Canadian Oilpatch Backs Hydrogen Innovation
Oilpatch heavyweights are investing substantial capital in Canada’s hydrogen vision — accelerating clean energy transitions nationwide.
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.
The majority of the hydrogen would be used at Suncor’s Edmonton refinery and in ATCO’s natural gas system. By utilizing carbon capture and storage technology, the companies claim the project would reduce CO2 emissions in Alberta by more than two million tonnes per year, equivalent to taking approximately 450,000 cars off the road annually.
‘Critical’ government role
At this point, the proposed facility is in its infancy. For the idea to become a reality, both companies acknowledge the 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 governments.
Those measures include the availability of carbon sequestration rights, emissions reduction compliance credits, regulations allowing hydrogen blending into natural gas, and investment tax credits for carbon capture, utilization, and storage.
Those are described as “critical” to the project’s financial viability.
“We’re hoping that this will accelerate consultations among the province, the 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. However, in an interview, Suncor Chief Executive Mark Little stated that 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 companies aim to 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 pleased to see companies respond to our call for bold projects that can showcase Canadians’ expertise, drive, and spirit in building a world-leading hydrogen industry. Working with the sector on decarbonization is a key part of our commitment to meeting our ambitious climate targets while creating opportunities for all Canadians,” said François-Philippe 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.
Negotiations begin
On the surface, the proposed project is a logical match for Ottawa, as it aligns with several federal priorities, including promoting greenhouse gas reductions, encouraging the development of more carbon capture and storage projects, and fostering economic growth during the transition to lower-emitting energy sources.
Negotiations on the proposed hydrogen facility are expected to begin as the companies commence 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 aims 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 utilized to reduce emissions in large industrial projects and for long-haul transportation, including 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 of the Pembina Institute, an environmental think tank.
“We would need many more projects like this to achieve the level of reduction from the oil and gas sector that’s needed, but it’s significant,” he said.
The oilsands are responsible for approximately 11 percent of the country’s total emissions, according to 2018 data from the federal government, while other oil and natural gas production accounts for an additional 11 percent.
Grey, blue, and green
The federal government’s eventual level of support for this project will also signal what type of hydrogen Ottawa aims to produce.
“Not all hydrogen is created equal, and hydrogen is only as clean as the sources used to generate it,” said Julia Levin of Environmental Defence.
What we’re seeing is natural gas and oil companies turning 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 “blue” hydrogen, as emissions are reduced.
“Green” hydrogen, produced from water using electrolysis powered by renewable energy, offers the most significant climate benefits.
The facility proposed by ATCO and Suncor would produce blue hydrogen, although the companies refer to it as “clean” hydrogen because 90 percent of the emissions would be captured.
Canada’s hydrogen economy is heating up — is your business ready?
You can return to the main Market News page, or press the Back button on your browser.
