Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 21, Evidence, October 23 meeting
OTTAWA, Thursday, October 23, 2003
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 9:06 a.m. to examine and report on emerging issues related to its mandate (Implementation of Kyoto).
Senator Tommy Banks (Chairman) in the Chair.
[English]
The Chairman: This is a meeting of the Standing Senate Committee on Energy, the Environment and Natural Resources which is considering the question of emissions in general but the application in a practical sense of the Kyoto accord in particular in Canada in an ongoing study in preparation for a report which we intend to issue on those questions.
Our guests this morning are, from HTC Hydrogen Thermochem Corporation, Mr. Lionel Kambeitz, chairman and CEO, and our most eminent guest, if you will allow me that, Mr. Kambeitz, is more used to sitting at this end of the table than that because for many years he was the chair of this committee. We all remember that fondly and have all learned a great deal from him in every respect. His encyclopaedic knowledge has been of enormous value to us all, and we are delighted to welcome back to this committee, in a different role, the Honourable Nick Taylor. It feels like there should be a round of applause at this point.
Hon. Senators: Hear, hear!
The Chairman: Since you are both here, we will concentrate, as I understand it, this morning on questions of the hydrogen economy, on the one hand, and the related issue of sequestration of carbon dioxide on the other, which is directly related to Kyoto. I would ask Mr. Kambeitz, that we begin with you, if we may, or have you discussed which would like to speak first?
Honourable Nicholas Taylor, Former Senator, As an individual: Mr. Kambeitz gives deference to seniority. He said I should go first.
The Chairman: Very well. Please proceed with what you have to tell us.
Mr. Taylor: I would have been pleased to be second, but the Kambeitzs are old family friends. You have two westerners here, so in our opinion that means you are completely surrounded.
The Chairman: Please tell us what you would like to tell us, and I hope you would be agreeable to accepting questions.
Mr. Taylor: I have kept it pretty well it to carbon sequestration.
Although the figures in Canada are hard to get hold of, in general, CO2 production is 15 per cent from industrial areas like smelters, petrochemicals and so on, and 33 per cent from transportation. It is pretty hard to sequester carbon that comes out of an exhaust pipe, so that part stays out. The real shaker is from the U.S., and there is not much reason to think it is that much different in Canada, and that is that 42 per cent of carbon dioxide emissions are due to power generation. If you take the stationary sources of CO2 production that you can get at, you run at around 58 per cent, or just over half. That is a pretty significant amount.
Bear that in mind that we must capture the CO2 from over 50 per cent of the production and use it in different ways. I have listed seven or eight ways to do the sequestration.
The first is fairly well known. We put the CO2 in caverns, as we now do with natural gas. We make the caverns with the help of nature by pumping water into salt areas. That is the way natural gas is stored now.
We do not hook a house or generator up to a gas well. You hook it up to a gas line and the line takes gas out of the wells in the summer or on days when there is not much use and put them into caverns. When more gas is needed, instead of having to build a large pipeline, they take the gas out of the caverns either for air conditioning in California or heating in eastern North America.
Caverns are one way you can sequester CO2. You have to pay for the cavern to be hollowed out.
The second way to sequester is mixing carbon dioxide with water. If you have ever had any grease spilled by you or by someone passing — an airline sometimes gives you soda water to sponge the grease out of your clothing — the same thing applies for flushing oil out of reservoirs.
If you do nothing to the oil reservoir, you can get about 25 per cent out of it. The secondary draw is done by pumping salt water or anything into the reservoir. That will bring out another 25 per cent. If you use CO2, you can pick up another 35 per cent. You are not really sequestering the CO2 but using it to push the oil out.
It creates a bit of a problem tax-wise, which I will explain later, because in most places in the world only one government controls oil production. In Canada, it is both the provincial and federal governments. We have a tax system that I will talk about a little later.
Another way to dispense CO2 is to pump it into coal beds to produce coal bed methane, CBM. The CO2 actually combines with carbon that is in place and increases the amount of production you will get out of your coal bed by 10 to 30 per cent.
You will notice that the last two ways that I mentioned increase production. Consequently, they are of great interest to the province that gets the primary share of the royalties produced from natural gas and oil.
Another way to get rid of CO2 is to pump it into deep coal beds that appear not to be usable for coal bed methane. It certainly would not be possible to mine these coal beds. A recent survey in the United States by a man named Scott Reeves, published in July, mentioned pushing CO2 into these deep coal beds. Remember that coal and CO2 not only goes into the fractures in the coal but combines with the carbon to sequester more carbon dioxide. The combination voids space because a chemical reaction takes place.
Scott Reeves states that the current levels of emissions would allow us to take a 40-year supply of CO2 and store it in deep coal beds. These coal beds exist in great supply in Western Canada west of Winnipeg and east of Montreal. Montreal to Winnipeg may think that they control the votes, but the coal is controlled outside that area.
A tremendous amount could be put away, but there again is a case of economics.
One of the other ways to sequester CO2 is an old-fashioned one. Remember they once would bring geraniums into the hospital room during the day and remove them at night. During the daytime, CO2 is sequestered on farms and forests.
We know that we can sequester a large amount of CO2 in different types of farming but it would be a very complicated set-up to give tax or sequestering advantages. We could start looking with farmers and lumber owners as to how to use a certain amount of it.
If you have a pipeline of CO2 going by your door on the way to an oil field or to be stored, you could tap some of it off into greenhouses. It helps the plants grow faster.
One of the last ways of sequestering CO2 is the one being used in Norway now under the sea. You can pump it into non-potable aquifers. Aquifers lie anywhere from 5,000 to 25,000 feet in depth and are very salt water or sulphur laden. In the oil business, we drill more of those than we need, so that might be a use for them.
I want to apologize. My printer quit. I would normally print these points so that you could have them to ask questions, but you will have a record anyhow. Your redoubtable assistant, who helped me for many years, will not miss anything.
