Section 127.48

Whether a project, which used the chlor-alkali process or the chlorate process to produce inter alia hydrogen, constituted a qualified clean hydrogen project depended on whether, in accordance with the “eligible pathway” definition, such processes produced hydrogen from “electrolysis of water.”

CRA indicated that the term "electrolysis of water" was a technical term defined on the Natural Resources Canada website as “a process that splits water (H₂O) into hydrogen and oxygen using an electric current” and that this process does not produce any other products.

In contrast, the chlor-alkali process involved the electrolysis of sodium chloride solution to produce sodium hydroxide, along with chlorine and hydrogen. Similarly, the chlorate process involved the electrolysis of a sodium chloride solution to produce chlorate compounds and hydrogen. In both cases, the hydrogen was considered a byproduct, representing 1% by mass of the products in the case of the chlor-alkali process and 5% by mass in the case of the chlorate process.

Accordingly, CRA concluded that neither process constituted the electrolysis of water.

The concept of an “operating year” is defined to “disregard … any period during which the project is not operating”, so that, for example, if it did not operate for one month, the operating year might be 13 months.

CRA was referred to the following scenarios:

• The carbon capture and storage plant is shut down, but the hydrogen continues to be produced.
• The supply of the eligible renewable hydrocarbon is disrupted, but the hydrogen continues to be produced using a different eligible hydrocarbon.
• Dedicated wind turbines are down, but the hydrogen continues to be produced by using electricity from the electrical utility grid.

CRA concluded:

[T]he meaning of “not operating” in this context refers to those periods during which hydrogen is not produced in any amount.

Consequently, each of the periods described in the scenarios above would not be considered a period during which the project is not operating. In other words, since hydrogen continues to be produced by the project in each of the outlined scenarios, the project is considered to be operating. Accordingly, for the purposes of determining the cumulative 365-day period set out in the definition of “operating year”, such periods would not be disregarded.