Will a loophole mean subsidized US blue hydrogen projects will allow doubled CO2 emissions?

The wording of tax credit access may be letting projects pollute twice as much as intended

Blue hydrogen produced using natural gas (a fossil fuel) in Texas may be capable of using a loophole to be able to pollute twice as much as similar projects located on the east coast of the United States.

The Texan projects would still qualify for the 45V clean H2 production tax credits

This conclusion was the result of an assessment conducted by the University of Texas in Austin, focusing on blue hydrogen projects.

The proposed guidelines for the projects in Texas show that despite double the carbon emissions, they will still be eligible for clean energy subsidies due to a loophole in the way the US government’s lifecycle emissions modeling was created.

The University of Texas, Austin researchers published their findings in the Nature journal.  In it, they stated that US regulators should be aware of the differences in regional gas emissions and take them into account when they determine the thresholds for the 45V tax credits.  They recommend this strategy instead of the use of the average national emissions currently modeled. This way, only those using the natural gas using methods producing the lowest emissions would maintain eligibility for subsidies.

The study looked at blue hydrogen projects in Ohio and Texas

The researchers looked into two blue hydrogen case studies in Texas and Ohio.  The Texas project sourced its natural gas from the Permian oil and gas basin in that state. The Ohio project sourced its natural gas in and around Pennsylvania, from the Marcellus gas basin.

The total lifetime greenhouse gas emissions from the Texan project were measured to be about 7.4 kilograms of CO2 per kilogram of produced blue hydrogen.  This was more than double the Ohio project’s emissions, which were measured to be 3.3 kilograms of CO2 per kilogram of produced H2.

Over the permitted threshold

The Texan project’s emissions are also almost double the total 4 kilograms of CO2 per kilogram of produced blue hydrogen allowed under the 45V production tax credits under the US government’s Inflation Reduction Act.

Much of the emissions are being blamed on leaks from pipelines transporting the natural gas from the wells to the demand centers.  The Permian basin’s leaks were estimated to be between 3.7 percent to 9.4 percent, whereas the Marcellus produced natural gas had estimated leaks of a much lower 1 percent.