Hydrogen bills spark heated debate ahead of introduction
Copyright © 2022 Albuquerque Journal
Governor Michelle Lujan Grisham is promoting a new ‘Hydrogen Hub Act’ as ‘signature’ legislation during this year’s session, which begins next Tuesday, but it could face formidable opposition given public concerns about the true “cleanliness” of hydrogen production.
State officials are expected to pre-table the governor’s bill this week, after completing its revisions following public comments on the original draft, which the state released in November to environmental organizations, the industry representatives and others.
Representative Patricia Lundstrom, Democrat of Gallup and chairman of the legislative finance committee, is also expected to pre-table a hydrogen bill this week on which she has been working since last June. It was also widely circulated and recirculated for comments from many groups, leading to seven different bills and other changes still in the works, Lundstrom told the Journal.
But both bills face rough waters in the legislature, with almost unanimous opposition from environmental organizations, and so far lukewarm support among Democratic lawmakers. This contrasts with the enthusiastic support from local trade associations and investors who hope to pursue hydrogen projects in New Mexico.
State officials present hydrogen as a potential game changer in the transition to a clean energy economy, as it is a non-carbon emitting fuel that supporters say can help speed up decarbonization in everything from power generation to long distance shipping and heavy industrial processes. And, given New Mexico’s vast deposits of natural gas, which is currently used to produce hydrogen, a whole new industry could quickly emerge here based on the vast gas-related infrastructure and manpower. qualified work already in place.
This could give New Mexico substantial advantages over other states that also aggressively pursue hydrogen production as the country strives to develop new energy technologies to achieve carbon neutrality by mid-century, said the secretary of the state’s Department of Energy, James Kenny, who is leading the development efforts and promoting the Governor’s Hydrogen Hub Act.
In addition, the legislation could increase the state’s chances of winning $ 8 billion in federal funding for the construction of four different “hydrogen center” demonstration projects across the country, which are included in the President Joe Biden’s $ 1.2 trillion infrastructure investment plan, approved last fall.
“The hydrogen economy has clearly arrived nationally and internationally,” Kenny told the Journal. “In New Mexico, we have real opportunities to continue while driving economic growth around the state.”
But local environmentalists strongly oppose it, in large part because almost all hydrogen today is produced with natural gas in a process that extracts hydrogen molecules from methane. This means perpetuating, and possibly increasing, natural gas production to expand the hydrogen industry, potentially offsetting any significant carbon reduction in hydrogen consumption, environmentalists say. In fact, emissions could potentially increase as more natural gas is extracted from the ground and more methane – a potent greenhouse gas – continues to escape into the atmosphere.
Industrial investors expect to reduce emissions through carbon capture technology, in which the CO2 emitted during the hydrogen production process is sequestered and then deposited in deep underground geological formations. But it’s a very controversial process that environmentalists say has yet to be proven.
As a result, nearly 30 environmental groups called on the state in December to reject the governor’s bill in the current session and instead launch a broad public process to fully assess the pros and cons of the lawsuit. of a hydrogen economy in New Mexico.
“Boiled to its essence, the Hydrogen Hub Act is conceptually and fatally flawed,” the group wrote in response to the November bill. “… The state should fundamentally take a step back, assess whether fossil hydrogen gas is appropriate for New Mexico, and defer new hydrogen legislation until it completes a broad and meaningful stakeholder process.” . “
While final drafts of the Governor’s Bill and Lundstrom’s legislation are still pending, early drafts outline a wide range of incentives to encourage hydrogen development.
The governor’s proposal foresaw a list of tax breaks for investors, including deductions from gross receipts and income tax credits for investments in hydrogen production facilities, power plants based on ‘hydrogen, service stations and distribution infrastructure.
Projects would have to meet a new set of emissions standards to qualify, which the original draft set at nine kilograms of carbon dioxide for every kilogram of hydrogen, at least to begin with. The limits would then decrease every two years to reach a three-to-one ratio by 2030.
The Department of the Environment would determine eligibility for incentives, and the state’s Environmental Improvement Council would establish new rules to measure carbon intensity for project certification.
In addition, the Department of Energy, Minerals and Natural Resources would be responsible for reviewing existing laws and regulations governing carbon capture and sequestration in order to recommend potential changes for items such as long-term liability. and liability for carbon stored underground.
Lundstrom’s bill, meanwhile, would establish designated “hydrogen centers” statewide. It would allow public-private partnerships to pursue projects supported by state funding, including grants of up to $ 250,000 to evaluate proposed projects, and state loans if projects progress.
All government money – including a single state credit from the general fund – would be administered by the state financial authority, under the oversight of a new hydrogen hub development board. And any public funding of projects would require at least 50% of matching funds from private partners.
Lundstrom told the Journal it expects to seek a general fund allocation of $ 120 million for the development of a hydrogen hub. But the budget proposed by the Legislative Finance Committee for fiscal year 2023 actually includes a $ 150 million credit for hydrogen development in New Mexico.
Lundstrom said she was working with state officials to harmonize the two bills.
“We are working very closely with the governor and his staff, as well as with the departments of the environment and energy mineral resources,” Lundstrom told the Journal.
Kenny said state officials were trying to address environmental concerns in the final bill before tabling it, but he expects at least some support from both sides of the aisle.
“Reactions have ranged from worry about environmental issues to enthusiasm for opportunities,” he said. “I am optimistic for some bipartisan support going forward.”
But some Democratic lawmakers have expressed concerns similar to those of environmental organizations. Senate Speaker Pro Tem Mimi Stewart said she waits to fully study the bills once they are tabled, but is concerned whether the production of hydrogen at gas base can be considered a “clean fuel”, taking into account all the emissions associated with the production of natural gas.
“We don’t have a good record in New Mexico when it comes to capturing methane and other emissions, so I’m concerned about going full steam ahead with carbon capture for the. hydrogen when we cannot control the methane that is coming out of our state right now. time, ”Stewart told the Journal. “… I have spoken with a number of my colleagues, and I have yet to see anyone who is passionate about hydrogen production in the state. We all have to ask ourselves if this is something that can benefit New Mexico, rather than what appears to be another problematic, emissions-producing project.