Texas natural gas is essential for the future of hydrogen

One of the few viable alternatives to fossil fuels

There is so much natural gas in Texas that last month, producers started paying customers to take it off their hands. Beyond driving down energy costs, this surplus could be harnessed to produce the fuel we need to decarbonize the U.S. economy: clean hydrogen, if the Biden administration allows it.

One of the few viable alternatives to fossil fuels, hydrogen can be converted to heat or electric energy without emitting any greenhouse gases — only water vapor. The challenge is that most naturally occurring hydrogen in the Earth’s crust is inaccessible, so it must be produced from compounds and fuels that contain it; most commonly, that’s natural gas.

Natural gas accounts for 95% of the hydrogen produced in the United States, one-third of which comes from Texas, the country’s top natural gas producer. To meet climate targets and reduce emissions, however, we’re going to need a lot more.

In the next six years alone, the Department of Energy projects that we will need to increase domestic hydrogen production by 20 times — a truly unprecedented scale-up of a nascent industry and one that will be impossible without Texas natural gas.

Until recently, the Biden administration seemed to recognize this, which is presumably why natural gas was included in its plans for the world’s most generous hydrogen production tax credit, passed by Congress and signed into law by President Biden as part of the 2022 Inflation Reduction Act.

Known as 45V, this tax credit statutorily applies to any U.S. producer that can produce hydrogen while keeping lifecycle emissions (greenhouse gases released in production) below a specified threshold. So, irrespective of whether natural gas, nuclear, renewables, or another fuel is used, any low-emitting hydrogen producer should be eligible to access the 45V tax credit. The lower the emissions, the higher the tax credit and, crucially, the cleaner the hydrogen.

But late last year, the Biden administration issued proposed 45V rules that include an unworkable model for calculating lifecycle emissions. This model is not only different from the one used for the past two decades but would also prevent Texas natural gas-based hydrogen producers from ever receiving the full tax credit, even if their emissions were low enough to be eligible.

Developed by DOE’s Argonne National Laboratory in 1995, the standard computer model used to assess emissions, known as the Argonne R&D GREET, accounts for the fact that different natural gas systems are, of course, different. Many Texas producers have invested millions to make their systems more energy-efficient and less carbon-intensive, while others have not.

Yet the Biden administration’s newly invented model, known as 45VH2-GREET, bizarrely presumes the same lifecycle emissions for every project based on the average emissions rate of natural gas-based hydrogen production projects across the United States. So, if Producer A invests in methane reduction and other advanced technologies to keep its lifecycle emissions below the specified 45V-eligibility threshold, and Producer B continues to emit above that threshold, they would be treated the same under the Biden administration’s proposed 45V model.

This new model would not only enable the laggards to freeload but also remove the incentive for high achievers to continue to invest in methane emissions reductions. It would impede economic growth, job creation, U.S. manufacturing, and infrastructure development — all purported goals of the Biden administration.

With over 1,000 miles of dedicated pipelines and 48 production plants, the HyVelocity Hydrogen Hub along the Texas Gulf Coast is the world’s largest concentration of hydrogen infrastructure. It is projected to contribute over 180,000 new jobs and an additional $100 billion to the state’s gross domestic product. For these reasons, DOE recently selected it to receive up to $1.2 billion in federal funding to advance domestic hydrogen production.

That’s a massive investment in the future of clean energy in Texas. But without a more workable and fair method of calculating lifecycle emissions, all of this investment will be for naught, including plans to build a major new hydrogen production plant in Baytown, Texas. Announced in 2022, this site would use natural gas with emissions captured and stored underground to produce up to 1 billion cubic feet of clean hydrogen per day, making it the largest such plant in the world. But the Biden administration’s hostility to natural gas is jeopardizing this project and, with it, America’s clean energy future.

Thankfully, the administration has time to course correct: The 45V rules aren’t final yet. Let’s hope that when they are later this year, Texas natural gas is included, as Congress — and the law they wrote — intended.

• Matt Welch is state director at Conservative Texans for Energy Innovation.

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