What you need to know about PA’s bid for hydrogen hubs

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HARRISBURG — As the federal government prepares to dole out billions of dollars to encourage states to invest in hydrogen production to fight climate change, Pennsylvania lawmakers are priming the state to benefit from the rainfall.

But as they make plans to regulate a new and potentially massive industry, serious divisions are emerging.

The conflict comes amid a boom in the use of hydrogen, which when produced under a specific set of circumstances can be a carbon-neutral energy source.

A desire to make the state attractive to the industry is pitting jobs-oriented lawmakers against environmental advocates who worry that without stricter regulation, hydrogen won't combat climate change as intended.

That divide was recently on display in the state House’s Environmental Resources and Energy Committee, which assumed a key role in figuring out how to regulate hydrogen in Pennsylvania after the federal Infrastructure Investment and Jobs Act became law in 2021.

The infrastructure law included billions of dollars in grants for the creation of hydrogen hubs, which are manufacturing centers for the production of the element. Last year, Pennsylvania lawmakers offered their own incentive to potential producers — namely, a $50 million state tax credit.

Lawmakers on both sides of the aisle, with support from the commonwealth’s powerful building trades unions, see hydrogen hub development as a major job creator. But some Democrats in key positions argue the state also needs to put stricter guardrails on hydrogen production to ensure the new industry is actually environmentally friendly.

State Rep. Greg Vitali (D., Delaware) belongs to that latter camp. He’s one of the legislature’s most outspoken environmentalists, and he chairs the House Environmental Resources and Energy Committee.

“The tension in the hydrogen hub issue is that many people view this as just economic development, job creation,” Vitali told Spotlight PA. “But it's a real climate issue.”

Vitali recently scheduled his committee to consider a bill that would impose stricter environmental standards on companies that take advantage of the state tax credit for hydrogen production by requiring them to adhere to emission caps and restrictions on where the hydrogen can be used.

But the bill never moved. Vitali said at least one Democratic House leader and two Democratic committee members urged him not to put the measure up for a vote because they worried it would be too politically difficult for members because the issue could conflict with labor interests. Vitali added that Democratic Gov. Josh Shapiro’s administration had voiced similar concerns.

“I don’t think [the Shapiro administration] want[s] anything done that could mess up their application,” Vitali said. “They don’t want to send the wrong impression to the feds.”

When asked if state House Majority Leader Matt Bradford (D., Montgomery) had requested Vitali to hold the bill, a spokesperson for Bradford told Spotlight PA, “We recognize that members are eager to advance their legislation and we also are mindful that we have a humble 102-member majority.”

A spokesperson for Shapiro said the governor does not comment on specific legislative conversations, but that a guiding principle for the administration is competing for hydrogen hubs.

Environmental advocates want the state to take its time crafting policies that ensure hydrogen production won’t exacerbate climate change, but some worry that the legislature will rush through regulations and defer to labor interests.

“Like we saw with the fracking boom, this was something that went from like zero to 100 really quickly,” said Jen Quinn, legislative director from the Sierra Club, an environmental group. “If this is going to happen, we should do it right. And I think we have the opportunity to put good safeguards in place.”

Whatever legislation emerges faces an uphill climb. In addition to the divisions among Democrats, Republicans who control the state Senate don’t appear to have any great appetite to put in place robust regulations or incentivize environmentally friendly behavior.

As lawmakers work through their differences, here’s what you need to know about hydrogen hubs, the quest to get them built in Pennsylvania, and what comes next:

Hydrogen isn’t always green

This legislative conflict over potential hydrogen hubs comes amid a much larger debate about how to get greenhouse gas emissions out of energy production.

Hydrogen fuel could cut emissions in industries that are hard to decarbonize, such as long-distance travel and steel production, as its use does not result in the release of any greenhouse gasses.

The production of hydrogen is another story. Methods can be divided into a few major categories that differ significantly in terms of emission neutrality.

The most common current method is known as “gray hydrogen.” It derives hydrogen from methane-containing sources like natural gas, and releases carbon dioxide and carbon monoxide into the atmosphere as byproducts. However, with the right infrastructure, it is possible to capture and store those emissions. A producer that takes this carbon capture step creates “blue hydrogen.”

Advocates for aggressive emission reductions see “green hydrogen” as the gold standard. This process strictly uses electricity from renewables like wind and solar to separate hydrogen from water, thereby creating no emissions and rendering carbon capture unnecessary.

A less common alternative, “pink hydrogen,” uses nuclear energy to conduct electrolysis and also produces zero emissions.

Federal incentives, state politics

As part of the federal Regional Clean Hydrogen Hubs program, the U.S. Department of Energy will dole out $7 billion beginning this winter to create up to 10 different hydrogen hubs.

Grants will range from $400 million to $1.25 billion and are slated to be paid to applicants over eight to 12 years.

