Atlantic Canadians greet prospective green hydrogen-ammonia producers with cautious optimism and healthy skepticism

 

 

Trent Vichie appeared bone-tired answering questions in late July about press coverage and critiques of his company’s wind-hydrogen-ammonia developments in Nova Scotia and Newfoundland and Labrador. He stepped into an interview with Atlantic Business Magazine toward the end of a long day of back-to-back meetings at what is set to become an ammonia production, transshipment and storage facility at Point Tupper, N.S.

Vichie’s used to long days, from his time as a partner at asset manager Blackstone and then co-founder of Stonepeak Infrastructure Partners, then month after month more recently pulling together the many, sizable pieces of business for EverWind energy developments. On this particular day, he was visibly upbeat talking about the future. But he also appeared sapped of energy and excitement, with heavy sighs and even emotion in his voice at times, when asked questions he seemed to view as having already been asked—and answered.

To be fair, EverWind responded to every request for information for this article. Vichie himself was never evasive or disrespectful. He said both he and the company respect the need for social license and the community’s acceptance of their planned industrial development. Still, on questions of public approval centred on the Canso Strait, he just came across as… drained.

“None of this is perfect, but gee, we’ve done our best job, ok? Our best job. I’ve been in the infrastructure space for 25 years, and I’ve done well over $20 billion worth of deals, and this is the hardest and most complex,” he said.

 

 

On the subject of “green” power for their hydrogen-ammonia production, EverWind faced nearly a year of news reports challenging their ability to produce ammonia without fossil fuels. This included a particularly prominent report produced by the Halifax Examiner in partnership with The Guardian (U.K.) in October 2022: “Nova Scotia touted its huge ‘green’ energy plant. Turns out it’s powered by coal”.

Nova Scotia is still trying to work its main electricity grid off of coal. The EverWind project seemed poised to tap into a less-than-green grid for at least its initial energy needs. If producers don’t add new clean electricity production, when they start producing hydrogen and ammonia they chew into whatever percentage of renewable electricity is available in the area, leaving people and local businesses the dirtier and more costly power options. EverWind representatives consistently said that wouldn’t be the case with their project, but there was a disturbing lack of detail around how they would do that.

But you also have to understand there’s no fixed guide for the company’s more than 120-person team to say, step-by-step, how wind-hydrogen-ammonia projects must be developed. The same is true for every would-be developer in the region. And EverWind wasn’t required to deliver a specific, detailed green electricity power plan before provincial environmental assessment for the hydrogen production facility, the ammonia plant and refurbished transshipment facility was wrapped up. In other words, for the purpose of environmental review, the project was split into processing and power, where details were to come later on the latter. Regulators never declared it shouldn’t, or couldn’t, be the case.

 

EverWind registered for environmental review in December 2022, with “the project” limited to a 300 MW electrolysis plant (for making hydrogen from electricity), a 600 metric tonnes per day ammonia plant, freshwater intake, a substation and power lines for electricity in and out of the plants, and a pipeline for the movement of liquid ammonia.

 

 

EverWind registered for environmental review in December 2022, with “the project” limited to a 300 MW electrolysis plant (for making hydrogen from electricity), a 600 metric tonnes per day ammonia plant, freshwater intake, a substation and power lines for electricity in and out of the plants, and a pipeline for the movement of liquid ammonia. In the meat of the paperwork, the company said it would look to establish agreements with Nova Scotia Power to supply electricity “primarily from newly-built wind farms, supplemented by additional renewable, low impact sources which may include wave, tide, run-of-the-river hydraulic, solar, or other acceptable renewable energy sources”. But it was really anyone’s guess exactly what the power source(s) would be. Nova Scotia’s Minister of Environment and Climate Change, Tim Halman, issued an approval for the EverWind production and shipping site (i.e. processing portion of the project) in early February.