How do you pay for it? One method is carbon trading. If you use a carbon trading system, you may get tax and investment funds to build a facility, whether it is a new nickel refinery in Newfoundland or a power plant in Alberta. You would try to make it as CO2-efficient as you can in order to gain carbon credits that you can trade to make money. That is one of the ways of paying for it.
The other way would be to study the tax regime in the U.S. I do not know it in detail, but they are obviously highly successful in trapping CO2 in the West. They are so successful that they export their CO2 to Canada.
One of the more humorous things that happened in Kyoto was that the leader of one the companies in Alberta was complaining loudly about CO2 and how bad the Kyoto Protocol was until someone whispered in his ear that he was buying CO2 from the U.S. That quieted that end of the table for a while.
CO2 is being exported from the U.S. because it is sound tax-wise. Forty oil fields in west Texas have been flooded with CO2 in the last two years. There is some sort of tax incentive for people creating CO2 to ship it.
CO2 will increase the primary oil from some of these old reservoirs by 30 per cent. Tax incentives may not be necessary from the federal government. I would be very careful, if I were the federal government, because the provinces will get the increased income from increased oil production. The province could retain a great deal of the increased income. They would likely establish the tax incentives.
In the U.S., Norway and the Middle East, we have only one government handling oil production, and therefore you can talk about tax incentives, but in Canada, we have the additional problem of two owners of oil and gas. The province has to be closely involved in how to use CO2 in oil reserves.
You remember I mentioned that nearly 43 per cent of emissions were from power. It seems to me that the federal government could do some streamlining of their tax laws to allow solar wind and even water. I do not mean hydro from huge reserves, but water that is just used in irrigation or natural water. There is a word, but I cannot remember what it is, for hydro that is not tied to a dam. All those could be increased, and that would not sequester CO2, but it would stop the necessity of generating power, which is mainly nowadays by coal and natural gas.
I want to go one step further and talk about another way of cutting down your CO2, which is not exactly sequestration but comes close to it. Our committee was involved in the safety of nuclear power. We must start looking closer than we have been at nuclear power. It can be used, for instance, to help the tremendous amount of power needed to get tar sand oil out and in other areas all across Canada. We are moving towards nuclear very slowly. If you came here from Mars, you would wonder why the country famous for exporting nuclear power plants all over the world is the one where it is most difficult to get nuclear power underway. I think it is mostly because of knee-jerk reaction from 25- to 50-year-old technology. It is not quite the same as the people that tried to ban cars in Chicago because they scared the horses, but it is getting awfully close to that type of thinking, that nuclear power has been a little dangerous. In Canada, of all places, we could replace a great deal of our power generation by nuclear.
I will mention another suggestion that might get you in hot water. We sit here next to the U.S. The oil industry, for 25 to 30 years, was protected in North America by having a tariff wall for Middle East crude. When I graduated university, and I hate to say how many years ago it was, but it was after the last war, you could get Middle East crude for $1.20. We thought everyone would go broke so we had an 80-cent-a-barrel tariff on foreign oil so that we could develop an indigenous oil industry. In other words, there was a North American policy in oil because we realized long before the oil embargo that relying on tankers to supply your needs was rather foolish because they could be sunk by submarines. Later on, the Arab embargo highly emphasized the fact that reliance outside North America was not a wise thing to do.
Now it is time to go back to the future, and go back to looking at what I would like to call an energy security
premium. The Canadian government and the provinces have been mired in the past and so pleased that the Americans
will buy our coal and oil that they have not even thought about asking for a premium because we lie so close to them.
Canadian oil saves them going over to the Middle East and not only spending billions but losing lives in order to get
oil. I think we have now got a very excellent argument, not a right-wing or left-wing argument, to say to the Americans,
``If you want our oil and gas developed and continue to be developed, pay a 5 per cent or 10 per cent energy-security
premium.'' That could go into a fund to fund the carbon dioxide equipment that we need on coal plants, generators
and smelters to take the carbon dioxide off. In other words, there is no reason we should be selling oil to our major
consumers in the U.S. for the same price as they bring it in from offshore. It is only in the last
15 or 20 years that we have done that. Before that, we always had a two-price system. Because of the NAFTA, you
cannot charge people different prices, but I think you could charge an energy security premium. It would be much
cheaper than sending their boys off to slaughter in the Middle East or invading Afghanistan and Iraq and so on. An
energy security premium could be used to finance sequestering of CO2 and equipping your industry, the stationary
industry, in such a way that it could capture the CO2.
I have left with you three solutions you can tussle with, tax-wise, for using carbon dioxide, although I think it is economically sensible for the provinces to replace some of power generation with nuclear, if not all the base load. France has gone to 85-per-cent nuclear now. Last, of course, is to charge an export or security premium to the people we export our oil and gas to.
The Chairman: I think it would be most practical if we hear from Mr. Kambeitz next before we begin questions. Is that agreeable to members?
Hon. Senators: Agreed.
Mr. Lionel Kambeitz, Chairman and CEO, HTC Hydrogen Thermochem Corporation: Thank you for the opportunity to present our vision of the coming hydrogen economy and its relationship to some of the environmental issues that we all are very concerned about as Canadians.
I am an entrepreneur and business developer from Regina, Saskatchewan. I have been fortunate in the last 15 years to have been involved in businesses that are either directly involved in the environmental movement or on the fringes of it. I feel I have sort of stumbled into becoming an environmental businessman. They are both successful ventures in the past, and we have decided to stay the course for many of our other business development endeavours, and that brought to us the hydrogen economy approximately 36 months ago.
From our perspective as entrepreneurs who are wanting to watch the rollout of the hydrogen economy, from the environmental side, the driving factor for us seems to be right in front of us: inner-city air quality, health issues related to inner-city air quality, and of course in many cases the socio-economic disadvantage of having to live in larger cities that have inner-city air quality issues all coming from the exhaust pipe. A more broad and macro concern for us is the greenhouse gas issue and of course the related Kyoto issues. To a certain degree, if we solve the inner-city problems with the hydrogen economy moving in and reducing gas exhaust emissions, we may not be solving the greenhouse gas issue because we may end up producing hydrogen using present technology: produce CO2 outside the inner cities, move the product into the inner cities and reduce, of course, the issues of inner city air quality.
