Québec’s hydrogen regulatory framework – key considerations for infrastructure players

Hydrogen production has recently become increasingly appealing to the energy sector due to its potential to provide clean fuel on a commercial scale to the transportation and utility sectors, in addition to existing industrial sectors such as oil and gas and agriculture. Policymakers around the world — including in Canada, France, Germany and Japan — are also focusing on the use of hydrogen to achieve their objectives of reducing CO₂ emissions.

In a recent Osler Update, we summarized The Hydrogen Strategy for Canada and highlighted some steps infrastructure players should consider to capitalize on new opportunities in the hydrogen sector.

In this update, we focus more specifically on the province of Québec and the applicable regulations to those interested in developing hydrogen production facilities in Québec. In fact, Québec is an attractive location for green hydrogen production because of the availability of relatively inexpensive electricity produced from large-scale hydroelectric generation facilities. While the list of required approvals for a proposed hydrogen production facility will depend, in part, on project- and site-specific characteristics, we describe several of the key authorizations and processes that are generally applicable in the province of Québec.

Key authorizations required in Québec

Québec’s publicly held electricity production, transmission and distribution company, Hydro-Québec, published its own Strategic Plan 2020-2024 in December 2019. The plan emphasizes supporting the development of green hydrogen production through research and development and the use of hydroelectricity. Like the Canadian hydrogen plan, Québec’s Strategic Plan states that there is a need for further regulation and legislative framework development.

As it currently stands, under section 22 of Québec’s Environment Quality Act (EQA), prior to pursuing a green hydrogen production project, one must obtain an authorization from the Minister of the Environment and the Fight against Climate Change (Minister) by filing for a Demande d’autorisation et de certificat d’autorisation pour les projets en milieux humides et hydriques et pour les projets susceptibles de modifier la qualité de l’environnement ou les habitats fauniques (available in French only).

However, note that the EQA also requires a wider environmental impact assessment and review procedure to be undertaken if the specifics of the proposed project involve certain elements listed by regulation, such as dams, work in wetlands and bodies of water, port, wharf and port terminals and gas pipelines.^[1] In such case, one must also file a written notice with the Minister describing the general nature of the project and send a copy to the municipality in whose territory the project will be carried out. Subsequently, there is a public consultation, and the environmental assessment begins. In fact, on the basis of the written notice and the directive provided by the Minister, any person, group or municipality may make representations to the Minister during a 30-day public consultation period on the issues that the impact statement should address. Then, within 10 days of the end of the public consultation period, the Minister sends to the Bureau d’audiences publiques sur l’environnement (Bureau) the applications for public consultation or mediation that were made to the Minister during that period. The Bureau must, within 20 days of the end of the public information period, recommend to the Minister whether the project should be the subject of a public hearing, a targeted consultation or mediation. Where there is a public consultation for the approval of a given project, the Bureau is also responsible for making recommendations on all issues related to water taking. Therefore, hydrogen producers using electrolysis should also expect the Bureau to evaluate all matters pertaining to water and water taking.

Furthermore, equipment used in hydrogen production facilities are generally subject to the Regulation respecting pressure installations (Pressure Regulation). Every person who manufactures, installs, repairs or alters pressure equipment (including, to a lesser degree, owners and operators) must hold a permit issued by the Régie du bâtiment du Québec (RBQ) and pressure equipment must be approved by the RBQ before it is put on the market.  However, as the usual standard^[2] used under the Regulation respecting pressure installations is not adapted to the particulars of hydrogen installations, the RBQ, in assessing the compliance and safety of hydrogen installations, also takes into consideration the requirements of the Canadian Hydrogen Installation Code (CHIC) [CAN/BNQ 1784-000], published by the Bureau de normalisation du Québec (BNQ) as a National Standard for hydrogen installations in Canada. However, the CHIC standard, which dates from 2007, is currently under review and a new edition is expected to be published later this year.

Finally, and to encourage the testing and validation of innovative technologies, section 29 of the EQA allows that “if the purpose of a project referred to in section 22 is to assess the environmental performance of a new technology or practice, the Minister may issue an authorization for research and experimental purposes and allow a person or municipality to depart from a provision or regulation made under the EQA.” However, players investing in large scale commercial hydrogen production facilities in the near future are likely to rely upon established technologies, means and methods.

Financial support for innovation in the green hydrogen sector

From a sectoral support perspective, the Québec government has generally conferred upon Transition énergétique Québec (TEQ) the mandate to support, stimulate and promote energy transition, innovation and efficiency.

Specific to the hydrogen sector, $15 million has been earmarked to date within the Technoclimat program to support innovation, with maximum financial assistance of up to $3 million per project. Those who wish to submit an application are encouraged to contact a program manager to ensure that their project is eligible and then submit the appropriate forms.

More information on hydrogen and its potential in Québec is available on TEQ’s website.

Update on what is being done in Canada

In addition to exploring different approaches for a coherent and effective regulatory framework for hydrogen production, the federal government is also actively communicating and establishing partnerships with other countries to facilitate the integration and use of hydrogen as an alternative fuel technology into domestic and international markets. Some examples include

• the work plan established by the Regulatory Cooperation Council between the US Department of Energy and Natural Resources Canada where, particularly, the initiative of aligning the US Codes of Low Carbon Alternative Fuel Infrastructure and the CHIC is discussed. This work plan will influence the upcoming edition of the CHIC expected later this year.
• the memorandum of understanding signed between Canada and Germany which provides for the cooperation between the two countries on energy policies and places an emphasis on the export of hydrogen produced in Canada to Germany. Green hydrogen that could be produced in large quantities in Québec is of significant interest for Germany, who wants to prioritize the use of green hydrogen over other types of hydrogen.

As the hydrogen economy continues to develop globally, more bilateral and international treaties may be signed. Given the strong potential in Canada for domestic hydrogen production for export, it is useful to assess the applicable legal landscape in potential export markets.

What is being done internationally – parallels to Québec and Canada

Although most countries, including Canada, are still developing regulatory frameworks for the production of hydrogen, certain countries have already adopted key legislation which provides insight for interested parties on regulatory trends.

France’s ordinance number 2021-167, dated February 17, 2021, for example, has done away with references to green, blue, yellow or grey hydrogen and, instead, has replaced the labelling of hydrogen with new definitions focusing on the environmental properties of the hydrogen produced. Additionally, there are currently discussions within the EU for the creation of a common classification system for sustainable economic activities.

Under the French ordinance, specific traceability guarantees have been introduced to be able to certify the renewable or low-carbon origin of the hydrogen produced. In Québec, efforts are already underway at the BNQ to introduce a similar procedure for the certification of hydrogen. The French ordinance requires that a traceability guarantee be produced at the time of production of renewable or low-carbon hydrogen in order to prove that the hydrogen produced has not been mixed with another type of hydrogen or gas post-production. Where renewable or low-carbon hydrogen is mixed with another type of hydrogen or gas, a guarantee of origin is required in respect of the renewable or low-carbon portion of the final substance.

Conclusion

As Canada’s and Québec’s regulatory frameworks for hydrogen continue to be developed, Osler will continue to provide updates and guidance to industry players to support the development of this crucial part of Canada’s energy transition.