Chemicals Guidance Document 3 Part 1

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Chemicals Guidance Document 3- Part 1 (Chemical
Processes) Basil Behnam, Matthew Parthun, Paul
Thomson, and Supriya SenGupta Chemicals
WorkshopsNovember 2004
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Workshop Binder Contents

• 1. Chemicals Guidance Document 1- Shop Floor
  SRED
• 2. Chemicals Guidance Document 2- Qualifying Work
• 3. Chemicals Guidance Document 3- Part 1
• 4. Powerpoint presentations
• 5. Case A - Fluidized Bed Development
• 6. Case B - Organics Pretreatment Process
• 7. Case C - Co-extrusion Process
• 8. Workshop Evaluation

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Chemical SRED Working Group Members

• Chair Pesh Patel NOVA Chemicals Corporation
• Members Supriya SenGupta NTSS,
  Chemicals/PulpPaper- CRA
• Basil A. Behnam Rhodia Canada Inc.
• Dennis Garratt RT Policy Coordinator
• Darren Lawless Fielding Chemical Technologies
• Mel Machado Manager FLA - CRA
• David McKeagan Consultant, KPMG
• Nancy ONeill Canadian Consumer Specialty
  Chemicals Ass.
• Matthew Parthun H.L. Blachford Ltd.
• Subhash Rai DuPont Canada Inc.
• Maury Smith Dow Chemical Canada Inc.
• Richard Steevensz Bayer Inc.
• Paul Thomson Crompton Co.
• Martin Vines NTSS, Plastics - CRA
• Secretary Dave Shearing Canadian Chemical
  Producers' Assoc.

4
Chemicals SRED Joint Committee - Some
Stakeholders Involved
Chemical Industry Members
CRA
Chemicals Guidance Docs.
Industry Canada
CCPA
5
Chemicals Claims Key Locations
Edmonton
Calgary
Montreal
Sarnia
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Agenda

• I Background Discussion of EP and CP/ED
  (Supriya SenGupta)
• II 3.1 Lubricants (Matthew Parthun)
• III 3.2 Batch Process (Basil Behnam)
• IV 3.3 Bioreactor (Paul Thomson)
• V Summary (Supriya SenGupta)
• VI QA
• www.cra-arc.gc.ca/taxcredit/sred/publications/chem
  3/chem3-README.html

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Definitions

• ED experimental development
• CP/ED experimental development commercial
  production
• EP experimental development experimental
  production
• CP commercial production only

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Chemicals Guidance Doc. 3 Objectives

• DETERMINE
• If a project meets the definition of SRED
  (Chemicals Guidance 1)
• Relevant work/expenditures that can be claimed
  (Chemicals Guidance 2) and
• Identifying Claim for Experimental Production
  (EP) or Experimental Development with
  simultaneous Commercial Production (CP/ED).

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Chemicals Guidance Doc. 3 Objectives

• ASSUMPTIONS
• There is sufficient information in the project
  description to determine eligibility.
• All operational, health and safety, and/or
  environmental guidelines may not have been fully
  considered.
• All work claimed is carried out in Canada.

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Plant Trials

• ED projects may include
• Plant trial(s) where there is ED involving EP.
• In this case no segregation of work and costs is
  required for the purposes of the SRED claim with
  respect to the required EP.
• Plant trial(s) where there is ED involving
  commercial production (CP/ED).
• In this case, the claimant must identify and
  allocate all of the ED-related work.

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Process to Determine EP or CP/ED

• 1. Technological Problem Defined
• 2. Define Project Scope Plant Trials
• 3. Is there a SRED Project?
• Y/N - Subsection 248(1) or check for 3
  criteria
• 4. Is trial commensurate with needs of ED?
• 5. Excluded commercial work?
• 6. Check EP technical considerations (Table 1)
• 7. Determine if trial is EP or CP/ED
• 8. Repeat for total number of trials

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Development
Experience
Intuition

• Technological Problem Defined

General knowledge
Creative genius
Commercial needs
Problems or Malfunctions
Standards
13
Development

• Technological Problem Defined

Define Project Scope Plant Trials
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Development
Technological Problem Defined
Define Project Scope Plant Trials
SRED Project? Check 3 critera
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Development
Technological Problem Defined
Define Project Scope Plant Trials
SRED Project?

• Trial commensurate with needs?