However, I think the hydrogen economy is upon us. We believe that the hydrogen economy will roll out. We are not futurists in that regard. We have stayed in close contact with what we think are the two driving industries of the hydrogen economy: the automotive industry and large oil and gas. If we can understand what their thoughts and needs are, or their thoughts and strategies are, between those two sectors we are starting to understand how quickly the hydrogen economy will roll out.
Without speaking too generally, or too specifically, about hydrogen, the good news is that today we are approximately 40 to 45 per cent efficient in the use of our fuel cells. Every single month, every single quarter, fuel cells are being produced to be more efficient, as compared to the combustion engine, where we are 90 to 95 per cent efficient already. There seems to be no room to improve the efficiency of the combustion engine. Where we are today in the fuel cells is we are 40 to 45 per cent efficient and moving up rapidly in that efficiency scale.
The other positive aspect of the hydrogen economy — and this is where we come into play — is that the technologies that will convert to hydrogen, whether it is the reformation of natural gas or electrolysis of water or other technologies, are improving their efficiencies almost exponentially. Certainly they are making dramatic improvements in that conversion efficiency, both from a cost perspective of the final product of hydrogen and efficiency from an environmental perspective.
In that regard, we have to track what the auto companies are really telling us. We have tried to stay as close as we can to the people who are driving the strategies of the big five or big six auto companies. Our conclusions are this: General Motors, in the next six years, will have one million hydrogen-powered cars on the road. They are committed to that by 2010. Honda is advertising fuel cell vehicles today in many of the business magazines. Heaven forbid, if you went to your Honda dealer, you could not buy one — they do not know how to price them — but they are advertising them, in any event. You see the fuel cell vehicles, FCVs, so Honda seems to believe that the fuel cell vehicle is a reality.
Toyota is advertising fuel cell vehicles as well. They have provided several universities and counties in California with fuel cell vehicles to start the demonstration process, and start the viability process of viable fleet use of hydrogen. BMW is the most committed — albeit in an area that we are not the most pleased about. They are most committed to an internal combustion engine utilizing hydrogen, which is unusual. All the others seem to be committed to fuel cell technology; and BMW wants to stay committed to hydrogen use, but utilizing an internal combustion engine. Ford is involved, but a little less committal — so we find that the auto companies are rolling out.
We found ourselves then in conversations with the big four oil companies — Shell, BP, Mobile Exxon and Chevron Texaco. We found that they were feeling a little behind in their strategy to roll out a service-station supply model. Governor Schwarzenegger, the new governor of California, has promised a hydrogen service station every 20 miles up and down the California interstate. I do not know whether that is a California promise or a reality. Nevertheless, it certainly has been in the news in the last week or so.
The fuel companies, two in particular, have impressed us with a sense of urgency. Chevron Texaco has impressed us with a sense of urgency to have a roll-out strategy to roll out hydrogen availability at their service stations in North America, and in parts of northern Europe. We find that British Petroleum, as well, has a sense of urgency to have a roll-out strategy to ensure that, in strategic geographic areas, they have hydrogen fuelling available for the coming hydrogen economy.
Royal Dutch Shell has a more global view; it has a European perspective, and a little bit of a different one than the other companies. It does not seem to be quite as concerned about rolling out a hydrogen fuelling strategy into its service station model.
We believe that the auto companies and fuel companies are indeed moving hand-in-hand and watching each other to be sure one is not ahead of the other. We are reminded of a time back in history, in 1915, when the price of oil was 80 cents a barrel in Pennsylvania and the price of gasoline was a dollar a gallon in Paris. We found out that somebody in Detroit, called Mr. Ford, was producing more cars, and suddenly we needed more gasoline and we did not know how to produce it. That inequity was solved with technology — thermochemical cracking. That technology solved that issue and gasoline went back down to eight cents a gallon, and the automobile was born and life went on. The fuel companies and the car companies do not want to be caught in that ``me first, who is first'' scenario.
We believe that there is a three-part strategy required on the part of Canada, and I would say the United States, in terms of rolling out what I consider to be a viable hydrogen economy, and a viable environmental strategy along with that hydrogen economy. First and foremost, we believe that hydrogen is not working in competition with hydrocarbons. Rather, based on issues of energy security, that Mr. Taylor has discussed, it is really in addition to. We seem to need every barrel and gigagram of gas we can get, along with all the new hydrogen technologies, to supplement what we have. It really is an issue of security, in our opinion.
Having said that, the three-part strategy involves a more significant approach to mandatory conservation. I think we have to start an approach to mandatory conservation of some sort and, if I can use the phrase, turn up the heat in the sense of education and volunteerism on the other side of conservation. We seem to have slipped off the wagon, and we are back to consuming fossil fuels at an alarming rate.
Second, and this is where Hydrogen Thermochem Corporation comes in, we need an interim strategy of 15 to 20 years, while the larger hydrogen economy is ushered in. That interim strategy involves the production of hydrogen at the end of the distributed energy network. It is the only practical way we can deliver hydrogen five years, seven years, ten years from now, to the consumer at a service-station level, at a residential-garage level, or at any sort of a fleet level. The strategy is to produce hydrogen at the end of the distributed energy network through utilization of the natural gas distributed energy network — or, of course, the electrical grid. We have chosen the natural gas distributed energy network because it is the most cost effective, first. Our intent is to have reformation technologies that involve CO2 capture and utilization. We believe that is the strategy that the company will pursue.
We have done that with the University of Regina. I have included a variety of information on our company in my package. Some of it is quite promotional. However, I have also included information on the new greenhouse gas centre, the international test centre for greenhouse gases at the University of Regina. Our laboratories are located within that facility.
