Why the oil and gas industry, the Biden administration, the AFL-CIO, and even some environmental groups support spending billions of taxpayer dollars on an economic and environmental absurdity
By Sean O’Leary
The names read like a progressive dream team – Joe Biden, Senators Ron Wyden and Tina Smith, the National Wildlife Federation, the Clean Air Task Force, Obama administration luminaries Ernest Moniz and Gina McCarthy, and the AFL-CIO. But strangely these progressive lions are united with the decidedly non-progressive oil and gas industry on one issue, their support for a blue hydrogen and carbon capture hub in the heavily fracked greater Ohio Valley where a third of the nation’s natural gas is produced.
Why the strange bedfellows? The political appeal of a project that would purportedly reduce carbon emissions while also preserving coal and gas jobs in economically depressed Appalachia is compelling for politicians and advocacy organizations. Plus there are obvious financial benefits that go with catering to an industry that is among the nation’s most generous donors to politicians and organizations. In fact, the benefits are so great that they make the cost and environmental drawbacks of the proposed hub seem almost irrelevant.
But, for those of us in the general public who aren’t part of that circle of mutual benefit and who would have to absorb the financial and environmental costs of the proposed hub, the drawbacks are too big to ignore. As is the fact that the proposed hub would also get in the way of better, less expensive ways to reduce carbon emission and create jobs.
What is a blue hydrogen and carbon capture hub?
The core element of the proposed Appalachian hydrogen and carbon capture hub is a pipeline network that would transport carbon that is captured not just in the manufacture of hydrogen, but also from coal and gas-fired power plants, petrochemical plants, and other facilities to points in the region where it would be injected for permanent storage in underground saline caverns. Meanwhile, the hydrogen that would be produced from methane could theoretically be used in a variety of industries, creating a larger market for fracked natural gas.
There is no single plan for the hub’s design and footprint, but all parties agree that it would entail the construction of hundreds of miles of dedicated pipelines to connect power plants, factories, and natural gas processing facilities throughout the region with injection points for underground storage.
There are many problems with the imagined hydrogen and carbon capture hub. Three stand out.
- The cost is prohibitive to the point that the hub probably won’t be built. But, if it is built, the cost in increased annual taxes and utility bills would be in the hundreds and perhaps the thousands of dollars per household.
- Carbon capture technology is unproven. Even if its most ambitious goals are met, it would probably capture little more than half the carbon currently being emitted by facilities that could theoretically use the hub.
- If the hub were built, it would contribute almost nothing in the way of jobs and prosperity.
The Cost: They can move it around, but they can’t make it go away
According to the White House Council on Environmental Quality (WHCEQ), the pipeline networks for this and three other carbon capture hubs would cost between $170 billion and $230 billion just to construct. But that figure is dwarfed by the additional investment in carbon capture technology that would have to be made by plant owners whose costs to operate and maintain their retrofitted plants would also rise significantly.
A recent Ohio River Valley Institute brief found that retrofitting just the nation’s coal and gas-fired power plants for carbon capture and sequestration (CCS) would add approximately $100 billion per year to Americans’ electric bills, an increase of 25%. The cost of adding CCS to steel mills, cement plants, factories, and other carbon producing facilities could be that much again or more.
In West Virginia, where the electric system is dominated by coal, the impact would be much worse, increasing the average monthly utility bill by 63% or $736 per year. But there’s another problem.
No business wants to take on unnecessary costs, which is why, despite forty years of federal government funding for research and development, CCS and blue hydrogen are rarely found in commercial settings and, in the case of power generation, they are not found at all. Consequently, even if the federal government invests hundreds of billions of dollars to build the pipeline infrastructure required to transport and sequester captured carbon, the putative customers of that infrastructure—power plants and factories—would still have no incentive to install CCS. In fact, they would put themselves at a competitive disadvantage by doing so.
The most popular solution to this problem among policymakers is to grant industry a massive taxpayer subsidy combined with relaxed environmental and safety regulations, an assumption by the public of legal liability, and legislation that would ease the way for the use of eminent domain for pipeline construction.
The proposed subsidy, which is contained in the stalled federal reconciliation bill, would pay companies $85/metric ton of captured and sequestered carbon. By most calculations, this is more than the actual cost of carbon capture, making it a 100%+ subsidy. WHCEQ also suggests that states can help promote CCS by adopting off-take agreements for CCS-equipped power plants, which would guarantee that we would pay well-above market rates for the electricity the plants produce. WHCEQ also encourages states to help the industry by cutting property taxes, severance taxes, gross receipt taxes, and sales taxes. And the administration is encouraging states to shift regulatory responsibility for assuring the safety of carbon pipelines from the federal government to state agencies, such as the West Virginia Department of Environmental Protection.