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Development
Technological Problem Defined
Define Project Scope Plant Trials
SRED Project?
Trial commensurate with needs?
Excluded commercial work?
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Development
Technological Problem Defined
Define Project Scope Plant Trials
SRED Project?
Trial commensurate with needs?
Excluded commercial work?
EP technical considerations?
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Development
Technological Problem Defined
Define Project Scope Plant Trials
SRED Project?
Trial commensurate with needs?
Excluded commercial work?
EP technical considerations?

• Determine if trial is EP or CP/ED

Focus
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Development
Technological Problem Defined
Define Project Scope Plant Trials
SRED Project?
Trial commensurate with needs?
Excluded commercial work?
EP technical considerations?

• Determine if trial is EP or CP/ED

Focus
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Development
Development
Technological Problem Defined
Define Project Scope Plant Trials
SRED Project?
Trial commensurate with needs?
Repeat
Excluded commercial work?
for Number of trials
EP technical considerations?

• Determine if trial is EP or CP/ED

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Development
Technological Problem Defined
Define Project Scope Plant Trials
SRED Project?
)
Identify research questions (S/T Uncertainty
Hypothesize answers (S/T Advancements)
Trial commensurate with needs?
Plan conduct experiments (ST Content)
Excluded commercial work?
EP technical considerations?
Prepare SRED Claim

• Determine if trial is EP or CP/ED

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Notes on Plant Trials

• There may be a combination of different types of
  ED plant trials, some of which involve EP, while
  others involve CP/ED.
• List of technical factors in Table 1 must not be
  used on a "check-list" basis, and none of the
  technical indicators, in isolation, is
  determinative.
• Final assessment of whether the ED project
  involves EP or CP/ED must be made after reviewing
  all of the facts of the case.

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Some Types of Evidence for EP

• Evidence that staff were involved in designing
  specific experiments and monitoring and analysing
  test data from the ED project.
• Evidence of meetings or other relevant sources of
  supporting information were available to
  substantiate and corroborate the planning and
  technological risk associated with the ED
  project.
• Evidence of experimental operating instructions
  and other consistent records were prepared for
  the ED project.
• Evidence of specific monitoring strategies and
  operating instructions for the ED project were
  communicated to the operating staff.
• Evidence of special tracking, classification or
  recognition of the project/product.

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Chemical Sector Examples in Doc. 3

• Example 3.1 Development of New Lubricants
• (Batch Example - EP)
• Example 3.2 Processing of Product Z
• (Batch Example - EP and CP/ED)
• Example 3.3 Bio-treatment of Wastewater
• (Continuous Example - ED in commercial use)

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T661 Form Requires

• A. Scientific/Technological Objectives
• B. Technology or Knowledge Base Level
• C. Scientific/Technological Advancement
• D. Description of Work/Activities in This Tax
  Year
• E. Supporting Information

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Chemicals Guidance Document 3 - Part 1
(Additional Fields for Guidance 3)

• Background Information
• Business Objectives
• Scientific/Technological Objectives
• Technology or Knowledge Base Level
• Scientific/Technological Advancement
• Description of Work/Activities in This Tax Year
• Supporting Information
• Analysis of Project
• Claim (including List of Personnel)

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Chemicals Guidance Document 3 - Part 1
(Additional Fields for Guidance 3)

• Background Information
• (Context of the project)
• Business Objectives
• (Companys rationale for Project)
• T661 Form
• (Required fields)
• Analysis of Project
• (Provides the rationale for why the project meets
  the definition of SRED)
• Claim (including List of Personnel)
• (Determination is made if the ED project involves
  EP or CP/ED)

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Agenda

• I Background Discussion of EP and CP/ED
  (Supriya SenGupta)
• II 3.1 Lubricants (Matthew Parthun)
• III 3.2 Batch Process (Basil Behnam)
• IV 3.3 Bioreactor (Paul Thomson)
• V Summary (Supriya SenGupta)
• VI QA

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Example 3.1Development Of New Forming Lubricants
- Issues Addressed

• Claim for EP
• Materials consumed
• Product trials at customer
• Disposal Costs (not claimed)
• Proxy Method
• Contract Costs

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Example 3.1Development Of New Forming Lubricants
- Technological Objectives

• Determine whether newly developed lubricant
  formulation could
• provide the required lubrication to form heavy
  gauge metal parts on a variety of metal forming
  presses, such that there would be no breakage of
  the formed metal parts.
• Be environmentally benign, have good spray and
  wetting characteristics, and have sufficient
  boundary lubrication strength.

