated through federal and provincial government agencies. A cross reference document has been created to ensure that all applicable regulatory requirements are addressed within the health, safety, environment and social responsibility standards noted in section 2.12 of this report. A regulatory management process has been established to help staff manage regulations. Regulatory subject matter experts at both the divisional and field levels of the organization play a key role in ensuring that changes to the regulations are reflected within the above standards. New training requirements, inspection, or other criteria resulting from changes to regulations are identified and implemented.

2 .3 Inform Public, Understand and Respond to Their Concerns 2.3.1 Outstanding charges etc. Background: There were no regulatory actions, charges, orders, etc, applicable to the Canadian Oil and Gas Division of Nexen at the time of the site visits. 2.3.2 Identification of community interests and representatives Background: For its coalbed methane operations in central Alberta, two community sectors have been identified. One of these areas includes the cities of Wetaskawin and Camrose and the village of Donalda. In this area interface occurs with a group referred as the Wetaskiwin Synergy Initiative which was established to develop a working relationship between the community and energy companies. The other community area includes the hamlet of Fort Assiniboine, the east side of Woodlands County and a portion of Barrhead County. In this area interface occurs with a similar group referred to as the Fort Assiniboine and Area Multi-stakeholder Alliance.


For its shale gas operations, the town of Fort Nelson, British Columbia has been identified as the centre for community outreach activity. The location of shale gas operations is in a remote bush area approximately 100 kilometres north of the town. There are a number of other companies operating the area and, along with Nexen, a group referred to as the Horn River Basin Producers Group has been established to provide a co-ordinated approach to multi-stakeholder communications. Shallow gas operations are carried out in rural areas around Medicine Hat, Alberta. Although a formalized community group has not been established for communications, a number of key stakeholders representing landowners and municipalities have been identified to interface with. To assist in community outreach activity an external stakeholder grid has been established to effectively prioritize and graphically illustrate, on one page, all stakeholders and groups within each operating area. The grid identifies stakeholders by level of interest and influence in the area. Improvement Opportunities:

i) Expedite completion and implementation of the aboriginal relationships policy currently being developed.

ii) Research how the traditional way of life in the shale gas area might be impacted especially if the organization expands operations further to the north and west where several first nations live other than those in the current area of operations. (Note: Useful information may be find in the document entitled “Fort Nelson First Nations Submission on EnCana’s Cabin Gas Project Environmental Assessment”)

Best Practices:

i) The entire community outreach program which has clearly established the organization as a model corporate citizen in the oil and gas industry.

ii) The external stakeholder grid used to determine the extent of site specific community outreach initiatives.

2.3.3 Process for risk communication and community dialogue Background: Initial communication of operational risks (e.g., worst case scenarios) for all new projects occurs through the regulatory approval process where any member of the public who may be adversely impacted by the project is required to be informed. On-going community dialogue occurs through the involvement with identified stakeholders as described above in section 2.3.2 of this report, and through annual neighbourhood visits from plant personnel, distribution of informational flyers, etc. This is supplemented by the distribution of newsletters and brochures. Improvement Opportunity:

i) Establish a process to regularly assess neighbour awareness of risks and what to do in the event of an emergency.

Best Practice:

i) Community involvement training provided for shallow gas area based field operators.


2.3.4 Response to community concerns Background: There is a documented public complaints standard in place which defines the minimum requirements to effectively receive, record, and follow-up on all complaints made by stakeholders. The organization is open to receiving complaints and encourages stakeholders to use various channels to address their issues (e.g., communication to field staff in the area, calls of visits to regional offices, or use of Nexen’s toll-free Community Hotline). Improvement Opportunities:

i) Bring additional focus to aligning community expectations with the organization’s ability to deliver. There is an example in the shale gas area regarding use of local services and job creation, and in coal bed methane area regarding elimination of adverse impacts to the entire ecosystem.

