How the feds see a big role for Big Oil in a hydrogen future

As some climate advocates push for hydrogen made from renewable energy, Natural Resources Canada is on the hunt for ways to include the oil and gas industry in the fuel’s future.

“Canada’s oil and gas sector is well-positioned to develop domestic hydrogen supply chains,” reads a meeting note Canada’s National Observer received through a federal access-to-information request. “In the short term, existing infrastructure and grey hydrogen production can kick-start Canada’s hydrogen economy.”

The note was prepared for Natural Resources deputy minister Jean-François Tremblay following a conference call March 10 between assistant deputy ministers Glenn Hargove, Mollie Johnson, Drew Leyburne, Frank Des Rosiers, and executive director of the ARC Energy Research Institute Peter Tertzakian. Tertzakian was not available for comment by deadline.

Hydrogen is increasingly seen as a fuel that could reduce greenhouse gas emissions, but experts realize any climate benefits are intrinsically tied to how the hydrogen is produced. The types of hydrogen produced are colour coded, with grey meaning produced from natural gas, blue meaning produced from natural gas with carbon capture technology used, and green meaning produced using renewable electricity. According to the Pembina Institute, more than 99 per cent of all hydrogen is grey, with blue and green together representing less than one per cent.

The note recognizes financing as a major obstacle for the oil and gas industry looking to break into hydrogen production, and reveals where Canada’s policy priorities might be.

“How would you address the debate over green versus blue hydrogen to persuade financial institutions to invest in blue hydrogen projects?” reads the note. “In your view, how can the government of Canada work with industry and the provinces to make headway on oil and gas sector diversification and competitiveness and reduce regulatory burden?” it also asks.

The note calls carbon capture “an essential part of Canada’s transition to a net-zero economy,” and says there are opportunities to deploy the technology in natural gas, upgrading, refining and petrochemical subsectors — depending on available financing — to curb emissions. Using carbon capture to convert natural gas to hydrogen would represent a new revenue stream for fossil fuel companies, the note says.

Green Party parliamentary leader Elizabeth May says Canadians should be skeptical of climate solutions that don’t seek to phase out the oil and gas sector, calling carbon capture, nuclear power, and hydrogen — unless explicitly green — “scams” that keep a needed transition at bay.

“What we need to do is say out loud: We have to shut down the oilsands by 2030, let's plan for that. Let's make sure we have a plan for workers, let's make sure there's a plan for communities, let's make sure the Alberta economy benefits from all these other technologies that actually are green technologies,” she said.

“We cannot afford to blow it on hitting the Paris target, and that means we can't have fake, fraudulent, technology that continues to perpetuate fossil fuels,” she added.

Natural Resources Canada maintains the goal is to lower emissions and sees hydrogen as a key part of that.

“Our government released the Hydrogen Strategy for Canada in December 2020, outlining a path for Canada to capitalize on this opportunity to grow the economy and lower emissions,” said Ian Cameron, a spokesperson for Natural Resources Minister Seamus O’Regan. “The goal of the strategy is to make Canada a top global producer of low-emission hydrogen.”

“I don't think we're categorically against blue hydrogen, but we don't want the carbon capture to involve enhanced oil recovery,” said NDP natural resources critic Richard Cannings, adding “that would be really extending the life of an industry we know that we have to move away from over the next 30 years.”

Cannings said aiming for green “is the way to go,” and that he is open to blue hydrogen production if it can be done without enhanced oil recovery, calling that “one step forward, two steps back.”

The same week assistant deputy minister for the Energy Technology Sector Glenn Hargrove and assistant deputy minister for the Strategic Petroleum Policy and Investments Office Drew Leyburne had a conference call with Tertzakian to discuss hydrogen supply chains, the two also hopped on a bi-weekly call with executives from Suncor, Cenovus, and Canadian Natural Resources Limited to discuss decarbonizing the sector.

According to a meeting note Canada’s National Observer received through a federal access-to-information request, the industry is looking for long-term policy predictability to feel more confident investing in technologies like carbon capture. The department admits in the note that some technology like post-combustion carbon capture has not been used in the oilsands, but expects to see multiple companies deploy the technology by 2030.

May says the government needs to ask of every piece of technology, “Does this get us off fossil fuels or not?”

“If it doesn't, then you don't do it, and you certainly don't spend public money on it, and you don't lie to Canadians and tell them you've embraced a clean economy agenda when embedded in it are fraudulent methods of keeping fossil fuels in use longer than they need to be,” she said.

The Pembina Institute says for hydrogen to help in the fight against climate change, it is best used in hard-to-decarbonize sectors that are already dominated by fossil fuels, like transportation or heavy industry.

John Woodside / Local Journalism Initiative / Canada's National Observer