We selected that facility because of the intellectual capital at the University of Regina on energy conversion, natural gas conversion. Our secondary mandate in the reformation of natural gas to hydrogen was to develop a technology that would capture CO2. Our mandate to the University of Regina — and to the five Ph.D.s that we have ``bubbling beakers,'' as we like to say, in the labs in Regina — is to produce a dry reformation technology that could be put into an appliance model, to be installed at a service station and consumer level. That reformation technology would have to be more efficient than existing steam reforming technology presently used to produce hydrogen.
Second, we wanted a CO2 capture capability in one of two areas. The first capture technology comes with the production of pure, food-grade CO2. In some of the large fleet scenarios and large service-station scenarios, that food- grade CO2 may indeed be collectible and reutilizable in the food industry. The other capture technology is a mineralization technology that we have instructed the University of Regina to proceed with on their research for us. That would involve the mineralization of partial amounts of CO2 that would normally be let out to the atmosphere as we normally would reform natural gas into hydrogen.
That is the mandate that we have given the University of Regina in our three-year collaborative research agreement which we have funded. We are completing a worldwide search for the right intellectual capital to follow through with this strategy.
The third and most important of the three-part strategy — one being conservation and two being the interim solution — involves government, academia and business. We have to provide significant support to the renewable technologies and the renewable research and development that will allow us to ultimately produce, in 15 to 20 years, a hydrogen for ultimately utilizing renewable technologies. The Americans have made quite a commitment to hydrogen. Mr. Bush commented that a child born today would drive a fuel cell vehicle. Mr. Bush's administration has dedicated several billions of dollars to that effort. I believe that if we begin today with the involvement of government, academia and business, we could have cost-effective, evolving, renewable technologies in 12 to 15 years time.
We support the three-part strategy. We need help from the Government of Canada in the area of conservation. We need a renewal in conservation education and mandatory conservation. We have all the help that we think we need for the interim strategy. Funding of universities and their facilities have encouraged us to move from a private laboratory setting into an academic laboratory setting to achieve our goal at a much more rapid rate. We are certainly pleased with how that has evolved. I believe that government's involvement would be the implementation of the newer renewable technologies.
The final vision of HTC for utilizing the distributed energy network is practical. Chevron-Texaco has endorsed it as the way to progress their service stations in North America. They are unsure of what they will do in 15 years time but they seem sure of their interim strategy and the involvement of natural gas. They have interests in companies such as ours because we will attempt to do this while being kind to the environment and reducing or eliminating the CO2 emissions of the process.
It is a pleasure to sit beside the Honourable Mr. Taylor. The concept and tragedy of natural gas is talked about a great deal — the ability to turn environmental gold, natural gas, into lead, which seems to be heavy oil. I do not know how to stop that. We have a significant movement of market forces that are driving the conversion of natural gas, which I consider to be environmental gold from an energy perspective, into the heaviest and stickiest oil we could possibly ever dream of. We have to upgrade and refine it such that I have grave concerns about its effect on the environment. I am sure Mr. Taylor will have more ideas than I would have on this subject but, certainly, I have looked at this from the outside for quite some time. We certainly must address this issue as well.
I would be happy to field any questions, Mr. Chairman.
The Chairman: Do I understand correctly that your reference to the end of the pipeline is, in effect, the production of hydrogen at the retail site?
Mr. Kambeitz: That is correct.
Senator Spivak: Mr. Taylor, it is great to see that you are firing on all engines, as always. I have only one question, although we get so many great ideas. The current legislation is not bad but there is a definite gap between the ideas that we have and the legislation that is in place and its implementation. For example, last night they spoke to the issue of toxics, which is big. In 10 years, they have evaluated one toxic chemical. Out of 23,000, they have done 10. It is slow going.
How do you evaluate, from your apolitical seat, the ability of government to move quickly? We do not have a great amount of time, especially when you think of lead-time to bring these things into production. How do you evaluate government's ability to capture some of these brilliant ideas and to place greater priority on funding to, for example, subsidize oil and gas development? What is your view?
Mr. Taylor: That is a difficult question. First, you have to leave it to the market. I do not think government spending is very efficient at any time. Right now in Canada, provincial governments have quite an input to energy because they own the coal and the oil. They are worried that the price of their resource in the future may not be as high as it should be. On the national scene, the Department of Natural Resources is rooted firmly in the past, maybe two generations ago, in terms of their thinking. The Department of the Environment is progressive and will want to get going. The northern resources department, Indian and Northern Affairs Canada, has a great deal of our future not only in diamonds but also in energy. Three government departments are all vying with one another without any coordination of effort, that I can see. They all appeal to a cabinet that has been in power for so long that a change in political parties may help. However, one of the big drawbacks has been the tremendous power of our energy companies, which are the biggest in the world as a general rule. They have tremendous political power to try to stay with the status quo. Petro-Canada would love to produce gasoline from 100-year-old and 50-year-old refineries forever. Naturally, some of the other companies would like that too. Some of the newer companies, such as Shell Energy, are building refineries now. We are getting a bit of an argument between the major companies that are competing with one another. As Mr. Kambeitz mentioned, it comes up in the issue of hydrogen as well.
We must have the courage and guts to mandate how much CO2 is allowed. We will have to say that we will reduce it by so many metric tons. Industry will find a way to do that. If we tell industry that government will fund, to a point, a change and to do this or that, it will not work. We have to mandate the changes to the resources. Mr. Kambeitz is right in his analogy of the conversion of gold to lead. About 40 per cent of natural gas is used for upgrading hydrogen to bring up the ends although we may have trouble getting out of it. Certainly, nuclear coal energy could be used for heating. You need natural gas for simple heating of water, which is similar to using solid mahogany in your fireplace; it is a non-starter.
If you pass rules that only a certain amount of CO2 will be allowed in the air from a coal plant or from a water heating plant, which is used in the tar sands, then that is all that governments have to do. Technology is available from people such as Mr. Kambeitz and others to accomplish that goal. As long as the large companies can lobby and scare the heck out of the poor MPs for the next election about how many jobs will be lost, industry will not innovate. However, if government mandates, they will innovate because the technology exists. You are not asking the impossible.