ii) Establish clearer classification criteria for community complaints. 2.3.5 Community awareness along transportation routes Background: Impacted stakeholders along transportation routes are provided risk information as outlined within a documented community involvement management system based upon the plan-do-check-act continual performance improvement cycle similar to the overall Responsible Care Management System described in section 2.1.2 of this report. There is a standard in place to carry out product and route risk assessments through which impacted stakeholders are identified. Impacted stakeholder information is contained within a computerized database. The organization actively participates in CIAC regional TransCAER committee activities including education programs for community response organizations 2.4 Hire, Train, Assess and Communicate to Employees 2.4.1 Employee orientation, training and performance Background: All new employees go through a formal on-boarding process which includes a Responsible Care overview and site specific orientation. On-going health, safety, environment and social responsibility training requirements have been identified for all employees as required. There is a progression system in place for field operators whereby core mandatory training must be taken and competency must be demonstrated before individuals can progress to a higher level of operating job function. All training is tracked for completion in a computerized system. Performance is addressed as described above in section 2.1.5 of this report Best Practice:

i) The electronic system referred to as “SkillsTrak” for training information gathering, sorting and reporting.


2.4.2 Communication of hazard and risk information to employees Background: Workplace place hazard and risk information is provided through the new employee orientation and training program described above. Pre-job hazard analyses are carried out as part of the day to day work permitting process. On-going information is provided through an internal web site, direct electronic communications and regular meetings. This includes information on new processes and procedures. 2.4.3 Health monitoring and communication Background: An occupational health and industrial hygiene manual has been prepared. This includes occupational health and hygiene standards and requirements for baseline and ongoing health assessments including disability management. Baseline workplace hazard exposure assessment has been done in all areas. This is being followed up through an on-going monitoring program to measure and address worker exposure to hazards found during the baseline. Following their baseline health assessment, employees are offered ongoing medical assessments every two years. An internal web site has been established to provide employees and their families with a variety of general health related information and solutions (e.g., physical activity, diet, nutrition, etc.). Improvement Opportunity:

i) Ensure that an appropriate level of attention is maintained on addressing low risk as well as the necessary priority that must be given to the higher health risks, in on-going workplace hazard exposure monitoring programs.

2.5 Collect Hazard Information and Assess and Minimize Risks 2.5.1 Potential impact of process incidents including worst case scenarios Background: Analysis of worst case scenarios occurs through the regulatory approval process for all new projects. This addresses the potential impact of process incidents both on and off site. All facilities have under gone this process. 2.5.2 Hazard and risk assessments for existing facilities Background: Critical task hazard assessments have been prepared for all operating areas which includes a risk ranking of potential incidents and controls required to reduce the risk. These assessments will be repeated every five years. Baseline hazard and operability studies are being conducted on all major facilities over the next five years, and there is a plan to carry our quantitative risks assessments for all areas commencing in 2011. Hazard and operability studies are also carried out on supplier equipment (e.g., well fracing equipment).


There is also a process in place to carry out critical procedure reviews. Improvement Opportunities:

i) Review the current practices for cell phone and radio use while driving and upgrade as appropriate to reduce or eliminate associated risks.

ii) Consider the use of global positioning equipment for employees as part of the working alone procedure to assist in locating anyone who has not checked in according to procedure.

iii) Review the effectiveness of the work alone procedure in areas where cell phones do not function.

iv) Expedite the completion of baseline hazard and operability studies according to, or earlier than, the current plan established for the next five years.

v) Expedite the completion of quantitative risk assessments according to, or earlier than, the current planned date of 2011.

Best Practice:

i) The application of hazard and operability studies on supplier equipment (e.g., fracing equipment).

2.5.3 Minimization of process risk Background: Process hazard assessments are carried out on all new facility projects or where changes are being made to existing facilities. Critical operating and maintenance procedures have been developed and are reviewed and verified yearly. All Safety Critical Equipment has been identified and preventive maintenance plans have been established. Compliance with safety critical inspection and preventative maintenance requirements is tracked as well as where safety critical equipment has been rendered out of service Best Practice:

i) The emphasis being placed in the coal bed methane area to manage service rig safety with respect to rig movement on highways and site preparation for service work.

