New Research Spells Trouble For Blue Hydrogen in Texas

Oil giants Exxon and Chevron are among a group of energy companies that could receive up to $1.2 billion in federal grants to make so-called “clean” hydrogen in Texas. Their proposal to produce the clean-burning fuel using natural gas and carbon capture, in addition to other methods, was selected by the Biden administration a year ago to become one of the country’s seven clean hydrogen hubs. But a trio of researchers at the University of Texas at Austin just showed that there’s a dirty paradox at the heart of the plan.

In a study published in the journal Nature Energy on Monday, the researchers show that upstream emissions in the natural gas supply chain in Texas are so high that it’s essentially impossible to make hydrogen from it that would meet federal standards for “clean” hydrogen. But, the authors warn, the government’s proposed method for measuring the carbon intensity of hydrogen overlooks these emissions. That means these Texas hydrogen projects could get millions in public funding in the name of tackling climate change, all while making the problem worse.

“You’re investing so much in developing a hydrogen economy, and then it turns out, 10 years later, half of them are not even low carbon,” Arvind Ravikumar, an associate professor at the University of Texas at Austin and one of the authors of the new paper, told me. “I think that’s a real risk.”

This story might sound familiar. I’ve written extensively about the emissions accounting challenges plaguing another method for making clean hydrogen that requires only water and carbon-free electricity, known as electrolysis. The problem there is that the electric grid still runs largely on fossil fuels, and so plugging in a hydrogen plant will produce indirect emissions, even if the production process itself is clean.

The new study highlights a similar issue with hydrogen made from natural gas. Of course, since this method uses fossil fuels, it’s already substantially more difficult to prove it has any climate benefits at all. In theory, the emissions can be greatly reduced, although likely not entirely eliminated, by capturing the carbon emitted from the plant. The authors show, however, that the more important factor is where the natural gas comes from.

Natural gas is mostly methane, a greenhouse gas more than 80 times more potent than carbon dioxide in the short term, and leaks are notoriously underestimated. But any assessment of the benefits of hydrogen made from methane must take leakage into account, and some natural gas fields are leakier than others.

The paper analyzes a range of scenarios for two hypothetical hydrogen plants — one on the Gulf Coast that sources natural gas from the Permian Basin, and one in Ohio that gets gas from the Marcellus Shale. The Treasury Department’s draft rules for calculating the carbon intensity of hydrogen for the clean hydrogen tax credit say these two plants should assume that a national average of 1% of the natural gas extracted from the ground is leaked into the atmosphere where it warms the planet. But more than a decade of on-the-ground measurements, combined with more recent satellite data, has shown that methane leaks vary widely from well to well and basin to basin.

Using the more accurate, though still approximate, leakage rates of 5.2% in the Permian and 1.25% in the Marcellus, the authors calculated the carbon intensity of hydrogen produced at the two plants under various assumptions. What if the carbon capture system is more effective? Or less effective? What if the capture equipment is powered by renewables? What if we measure the warming effects of methane over 20 years versus over 100 years?

No matter which variable they changed, one result stayed the same: Hydrogen made from Permian Basin gas greatly exceeded the government’s definition of clean hydrogen, i.e. 4 kilograms of CO2 released per kilogram of hydrogen produced. In fact, the emissions from natural gas production in the Permian Basin alone pushed it over that standard. Hydrogen made from Marcellus Shale gas, on the other hand, has the potential to qualify as clean if at least 90% of the carbon at the plant is captured.

The findings suggest that without enormous efforts to reduce those upstream emissions, which come from leaks, venting, and flaring at the wellhead and along the pipeline system, natural gas-based hydrogen projects on the Gulf Coast should not qualify for federal subsidies.

The authors advocate for the Treasury’s final guidelines for calculating the carbon intensity of hydrogen to account for these regional differences. “I think that, to begin with, will make a huge difference in accurately estimating the emissions intensity of these projects,” Ravikumar said. As new methane regulations from the Environmental Protection Agency go into effect, it’s possible that projects that are not eligible today could become eligible in the future. “But the point is, you’ll only know that if you do your carbon accounting accurately across supply chains,” he said.

One problem with this solution is that hydrogen producers have access to another federal tax credit that doesn’t require any analysis of how clean the hydrogen is — up to $85 for every ton of carbon they capture and sequester underground. Indeed, at least one project developer has already said they will go after that subsidy instead of the one for clean hydrogen.

Ravikumar thinks those developers are facing a major risk. “At the end of the day, you’re going to buy hydrogen from these companies explicitly for its low-carbon attributes,” he said. “Right now we did this analysis, but very soon, you’re going to have satellites that are going to look at all these regions and be able to make emissions information publicly available. And once you’re able to do that, you can’t make up numbers on paper.”