Senator Buchanan: As my good friend knows, I am one of those rather dangerous people, in a way, with a background in science, engineering, law and politics. Some people say those are ingredients for an absolute disaster.
Mr. Taylor: I still think you are a better singer.
Senator Buchanan: I am absolutely fascinated by what we are talking about today — the conversion of natural gas to hydrogen. I will pat myself on the back, because I was instrumental in ensuring that the first offshore natural gas and oil federal-provincial agreements were negotiated when we signed them back in the 1980s. That started the natural gas flowing off Nova Scotia and the oil from Newfoundland. I will take credit for the Newfoundland situation, too.
Mr. Taylor: Did they not have a change in government?
Senator Buchanan: That is right, for the better.
What I am interested in, and it is not new to this committee, is the conversion of natural gas to hydrogen. As you may know, Mr. Taylor knows, at the present time, we are delivering about 500 to 600 million cubic feet of natural gas a day into the northeast States, which will increase to about a billion cubic feet in two or three years. We have our gas plants in the Guysborough area. We have our petro plants over on the Cape Breton side. They are vitally interested in hydrogen production, no question, although they have not really done anything yet. I am interested in your comments about the University of Regina and the research being done there on the conversion of hydrogen from natural gas. We also have, as you may know, a lot of coal in Nova Scotia. What about the production of hydrogen gas out of coal? I am fascinated by your comments that, within five or six years, hydrogen could be produced in sufficient quantities to have GM produce quite a few hydrogen-operated cars. Are those the H-wire cars?
Mr. Kambeitz: Correct.
Senator Buchanan: Two weeks ago, in the United States, we did not get the impression from the people to whom we spoke that hydrogen production would be that quick. Some said it may, but I think most said it would not be. They said it would be in the long term. In answer to my question as to whether we could forward to it within the next four to six years, I think the consensus was no. I am heartened to hear you say it could happen. You are not alone in this, by the way. The General Motors people have told members of this committee that they are optimistic that it will happen quicker than others are saying. We all drove a hy-wire car. It is an incredible vehicle. When I was down to the plant in Point Tupper, I talked to them about that, and of course they are well aware of it. They are looking forward to getting involved in research projects in Nova Scotia for the production of natural gas.
You said you were working on the cost effectiveness of production of hydrogen from natural gas, and it appears that it will be very cost effective. Could you explain that again, please?
Mr. Kambeitz: On the first question with respect to hydrogen from coal, senator, of course we believe that hydrogen will be produced to the practical market at the end of the existing distributed-energy network. The cost of putting in a hydrogen infrastructure is about 35 or 40 per cent over the cost of putting in a natural gas infrastructure. Of course, we have no hydrogen infrastructure, and we have just completed natural gas infrastructure all over this country, and it is sophisticated and new.
New technologies from large coal facilities have been slated by the hydrogen industry as spots to put the large macro plants and then a special infrastructure to move hydrogen produced on site at larger plants into the market place. That is why we think that becomes part of that 15-year solution, where we have renewable or energy-efficient technologies moving into spots just like that and putting up large hydrogen facilities. Then the hydrogen economy or the hydrogen infrastructure will roll out and service the demographics where the mobile or stationary fuel cells are operating.
With regard to the cost-effective side of things, our objective is to have an appliance-sized reformer, meaning a type that a service station would utilize to convert natural gas already at its service station into hydrogen. You would have something much like a propane tank on the side of a service station that would now indeed pump hydrogen. What is practical about the appliance size —
Senator Buchanan: Can I just stop you there? You say the production of hydrogen from natural gas at a service station?
Mr. Kambeitz: That is correct. It is right at the service-station level.
Mr. Taylor: I might be able to help here. Coal bed methane can be produced from coal, and that is natural gas. That is what you would make the hydrogen from. Coal bed methane production can be enhanced by pumping CO2 into the same bed. It combines with the coal and creates more methane, so it becomes a cycle. You take your CO2, combine it with your coal, coal makes natural gas, and natural gas makes hydrogen.
Senator Buchanan: In Alberta and in Nova Scotia, they have done a lot of work on methane production from old coalmines.
Mr. Taylor: He would make hydrogen out of that.
Senator Buchanan: That is interesting.
Mr. Kambeitz: At the service-station level, senator, we would do that.
The reformation technologies are becoming more cost effective because when you are dealing with micro-plants and micro-appliance units, you can find yourself making continual technology improvements. You are dealing with an appliance model, and year-to-year, technology improvements are immediately implemented and introduced into the market. We have had conversations with Chevron Texaco. They talked about not only what our objectives were for a conversion efficiency, but incrementally year after year what our improvements would be as they continued to buy appliances to convert at the service-station level. We can get greater efficiencies because we are continually building micro hydrogen plants and introducing the newest technologies on an ongoing basis, as opposed to the large macro plants that exist today where the capital cost is put in, the technology is chosen, and you have made a 15- to 20-year commitment to a certain technology.
Senator Buchanan: There are no micro ones at the present time in Canada, are there?
Mr. Kambeitz: No, but there are several appliance-style hydrogen reformers in the world today that are made appliance-style and that will sit in an area six feet by eight feet, for example.
The problem that we have seen with those technologies is twofold. Many require steam reforming, which means you have issues of having to provide clear and pure water at a service-station level, which certainly is not practical. Second, they were technologies that were more difficult to capture CO2 from. The mandate was to build a dry reformer which would not require purified water at the service-station level and then, second, that would be able to capture the CO2 either in food grade or in mineralization strategy.
Senator Buchanan: The mineralization strategy is interesting also. Could you describe that?
Mr. Kambeitz: I am not a chemist. In practical terms, there is an opportunity to capture through a mineralization, whether calciums or calcium carbonates. There is an opportunity to capture into mineralization form some CO2 as the flue gas passes through it. You can capture portions of that CO2 that normally would be omitted.
We have asked the University of Regina to identify a CO2 mineralization opportunity that would apply primarily to what would be residential hydrogen conversion units. It is not practical to have food grade CO2 produced at a residential level and collect it to put back into the utilization chain. It would be practical to have a mineralized product in a small appliance style reformer that could be disposed.