In July, just before this interview with Vichie, the company released more details on the green power issue: specifically, commercial deals with three proposed, private wind farm developments onshore Nova Scotia. The Windy Ridge farm is being proposed for Colchester County; a Membertou First Nation company is leading development of the smaller Kmtnuk and Bear Lake wind farms, planned for Colchester and Hants counties respectively. It’s expected the trio will have a combined, installed capacity of just under 530 MW from a total of 101 onshore wind turbines. EverWind suggests all could be up and running by 2025, if things go smoothly. The company also said there may be more power production announcements to come.

Vichie said the company has “really tried” to be transparent, to avoid even the impression of resistance to sharing information related to its hydrogen and ammonia work. At the same time, it’s hard to talk about details and commercial deals before they’re settled. Proponents may face explicit agreements for confidentiality during negotiations. Then there is the risk of embarrassment and potential loss for the company if a talked-about deal doesn’t go through. Public debate can also inadvertently increase costs, such as when a proponent tips their hand to how essential they believe a particular deal is to the larger development plan. While it’s safer to avoid premature announcements and speculation, that can lead to uncertainty and criticism from the community and industry watchers. So there’s risk there too.

In an effort that seemed designed to inspire trust, Vichie pointed out EverWind is not a fly-by-night operation. He described the company’s effort to connect early with Indigenous communities, its work through the environmental review process and the experience of its project team as well as its engagement with reputable companies like engineering, procurement and construction firm Black & Veatch.

 

 

“I think it’s different if you haven’t actually put in as much money and time and effort as we have,” he said. The company has over $160 million invested (Vichie said they were closing in on $200 million as we spoke).

Apart from questions about future power sources, the project is also under scrutiny for its end market. Who will buy their green hydrogen? Vichie said there’s no shortage of interest. It’s another pressure point though, where a constant push for information meets inadequate data, likely because details are still being locked down. The company has memorandums of understanding (MOUs), some public and some not, with final and binding offtake agreements still in the works. MOUs with Germany-based Uniper and, separately, E.ON were announced last summer. The companies agreed to work towards final agreements for purchases of up to 500,000 tonnes a year of green ammonia production each. As well, Vichie told Atlantic Business Magazine, he has spoken to shipping companies about possible, future fuel supplies, and he said there are further opportunities in the European market. EverWind has plenty of reasons to keep hunting for new buyers.

With access to an estimated $700-million worth of existing infrastructure on the Canso Strait, offtake agreements in sight and political support, EverWind is essentially planting a flag with this first phase of development in Nova Scotia. They are also working in Newfoundland and Labrador, on a separate prospective wind-hydrogen-ammonia development for the Burin Peninsula. There, Vichie joined project lead Sam Imbeault for early community consultations and even went door-to-door through towns like Marystown, Burin and Lawn. No part of that project has reached environmental assessment as of deadline for this piece but there is optimism within the company.

As they and other companies chase the goal of ammonia-for-export production, a lot of questions from the public have focused on topics like wind farm siting, available electricity and planned freshwater use—but also why companies are planning to export green ammonia when there is still need to decarbonize existing ammonia production here in Canada.

Vichie said EverWind looked closely at that. They found there wasn’t enough ready or potential demand locally to justify the first phase of operations, as quickly as the company wanted it. That doesn’t mean they aren’t interested. “There is a lot of work going on as to what we can do in the domestic market here in Canada. We’ve signed MOUs that aren’t public, but we’re working on that,” he said.

 

Limits to the business

A handful of hydrogen-ammonia projects across Atlantic Canada have moved into serious, public consultations or are even further advanced—like EverWind or the adjacent Bear Head Energy project, which has also passed through environmental review for its manufacturing process. Excitement is growing about the potential of this new industrial sector. That said, none of the people Atlantic Business Magazine spoke with this summer said they believe all of the pitched projects will proceed.

“There are a lot of prospects for the foreseeable future and long term, but we need to be mindful the future markets still need to be developed.” That rare, tempered view came from Rystad Energy’s senior vice-president and North America research director Claudio Galimberti in front of a capacity crowd on May 31 at the Energy NL conference at the St. John’s Convention Centre.

