Oilpatch heavyweights put Canada’s hydrogen ambitions to the test

The federal government has made no secret about its lofty goal of becoming a global leader in hydrogen as part of its stated effort to reduce harmful carbon emissions from coast-to-coast. 

A pair of oilpatch heavyweights are now proposing a project that will test Ottawa’s appetite for it.

Suncor Energy and ATCO announced Tuesday they are partnering together on plans for a facility in the Edmonton area that could produce more than 300,000 tonnes per year of hydrogen.

The majority of the hydrogen would be used at Suncor’s Edmonton refinery and in ATCO’s natural gas system. By using carbon capture and storage technology, the companies say the project would reduce CO2 emissions in Alberta by more than two million tonnes per year, equivalent to taking 450,000 cars per year off the road.

‘Critical’ government role

At this point, the proposed facility is in its infancy. For the idea to become a reality both companies acknowledge there is need for government support.

Suncor and ATCO say they aren’t asking for direct public funding, but instead a list of regulatory and fiscal policy measures to ensure this type of project would be profitable from both the provincial and federal government.

Those measures include the “availability of carbon sequestration rights, emissions reduction compliance credits, regulations to allow hydrogen blending into natural gas, and investment tax credits for carbon capture utilization and storage.” 

Those are described as “critical” to the financial viability of the project. 

“We’re hoping that this will accelerate the consultation between the province, federal government and industry,” said ATCO chief executive Nancy Southern in an interview.

Considering the project is still in its infancy, there is no estimated cost, although, in an interview, Suncor chief executive Mark Little said it will be a few billion dollars.

“It’s a different type of project from what we’ve seen in the past, but it’s one of the reasons we’re serving it up now so that we can work through it but we fully expect to be successful in dealing with all the challenges to do something new and different,” he said.

“And big,” added Southern.

The oilsands produce about 11 per cent of Canada’s total emissions. (Kyle Bakx)

The companies want to specifically qualify for the Alberta government’s petrochemicals incentive program and the federal government’s recently announced investment tax credit for new carbon capture facilities.

“I am happy to see companies answer our call for bold projects that can demonstrate Canadians’ expertise, drive, and spirit to build a world-leading hydrogen industry. Working with industry on decarbonization is a key part of our commitment to meet our ambitious climate targets while creating opportunities for all Canadians,” said Francois-Phillippe Champagne, minister of innovation, science and industry, in a statement.

In Alberta, ATCO has already received $2.8 million toward a pilot project to blend hydrogen into the natural gas system to reduce emissions from home heating.

Experts say hydrogen could help reduce emissions in the transportation industry. (Eric Piermont/AFP via Getty Images)

Negotiations begin

On the surface, the proposed project seems like a logical match for Ottawa as it intersects many federal priorities such as promoting greenhouse gas reductions, spurring the construction of more carbon capture and storage projects, and stimulating economic growth during the transition to lower-emitting sources of energy.

Negotiations on the proposed hydrogen facility will start, as the companies also begin engineering and other development work. A final investment decision is expected in 2024 with the facility operational by 2028, at the earliest.

The federal government has created a $1.5-billion Low-carbon and Zero-emissions Fuels Fund, but experts have said that is likely insufficient and falls below what other countries have committed to growing their domestic hydrogen sectors, such as France and Germany.

The federal government released the Hydrogen Strategy for Canada in December, which aspires to leverage the country’s energy industry, tech sector, and growing renewable energy resources to become one of the world’s top three producers of clean hydrogen.

Hydrogen can be used to reduce emissions in large industrial projects and for long-haul transportation such as marine shipping, freight trucks and trains.

The strategy could help Canada reach its net-zero emissions targets, while also generating 350,000 high-paying jobs, according to the federal government.

The proposal by ATCO and Suncor is a positive development from the oilpatch, said Chris Severson-Baker, with the Pembina Institute, an environmental think tank.

“We would need many more projects like this to achieve the kind of levels of reduction from the oil and gas sector that’s needed, but it is significant,” he said.

The oilsands are responsible for about 11 per cent of the country’s total emissions, according to 2018 data from the federal government, and other oil and natural gas production makes up another 11 per cent.

Grey, blue and green

The federal government’s eventual level of support for this project will also signal what type of hydrogen Ottawa wants.

“Not all hydrogen is created equally and hydrogen is only as clean as the sources used to generate it,” said Julia Levin, with Environmental Defence.

“So what we’re seeing is natural gas and oil companies looking to fossil fuel-derived hydrogen in a desperate attempt to find new markets for their products.”

When hydrogen is produced from natural gas using a thermal process, it’s described as “grey” and often offers little to no climate benefit. 

When carbon capture and sequestration technology is used, the hydrogen is considered to be “blue” as emissions are reduced.

“Green” hydrogen, made from water using electrolysis powered by renewable energy, offers the greatest climate benefit.

The facility proposed by ATCO and Suncor would be blue hydrogen, although the companies call it “clean” hydrogen because 90 per cent of emissions would be captured.

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