Perhaps the microelements that we have in soil could be re-composted into the soil at a consumer level, which would hold the carbon that is ultimately sequestered.
Senator Buchanan: If I were to go out to Regina, could I tour this facility?
Mr. Kambeitz: Yes. In fact I have an invitation in my package. We are having the grand opening of our lab on November 20. We will invite you all to the University of Regina. We will be showing off our laboratory.
Mr. Taylor: Is that Grey Cup day?
Mr. Kambeitz: Just after. The Greenhouse Gas Technology Centre was officially opened about six months ago. I have included an article about greenhouse gas issues in the material that you have. It shows on page 2 the International Test Centre for Carbon Dioxide Capture being opened in Regina.
We again focused on Regina, not only because my family is from that area since 1898, but also because the university had particular intellectual capital and skill in the area of capturing CO2. We felt that we could create an academic alliance with other universities on reformation technology. However, this university has been focusing on CO2 capture with the new Greenhouse Gas Technology Centre.
Our intentions are to be the second prototype project in this large centre. Senator, the first one is for the capture of CO2 from flue gases primarily utilizing coal burners. That is happening currently.
Senator Buchanan: Is it the capture of CO2 utilizing coal burners?
Mr. Kambeitz: Coal burning flue gas is —
Senator Buchanan: We have many of those.
Mr. Kambeitz: The University of Regina has pioneered much of the technology of CO2 capture utilizing coal flue emissions. There is one in active use today at one of the power plants in southern Saskatchewan. It is fully monitored by the University of Regina.
Senator Buchanan: Capturing CO2?
Mr. Kambeitz: Yes. It is at one of the coal plants in southern Saskatchewan. That is actively monitored by the University of Regina.
Senator Buchanan: Senator Spivak always complains to me about the CO2 that we emit from all our coal burners in Cape Breton. We have eliminated SO2 in one of the major generating plants at Point Aconi with the fluidized bed method. I started that as a politician.
The remark from people such as Senator Spivak is now: You have to get rid of CO2. I can tell her that we can do that.
Mr. Kambeitz: I think you can. I would certainly like to provide to the Senate some of the reports of the research at the University of Regina. Certainly, it is progressive. It is on the cutting edge, and it is real. It is past the laboratory stage. It is at the power plant.
Mr. Taylor: To interject, Senator Buchanan, you may recall when you were in California a year or so ago on this committee, California was buying electricity from Nevada, paying a premium because Nevada was manufacturing electricity by coal. California is so dedicated to clean air; they were capturing CO2 in the flue gas and paying the premium.
First, CO2 can be captured, and they are working on. Second, the consumer is willing to pay a bit of a premium to put the CO2 inhibiters on the flue. California and Nevada are already working on that. This is continuation of it.
Senator Buchanan: You can expect me to come to the University of Regina because in three years I will be joining people like Nick Taylor. I have no intention of retiring. I never had such an intention in my life. Then when I learn enough from people like you and the University of Regina, I will go back to Cape Breton and become again a research scientist in CO2 removal and in the conversion of hydrogen from natural gas.
The Chairman: If you would, send us those reports with respect to scrubbers and inhibitors and those kinds of things. We would be very interested in incorporating that information into our forthcoming report. We would be grateful if you would do that.
Mr. Kambeitz: I certainly will.
Senator Christensen: Sequestration is certainly a buzzword that we are hearing often as we are talking about greenhouse gases and trying get rid of the CO2. It implies to me that we are getting rid of it. We will capture it, and we will put it somewhere so it cannot create a greenhouse gas and get into the atmosphere.
Mr. Taylor gave us five different examples of how to sequester CO2. There were the caverns, the flooding of the oil wells, putting it into the deep coalmines and putting it into non-potable water aquifers. It seems to me, and perhaps you would elaborate on this, that only two of those — the caverns and the non-potable aquifers — would actually be the storing of CO2 out of circulation. Those two ways would have to prove to have no leakages.
In the other three ways, CO2 would go back into the atmosphere. Those are really only recycling of the CO2. The same thing happens with your green process of planting trees. They are taking out the CO2, but when the trees are burned or used, the CO2 returns to the atmosphere again. Could you comment on that?
Mr. Taylor: That is a good point. You are quite right. To get rid of CO2 absolutely is very difficult because it cycles through. It is a natural sequence of combustion.
You have natural caverns that do not leak natural gas now. You would use some of those caverns to keep CO2 until the CO2 can be used in manufacturing. CO2 can be used to mix into coal and so on.
At the beginning, I said that it was not exactly sequestration. Sequestration means to hide it. My presentation was regarding the uses of CO2.
CO2, put into a coal bed, is gone. It makes a reaction with the carbon, and you do not see that CO2 coming back.
If CO2 goes into an oil bed with water, it has a tendency to stay in the water. CO2 in the water flushes the oil out, and the oil, being lighter, stays in front of the CO2 and water mixture. You get very little CO2 produced back with the oil. You do have to capture it and push it back in the water behind the oil, so most of it is gone that way. It does not get back to the surface.
They use non-potable aquifers in Norway because most of their oil production is out in the ocean. They are able to drill holes into the water beds and pump CO2 in there. There are already a bunch of gases in there, so they are just putting it under more pressure. However, it is at such depth that you have to ensure you do not make the formation explode and make it come up, but you can usually put in quite a bit more.
Senator Christensen: What about the costs of capturing it and then transportation?
Mr. Taylor: The cost of capturing it, in many cases, can be paid for by the amount of use you make of it. As I mentioned, the oil companies and the governments of the provinces will recover about one-third more oil by using it, so it becomes an economical thing. It is so economical, in fact, that even in Regina, where you were experimenting in how to get CO2, they are buying it out of North Dakota and pipelining it up to Regina. In other words, CO2 can be an economical thing. I used to cite the example that CO2 is something like natural gas. We used to burn the natural gas, when I first started in the war years. We used to burn the carbon dioxide in Alberta, or natural gas, in order to get at the oil. Now it is the other way around; we would rather burn the oil to get the gas.
