Hydrogen panel wants to tap taxpayers needlessly

Whistling into the wind is all right as long as Louisiana taxpayers don’t get put on the hook.

The Louisiana Clean Hydrogen Task Force released its report this week. Its mission was to study current hydrogen production, transportation, storage and use, and to recommend how Louisiana should respond to emerging “clean hydrogen” markets. “Clean” hydrogen is one that in its manufacture produces little in the way of carbon byproducts or carbon used in the process.

Typically, clean hydrogen production involving carbon in any form is paired with carbon capture and sequestration, certainly the most common form coming from use of fossil fuels especially natural gas. Louisiana has inherent resources to facilitate this process, such as an extensive pipeline network, shipping points for end products such ammonia, and geological formations suitable for sequestration. Plus, its manufacturers consume a large amount as well, often coexisting with production.

This would portend enormous production, except for one thing: it’s horrendously expensive with next to no market for it. It’s vilified both on the political right, for its highly uneconomic nature that becomes worthwhile only through government subsidies, and the left, for all but its “green” (where the separated carbon is stored and isn’t used in the production process) version because it enables the use of fossil fuels.

Worse, as the task force was completing its work, this year’s federal budget reconciliation bill hastened the departure of what is known as the Section 45V tax credit, which is a production tax credit of up to (depending upon the carbon content involved) $3 per kilogram or about $2,722 per ton. The law now says it applies only to hydrogen produced by a facility put into service prior to 2028 for ten years after it begins production, or a reduction of five years from its original jump off date.

Since blue hydrogen production costs from $1,814 to $3,715 per ton and as its typical release of carbon compared to hydrogen of 1:1 would only qualify it for about $907 per ton subsidy, it’s clear the subsidy is crucial to making the project economically viable. Add to that the uneconomic nature of CCS utilizing the Section 45Q tax credit, which remains without a cutoff date, of $85 per ton, exacerbated by the fact that a project cannot claim both, which makes it even less economically viable.

That bite on tractability already has begun to be experienced by firms. To great ballyhoo under the climate alarmist Democrat John Bel Edwards Administration, Air Products announced an extensive blue hydrogen facility coming to Ascension Parish. Earlier this year, it essentially halted the effort, buffeted by an inability to secure customers willing to pay the high alarmism premium and in the impending scaling back of the 45V credit. A major low carbon steel project by Hyundai depended crucially on the credit, but now will miss it with its first production anticipated for 2029. The firm still says its coming but its goal of eventually producing green hydrogen there – which doesn’t produce nor use carbon in the process – now seems quite farfetched.

Worst of all, the federal government cancelled its “H2Hubs” grant program (for which Louisiana was competing but didn’t initially win an award). This could have awarded research and economic incentive money for hydrogen production in the state.

So, the task force answered all of this by saying state taxpayers needed to throw money at these projects plus revitalize the federal taxpayer-paid 45V credit while hoping the private sector sucks it up: “Louisiana retains many competitive advantages but success in the clean hydrogen economy most likely now depends on maintaining the Federal Section 45Q and 45V credits and expanding state-level support, recognizing that industry will likely need to shoulder more of the financial risk.”

Wrong answer. There is no compelling reason Louisianans have to have the hands of large corporations stuck into their pockets to produce something far more expensively than necessary, given the inherent errancy of catastrophic anthropogenic global warming as a theory. Recommendations of streamlining the permit process make sense, but no extra taxpayer dollars should be spent on this needless exercise.