Natural Resources Committee on June 21st, 2021

[Paul Lefebvre, Liberal, Sudbury, ON]

Thank you, Mr. Chair.

Thank you, again, to all the great witnesses we have today for your very interesting testimony with respect to biofuels.

We're hearing on the one side of the ledger that biofuels should be part of the future and that advanced biofuels will help certainly reach our climate targets. Then we hear Mr. McKitrick from the University of Guelph saying that's maybe a bit too hopeful.

Let's go to industry and the market.

Mr. Masselot, you said that you are making massive investments in decarbonization and that you want to attain carbon neutrality by 2050. Why are you making those decisions?

Since Air Liquide Canada Inc. is a public company, you must be looking at making a profit. It might be said that it won't work and won't be worth the effort. It might also be said that it is a very interesting business opportunity that would provide Canada with huge good fortune and potential. Could you tell us more about that?

[Bertrand Masselot]

Thank you. Let me make two points.

First, we understand hydrogen, because everything at Air Liquide revolves around it. We are totally convinced that this molecule is what we need. We produce several tens of millions of cubic metres of it per year, and we have done so for a little more than 50 years.

Second, we are investing for our own assets and for our clients simultaneously, not just to make a profit, but to make a profit in the long term. In other words, we want to create value for the duration.

We—the company and its managers, as individuals in the broadest sense of the term—are totally convinced that creating sustainable value will come through the acceptance of all our focus on energy, intensive though the activities may be. That is why we are conducting those activities now and why we started them some years ago. We think that we are in a position, not only to create value but to create it for the long term.

[Paul Lefebvre, Liberal, Sudbury, ON]

That is great.

Thank you.

Mr. Thomson, on that point, you talked about advanced biofuels and the potential they have. You didn't really talk about this in your remarks, but I want to hear about the potential for exports. What is the rest of the world doing in that sector? Here in Canada, are we the only ones doing this or are there other players around the world? Is this a huge market opportunity for Canada and for Canadian companies?

[Ian Thomson]

There is an export opportunity, absolutely. Canada is not going it alone on climate action. As most Canadians know, we are over-weighted in our natural resource sector capacity to population, so we're a natural for export. We export a lot of our conventional energy and the same is true for alternative energies, full stop.

Our analyses say that it's a very attractive market internationally. Today, Canada exports a substantial amount of biofuel to places like California and the European Union.

[Paul Lefebvre, Liberal, Sudbury, ON]

We heard from a witness today that the cost doesn't outweigh the benefits. What would you say to that?

[Ian Thomson]

I would only say that competent bodies, such as Navius Research in British Columbia and others, have studied that exhaustively with their expertise and found that to be not true. The “Biofuels in Canada 2020” report, which you can find on their website, lays out, by province, the cost of using biofuels and renewable fuel regulations.

In the case of ethanol in gasoline, it creates a negative net cost for Canadians because of the octane value. For renewable diesel-type fuels, there is a slight cost for a typical long-haul trucker.

[Paul Lefebvre, Liberal, Sudbury, ON]

Okay.

Thank you.

I'd like to hear Mr. Lewis or Mr. West on that same point, please. I think it's very important.

[Malcolm West, Board Member, Renewable Industries Canada; Executive Vice-President and Chief Financial Officer at Greenfield Global]

It's Malcolm West. Hopefully, you can hear me now.

[Paul Lefebvre, Liberal, Sudbury, ON]

Yes, we can hear you.

Thank you.

[Malcolm West]

I apologize for the glitch earlier.

I would echo Ian's comment when it comes to ethanol, which is more the world of Greenfield Global versus renewable diesel, which is Scott's world. On the ethanol side, typically at wholesale, ethanol is trading at a significant discount to gasoline. As well, it comes with it the high octane value, which saves costs as well. Overall, the use of ethanol, even taking into account its slightly lower energy density, is cheaper than gasoline.

[Paul Lefebvre, Liberal, Sudbury, ON]

Mr. Lewis.

[Scott Lewis]

There's been a lot of talk here about the scale of putting this in and what the actual life cycle is. I'd like to refer to a significant project, our largest one that we have in California right now, where we actually converted an existing and yet no longer viable petroleum refinery. We bought a 63-acre parcel just about 10 miles east of Long Beach. It was a 100-year-old asphalt refinery. It started out as a crude refinery and we're converting that. We saved the jobs. We kept every single employee who was there.

We're converting that into a 25,000 barrel per day renewable diesel and sustainable aviation refinery. We're operating right now at about 4,000 barrels a day and by 2023 it will be at 25,000 barrels a day, all using waste products, recovered vegetable oils and used cooking oils, etc.

In terms of the life-cycle analysis of these, it's been pretty clearly established right now. We want to make sure we're comparing apples to apples with the data that is now available as opposed to data that was available 15 or 20 years ago. There have been significant advances in that.

