Midwesterners Lament Lack of Transparency as Coalition Seeks Federal Aid for Proposed Hydrogen Hub

Midwesterners know Lake Michigan for its crystal-clear water, distinctive sand dunes and stunning views. But the lake has a legacy of pollution, too: Steel mills, oil refineries and other heavy industrial facilities dot its southwestern shoreline from Chicago through Indiana to the Michigan border. 

Now, a burgeoning industry is hoping to accelerate the clean energy transition in the region with a clean hydrogen hub: a network of producers, consumers and transportation infrastructure intended to expand the use of hydrogen as a green fuel source in the United States. Unlike fossil fuels, hydrogen emits no heat-trapping carbon dioxide when burned.

A group of corporations and public agencies known as the Midwest Alliance for Clean Hydrogen, or MachH2, aims to take advantage of new federal funding to build such a hub, which would be mainly focused in Illinois, Indiana and Michigan but extend to nearby states as well. In April, the alliance submitted an application to the Department of Energy in a bid to receive a chunk of the $7 billion apportioned by the 2021 Infrastructure Investment and Jobs Act to support the creation of six to 10 hydrogen hubs nationally. 

MachH2 declines to disclose details of its proposal, including specifics on where the infrastructure would be located. But the proposed hub could include new hydrogen production facilities, infrastructure for transporting the fuel, underground wells for storing carbon dioxide emitted by hydrogen production, and renewable energy installations like solar arrays or wind farms. The federal Department of Energy is expected to announce the recipients by the end of the year. 

In theory, the hydrogen hub could provide a major economic opportunity in the form of new jobs while weaning the region’s highly polluting steel industry from its reliance on fossil fuels. The industry is a major contributor to climate change, accounting for roughly 8 percent of global carbon dioxide emissions.

But environmentalists argue that by withholding virtually every detail about the proposal, neither MachH2 nor the DOE has demonstrated that the hydrogen hub will yield a net benefit for the climate or for the region’s residents. 

While they are hoping that the hub could reverse a pattern in which the region’s poorest bear the brunt of air and water pollution, those activists maintain that this will not happen unless environmental justice advocates get a seat at the table.

“Environmental, labor and justice community leaders must be included in these publicly funded multibillion-dollar industry-led proposals for hydrogen,” said Chris Chyung, executive director of the Indiana Conservation Voters, an environmental advocacy group. “That’s a simple thing that we think” MachH2 ”should be able to meet.”

In June, Indiana Conservation Voters and 14 other environmental groups sent a letter to the MachH2 alliance and the DOE seeking greater transparency in the planning process and more opportunities for community input. “It is unacceptable for out-of-state interest groups and their consultants to shut out local environmental, racial justice and faith community leaders from these important discussions that can make or break Indiana’s industrial and clean energy future,” the groups wrote. 

The DOE has not yet responded to a Freedom of Information Act request filed on Aug. 21 by Inside Climate News for the release of MachH2’s application. 

A “Game Changer” for Victims, or a Sinkhole?

For decades, residents along Indiana’s shoreline have dealt with higher-than-average air pollution as well as water contamination from the heavy metals that flow from coal ash waste sites into Lake Michigan. Indiana ranked next to last in a recent analysis of environmental justice efforts in 18 Midwestern and Northeastern states, scoring poorly in terms of introducing legislation and dedicating state employees to addressing inequities.

Between Gary, Indiana, and Lake Calumet in Chicago, roughly a 15-minute drive, there are 11 current or proposed Superfund sites ridden with lead, chromium, arsenic and other contaminants.

An influx of federal money for clean energy projects could therefore be a “game changer” for the area, Chyung said, but that all depends on who benefits most: the corporations that develop the hydrogen projects and reap federal largess, or the people who have historically suffered the consequences of pollution from steel mills.

“We can really turn the tide here,” he said. “I really don’t want us as a region to squander the ability to transition to clean sources and to be a technological leader in things like clean steel and clean hydrogen nationally.” 

While the hub would aim to manufacture hydrogen fuel for a range of purposes, from heavy-duty trucking and rail transport to making chemical fertilizer and glass, Chyung and other advocates have pinned their hopes on one application in particular: using it to make steel. Traditional steelmaking requires heating iron ore to high temperatures, a process in which virtually all US producers burn coal or petcoke, a carbon-rich solid derivative from oil refining. Both coal and petcoke release large amounts of carbon dioxide when burned, making the process particularly emissions-intensive. 

Steelmaking is hard to electrify—that is, to power with electricity generated by renewable sources—due to the industry’s energy intensity and the money that has already been sunk into infrastructure for burning coal and petcoke. But using hydrogen could not only vastly reduce the industry’s carbon footprint but also lessen the air pollution faced by communities near steel plants, Chyung said, since burning hydrogen to heat iron ore would emit no carbon dioxide or particulate matter.

Chyung maintains that committing hydrogen produced by a regional hub to less proven applications, such as hydrogen-powered cars or electricity for the grid, would be a waste. “We want to really draw the focus away from these pie-in-the-sky applications,” he said. “The hydrogen hub proposal needs to be laser focused on steel, because it’s so dirty and hard to decarbonize. To ignore steel would really be such a missed opportunity.”

Although Neil Banwart, MachH2’s chief integration officer, ticked off the variety of purposes the hydrogen could serve in an interview, he said the coalition could not yet share names of potential “offtakers,” or users. “Steel is absolutely an offtake that we’re really excited about,” he said.

