Air Products plans $1.3-billion hydrogen plant in Alberta as oil and gas industry seeks net-zero emissions

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Alberta’s oil and gas industry, with funding from both Ottawa and the provincial government, has introduced significant new plans for lowering the province’s substantial industrial emissions while greening its image.

Air Products and Chemicals Inc. said Wednesday that it plans to build a $1.3-billion facility in Edmonton that will produce hydrogen derived from natural gas, with a goal of opening in 2024. The company has signed a memorandum of understanding for construction. The agreement is still subject to further negotiations for incentives from the Alberta and federal governments, including $15-million through the province’s emissions reduction fund.

On the same day, Alberta’s largest oil-sands producers formed a new group, pledging to step up efforts to improve technology such as carbon capture in a quest to achieve net-zero emissions by 2050.

Alberta Premier Jason Kenney said hydrogen and carbon capture will be crucial to the province’s economic future.

“Hydrogen can bring billions of dollars to Alberta’s economy each year while cutting emissions and creating jobs, making it a real game changer,” Mr. Kenney said during a news conference for the hydrogen announcement. “We’re building on existing natural gas resources and infrastructure.”

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Most of the hydrogen produced in Canada today is categorized as grey, or derived from natural gas in an emissions intensive process. Using hydrogen doesn’t emit carbon dioxide, but the production process does. Only green hydrogen, derived from low carbon sources such as hydroelectricity, solar and wind power, has a small amount of emissions.

Air Products chief executive Seifi Ghasemi said the Pennsylvania-based company will concentrate in Alberta on producing blue hydrogen, where carbon dioxide from the production process is captured and stored, causing a much lower carbon footprint than grey hydrogen.

“I don’t see a lot of possibility that we would build electrolyzers in Canada to produce green hydrogen,” Mr. Ghasemi said during a conference call with industry analysts.

Non-governmental organizations such as Environmental Defence Canada support green hydrogen.

“Fossil hydrogen helps oil and gas companies greenwash themselves, but it’s just another fossil fuel,” Julia Levin, a senior program manager at Environmental Defence, said in a statement. “Rather than prioritizing renewable energy and putting Canada on a pathway to zero emissions, public funding is being put toward finding new revenue streams for oil and gas companies.”

The new plant to produce blue hydrogen would be in addition to Air Products’ three facilities in the Edmonton region that rely on a process called steam-methane reforming in the production of grey hydrogen.

Last month, Suncor Energy Inc. and Atco Ltd. unveiled plans to produce blue hydrogen in Alberta, hoping to open in 2028.

“Investors are rewarding jurisdictions that take combatting climate change seriously,” federal Natural Resources Minister Seamus O’Regan said.

While the Alberta Carbon Trunk Line is underutilized, there are plans to handle more carbon dioxide through the pipeline as part of overall efforts to decarbonize.

The Pembina Institute, a think tank for clean energy, said in a statement that building a hydrogen plant with new technology in Edmonton would be a step in the right direction. “This is a major improvement over traditional hydrogen production facilities in Canada today and sets a high standard for new hydrogen production from natural gas,” said Simon Dyer, deputy executive director at the Pembina Institute.

The Alberta government hopes the Air Products project will be the first in a series of major hydrogen announcements to come in the months ahead. The province has plans to leverage vast and cheap natural gas resources (and geology that allows for carbon storage underground) to become a global player in blue hydrogen production.

On Wednesday, five major oil-sands producers representing 90 per cent of oil-sands production – and a significant and increasing source of Canada’s greenhouse gas emissions the past two decades – also announced a new alliance to work together toward net-zero GHGs from their operations by 2050.

Canadian Natural Resources Ltd., Cenovus Energy Inc., Imperial Oil Ltd., MEG Energy Corp. and Suncor Energy said their Oil Sands Pathways to Net Zero initiative will focus on an “actionable approach” – with details still to come – to address emissions and help Canada reach its climate goals. They will do this while still preserving what they say is a likely $3-trillion contribution from the oil sands to the country’s gross domestic product over the next three decades.

Key to the initiative are plans for a brand new project, a carbon capture, utilization and storage (CCUS) line that would link oil-sands projects in the Fort McMurray and Cold Lake regions to a carbon sequestration hub near Cold Lake. This news comes as Ottawa launched a public consultation on the shape of a major new CCUS tax credit this week.

Rhona DelFrari, chief sustainability officer for Cenovus, said officials from the companies, including chief executives, have been meeting on a weekly basis to plan the initiative since last fall. She said more exact steps to get to 2050 will come after more talks with various levels of government, the clean-tech industry and Indigenous communities. For Canada’s oil industry to remain globally competitive for the long term, “it needs to be both low-cost and low-emission. That’s the reality. We get that, and that’s why we’re taking action.”

Mark Little, chief executive officer of Suncor Energy, which laid out its own net-zero plan last month, said the strategy builds on the industry’s experience with technology sharing within Canada’s Oil Sands Innovation Alliance (COSIA), where companies have spent $1.4-billion on environmental technology since 2012. It will allow the industry to meet its objectives while minimizing the costs associated with operating independently.

Mr. Little added that under the new initiative, one-third of the GHG reductions will occur by 2030, another third by 2040 and the remainder by 2050.

“Often when we talk about carbon sequestration or driving down CO2 emissions so that we can meet the climate objectives, often the economy is pitted against climate. It’s either you have one or the other,” Mr. Little said.

“Our belief is that if we apply technology and we apply all of the smarts of the technical and great people in the industry, we can actually take the revenue, continue to produce our oil and provide it to the world while dealing with climate.”

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