Deloitte Canada’s director of sustainability and climate change, focused on transportation and utilities, Arvind Ramakrishnan, more recently told Atlantic Business Magazine the initial target for companies active in Atlantic Canada of ammonia export into Europe “may not be a huge opportunity”—but it is an opportunity nonetheless. The question is really what companies will emerge from the crucible, gather up commercial contracts and successfully manage public relations and construction costs to get to steady production.

If people like Ramakrishnan were working entirely in their own interests, they could wave off any mention of limits for would-be green ammonia producers and run with generic cheerleading. But if consultants want to retain clients, he suggested, they need to be able to offer a realistic view of an industry’s potential and the world as it stands. Realistically, he said, he and others expect Europe will develop domestic green hydrogen-ammonia projects, enough to cover maybe 70 per cent of its hydrogen need through the next decade and import another maybe 20 per cent from neighbours via pipelines. Atlantic Canadian suppliers offering green ammonia shipments are really looking to grab a share of the remainder. There will be competition.

 

“There are a lot of prospects for the foreseeable future and long term, but we need to be mindful the future markets still need to be developed.”

—Claudio Galimberti, senior vice-president and North America research director, Rystad Energy

 

Energy major BP echoed that forecast in its 2023 energy outlook, saying it expects to see the EU self-supplying 70 per cent of its hydrogen needs by 2030, with another big chunk piped in from other European countries and North Africa.

Ramakrishnan thinks Atlantic Canadian-based developments will be fighting for a share of 10 per cent of Europe’s needs. What that represents as a hard number is unknown. The actual size of the market will be tied to everything from changes in government climate policies to natural gas prices to an expected decline in the cost of production. Heading into 2030, Ramakrishnan suggested,10-15 per cent of the European market could support at least a million tonnes of ammonia production by Atlantic Canadian operations.

“Cautious optimism” is a common phrase. But it’s more than that. Only a few of the producers pitching new production facilities for Atlantic Canada are expected to make it. Most won’t.

Based in Vancouver, Ramakrishnan worked with Fortis BC for about 15 years before joining Deloitte. Looking back, he sees a lot of lessons in B.C.’s experience with LNG export for East Coasters bullish on wind-hydrogen-ammonia.

“I would say in 2008-10, some 18 projects got announced. I see very similar enthusiasm around these (green) projects as what we saw in LNG projects and slowly, slowly projects got whittled away. Markets changed, pricing changed, geopolitical situations changed, and then we suddenly find out that we’ve only got two projects out of this in British Columbia right now, LNG Canada and Woodfibre LNG, among the 18 that were proposed,” he said.

If the East Coast wants more survivors over time, he suggested, politicians and industry will want to find ways to the speed review processes and accelerate timelines. He also suggested government look at further de-risking investments in Canada (the latest federal budget offered generous tax credits for both renewable power and hydrogen production). Another idea he raised was a dedicated, federal office to fast-track large projects related to the energy transition.

 

 

Political pressures

With all the talk about global competition, power sources, markets and financing, the greatest challenge to overcome is public acceptance.

World Energy GH2’s team understands it well. The company has registered plans for the Nujio’qonik Project in Newfoundland and Labrador, with planned ammonia exports from Stephenville in Western Newfoundland and wind farms on the coast amounting to about two GW of installed power production capacity to feed production. The company has filed for environmental review and closed a deal for the purchase of the Port of Stephenville earlier this year. It also has an investment agreement in place with SK Ecoplant, part of sustainable infrastructure company SK Group, with the subsidiary taking a 20 per cent stake in the first phase. A final investment decision is still to come, but the project is the only one in the province into the environmental assessment process as of deadline for this piece, registering in June 2022. A detailed Environmental Impact Statement (EIS) is still required. Roughly 50 pages of guidelines were issued to the company in mid-December 2022. A spokesperson told Atlantic Business Magazine a response could be filed as early as August. That would be the last major milestone in the review process.

To date, the company has already survived a political storm, started when news outlet allNewfoundland-Labrador reported Premier Andrew Furey took a fishing trip in July 2021 to the Rifflin’ Hitch Lodge on idyllic Eagle River in Labrador. The lodge is owned by World Energy GH2 director John Risley. Since the trip was before the province ended a moratorium on wind farm developments, Furey and company reps were grilled about a potential conflict of interest.