Citing the competition for federal grants, Banwart maintained that MachH2’s hands were tied on revealing specifics until the federal government selects which projects will receive funding. “We’re still part of a very competitive process, and so there’s a limit to what we can share,” he said. “Our commitment is to be as transparent as possible.”

According to a recent survey by the energy market research company S&P Global Commodity Insights, at least 20 proposed hubs are currently in the running for DOE funding, including one also hoping to serve Michigan, as well as Ohio and Pennsylvania.

After the DOE makes its selection, “we’ll move right into the negotiation phase, and we’ll continue the dialogue,” Banwart said, adding, ”We really look forward to sharing more details.”

Members of Indiana Conservation Voters and other environmental organizations met with Banwart in July, but Chyung said the MachH2 official did not provide much in the way of additional detail. 

“Unfortunately, it’s kind of a black box at this moment in time,” said Ben Inskeep, the program director for the Indiana-based environmental and consumer advocacy group known as the Citizens Action Coalition, who also attended the meeting.

Banwart said that MachH2 is committed to environmental justice and to the Biden administration’s Justice 40 Initiative, which was created to ensure that 40 percent of the federal money invested in areas like climate change, clean energy and transportation, and environmental remediation flows to neglected or ignored communities buffeted by pollution. 

Wildly Different Footprints

Beyond the implications for environmental justice, the lack of details makes it hard to assess the MachH2’s proposal’s potential impact on climate change. Hydrogen can be produced in many different ways, and the various types can have wildly different footprints.

Hydrogen types are commonly referred to by corresponding colors, depending on how each is sourced and what type of energy powers the manufacturing process. Green hydrogen, for example, is sourced from water, with the process powered by renewable energy. Blue hydrogen originates with methane, a potent heat-trapping component of natural gas, and creates carbon dioxide as a byproduct. Blue hydrogen is produced by capturing and sequestering the carbon dioxide byproduct. 

Virtually all the hydrogen in the U.S. is currently sourced from fossil fuels such as natural gas, according to the DOE. Banwart said that MachH2 plans to generate hydrogen from a variety of sources, including natural gas, and that its proposal encompasses both green and blue hydrogen as well as a carbon capture and sequestration process. 

According to Mark Jacobson, a professor of environmental engineering at Stanford University, blue hydrogen production can hardly be considered a climate solution. Capturing carbon from methane is highly energy-intensive, and because it relies on natural gas as a hydrogen source, it is highly likely to promote the creation of more fossil fuel infrastructure, air pollution, and planet-warming emissions, he said.

“It’s a really unethical technology,” he said. “The natural gas industry has seen this as an opportunity to keep their business alive.”

Environmental activists are also concerned that a new hydrogen hub could siphon away some of the solar and wind energy that underserved residents have started to rely on, rather than letting this green energy travel to the electric grid. “We can’t just let the industrial user gobble up all of the clean energy,” Chyung said.

MachH2 says it expects to source its energy from a combination of nuclear energy, wind energy, solar power and natural gas.

In addition to the DOE grants, hydrogen entrepreneurs benefit from a tax credit included in the Inflation Reduction Act, the pathbreaking climate-related legislation passed last year. The act offers producers up to $3 per kilogram of hydrogen produced, with more money available to companies that can prove that their process has a low impact on greenhouse gas emissions.

However, the Biden administration has yet to release guidelines outlining how that impact will be calculated. Environmentalists say the guidelines could have a big impact on any climate dividends.  

A group of environmental advocates have been pushing the Treasury Department, which administers the tax credits, to implement three main guidelines: ensuring that hydrogen projects prove that the energy they’re sourcing is renewable, considering the climate impacts of hydrogen gas itself, and requiring an accurate accounting of any leaks or emissions of natural gas along the entire supply chain. 

“It’s a really generous tax credit—it’s incredibly beneficial and really will do a lot to accelerate and to incentivize production of hydrogen,” said Beth Trask, an energy transition expert at the Environmental Defense Fund. “But if you’re going to get those tax credits, you really need to be able to show that you are generating those climate benefits per kilogram of hydrogen produced. That’s imperative.”

A Fear That Tax Credits Could Backfire

Weak guidelines could cause the federal government to spend more than $100 billion on subsidizing projects that lead to a net increase of greenhouse gas emissions, a coalition of environmental organizations warned in a letter to the Treasury in February.

Genuine low- or zero-emissions hydrogen projects must follow the so-called “three pillars” of clean hydrogen, the letter argued: adding new clean power to the grid, taking power from the grid the same hour that it is being produced and ensuring that the newly produced clean power can be delivered to the hydrogen facility. Projects that adhere to these requirements are likely to be economically competitive, too, the authors added. 

“We have the solutions to get this right,” they wrote.

The alternative, said Inskeep of the Citizens Action Coalition in Indiana, would mean overlooking disadvantaged communities once again. “If it’s implemented in a bad way,’’ he warned, “it can mean a lot of companies will be getting really rich off of making dirty hydrogen that’s exacerbating environmental injustices.”

As the MachH2 applicants await the DOE’s funding decision, northwest Indiana residents who are invested in the outcome are hoping they’ll get a chance to evaluate the proposal in full—from the sites envisaged to the manufacturing methods, Inskeep added. 

“You fear for the worst in a state like Indiana, which has historically been captured by fossil fuel interests,” he said.