Calgary-based E3 Lithium Ltd. received $27 million from the federal government to boost its operations, an award the company’s CEO said could be a first step on the way to developing a lithium industry in a region that’s dominated by oil and gas.

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Alberta's E3 Lithium says investment from Ottawa sets it up to lead mining boom on Prairies Back to video

“To have the support of the federal government, is incredible,” said Chris Doornbos, E3 Lithium’s chief executive. “We are developing a new industry here, and that’s hard work. It takes time, effort and money but the benefit to Canadians is that if we are successful, it won’t just be E3, there will be a lot of players that will come just like the oil industry here.”

The demand for lithium, which is used to make batteries, has increased in recent years due to the rising global sales of electric vehicles as the world looks to accelerate its shift away from fossil fuels. The government’s Strategic Innovation Fund, which provided the funding, is on the hunt for firms that can play key roles in meeting Canada’s goal of developing a battery ecosystem.

Global mining giant Rio Tinto Plc and auto companies such as Stellantis N.V. and General Motors Company are some other companies that received funding under the program.

Doornbos said the federal money will fund 34 per cent of all the company’s activities until the point when they are ready to start building their project.

The funding of E3 Lithium is part of a series of steps taken by Canada to ensure EV production occurs close to home and to reduce its dependency on China, which dominates this industry.

In late October, Prime Minister Justin Trudeau’s government raised the bar that foreigners must clear to join Canada’s critical minerals industry, saying any attempt by a state-owned enterprise to purchase assets in the sector can now trigger a section of the Investment Canada Act that determines whether deals that could be “injurious to national security,” requiring lengthy review.

Days later, Ottawa ordered three Chinese companies to divest their investments in three Canadian junior lithium miners.

Deputy Prime Minister Chrystia Freeland used a series of speeches this fall to stress the need for “friendshoring,” an idea that would see democratic allies build supply chains through each other’s economies and tackle the influence of authoritarian regimes in the energy sector.

E3 Lithium, which owns properties in south central Alberta, is working on technology to extract lithium from old, depleted oil and gas reservoirs. Doornbos said E3 controls mineral rights in the Leduc Aquifer, which was discovered as a source of oil in the 1940s, and then was “drilled out” by the 1990s.

“It’s a well understood resource that we are repurposing to turn into a lithium play,” Doornbos said. “It’s a big water bearing aquifer that has lithium dissolved in the water and E3 has the technology to extract the lithium out of the water.”

The CEO added that part of the funding would be used to test the technology and demonstrate that it can work in the field. That’s E3’s main goal next year. After the pilot, the company hopes to develop the commercial project, which includes making an engineering plan, drilling wells to pump the fluid from the aquifer and bringing it to a facility to extract the lithium.

• Email: nkarim@postmedia.com | Twitter: naimonthefield