We find that the demand for the product and our primary customers are obligated party oil and gas companies. That's who we partner with. We have a joint venture with Shell, who is our neighbour in Hamilton. We've been supplying them for over 10 years.

We find that the oil and gas companies are the ones—

[The Chair, Liberal, James Maloney]

Thank you.

[Scott Lewis]

—who are actually taking this on.

[The Chair, Liberal, James Maloney]

Thanks, Mr. Lefebvre.

[Paul Lefebvre, Liberal, Sudbury, ON]

Thank you, Mr. Chair.

I thank everyone.

[The Chair, Liberal, James Maloney]

Mr. Simard, it's over to you, please.

[Mario Simard, Bloc, Jonquière, QC]

Thank you very much, Mr. Chair.

I have a quick question for you, Mr. Masselot.

In your presentation, you mentioned investments of eight billion euros around the world. It that just for your hydrogen component?

[Bertrand Masselot]

Yes, I can confirm that. However, it's in the broad sense. It's not just about primary production, but from production to use and application, either for transportation or for industry.

[Mario Simard, Bloc, Jonquière, QC]

Okay.

So eight billion euros invested around the world to produce and transport hydrogen, with all that implies in the value chain.

I am wondering about regulation. Perhaps you could tell us about the regulations in Europe. Let's start with the famous hydrogen colour scheme: blue, grey and green. Do the projects you are investing in make that distinction between the different types of hydrogen?

[Bertrand Masselot]

Yes. We can certainly talk about the various colours of hydrogen. I would rather describe hydrogen in terms of its lack of carbon. Green hydrogen will always keep a portion of a carbon molecule, whereas other types of hydrogen will have more carbon.

Today, if we consider the projects among which we are positioning ourselves, we see projects based on electrolysis first and foremost. That does not make green, or low-carbon hydrogen by itself. It first needs the electricity in order to do so, including intermittent and other kinds of power.

We are also positioned for carbon capture, using more classic hydrogen-producing units. We have already conducted projects of that kind. An example is with natural gas steam reforming units. Since 2018, we have been recovering carbon dioxide from a natural gas steam reformer.

Most of our investments are being made in the hydrogen with very low carbon emissions. As I have told you, we are looking at investments in the order of three gigawatts of electrolysis, compared to the 20 megawatts we have just invested in Bécancour.

[Mario Simard, Bloc, Jonquière, QC]

Do the regulations in Europe allow for the production of hydrogen with a carbon capture strategy?

In other words, can you make hydrogen from renewable natural gas, as long as you have a carbon capture strategy?

[Bertrand Masselot]

Certainly. Today, an industrial concern like Air Liquide is able to invest in all those means of primary production. I would tend to say that we will be guided by the energy situation and the possibilities in the countries in which we find ourselves.

In Canada, and in Quebec in particular, clearly the abundance of renewable energy, in the form of hydroelectricity, is pushing us towards electrolysis. On the other hand, we are in the process of investing in and starting up a unit that will produce 30 tonnes of liquid hydrogen per day for the transportation market in California. The plant is located in Nevada and works by reforming natural gas, renewable to a huge extent, because we are fuelling it using our own fuelling technology for that type of unit, mostly with biomethane.

So we can assume that the next stage will be to capture and sequester the carbon dioxide produced, making it net carbon negative in this case.

[Mario Simard, Bloc, Jonquière, QC]

Let me go back to the cost of production. If you produce a molecule of hydrogen in Canada, the cost of production must be lower if you do it in Quebec using hydroelectricity, than if you do it in western Canada using renewable natural gas. That is because you have to use a carbon capture strategy.

Is that in fact the case?

[Bertrand Masselot]

This is where it is so important to have all the players all lined up, including the authorities and the politicians. Generally speaking, what we can certainly say, and say very clearly, is that our situation today is that, if we compare today's cost of so-called grey hydrogen from regular natural gas to what we are currently doing with elecrolysis, we end up with a product that is not expensive and that is top-of-the-line. That is how I would describe it, and therein lies the interest in scaling-up, of course.

Scaling-up provides us with three things. It means that we can drastically reduce the cost of the investment by automating the actual manufacture, such as with the electrolyzers. It also allows us also to reduce the price per kilo or per tonne of hydrogen that is produced and shipped to the point of end use.

Today, actually, we no longer worry about the competitiveness of a hydrogen solution in relation to any other kind of fuel. Hydrogen is already competitive for fuelling forklifts. For heavy transportation, we know that we are going to quickly reach that level of competitiveness. After that, everything will actually depend on the use made of it, using figures showing the frequency of use, the number of kilometres covered, and so on.

What actually happens is that price levels are not the same. They are dependent on geography, the input costs and the method by which the hydrogen is produced.