Good morning. My name is Paul MacLean. I am the managing director of Bear Head Energy. I lead a team of engineers, project developers and permitting specialists who are seeking to develop, construct and operate a green hydrogen and ammonia production facility near Point Tupper here in Nova Scotia. We thank you for the opportunity to share Bear Head’s perspectives on the standing committee’s consultation process for budget 2024 and for travelling to Halifax to gather our feedback.
In April of this year, Bear Head’s facility was permitted for up to two gigawatts of hydrogen electrolyzers. At full build-out and peak power inflow, Bear Head could produce up to 350,000 tonnes of green hydrogen and two million tonnes of green ammonia per year, positioning Nova Scotia to be a leader in the production of green energy and a critical contributor to the global energy transition.
Bear Head’s facility will be developed in phases. Our development costs are being funded by Bear Head’s owner, BAES Infrastructure, which is a diversified energy company focused on the development, construction and operation of the transition projects. Bear Head is busy working on detailed engineering designs, our power sourcing and transmission plans, and the remaining permitting that we will need for those building blocks. We are also actively engaged with the Assembly of Nova Scotia Mi’kmaw Chiefs, various first nations bands and the local broader community. We can clearly see a path to producing green hydrogen and ammonia well within this decade and bringing many skilled jobs to the province of Nova Scotia.
We are working to clarify our cost per tonne to produce ammonia. As you can imagine, this is of particular interest to the potential customers with whom we are in dialogue. Gaining more certainty and clarity around the investment tax credits for which we may be eligible would help us to quantify those costs and continue to advance our offtake discussions.
Once we are successful in organizing all the elements necessary for this viable project, especially customer contracts, we will approach the project finance debt market for the majority of the funds used to construct the facility and its associated wind farms. These financing sources will take into account and in fact assume receipt of certain investment tax credits when agreeing to the project’s pro forma capital structure.
With that background, I would like to acknowledge the generous package of investment tax credits put forth in budget 2023. This budget was a very tangible and positive step for the development of a green energy industrial and export sector in Canada and in particular Atlantic Canada. Given the significant potential for both local industrial and export sectors in Canada, it is important that policy frameworks support the hydrogen industry on a global basis to ensure that the industry is competitive in world markets. For Bear Head, the clean hydrogen investment tax credit and the ITCs available for wind farm development will be critical in financing our project and helping it to be cost-competitive with similar projects located in other countries around the world.
In terms of Bear Head’s commentary today, my suggestion is that the committee help promote adequate rules and interpretations set forth in budget 2024 to provide the clarity and certainty necessary for Bear Head and similar projects to benefit from the proposed ITCs and to quantify their impact. Our comments on budget 2023 were previously provided to the Department of Finance, but I will summarize our principal suggestions.
First, the industry would benefit from more detail as to which assets are eligible for which tax credits, especially the necessary common infrastructure assets that aren’t specifically used in either hydrogen or ammonia production.
Second, the industry would benefit from specific guidance as to how the carbon intensity calculations are to be made. Given the complexity of this calculation and its potential for different outcomes depending upon when it is measured, our suggestion is that Canada provide as much detail as possible so that projects such as ours have adequate time to plan for our compliance with those rules.
Finally, our assumption is that a one-time carbon intensity test must be assessed at the time of successful commissioning of the facility. A predictable but rigorous one-time test will mirror the one-time nature of the ITC itself, and will therefore help to ensure that lenders have sufficient confidence in the availability of the ITC to give full credit to its financial benefit. A multiple testing requirement that extends beyond commissioning would create barriers to securing investment, and would therefore impair the developer’s ability to finance the available investment tax credits.
As previously noted, more details on each of these points are included in our letter provided to the Department of Finance and separately provided to this committee. I would be happy to elaborate on any of those points.
I hope these suggestions are helpful to the committee. I will conclude by saying that Bear Head welcomes the government’s ongoing dialogue in consultation on these important and consequential tax credits. I look forward to your questions.