One state’s heated debate over the development of a hydrogen industry.

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If you thought this state was California trying to be first in everything, it’s not. If you thought it was Texas trying to be first in all things energy, it’s not.

It is a poor sister state with a very rich oil field – the Delaware Basin – and the state has risen to number 2 in oil production.

The Delaware Basin is the premier oil and gas basin in the United States. The value of oil and gas at the New Mexico wellhead was $24 billion per year in 2019 and likely a little more in 2021 – a staggering amount of money.

So why is New Mexico debating the role of liquid hydrogen in its future? Part of the reason is a connection to the state’s oil and gas industry. The cheapest way to create liquid hydrogen is natural gas, which the state has in abundance.

A second reason is that New Mexico, under a Democratic governor, has taken an aggressive stance to stop global warming. Hydrogen as a fuel for long-haul trucks, planes, ships, and manufacturing seems like an ideal solution for these hard-to-reduce greenhouse gas (GHG) emitters.

Source: The Albuquerque Journal, Mountain View Telegraph.

The Fabulous Delaware Basin.

Two monster wells drilled by Devon Energy were announced in 2018, producing 11,000 to 12,000 boe/d (barrels of oil equivalent per day) at the start of a 24-hour period.

Royalties and taxes on 45,000 wells provide revenue to the state and this has been a boon in recent years. For fiscal year 2021, NM general fund revenue of $2.96 billion accounted for 35% of the state budget, with more than $1.4 billion going to education and more than 0.6 billion dollars for health services.

The climate dilemma.

Now let’s go over the fence and see what’s on the other side. In New Mexico, the oil and gas sector generated 60 million metric tons of greenhouse gas (GHG) emissions in 2018, or 53% of the state’s total and 1% of total US emissions. Methane accounts for 35% of New Mexico’s greenhouse gases (see a 10% national figure) and in this state, most of it comes from the oil and gas sector.

Governor Michelle Lujan Grisham has set a goal of reducing methane emissions by 45% between 2005 and 2030. New rules were established by New Mexico in 2021 to reduce methane leaks and gas flaring, and these are now some of the strictest state rules in the country.

The state government also committed in 2019 to switch to renewable energy by reducing GHG emissions to net zero for the entire economy by 2050. This has two consequences:

· The state’s goal is for electricity to be carbon-free by 2040. This means there will be no more coal or gas-fired power plants. This would reduce the demand for natural gas. For the whole of the United States, it has been estimated that gas demand will fall by 39% by 2035 (updated figures).

· Cars and trucks will switch to electric vehicles on the way to net zero. This will reduce the demand for gasoline and therefore oil. For the United States as a whole, oil demand would fall by 34% by 2030 (updated figures).

The picture is one of a juggling act, with New Mexico lawmakers trying to strike a balance between a highly profitable oil and gas venture and a climate-driven transition from fossil fuels to renewables. How does a state like New Mexico achieve this? How do entire countries achieve this?

The hydrogen option.

One potential answer that involves the oil and gas industry is the liquid hydrogen option. The governor recently proposed House Bill 4, called the Hydrogen Hub Development Act. It was discussed last week at a conference organized by a House committee.

Tax incentives would be provided to start a new industry that would be part of the transition to renewable energy. The new industry would be linked to the burgeoning oil and gas industry which would supply the natural gas to produce the hydrogen, then sequester or bury the carbon dioxide byproduct – a process called carbon capture and storage (CCS) . The hydrogen thus generated from methane is called blue hydrogen.

The bill would reduce GHG emissions in certain applications where battery storage is not important enough, including airplanes, ships and steel or cement manufacturing plants.

A whole new blue hydrogen production industry would provide well-paying jobs, especially in parts of the state where coal-fired power plants are shutting down.

Two positions in the New Mexico debate.

The conference organized by the House committee was attended by hundreds of industry people, environmental advocates and other interested parties. After six hours of debate, the House committee voted 6 to 4 to introduce the hydrogen bill.

Here is a summary of the arguments for and against the concept of a blue hydrogen hub in New Mexico.

Proponents of the concept.

· The oil and gas industry has lobbied for funds under the federal infrastructure bill, now in effect, to be used to develop hydrogen as a clean liquid fuel.

Hydrogen is a clean-burning fuel that could be used in steel and cement plants, heavy trucks, aviation and ocean-going vessels. A thriving hydrogen industry would boost efforts to reduce carbon emissions. GHG in New Mexico.

· In New Mexico, tax incentives would be provided to start a new industry that would be part of the transition to renewable energy, as committed to by the State. The new industry would be linked to the burgeoning oil and gas industry which would supply the natural gas to produce the blue hydrogen and sequester the carbon dioxide by-product via CCS.

· The new industry would provide well-paying jobs and benefit communities in northwestern New Mexico where coal mines and coal-fired power plants are closed.

· The new industry in cooperation with oil and gas would represent part of the shift trajectory from fossil fuels to renewable energies.

Those who are against the concept.

· 99% of hydrogen today is called blue hydrogen which comes from methane, so this method will keep natural gas production going. But it causes methane to leak from wellheads, pipelines and gas processing facilities, and methane has a far greater global warming effect than its more common GHG sibling, carbon dioxide.

· The by-product of decomposition, carbon dioxide, will need to be stored deep underground via CCS. But CCS has its own scaling challenges.

· These are two big drawbacks that cripple the benefits of clean blue hydrogen. Reason says the approach is more difficult than simply divesting from oil, gas and coal production and reinvesting in established renewables like wind and solar.

Prioritizing blue hydrogen would divert state investment in more direct ways: clean electricity from wind and solar, new transmission grid lines, electric vehicles, and repairing methane leaks in heads wells and pipelines.

· According to Rystad Energy, a hydrogen fuel sector, which is expensive, will be too little too late. By 2050, only 7% of the world’s energy will be hydrogen to serve a niche industry to power aviation, shipping, and metal and chemical plants.

A spokesperson for the governor promised that the bill would be brought up again during the current annual session of the legislature.

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