Copyright © 2022 Albuquerque Journal
SANTA FE – A slimmed-down hydrogen energy bill is headed to the full House with just five days left in this year’s 30-day legislative session.
After several previous hydrogen-related proposals were stymied at the Roundhouse, a revived bill that was brought forward under a legislative “dummy” bill process was approved on a 7-3 vote Friday by a House committee.
Backers of the measure, including Gov. Michelle Lujan Grisham’s administration, say hydrogen energy could be an economic boon for the state, particularly in northwest New Mexico.
“To me, this is an opportunity to not only create a path for this specific industry … but also to create an economic development project for an area that’s pretty economically depressed,” House Majority Leader Javier Martinez, D-Albuquerque, said during Friday’s hearing of the House Commerce and Economic Development Committee.
But he acknowledged hydrogen would not be a sweeping “fix” for climate change.
Critics of the hydrogen legislation, House Bill 228, say New Mexico going all-in on the technology would continue the state’s reliance on fossil fuels – since hydrogen developers plan to use natural gas to produce hydrogen – and it could stymie efforts to expand renewable energy sources.
“It’s a worthy endeavor, but it’s a risky endeavor,” said Rep. Rebecca Dow, R-Truth or Consequences, who said it’s possible environmental groups could file lawsuits if the legislation is enacted.
Dow was one of three lawmakers who cast “no” votes on the proposal – Reps. Natalie Figueroa, D-Albuquerque, and Linda Serrato, D-Santa Fe, were the others.
The new bill would create a framework for building “hydrogen hubs” around the state where private investors could partner with public agencies to build needed infrastructure, and where hydrogen-related businesses could co-locate to turn the hubs into bustling industrial zones.
Companies located in the hubs could qualify for grants, loans and other state assistance.
To produce “clean hydrogen,” the bill would impose a cap on carbon emitted when extracting hydrogen from methane contained in natural gas to just two kilograms of CO2 for every one kilogram of hydrogen produced. That’s in line with federal standards now being developed by the U.S. Department of Energy for hydrogen production.
And that emissions cap would ratchet down over time, reaching a zero-emissions mandate for hydrogen production by 2045.
In addition, natural gas producers that supply gas to hydrogen facilities would be required to capture 99% of all methane emissions in the production process, from the point where gas is pulled from the ground to its delivery at a hydrogen facility. That would make New Mexico’s methane emission limits on natural gas the strictest of any state in the country.
The new emission standards are stronger than those contained in a previous hydrogen bill that stalled in a different House committee last month.
Unlike that previous hydrogen proposal, the bill approved Friday eliminates a suite of new tax incentives that last month’s bill contained to encourage hydrogen production in New Mexico.
Despite those changes to the legislation, environmental groups remain firmly opposed to the concept.
Nearly 200 individuals logged on to testify remotely against the new bill during a committee hearing this week.
Among other concerns, environmentalists say the newly proposed emission standards are based on “false promises.”
They question whether the state would have the human and monetary resources needed to successfully verify and impose compliance with the standards. And they distrust the effectiveness of carbon capture and sequestration technology, which hydrogen producers would use to trap carbon emissions when producing hydrogen from methane.
“The determination of a project’s carbon intensity will be based on assumptions about the availability of carbon capture and storage that are guaranteed to be wildly optimistic since the technology has been a failure everywhere it’s been tried to date,” Tom Singer of the Western Environmental Law Center told the Journal.
Skeptics also pointed out a budget bill approved last week by the House would earmark $125 million in federal relief funds for hydrogen development in New Mexico if lawmakers pass the hydrogen hub framework.
“I’m a little concerned about putting that much taxpayer money down on something very new,” Figueroa said during Friday’s hearing, adding the idea holds promise but also significant risk.
Some critics also took issue with the process used to bring the revised legislation forward.
Dummy bills, also known as generic or emergency bills, can be used as a vehicle to revive stalled legislation, often with substantial changes. And the bill approved Friday was the second such bill to be brought forward on the issue.
The other such bill, House Bill 227, was shelved by House Speaker Brian Egolf, D-Santa Fe, who said it would not move forward before the 30-day legislative session ends Feb. 17.
Industry leaders say they can comply with the new emission standards, which are in line with – and in some aspects exceed – federal standards.
“The environmental standard is very high,” said Justin Campbell, the vice president for power and transmission for Tallgrass Energy. “It requires a very low level of greenhouse gas emissions, which go down over time. But we’ve taken a hard look at it, and we expect to meet those standards.”
Tallgrass is a natural gas pipeline operator that’s partnering with Texas-based Newpoint Gas LLC on a $600 million project to convert the coal-fired Escalante Generating Station near Grants, which shut down in 2020, into a hydrogen-based power plant.
The partners would source natural gas feedstock from the San Juan Basin in northwestern New Mexico to make hydrogen at the Escalante facility, and then use the hydrogen to run the plant’s turbine generators to provide “clean” electricity to utilities.
The Escalante project would generate 500 construction jobs and 60 full-time jobs, Campbell told lawmakers Friday. He also said the hydrogen industry could eventually create between five to 10 times more jobs than that amount.
Elimination of state tax incentives from the hydrogen bill have no impact on the Escalante project, said Newpoint Gas CEO Wiley Rhodes.
Rather, the partners are relying on the federal government’s 45Q subsidy program, which pays companies $50 for every ton of carbon dioxide that they permanently store in certified underground wells.
The Escalante plant would use carbon capture technology to trap the CO2 emitted during hydrogen production, and then pump the carbon to a nearby storage site in the San Juan Basin.
“That federal subsidy justifies the project at Escalante,” Rhodes told the Journal. “45Q would also support a potential expansion of hydrogen production to other sites in southeastern New Mexico.”
The bill does, however, include one critical legal component needed by Escalante – the addition of “clean hydrogen” to New Mexico’s Renewable Energy Act.
That would allow local utilities and electric cooperatives to purchase Escalante’s hydrogen-based electricity as a legitimate “clean” fuel as they strive to comply with the state’s Energy Transition Act, which requires all public utilities to convert their grids to 100% noncarbon generation by 2045.