2.5.4 Minimization of risk for transportation modes and routes Background: There is a transportation standard in place and currently being implemented which addresses product risk and route assessment. Identified risks are mitigated by the use of alternate routes where possible. The results of these risk assessments are maintained in a computerized data base. Risk mitigation measures are included in carrier term agreements to which drivers are made aware. Improvement Opportunity:

i) Expedite completion of transporter route risk assessments according to, or earlier than, the current plan, and input stakeholder awareness requirements into the annual neighbour visit information database.


2.6 Identify, Manage and Minimize Emissions and Wastes 2.6.1 Emission and waste reduction objectives Background: A documented environmental management system has been established, based upon the plan-do-check-act continual performance improvement cycle similar to the overall Responsible Care management system described in section 2.1.2 of this report. A standard describing the process for establishing reduction targets is also in place. The process includes tracking waste production, water consumption and air emissions, and assembling the data to develop an air, water and waste baselines for each business unit. Baseline information is used to determine appropriate reduction targets for each medium. The process also includes for regular review of the targets to determine if they have been achieved or if they need to be reassessed. A corporate footprint reduction program was initiated in 2009. By 2011 the plan is to have all related data into an electronic data base and a reduction plan in place by 2012. Environmental aspects and impact assessments related to emissions to the air are currently being performed for all sites and an emissions reduction plan will be in place by 2011. Water and waste aspects and impact assessments will be done in 2011. Improvement Opportunities:

i) Expedite implementation of the environmental footprint reduction program according to, or earlier than, currently established completion dates for all media.

ii) Expedite installation of the vapour recovery facility as currently planned at the shale gas area Dilly Creek site to reduce flaring.

2.6.2 Health and environmental impact of emissions and wastes Background: Members of the environmental function participate in various committees of the oil and gas industry associations to which the organization belongs. They are also involved with airshed committees in the various operating zones and industry spill cooperatives. It is through participation in these groups, where potential impacts of industry activity on health and the environment are monitored, that the organization maintains an awareness of current issues related to the oil and gas industry. It also allows for access to industry best practices which can be incorporated into field operations and contribute to minimizing the potential for adverse impacts. 2.6.3 Waste minimization for new products and processes Background: The environmental management system, noted above, includes an environmental planning standard that states that all design and construction will include consideration for the minimization or elimination of waste sources at the design and development stage of a project, wherever possible. 2.6.4 Application of hazardous waste management code to co-disposal sites


Background: The environmental management system noted above includes a process to review current environmental practices, which includes waste characterization and disposal locations. Waste waters from field sites are disposed off at approved deep well injection locations, and other wastes are disposed of at approved facilities.

2.7 Incorporate Environment, Health and Safety into Design Stages 2.7.1 Environmental impact of new facilities Background: A project management framework referred to as “Cornerstone” is currently being developed to direct the manner in which engineering projects are executed. The framework is being developed in alignment with the principles of industry accepted good practice in project management for the size and complexity of projects being executed. There are 15 areas of attention that must be addressed on projects to facilitate project success. Health, safety, environment and social responsibility is one of those areas of attention. Various documents will be published in each of the 15 areas of attention to guide project personnel in application of project management principles to projects. This includes a for a process hazard analysis to be conducted for all new projects when necessary. 2.7.2 Buffer Zones Background: Buffer zones are determined by regulations and are addressed in applications for a licence to operate a facility. Emergency planning zones are also set by regulation based on product and hazard. Improvement Opportunity:

i) Consider establishing a specific buffer zone standard which addresses not only regulatory requirements but also defines a process to monitor and access the necessary information to proactively address issues related to encroachment of commercial/residential/institutional developments on existing facility set backs.

2.8 Document of Standards and Procedures Background: There is a very comprehensive computerized document management system in place which contains the overall Responsible Care management system with subsets specifically addressing environment, safety, transportation/product stewardship, process safety, and community involvement. Standards and procedures which support the management systems are also included, as well as records and other related documentation. Best Practice:


i) The hand held electronic activity data collection and scheduling system referred to as “FieldTrak” which ensures that all critical operating and compliance activities are identified and carried out according to requirements.