CO2 has its uses. Sequestering it in caverns or in reservoirs — I think the march of history will show we can pull it all out and use it again for some reason. I do not know exactly what the CO2 will be used for, outside the flushing and the acid system, but there may be a reason for it. Perhaps it will be used to mix with limestone and make cement — there are 100 different things that CO2 is present in, in some form. As a matter of fact, we take a certain amount in Tums, do we not? Also, in internal medicine — if you get the wrong government you might need a lot of those antacids.
Senator Buchanan: That is interesting too, but regarding sequestering CO2, could this be done in salt caverns?
Mr. Taylor: As a matter of fact, chances are that is where it would be. As you know, Nova Scotia has big salt caverns. I think you are probably going to start sequestering natural gas in those salt caverns, too, in order to keep your deliverability high. Mind you, I also suggested that you should be charging the Yankees a little bit more than you are.
Senator Buchanan: If I was still there, we would have. There was a change of government.
Mr. Taylor: The alternative is going over to the Middle East and starting a war, and getting your young people killed, and spending billions of dollars and going on and on in a bottomless pit. If you came here from Mars, you would say, ``What the hell is the matter with you, spending all your money over there when you could do it right here.''
Senator Milne: I must say that when Senator Taylor sat beside me, the first half of his time in the Senate I spent pulling him by the coat tails to get him to sit down. The second half I spent urging him to stand up because he is so wonderful when he gets on his feet, and he has such a fertile mind. We have had a lot of discussions about carbon sequestration. I am not even going to try and cross swords with him.
Mr. Taylor: Your partner is one of the more famous pipeliners.
Senator Milne: That is right. I will ask most of my questions of you, Mr. Kambeitz.
You talk about this thermochemical hydrogen catalyst process on your Web site. I gather this is the dry reforming of natural gas. Perhaps you could tell us more about how that works — rather than using steam.
Mr. Kambeitz: Actually, I cannot — and I say that sincerely, because I am not a chemist — in terms of some of the proprietary technologies we are using. However, effectively, a shift water gas reaction will take place and there will be some membrane separation. We will then be taking a CO and CO2 product and recycling it for a second burn — we are trying to get a second burn of the CO2. If I say much more than that, two things would happen. First, I would expose myself as having no understanding of chemistry. Second, it is really what we are working on that is proprietary.
However, what we are finding is the second burn of CO2 within the reformation process is where we will try to get a little more efficiency in terms of the CO2 extraction. Of course, we are not going to be utilizing water or steam for the process. That is really all I can say about the process. I was not sure if I should have brought a chemist with me or not, senator.
The Chairman: Do you mean you are not using purified water, or you are using no water?
Mr. Kambeitz: No water at all.
Senator Milne: One of the terms that you used, one of the end products of this whole process — this sort of end of the delivery line process — would be coming up with food-grade carbon. That is a term that I have not heard used before, and it intrigues me. How do you take the carbon in whatever form it is in out of this end process at the service station that will put fuel cells into cars, and convert that into food?
Mr. Kambeitz: Food-grade CO2, senator, is ultimately in the last process — all we have to do is effectively filter the final CO2 product. By virtue of the burning reformation, we have burned a lot of the normal impurities that would be in what I would classify as non-food-grade CO2. With the right filtration and membrane separation in the last process, we would then create food-grade CO2. That would be sold to the bottlers, margarine producers, hydrogenated oil producers and things of that nature.
Senator Milne: Tums producers.
Mr. Kambeitz: Yes. The challenge will be — as always is the case when you have a capture scenario — the utilization scenario. Is the collection of that food-grade CO2 going be viable? Much will depend on how efficient the collection process can be. We will have food-grade CO2 sitting in a service station. Is it viable to go and deliver it to the bottling plant or the hydrogenated oil plant in town? That will be the challenge after we produce the food-grade CO2.
Senator Milne: As an aside, I point out that many of the salt caverns in southwestern Ontario are being used already to store natural gas. In fact, I think they all are being used now for that, so there is not a whole lot of capacity there in southwestern Ontario for much more carbon, unfortunately.
The Chairman: When you talk about the improved efficiency of fuel cells, are you talking about the capacity to make them, in layman's terms, go further? We have heard from many scientists, and from the motor companies, that the main impediment to actually rolling out personal-use vehicles in North America is the problem that when you fill it up in one way or another, it just will not go far enough. Is that what you mean when you say improving the efficiency of fuel cells?
Mr. Kambeitz: Not necessarily. That efficiency of being able to go further will come from improved storage technologies. There are great improvements being made in the storage technology. How will we put hydrogen in the tank of the car? There are new nanotechnologies and alkaloid technologies being used, where they will try to take it to 300 kilometres and 500 kilometres out. When I speak of improved fuel cell efficiency, it is truly the conversion of hydrogen to electricity, which ultimately the fuel cell does. They are only at approximately 40 or 45 per cent — that is a debateable issue, but many of our scientists will tell us that fuel cells are at 40 or 45 per cent of their theoretical efficiency. Yet we have taken the combustion engine to 95 per cent or 90 per cent of its theoretical efficiency. As Ballard Power — the great Canadian success story — continues to improve the efficiency of fuel cells, we may see this incremental improvement year to year, which will certainly benefit the hydrogen economy.
The Chairman: The efficiency you are talking about with fuel cells does not improve the distance that a consumer can travel.
Mr. Kambeitz: It will as well, but the biggest efficiency that will improve the consumer's distance will be storage technology. That will be the first. The second will be the improvement of the conversion rate at the fuel cell level.
The Chairman: If you were looking back an unnamed number of years from now at what you have said today in respect of the rollout to the retail level, so that the guy on the street can pull into a service station and fill up with hydrogen, what is your best guess at how long it will be from now that we will see those appliance-sized converters in service stations, the same way we now see propane tanks there?
