Environment

Managing Responsibly, Limiting Our Footprint

Our Approach

Our pursuit for continuous improvement in environmental performance includes integrating environmental considerations into our business and making efficient use of resources. We carefully plan all projects and operations so as to minimize our impacts to air, land and water. We also draw on technological innovation and best practices to ensure we are using energy, water and other materials we need to operate our daily business activities as efficiently as possible.

Strengthening Spill Prevention

We track and record spills across our global operations as a key indicator of environmental performance. We take all spills seriously. By investigating for root causes, developing corrective actions and sharing what we learn, we work to prevent similar incidents from occurring in the future. In 2010, the number of spills greater than one-half barrel in our global operations decreased from 157 in 2009 to 109.

Responding To A Spill In Pennsylvania

In March 2010, we experienced a spill from a shale gas drilling operation in Bradford County, Pennsylvania, of which 1,700 litres (450 gallons) of diesel were recovered. The spill leaked offsite into a nearby field. Upon discovery of the spill, Talisman’s environmental response crews were immediately notified and began implementing containment and recovery operations. Working with local regulators and stakeholders, we took prompt action to remediate the area impacted by the spill and to thoroughly investigate the incident.

As a result of our investigation, we implemented a number of improvements to prevent future offsite impacts from our shale gas developments across North America. We installed plastic liners under drilling and completions sites in order to p revent any spilled fluids from reaching the environment. We also upgraded connector equipment to help prevent leaks, introduced new operating procedures for tanks and increased spill prevention training for our field staff.

Protecting And Conserving Water

Shale gas development uses fracturing fluid, which consists of greater than 99.5% water and sand with less than 0.5% of other chemicals, to fracture the shale and release trapped gas for production. In North America, increased shale gas development has raised concerns about possible impacts on the environment, including aquifers and surface water. Our industry must apply and be granted permits from the government to withdraw surface water. Most of the water used for shale gas development is taken directly from nearby lakes and rivers.

At Talisman, we take great care to protect aquifers. Before starting to drill, we carry out voluntary testing of domestic wells in the vicinity. We follow stringent wellbore casing techniques that meet or exceed industry guidelines designed to protect fresh water and we monitor our practices and strive for continuous improvement in each well program.

To minimize our environmental footprint, we are focused on recycling water to reduce the amount of fresh water used in our developments. This involves recovering flowback water (fracturing fluid that flows back through the wellbore to the surface), storing it and reusing it to fracture future wells. Since mid-2010, we have achieved nearly 100% reuse of flowback water in Pennsylvania, our largest shale gas operation. Reuse of flowback water reduces the cost of offsite waste disposal and helps to conserve water resources.

As the pace of Talisman’s shale development increases, so will our focus on enhancing our water management practices. In 2010, we developed a water management strategy to define best practices for water withdrawal, reuse, disposal and conservation in our North America shale gas operations. This strategy outlines a number of objectives to minimize fresh water use, reduce water disposal and increase the use of alternative water sources.

Talisman is active within the industry to drive continuous improvement in water management. We have partnered with the World Resources Institute in their Aqueduct project. The project’s overarching goal is to share research and information on the multiple drivers of water risk, in order to better manage increasingly scarce water resources around the world. We are also participating in initiatives led by IPIECA and GEMI (Global Environmental Management Initiatives) to develop oil and gas-focused water risk tools and best management guidelines.

Minimizing Our Footprint

We conduct studies to identify and avoid encroaching on environmental features, such as streams and wetlands, early in the planning stages for our exploration projects. We minimize the size of land to be cleared and look for opportunities to avoid sensitive environmental areas through routing and schedule adjustments. In some cases, as in our shale gas developments, we drill multiple wells from a common pad to minimize our footprint on the land and the community.

In 2010, we took additional global actions to reduce our environmental footprint, including:

• In North America, we introduced the use of geographic information system (GIS) technology to enhance our ability to identify and map environmental features in planning for shale gas well sites.
• In PNG, where possible, we located our remote camps for our seismic crews in areas of the rainforest previously cleared by the indigenous people for villages and a griculture. This allowed us to minimize tree clearing and land disturbance.
• In Colombia, we hired environmental inspectors to monitor our seismic activities to ensure compliance with government regulations and our own standards. Based on input, we adjusted seismic locations to safe distances from streams and water bodies.

Managing Emissions

Greenhouse gas emissions pose significant regulatory and reputational risks to our industry. A priority for Talisman is the use of economic energy measures that can be integrated into our daily business to improve energy efficiency and operations. For example, in Alberta, Canada, we operate a waste heat recovery unit at our Bigstone gas plant and a cogeneration facility at our Edson gas plant. Both facilities help to reduce fuel consumption and, together, they reduce carbon dioxide (CO2) emissions by more than 40,000 tonnes a year.

We also monitor and participate in regulatory initiatives. Since 2008, our Talisman UK and Norway operations have participated in Phase II of the European Union Emissions Trading Scheme. The market-based scheme involves the trading of greenhouse gas emissions allowances to ensure emissions reductions by industrial emitters across Europe. Since 2008, equipment upgrades and operating efficiencies have enabled our UK operations to reduce emissions by about 25%. In 2010, CO2 allowances for our UK operations slightly exceeded emissions. Our Norway operations have had to purchase CO2 quotas for each tonne of CO2 emitted since 2008.

Longer term, we recognize a need to develop a consistent approach to climate change across our global operations. We are evaluating a set of global requirements for greenhouse gas emissions and energy efficiency. In 2010, we also developed an online information package to increase internal awareness of climate change science and possible emissions reduction strategies.