“I don’t think there’s any conflict on the premier’s part or on the part of our senior management team. Everyone’s trying to do the right thing to kick-start this industry and get us positioned to take advantage of this massive, unprecedented opportunity,” World Energy director Sean Leet told the CBC in October 2022. Despite the reassurances, not surprisingly, the story hung on.

There were calls from individuals and Opposition politicians for receipts to show the trip wasn’t a gift from Risley or anyone else associated with the company. Furey didn’t offer receipts but he did respond to questions, on the trip and on his relationship to World Energy GH2 directors Risley and fellow director Brendan Paddick. His well-known friendship with both Risley and Paddick pre-dates both his premiership and the province’s foray into the wind-hydrogen-ammonia rush. Furey said he’d established an “ethical wall” for government decisions, separating himself. But the story never went away.

Commissioner for Legislative Standards Ann Chafe was asked to consider if an investigation was warranted related to the provincial legislature’s Code of Conduct. On Aug. 1, about seven months after Furey was interviewed, roughly 10 months after word of the fishing trip hit the mainstream, and a full two years after the trip itself, a report was released online. Chafe described how, when she spoke with Furey, she was able to see a receipt “confirming that the trip was paid from personal funds.” Further, she said, an interview with the Clerk of the Executive Council in June confirmed “a conflict screen was established” related to wind energy development. For all-important cabinet discussions relating to wind-hydrogen-ammonia, “if an issue arose that could place Premier Furey in a conflict, he was quick to excuse himself from the room.” Those recusals in the closed-door cabinet meetings were on record, recorded by the Clerk.

“There was no evidence that the trip was paid for by anyone associated with wind energy development,” Chafe stated, clearly and definitively. If the evidence she relied on had been made available to the public earlier, or if Chafe had issued a report after meeting with Furey in January, the controversy could have been forcefully addressed much sooner. The company rode it out.

Meanwhile—arguing against the perception of favouritism—World Energy GH2 received a setback last year from the provincial government when they set a new process for Crown land applications, applicable to all wind-hydrogen-ammonia proponents. World Energy’s already-submitted request for land leases was essentially null and void, pushing the company back into the mix with other project proponents. Results of a first round of bids on land leases, with nine companies still in the running, are expected shortly after deadline for this piece.

 

 

In Placentia-Argentia

On a call in July, president and CEO of Torrent Capital Wade Dawe said he doesn’t believe there will be nine wind-hydrogen-ammonia projects in Newfoundland and Labrador for 2025, 2026, or even 2035. “I don’t believe for a second all the projects being pursued, or even half of them, are going to be developed. Not in the next 10 years anyways,” he said.

He pointed to things like issues with permitting, labour and availability of key pieces of equipment like electrolysers (the unit that uses electricity to split water into hydrogen and oxygen). Public reviews will also slow development but, more to the point, given the scale of projects (larger in more than one case than anything currently seen on earth), he thinks it’s unlikely the market for that much green ammonia will be there. The level of demand year-to-year is still unclear. The world is still changing manufacturing processes, modes of transportation and developing new, green alternatives to fossil fuels.

About three years ago, Dawe told Atlantic Business Magazine, he was looking into renewable energy and emerging opportunities, marking how quickly and how far the costs for solar and wind power had fallen. The economics became undeniable. For himself, it meant taking a closer look at wind power, and finding potential in the Port of Argentia.

In Eastern Newfoundland, you can head out the Trans-Canada Highway from St. John’s to the turnoff to Route 100 where, beside a collection of gas stations, more land is being cleared and new restaurants and tourist services are popping up. Down the road, you’ll drive into the amalgamated Town of Placentia (including Dunville, Ferndale and Jerseyside), with an option to dip into old Placentia, settled at a rising sea level and highly conscious of the climate change challenge. Past Placentia, there’s the former military base turned industrial centre of Argentia.