2.9 Provide Information to Second Parties 2.9.1 Supply and receipt of Environment, Health and Safety information to customers Background: The natural gas product is directly transported by pipeline to other pipeline operators where it is comingled with the production from other companies and transported to further destinations. Through this pipeline system product is sold to a variety of customers throughout North America for the end use as a source of energy. Material safety data sheets containing environment, health and safety information are made available to customers. 2. 10 Assessing Second Parties 2.10.1 Selection of site contractors Background: The organization uses an industry wide system managed by a service provider to screen and pre-qualify all contractors. To maintain their status as an approved supplier of contract services, contractors are required to continually review their status within the system and remedy any shortfalls with respect to the criteria set on their levels of health, safety and environment performance. A contractor scorecard is used and post job evaluations are carried out. Related documentation and records are maintained in a computerized document management system. 2.10.2 Contractor understanding and compliance with Environment, Health and Safety

instructions Background: The requirements for environment, health and safety performance is communicated to contractors through the prequalification process, the contract, on-going communications, training, assessments, audits and inspections, and through follow-up relating to any failure identified in the working relationship. There is a detailed health and safety handbook in place which is also provided to all contractors. Various checklists are used to carry out and record the above assessments, audits, inspections etc. 2.10.3 Selection and evaluation of hazardous waste contractors Background: Within the environment management system there is standard in place to address the selection of waste contractors. A defined performance evaluation system is in place, primarily utilizing an oil and gas industry process meeting CIAC requirements, augmented by in house evaluations.


2.10.4 Selection and assessment of suppliers Background: Key suppliers are managed through a supply management database with regards to prequalifying, reviewing and continuously improving supplier performance. There is a new supplier evaluation process in support of this activity. There is a hazardous product supplier standard in place within the transportation/product stewardship management system, noted in section 2.1.2 of this report, that requires that supplier self assessments be completed, reviewed and tracked within the above data base. Full implementation of this standard is set for 2011. Improvement Opportunities:

i) Expedite implementation of hazardous product supplier assessments and follow-up according to, or earlier than, the current planned date of 2011.

ii) Implement the supplier assessment process with second party pipeline operators. 2.10.5 Selection and assessment of carriers Background: The organization uses the CIAC protocol and the association’s approved external service provider to screen and pre-qualify all carriers, including waste carriers. Carrier assessments are performed by employee personnel using an internally developed protocol which includes CIAC expectations plus specific oil & gas operations requirements. External CIAC evaluations at 5 year intervals are used to benchmark the process. This process also applies to carriers of the organization’s waste materials. Section 2.11 Manage Changes Background: There a documented management of change standard in place, and within the currently being developed project management framework, as previously noted in section 2.7.1 of this report, there is an area of attention that specifically addresses change management, with respect to ensuring that changes to equipment, control systems, procedures, etc. do not downgrade their integrity. It includes aspects of initiation of changes, logging of changes, and the workflow associated with the implementation of changes. Improvement Opportunity:

i) Expedite implementation of the new electronic management of change tool referred to as “eMOC” to replace the existing manual system.

2.12 Provide Security Background: Site security audits and vulnerability assessments are done for all facilities on 2 to 3 intervals, and appropriate security measures have been put in place commensurate with the results of these audits and assessments.


Monthly security information and alerts where warranted are issued based on information from outside sources. A security standard is currently being developed to define minimum requirements for facility protection and sensitive information. Improvement Opportunities:

i) Complete and implement the security standard currently under development. ii) Give an appropriate level of attention to training contracted truckers in aspects