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Example 3.1Development Of New Forming Lubricants
- Technological Knowledge Base

• ABC was knowledgeable on types of lubricants used
  in metal forming.
• ABC had expertise in the development and testing
  of new formulations and an up-to date library of
  recent published developments in the field.
• Previous work at ABC to develop lubricants for
  combined performance and reduced toxicity had
  been unsuccessful.

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Example 3.1Development Of New Forming Lubricants
- Technological Advancement

• ABC sought to develop a new and enhanced
  lubricant with physical properties that could not
  be met with other existing lubricant
  formulations.
• ABC sought to gain an improved understanding of
  the role of enhanced additives for use in
  industrial forming compounds.

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Example 3.1Development Of New Forming Lubricants
- Work Done

• New lubricant laboratory development at ABC -Work
  done prior to 2 Field Trials at XYZ (Feb
  2002-April 2002)
• Field Trial 1 at XYZ (May 2002)
• Analysis of Results and modification of
  formulation, (June-Sept 2002.)
• Field Trial 2 at XYZ (October 2002)

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Example 3.1Development Of New Forming Lubricants
- Analysis of Project

• Work was carried out to develop a new enhanced
  lubricant that could be used for the manufacture
  of formed metal parts.
• 2 Field trials were needed to overcome several
  technological uncertainties, such as the changes
  in the spray and the wetting characteristics of
  the lubricant.
• Project meets the definition of SRED.
• Since simultaneous commercial work, claim is for
  EP.

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Example 3.1Development Of New Forming Lubricants
- Expenditures

• Table 2 Overall Expenditures Summary
• Total Labour Cost 17,100.00
• Material (7500 gallon 2/gallon) 15,000.00
• Capital 0.00
• Contract Lab Analysis 5,000.00
• PPA labour.65 11,115.00
• Total Claimed (including PPA) 48,215.00

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Agenda

• I Background Discussion of EP and CP/ED
  (Supriya SenGupta)
• II 3.1 Lubricants (Matthew Parthun)
• III 3.2 Batch Process (Basil Behnam)
• IV 3.3 Bioreactor (Paul Thomson)
• V Summary (Supriya SenGupta)
• VI QA

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Example 3.2 Batch Processing of Product Z with
Novel Catalyst - Issues Addressed

• Claim for EP and CP/ED
• Capital
• Materials consumed and Materials transformed.
• Recapture / materials transformed.
• Modeling
• Reproducibility and repeatability
• Disposal Costs (not claimed)
• Proxy Method

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Example 3.2 Batch Processing of Product Z with
Novel Catalyst - Technological Objectives

• Develop full-scale chemical manufacturing process
  to produce new product Z.
• Determine optimum process conditions to minimize
  by-product Y, minimize reversion, maximize yield
  of product Z.
• Understand mass transfer/kinetics.
• Determine optimal design configuration for
  efficient impeller design.

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Example 3.2 Batch Processing of Product Z with
Novel Catalyst - Technology Knowledge Base

• The company had developed a new catalyst for a
  batch process from earlier lab-scale studies,
  claimed in a prior tax year.
• Laboratory trials had produced up to 100 L of
  Product Z, but there was no operating experience
  with use of the newly developed catalyst for the
  present large-scale (50,000 L) application
  (5001 scale-up factor).

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Example 3.2 Batch Processing of Product Z with
Novel Catalyst - Technological Advancement

• Specifically, the company sought to develop
• large-scale batch manufacturing process for a
  multi-phase catalysis application
• chemical process to maximize product yield and
  minimize reaction by-products and chemical
  reversion
• semi-empirical mathematical model to simulate the
  large-scale and complex multi-phase catalytic
  process, based upon a combination of theoretical
  principles and data from the experimental trials.
  

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Example 3.2 Batch Processing of Product Z with
Novel Catalyst - Work Done

• March 2002 - Design of Experimental Plan
• May 2002 - Trials 1, 2
• Trial 1 Removing Mass Transfer Limitations
• Trial 2 Steepest Ascent Yield Maximum
  Determination
• June 2002 -Trials 3-5
• Reliability and Repeatability Of Process Data
  Study
• July 2002- Mathematical Modeling
• August 2002 Impeller Study
• September 2002- Trials 9, 10
• Reliability and Reproducibility of Impeller Data

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Example 3.2 Batch Processing of Product Z with
Novel Catalyst - Analysis of Project

• Project involved the plant-scale development of a
  new multi-phase catalytic chemical process.
• Multiple trials were needed to develop a
  completely new process with an unproven catalyst
  technology.
• Project meets the definition of SRED.
• Mix of CP/ED and EP trials.