 

 

Dawe’s Torrent Capital has a 50:50 capital development partnership with the port through a new entity called Argentia Capital. On June 5, well-known renewable energy developer Pattern Energy announced a deal with Argentia Capital for a green fuels project in Argentia. The agreement involved, among other things, a lease of about 6,000 acres of port property for a first phase of construction, with hydrogen and ammonia production within the port’s footprint, plus wind turbines, mainly over an area known as the port backlands. The agreement also covers lease rates, priority berthing charges and a wind royalty on electricity sales, terms by which Argentia Capital can co-invest with Pattern. None of the figures were released.

Standing at the port in July, for an announcement with then-Transport Minister Omar Alghabra on funding to support new infrastructure, additional berths and more roll-on/roll-off cargo capability, Member of Parliament for the District of Avalon Ken McDonald had only positive things to say about the wind-hydrogen-ammonia proposal. “I haven’t heard one person complain that this project is moving forward,” he said. Of course, the project hasn’t registered for environmental review yet. But it’s not a case of blind support to this point either.

The municipality is directly invested in the project. The Town of Placentia has a standing deal with the port, whereby 20 per cent of the port’s gross revenue flows to the town. What benefits the port benefits the town. Port cash has, in recent years, helped fund multi-million-dollar infrastructure projects without the need for painful borrowing, from a completely retrofitted wellness centre to an upcoming project that will remove asbestos-lined water pipes from Dunville. That arrangement is up for renewal. There is also a separate agreement the town wants with Pattern Energy for the project.

Few people know Placentia quite like Keith Pearson. The former manager of a local grocery store who now runs the liquor outlet, Pearson is also the mayor. He says he’s considered a number of different scenarios for what the next few years might look like and come to the conclusion there are no certainties. While early response has been generally positive, he told Atlantic Business Magazine, no one knows how the public reviews will go on the wind-hydrogen-ammonia project, the labour agreements, the construction, inflation.

“We do have some concerns. It’s not all rosy, I will say that,” Pearson said, highlighting a housing issue emerging with Cenovus’ work in Argentia on the West White Rose offshore oil project.

“People were asking from $1,200 up to $1,600 a month for rentals. That puts a big squeeze on people who are working in the retail industry, working other jobs, could be single parents… And I’ve heard stories that people have got pinched and had to move out of their place and try to find alternate arrangements when there’s not a lot of arrangements in the area. That’s a major concern with housing, and how we go forward,” he said.

Pearson hopes any new industrial tenants at the port can be a partner in trying to stave off future problems. His focus is on trying to make sure people living in the area don’t get left behind. He’s also watching closely to see where the wind-hydrogen-ammonia developers plan to place turbines as they expand beyond their “first phase.” It isn’t expected to be part of the initial project review, but he said people in the town have asked about it.

Placentia Chamber of Commerce president Wayne Power, also the town’s deputy mayor and a former member of the port board, and manager of Power’s Ambulance, said little things can make a big difference for people in the town, beyond formal agreements. He noted that Pattern is well into outreach about the project. That same week, there was a barbecue/project Q&A event scheduled at the The Three Sisters pub. The company has also sponsored local events like the Placentia Bay Industrial Showcase and the more recent 60th anniversary of the Placentia Regatta. Meanwhile, Newfoundland and Labrador-based Growler Energy has been working with Pattern and the port on developing the pieces needed to move through an environmental assessment.

“It’s like any new opportunity that presents itself. You’ll always have those that are thinking twice about the reality of it. But Pattern, I think, has been very up front with its presentation with community members. They’ve answered questions as they’ve been presented and that I think is creating a level of comfort with the community that this is a legitimate project. The business community as well is starting to take the advice that’s being presented as to how they need to prepare themselves to participate in it as it evolves,” he said.

For his part, Mayor Pearson thinks something could be settled over the next six to eight months. “No matter what, I can see the Town of Placentia is going to be in a better place with Pattern in their community,” he said.

Is it cheerleading, creating a false positive view for the proponents? “People are cautiously optimistic. I mean I’m cautiously optimistic,” he said.