of security awareness. 2.13 Manage Previous Waste Sites Background: A method has been developed for identifying historical waste sites within the current operating areas which includes accessing government and internal records of reportable spill events. Once it has been identified that a reportable spill event has occurred on one of the organization’s sites, it is cataloged in a historical spills data base. Information from the government reports is used as the criteria for evaluating the significance of the historic spill site. Spills that involve dangerous oilfield products, large volumes or spills that affected large areas are prioritized or flagged. Currently communication is taking place with environmental consulting companies to determine the level of follow up that is required at this stage. This would typically involve a site inspection to identify any signs of adverse environmental impact followed by more detailed physical testing if warranted. Remediation work would then be performed on sites that are determined to have some level contamination present. Operations sites in Southern Alberta and Saskatchewan are being reclaimed to specific grasslands status that originally existed. 2.14 Measure and Improve Performance Background: There is a core set of quantitative measures in place that are used to track historical environment, health and safety related performance in the areas of employee injuries, emissions of air contaminants to the environment, spills to the natural environment, and the use of water. All of these measures are benchmarked against the industry as whole through a major oil and gas industry association to which the organization belongs. The organization also participates in providing occupational illness/injury, process, and transportation incident information into the CIAC comparison data base. These are referred to as Safety and Health Analysis, Recognition and Exchange (SHARE), Process Incident Measure (PRIM), and Transportation Incident Measure (TIM)


In 2011 environmental emissions and wastes will begin to be reported into the CIAC environmental data base referred to as the National Emissions Reduction Master Plan (NERM). In addition to the above, the organization also tracks complaints from the public related to its operations. As well as addressing measures related to historical issues, a slate of indicators aimed at preventing incidents has been established. These are referred to as leading indicators and include completion of compliance observations, safety critical equipment inspections, employee training, work site inspections, etc. Improvement Opportunity:

i) Expedite implementation of NERM reporting to the CIAC according to, or earlier than, the current plan to commence in 2011.

Best Practice:

i) The focus on incident prevention through the use of “leading indicators” which formally track such aspects as completion of compliance observations, safety critical equipment inspections, employee training, work site inspections, etc.

2.15.1 Incident investigation Background: There is a documented standard in place that addresses incident investigation and reporting. Its purpose is to set minimum requirements for the reporting and investigation of all occupational health and safety environment, property/ vehicle damage, process safety, security, and transportation incidents that occur. All incidents investigations and preventive measure follow up actions required are logged in a specific data base and remain active in the system until all remedial actions have been satisfactorily addressed. Within the system there is an automatic process to remind those who have been assigned to carry out the remedial actions when the targeted completion date has become overdue. 2.15 Manage Emergencies 2.15.1 Ability to respond Background: There is an overarching emergency response management standard in place that gives direction to central management planning and to the field based emergency response plans. Each business unit has an area specific emergency response plan, each of which takes into consideration the communities and the various stakeholders in proximity to the operations that could be affected during an emergency. Emergency response plans are built on the recognized model, and are a legislative requirement. All personnel have been trained in various aspects of the incident command system, all personnel designated to manage emergency operations have been trained accordingly. Plans are tested on an annual basis through drills and exercises that involve employee personnel, first responders, municipalities and regulators.


Improvement Opportunities: i) Review the medevac system for the Dilly Creek facility in the shale gas area with

a view to improving the timeliness of same. ii) Establish plans for emergency exercises in all areas that include aspects which

would complicate the response (e.g., inclement weather, during the off hours, road blockages, site inaccessible, loss of communications, equipment not readily available, etc.)

2.15.2 Integration of site and community emergency plans Background: The annual drills noted above which involve first responders, municipalities and regulators is the primary method of integrating the organization’s and community emergency response plans. Improvement Opportunities:

i) Ensure that the incident command system, with respect to response roles and responsibilities, is applied consistently in all communities. There was one recent example in the coal bed methane W5 area where the local fire truck entered a site without permission.

ii) Expedite completion of an offsite emergency response exercise in the coal bed methane W5 area according to the current planned date of the fourth quarter of 2010.

2.15.3 Dislocated persons Background: Guidance for managing residents who have been evacuated during an emergency is provided in the individual site emergency response plans, and mock evacuations are tested during emergency response exercises. During emergencies that are prolonged, evacuated residents are supported in accordance with the requirements of a corporate crisis management plan. 2.15.4 Evaluation and correction of emergency systems Background: Goals and objectives are set to test each emergency response plan using a variety of methods, such as table top, field drills, what if scenarios, etc., to ensure the plans achieve the desired result. Analyses of the test activities are discussed and actions arising from these discussions are entered into a specific data base for follow-up and resolution, and remain active until all actions have been satisfactorily addressed. The entries have responsibility assigned and timelines set. All of these requirements are set out in the emergency response management standard noted above. 2.15.5 Transportation emergency response Background: The emergency response management standard, noted above, sets out the requirements for transportation emergency response planning.