Three proposals have been submitted for projects to build hubs with infrastructure at least partly based in Pennsylvania. Coordinators say they plan to produce blue, pink, or green hydrogen — the latter of which the federal government is trying to incentivize with its own tax credit.

While private organizations apply for these grants, the state is closely involved in the process.

One applicant is a nonprofit led by Team PA, a public-private partnership that previously paid for Shapiro to attend the Super Bowl. Another includes a positive quote from Shapiro in its promotional material.

To boost the state’s chances at getting hydrogen grant money, lawmakers last year successfully passed a state tax credit that would give $50 million in annual tax breaks to a company that agrees to produce hydrogen for 20 years.

The effort to lure hydrogen producers has been bipartisan and has politically powerful backers like the commonwealth’s building trades, which see hub construction as a promising source of jobs.

But environmental advocates and some lawmakers argue the commonwealth must create its own regulations that will hold future hydrogen producers to standards that will keep them carbon-neutral.

That’s what Vitali was attempting to do with the bill that was halted in his committee. It would amend last year’s state tax credit to add a requirement that companies capture around 90% of their emissions.

The legislation would also require higher emissions monitoring standards and create a second tier of the tax credit, worth more, for hydrogen fuel produced with zero emissions. And the energy produced would be limited to use in hard-to-decarbonize sectors, such as fuel in aviation or shipping, as determined by the state Department of Environmental Protection.

Vitali said he’s concerned about a “bait and switch” from energy companies that could promote the use of hydrogen as a more environmentally friendly alternative to fossil fuels, but produce it in a way that still releases greenhouse gasses such as methane and carbon dioxide.

Environmental advocacy groups in the commonwealth back Vitali’s effort. But along with skepticism from members of his party, Vitali has also faced resistance from the Republicans who control the state Senate.

A spokesperson for that caucus declined to comment on whether leaders would call up Vitali’s bill.

Vitali acknowledged that his efforts on hydrogen will likely see limited success in the divided legislature, even if they overcome division among Democrats.

“At the end of the day, we're using this bill kind of as a teaching tool to educate the public, to raise the profile of the issue, to raise the climate concerns with hydrogen,” Vitali said. “[Then] maybe the legislature and the governor will factor climate change issues into what they do.”

The difficulty of capturing carbon

Environmental advocates like Vitali are particularly concerned about regulating blue hydrogen because the carbon capture and storage that it requires involves infrastructure that would be vast and expensive, doesn’t yet exist in Pennsylvania, and can be dangerous.

Carbon capture and storage typically involves preventing emissions from dissipating into the air during manufacturing, compressing the carbon, transporting the material via pipeline, and then injecting it underground.

Advocates point to issues such as unintended leakage of methane during transportation and and note surrounding communities could be exposed to methane and carbon dioxide leaks and earthquakes.

State senators recently passed a bill that would begin the process of allowing Pennsylvania to oversee injection wells in the state — a precursor to carbon capture development. The bill’s sponsor, state Sen. Gene Yaw (R., Lycoming), said the issue is urgent.

“Doing nothing is not an option,” Yaw told Spotlight PA. He cited climate change as a major concern for getting the state started on carbon capture. He added that the bill would also signal to federal investors that Pennsylvania is ready for the hydrogen industry.

“All we're worried about is being in the mix, that we're considered as a location [for hydrogen hub funding.] And in order to do that, we have to indicate our interests.”

State Sen. Katie Muth, (D., Montgomery), who sits on the Senate Environmental Resources and Energy Committee, unsuccessfully tried to add oversight regulations to Yaw’s bill that other states have considered or passed. Those provisions include requiring insurance for operators who store and transport compressed emission materials, and requiring a public health study about where underground storage facilities will be located.

Muth also said she has concerns about enforcement of the regulations that already exist in Pennsylvania. Namely, she is skeptical the Department of Environmental Protection can adequately oversee the injection wells that are already used in the commonwealth to extract oil and dispose of byproduct fluids.

“It really blows my mind that we're voting on this in the absence of an increased dollar amount for DEP to staff up,” Muth told Spotlight PA. “They don't have enough people to inspect all the things that they permit. And so why would we permit something new if we can't even oversee the infrastructure we have now?”

Since then, both legislative chambers have passed a state budget that would include a nearly 11% funding increase for DEP. The plan is currently in limbo.

Most of those increases would go toward administrative work such as customer service, permitting, and inspections.

The budget, however, doesn’t include any increases for the Department of Conservation and Natural Resources, which is the agency that would assess whether wells can safely be drilled and monitor for leaks. The move functionally amounts to a funding cut due to inflation.

Katie Blume, the policy director for environmental group Conservation Voters of PA, said that this is “nowhere near enough” preparation to begin regulating a new industry.

“We need to make sure that we do not give polluting industries the keys like we did when we opened up Pennsylvania for fracking,” Blume said. “We need substantially more resources in both agencies to do so.”

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