None of these measures would reduce the underlying cost of CCS and the hydrogen hubs. Many would increase it and shift the inherent risks associated with carbon pipelines to the public. And they would result in much of the cost of CCS and blue hydrogen being recovered through our tax bills rather than our electric bills, making it less obvious.
Carbon capture doesn’t work very well and would leave us with a massive GHG and local pollution problem
Perhaps more damning than the cost of carbon capture is the fact that it doesn’t do a very good job of reducing emissions and other forms of pollution, which have long damaged our region and the health of residents.
First, the hydrogen hub and the production of blue hydrogen would do nothing to mitigate upstream emissions associated with fracking and the transportation and processing of natural gas and methane. They would also miss entirely plants and factories whose owners see no advantage in installing CCS.
Second, even after CCS technologies have been installed and put into operation, they are expected to capture only about 90% of the emissions at the plants where they are installed. Existing pilot projects have regularly captured only two-thirds or less.
Finally, depending on the type of CCS technology that is deployed, pollution from nitrogen oxide, volatile organic compounds, and other hazardous pollutants would continue and may worsen, especially if implementation of carbon capture helps increase production from fracking.
An Appalachian hydrogen and carbon capture hub would do little to stimulate job growth and prosperity
The hydrogen hub’s most noticeable effect would be a perpetuation of the coal industry and the possible expansion of the gas industry. But that only amounts to locking in an economy that is already causing the region to shed jobs and population. The structural inability of the natural gas industry to deliver job growth was amply documented in a 2021 ORVI report titled “Destined to Fail: Why the Appalachian natural gas boom failed to deliver jobs and prosperity and what it teaches us.”
In contrast, clean energy transition with an emphasis on renewable resources, distributed generation, and energy efficiency improvements to homes and buildings would cost less, eliminate emissions, stimulate job growth in the tens of thousands, reduce utility bills, increase disposable incomes, and improve the quality of life in both public and private spaces by making them safer and more comfortable. The clean energy approach would also free up vast sums of money that could be used to compensate workers, families, and communities directly affected by reductions in fossil fuel industries.
We’ve been down this path of promised prosperity by subsidizing industry before
West Virginia has been tantalized before by promises that new industries and technologies would produce jobs and prosperity.
The Appalachian natural gas boom was one such instance, but it has had little impact on jobs and population. We heard the same story about an imagined Appalachian Storage Hub and petrochemical cluster that was supposed to usher in what the Department of Energy called a “manufacturing renaissance”. But the storage hub, the ASCEND cracker in Wood County, and the PTT cracker in Belmont County, Ohio never came to fruition. The only major project that has, the Shell ethane cracker in Beaver County, Pennsylvania, has had no measurable economic impact.
That’s why we should be skeptical when many of the same voices that promoted those failed visions now champion the Ohio River Valley Hydrogen and Carbon Capture Hub. And they have a prominent new participant. Former Obama administration Energy Secretary, Ernest Moniz, is ubiquitous in hydrogen and carbon capture hub advocacy. His work and that of his organization, Energy Futures Initiative, was cited by the White House Council on Environmental Quality. He co-authored hub-related reports as part of the Labor Energy Partnership, and he was a keynote speaker at the Ohio River Valley Hydrogen and CCS Hub Market Workshop, which was attended by Senators Joe Manchin (D-WV), Shelley Moore Capito (R-WV), and Sherrod Brown (D-OH).
Mega technological projects are a passion for Dr. Moniz, many of which have become mega busts. Dr. Moniz was a major proponent of adding nuclear reactors at Plant Vogtle in Georgia, a project which was supposed to cost $14 billion and go online by 2018, but which now has a price tag of over $30 billion and is still not online. He also championed the $7 billion Kemper coal gasification project in Mississippi. But, after years of delays, the plant never operated as promised, its cost ballooned by more than $4 billion, and last year Kemper’s owner, Southern Company, gave up and began demolishing the plant’s gasification equipment.
We can’t afford those kinds of fiascos in our region and we can’t afford more industry bonanzas like the natural gas boom, which fulfilled none of its promises of jobs and prosperity. Whether the goal is emission reduction, jobs, or affordability, the proposed Ohio River Valley hydrogen hub is a bad solution that gets in the way of good ones.