Mr. Kambeitz: When I answer the question, as we look in the crystal ball, I am humbled by looking to California for some consumer leadership. Is there a consumer trend there that will move through the rest of the large urban areas? While General Motors has aggressively and factually told us that they will have a million cars out by 2010, and the other companies have told us what their plans are, we believe that is real. There has been a disappointing first attempt in California, if we use that as an example. Many years ago, when the hybrids were introduced and were put to the market in California at a lease price competitive to a normal vehicle, the uptake of that product at the consumer level was disappointingly poor. They thought California was the spot, the home of the environmental movement. The profile of the consumer that bought that product, when it did roll out, was not indeed environmental groups and the people whom they had targeted as environmental buyers. It went more to members of the movie industry. They were the people who really engaged the hybrid vehicles. To a certain degree, while General Motors, with the bravado that only it could have, would say, ``We are rolling out 1 million cars by 2010,'' it follows up with that caveat.
However, the practical side of our technology is imminent. It is 24 to 36 months that versions of reformers will be ready to go, whether it is our technology that will drive reform and capture CO2, or whether it is a competitor's that would perhaps not capture CO2. It will be a case of whether the car is pulling up to the service station and asking for the hydrogen. That will certainly not be the delay in the rollout.
The Chairman: Those two things by definition cannot happen at the same time. Senator Buchanan mentioned, and we have heard, particularly in Washington when we were there, misgivings from people who are saying those two technologies are not going to arrive on Thursday, March 2 — boom, it is all here. There is a lot of, ``After you, Alfonse; no, after you Gaston,'' going on, and the fact is that I am not going to buy a hydrogen car, even assuming it can go 300 kilometres on a fill-up, unless I know there are some service stations, where, after I have run out in 300 kilometres, I will be okay. How do you see that being met? You alluded to this. Everyone is hedging bets, and there is a bravado that goes on with General Motors and a couple others. As you also pointed out, Ford has got out of the hybrid business because that consumer resistance, to which I am referring, was there. It was less so with hybrid vehicles, which use readily available fuel, as half of what they do, than it will be or is perceived to be with respect to hydrogen.
Are you looking at the best-case scenario when you are talking about having this out there by 2010? Will the whole thing collapse if that does not happen, if the same thing happens as happened to hybrid cars in California?
Mr. Kambeitz: Excellent question, and it really is the chicken and egg. Our original hydrogen research was focused in a private laboratory in Saskatoon, and it was focused on the final solution of fractionating water and, ultimately, doing it with a renewable resource. We found ourselves asking that question quite often, and we realized several years ago that a practical, quick interim solution was required. If the car is going to arrive, can the service station arrive that quickly? That is why when we bring this to the appliance level, let us use, for the sake of discussion, a capital cost of $50,000 to $80,000, to convert a service station to be able to reform hydrogen and sell hydrogen. That is the kind of speed that is required. Once again, the reformation technology at the service-station level will be ready to go in 24 to 36 months, whether it is ours or one of our competitors. That will be the good news, so that will be in waiting, and watching the car economy try to roll out. That is where the challenge really is in that regard.
The Chairman: The other challenge is also convincing the operator of the service station to put in that technology for the two customers a day he will have.
Mr. Kambeitz: It is a fact, and fleets will start, senator. You are right. That is a fact. Texaco Chevron has set up a department in Houston, and they have told us they have a budget for hiring 68 people that will deal exclusively with the rollout of the hydrogen economy on the work of their North American and northern European stations. They believe that this is the solution because of the speed of which this infrastructure can be put in.
If there is a push in a certain jurisdiction — let us pick a state in the United States that is offering the incentives — General Motors focuses on that particular state. They move those 20,000 cars into that demographic area. Then Texaco believes that, very quickly, the infrastructure can be put in. The appliance model can be put in. We can be producing hydrogen in very short order as General Motors moves and focuses on a certain area. They have talked about doing it in that pocket approach, where they will look for incentives, high marketing budgets, very concentrated areas, and try to focus groups of hydrogen cars in that fashion. This is what General Motors has told us, senator.
The Chairman: One way that might help in at least a small way would be if governments undertook to mandate that their fleets of automobiles be converted to this. There are, as you know, laws on the books which already require federal government fleets to do that, but there is the magic codicil, ``where practicable,'' or something to that effect, where cost-effective. Maybe we have to bite a bit of a bullet and say, ``We will do it regardless of whether it is cost effective today, in the hopes it will be next month or next year.'' Do you think that is a useful idea to pursue? Would we be able to bring that off?
Mr. Taylor: I think if you try to pursue it, it helps, although I remember going back to the early days on the committee when we tried to mandate alcohol mixture of gasoline. We were making great strides until the Mounties seemed to be able to prove that they could not catch the crooks that were using 100 per cent gasoline when they were using only 80 per cent, 80-20. We got in a mess and it eventually ended up that Ford came out with a motor that would run just as fast, but I think, in this case, you might have some argument. If you would be permit me, Mr. Kambeitz has hydrogen manufactured that you put into a fuel cell, which is good. However, you could have an onboard. Already, you have cars with onboard natural gas set up and you have natural gas stations. Could you put a hydrogen converter on to a natural gas drive in the car, if you already have one in the service station? Could you put it in the car and continue to sell natural gas at your service station? I am sorry for turning the tables.
The Chairman: I guess the opening answer is size, but then the Japanese could fix that. They can miniaturize anything.
Mr. Kambeitz: There are other practical reasons that relate to the cold weather conversion, but, senator, you are absolutely right. I talked about consumer cluster. The fleet cluster is a very practical application as well, where, again, an appliance-style reformer would move into a fleet bus scenario, as we know. Perhaps, in some of your travels you have seen some of the buses that Ballard is equipping worldwide today. Certainly, a fleet bus fuelling infrastructure would be an excellent start as well, senator.
The Chairman: This has been most informative. As always, Senator Taylor, you have exercised our minds and our emotions and we are grateful for that. Thank you to Mr. Kambeitz for being with us, and we look forward to those reports.
The committee adjourned.