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Example 3.2 Batch Processing of Product Z with
Novel Catalyst- Trials 1-10 Expenditures
Trials 1-2 (EP) Labor 27,840.00
Material consumed/transformed 374,164.00
(see next slide for details) Capital
0.00 Trials 3-5(EP) Labor
41,760 Material consumed/transformed 0.00
(product sold) Capital 0.00 Trials 6-10
(CP/ED) Labor 75255 Material
consumed/transformed 0.00 (product
sold) Capital 160,000
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Example 3.2 Batch Processing of Product Z with
Novel Catalyst - Expenditures
EP TRIALS 1-2 MATERIAL /KG TOTAL
A 7 2160007 224,000 B 3 2250003
150,000 CATALYST 20 24.120 164 TOTAL
MATERIAL 374,164
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Example 3.2 Batch Processing of Product Z with
Novel Catalyst - Total Expenditures
TRIAL TYPE CLAIM () PPA () 1-2 EP 402,004
18,096 3-5 EP 41,760 27,144 6-10 CP/ED
235,255 48,916 1-10 5 EP 679,019 94,156
5 CP/ED Total Claim, including PPA (Trials
1-10) 679,019 94,156 773,175
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Agenda

• I Background Discussion of EP and CP/ED
  (Supriya SenGupta)
• II 3.1 Lubricants (Matthew Parthun)
• III 3.2 Batch Process (Basil Behnam)
• IV 3.3 Bioreactor (Paul Thomson)
• V Summary (Supriya SenGupta)
• VI QA

47
Example 3.3 Bio-treatment of Wastewater - Issues
Addressed

• Claim for ED (in simultaneous commercial use)
• Capital
• Materials consumed
• Modeling
• Reproducibility and repeatability
• Proxy Method
• Contract Costs

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Example 3.3 Bio-treatment of Wastewater -
Technological Objectives

• Objective was to determine the appropriate flow
  rates of oxygen (350 - 500 litres/min) and
  influent (100 - 150 litres/min.) required to
  maximize the rate of organic contaminant removal
  in the bio-reactor unit, while monitoring the
  effects of normal variations in operating
  conditions (pH, temperature, waste stream
  composition) on the system.

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Example 3.3 Bio-treatment of Wastewater -
Technological Knowledge Base

• Company gained significant knowledge about
  treating typical waste streams after several
  years of operation of a biological wastewater
  treatment system.
• Companys engineers have shown their
  understanding by reducing DOC levels in the
  process wastewater by up to 50.
• However, much is unknown about the effect of
  operating conditions such as rates and type of
  oxygen feed.

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Example 3.3 Bio-treatment of Wastewater -
Technological Advancement

• Company sought to advance the waste bio-treatment
  process by replacing the low-pressure air feed
  with oxygen.
• Company sought to advance existing technology by
  modeling the system to provide a predictive tool
  for evaluating most efficient bio-treatment
  system operation.

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Example 3.3 Bio-treatment of Wastewater - Work
Done

• Installation of oxygen - (Aug. 2002)
• Optimization of oxygen supply and influent rate
  (Sept. Nov. 2002)
• Analysis of Results - (Nov. 2002)
• Verification of Model - (Nov. 2002 )

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Example 3.3 Bio-treatment of Wastewater -
Analysis

• Experiments carried out on continuous bioreactor
  currently in operation at the companys
  wastewater treatment facility.
• Work was also done to generate a reliable
  mathematical model of the process to optimize
  operating parameters, which was in support of the
  ED.
• Project meets the requirements for SRED
• Claim is for ED with simultaneous commercial use
  (all SRED expenditures need to be allocated)

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Example 3.3 Bio-treatment of Wastewater -
Expenditures

• Labour 23,775
• Material consumed (Oxygen) 3,500
• Contract Chemical Analysis 15,000
• Capital 16,000
• Total Claimed, excluding PPA 58,275
• PPA 15,454
• Total (including PPA) 73,729

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Agenda

• I Background Discussion of EP and CP/ED
  (Supriya SenGupta)
• II 3.1 Lubricants (Matthew Parthun)
• III 3.2 Batch Process (Basil Behnam)
• IV 3.3 Bioreactor (Paul Thomson)
• V Summary (Supriya SenGupta)
• VI QA

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Chemicals Guidance Document 3 - Chemical
Processes
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Q A SESSION

• www.cra-arc.gc.ca/taxcredit/sred/publications/chem
  3/chem3-README.html