The organization’s transportation emergency response plan complies with all of the CIAC transportation emergency assistance planning requirements, and legislated transportation emergency response assistance plans are also in place where required by the regulations. 2.16 Assisting in Public Policy Development Background: This is primarily achieved through active involvement in the Canadian Association of Petroleum Producers and numerous related committees within this oil and gas industry association. Representatives also participate in various related CIAC committees. 2.17 Audit and Follow-up Background: Annual internal health, safety, environment and social responsibility audits and process safety audits are carried out. External audits are carried out by health and safety, environment and energy resources regulators. Follow up actions required are logged in a specific data base and remain active in the system until all remedial actions have been satisfactorily addressed. Improvement Opportunity:

i) Establish a process for annual attestation to the CIAC by the executive contact, regarding continued Responsible Care compliance.

3. CONCLUSIONS and RECOMMENDATIONS Based upon this verification the team considers that Nexen Inc. Canadian Oil and Gas Division has achieved the required standard for Responsible Care In-Place certification, and that the CIAC officially recognize this verification with an award at the next suitable occasion. Improvement Opportunities and Best Practices as identified in the body of the report are listed below: Improvement Opportunities:

1) Establish a process to ensure continued promotion and support for Responsible Care throughout the organization and to sustain the current momentum into the future.

2) Establish and implement a plan and schedule to ensure for timely review and implementation of new standards in all areas, and their incorporation into local procedures.

3) Expedite implementation of the process safety management program according to, or earlier than, the current plan to have this completed by 2013.

4) Follow-up to ensure that all contract operators are receiving performance evaluations.

5) Consider including contract operators in the safety and environmental performance aspect of the incentive bonus program.

6) Review the organization’s policy for diversity in the workplace and promote hiring practices in all areas that are representative of local demographics. It was observed that field personnel were predominantly male Caucasian.


7) Expedite completion and implementation of the aboriginal relationships policy currently being developed.

8) Research how the traditional way of life in the shale gas area might be impacted especially if the organization expands operations further to the north and west where several first nations live other than those in the current area of operations. (Note: Useful information may be find in the document entitled “Fort Nelson First Nations Submission on EnCana’s Cabin Gas Project Environmental Assessment”)

9) Establish a process to regularly assess neighbour awareness of risks and what to do in the event of an emergency.

10) Bring additional focus to aligning community expectations with the organization’s ability to deliver. There is an example in the shale gas area regarding use of local services and job creation, and in coal bed methane area regarding elimination of adverse impacts to the entire ecosystem.

11) Establish clearer classification criteria for community complaints. 12) Ensure that an appropriate level of attention is maintained on addressing low risk as

well as the necessary priority that must be given to the higher health risks, in on-going workplace hazard exposure monitoring programs.

13) Review the current practices for cell phone and radio use while driving and upgrade as appropriate to reduce or eliminate associated risks.

14) Consider the use of global positioning equipment for employees as part of the working alone procedure to assist in locating anyone who has not checked in according to procedure.

15) Review the effectiveness of the work alone procedure in areas where cell phones do not function.

16) Expedite the completion of baseline hazard and operability studies according to, or earlier than, the current plan established for the next five years.

17) Expedite the completion of quantitative risk assessments according to, or earlier than, the current planned date of 2011.

18) Expedite completion of transporter route risk assessments according to, or earlier than, the current plan, and input stakeholder awareness requirements into the annual neighbour visit information database.

19) Expedite implementation of the environmental footprint reduction program according to, or earlier than, currently established completion dates for all media.

20) Expedite installation of the vapour recovery facility as currently planned at the shale gas area Dilly Creek site to reduce flaring.

21) Consider establishing a specific buffer zone standard which addresses not only regulatory requirements but also defines a process to monitor and access the necessary information to proactively address issues related to encroachment of commercial/residential/institutional developments on existing facility set backs.

22) Expedite implementation of hazardous product supplier assessments and follow-up according to, or earlier than, the current planned date of 2011.

23) Implement the supplier assessment process with second party pipeline operators. 24) Expedite implementation of the new electronic management of change tool referred

to as “eMOC” to replace the existing manual system. 25) Complete and implement the security standard currently under development. 26) Give an appropriate level of attention to training contracted truckers in aspects of

security awareness. 27) Expedite implementation of NERM reporting to the CIAC according to, or earlier

than, the current plan to commence in 2011. 28) Review the medevac system for the Dilly Creek facility in the shale gas area with a

view to improving the timeliness of same.


29) Establish plans for emergency exercises in all areas that include aspects which would complicate the response (e.g., inclement weather, during the off hours, road blockages, site inaccessible, loss of communications, equipment not readily available, etc.)

30) Ensure that the incident command system, with respect to response roles and responsibilities, is applied consistently in all communities. There was one recent example in the coal bed methane W5 area where the local fire truck entered a site without permission.

31) Expedite completion of an offsite emergency response exercise in the coal bed methane W5 area according to the current planned date of the fourth quarter of 2010.

32) Establish a process for annual attestation to the CIAC by the executive contact, regarding continued Responsible Care compliance.

Best Practices:

1) The entire Responsible Care management system structure with supporting standards and procedures, including its roll out and implementation throughout the organization, which incorporates a process for end user input to maximize understanding and acceptance of the standards.

2) The clear emphasis in the Responsible Care management system, and the explanation therein, on the plan-do-check-act continual performance improvement cycle.

3) The process safety management system currently being implemented. 4) The “communities of practice” forums where best practices can be shared across the

organization. 5) The emphasis placed on promoting the understanding of the Responsible Care ethic

and management systems as well as the acceptance of personal responsibilities and accountabilities for implementation throughout the organization.

6) The entire community outreach program which has clearly established the organization as a model corporate citizen in the oil and gas industry.

7) The external stakeholder grid used to determine the extent of site specific community outreach initiatives.

8) Community involvement training provided for shallow gas area based field operators.

9) The electronic system referred to as “SkillsTrak” for training information gathering sorting and reporting.

10) The application of hazard and operability studies on supplier equipment (e.g., well fracing equipment).

11) The emphasis being placed in the coal bed methane area to manage service rig safety with respect to rig movement on highways and site preparation for service work.

12) The hand held electronic activity data collection and scheduling system referred to as “FieldTrak” which ensures that all critical operating and compliance activities are identified and carried out according to requirements.

13) The focus on incident prevention through the use of “leading indicators” which formally track such aspects as completion of compliance observations, safety critical equipment inspections, employee training, work site inspections, etc.


4. OBSERVATIONS FROM THE ORGANIZATION Nexen COG (Canadian Oil & Gas Division) is pleased with the outcome of our Responsible Care® In-Place Verification. We sincerely thank the verification team for its expertise and commitment during our first Divisional verification. Dialogue between our COG Division & Field staff and the verifiers during the verification was very informative and beneficial. We would also like to thank Brian Wastle for his inspiring and supporting role and other CIAC staff for their support along this three year journey. Our COG Division employees have embraced the Responsible Care® ethic and we remain committed RC ambassadors to other interested parties within the greater Nexen Corporation and within our Canadian Oil & Gas industry. We are dedicated to follow-up with the action items that have been generated by the opportunities detailed in this initial Verification In-Place report. We are looking to our first Re-Verification in 2013 under the new Responsible Care® Codes of Practice protocol! Name Brian E. McAusland Position, Company RC Manager, COG HSE&SR, Nexen Inc. Date Dec 14, 2010

CHEMISTRY INDUSTRY ASSOCIATION OF CANADASuite 805, 350 Sparks Street

Ottawa (ON) K1R 7S8T: 613 237-6215 F: 613 237-4061

www.canadianchemistry.ca

RESPONSIBLE CAREThe verification also focused on continual improvement performance objectives and...

Documents

Transcript of RESPONSIBLE CAREThe verification also focused on continual improvement performance objectives and...