February 6, 2022

Lundstrom revives plan for hydrogen hub with new House bill

The seal of the state of New Mexico in the House

Conservation groups are unhappy with the revival of a controversial bill to make New Mexico a hub of “blue hydrogen” production.

State Rep. Patty Lundstrom, D-Gallup, who introduced the initial hydrogen hub legislation, House Bill 4, has reintroduced the plan through a substitute measure, House Bill 227. Like HB 4, it would offer tax incentives for public agencies and private businesses to develop the infrastructure needed to separate hydrogen from natural gas for use as an energy source.

The bill is scheduled to be heard in the House Appropriations and Finance Committee, which Lundstrom chairs, perhaps as soon as Monday. 

Erik Schlenker-Goodrich, executive director of the Western Environmental Law Center, said in reviewing the new bill, it is very similar to HB 4.

“Effectively they are just rearranging the deck chairs in the bill,” he said. “It includes all the same tax credits and tax deductions, it sets up private-public partnerships. It is very much a pro-hydrogen bill.”

Tom Solomon, a retired electrical engineer and co-coordinator for 350 New Mexico, a climate advocacy group, said despite a few minor “tweaks” in the new bill, including a reduction in carbon emissions, it basically remains the same as HB 4.

The bill, he said, still gives “tax benefits to the same industry [oil and gas] that does not need more so they can continue to increase the amount of global warming emissions.”

But Rep. Nathan Small, D-Las Cruces and one of the co-sponsors of HB 4, said Saturday the new legislation adheres to or tops federal guidelines on capturing methane gas and reducing emissions.

The original bill allowed 4 kilograms of carbon dioxide emitted per 1 kilogram of hydrogen for three years. The new bill reduces that to 2 kilograms of carbon dioxide per 1 kilogram of hydrogen. 

“In every single place [in the bill] we have tightened and put in place national leading standards … for low decarbonization through hydrogen,” Small said Saturday. 

Small said a new clean hydrogen industry will create jobs, particularly in areas of the state hit hardest by coal plant shutdowns. The effort has been a pet project of Gov. Michelle Lujan Grisham, who has pushed hard for the idea.

While the governor touts what could become a burgeoning new industry, environmental groups and some progressive Democrats contend it will lead to more greenhouse gas emissions amid a global climate crisis — and would heavily benefit the oil and gas industry at a time when the state should be decreasing its reliance on fossil fuels.

The original hydrogen hub bill became one of the most contentious issues in the first half of this year’s 30-day legislative session. 

HB 4 was halted in the House Energy, Environment and Natural Resources Committee by a 6-4 vote after about six hours of testimony and debate. Two Democrats joined four Republicans from oil- and gas-rich districts to block the measure.

At the time, Lundstrom said she did not intend to introduce a similar measure or push to revive the tabled bill.

But during a news conference Thursday on the state’s proposed budget for fiscal year 2023, Lundstrum said the spending plan includes $125 million for a hydrogen fund administered by the New Mexico Finance Authority.

“Obviously, this fund is contingent on the passage of a bill, House Bill 4 or something similar,” she said, hinting a new plan was in the works.

“It’s not over till it’s over,” she said. “You guys know that about me. It’s not over until it’s over when it comes to something like the hydrogen bill, so you can expect some good things in the very near future when it comes to hydrogen.”

It’s not clear if the new bill will go through the House Energy, Environment and Natural Resources Committee. If it bypasses that committee and goes only to Lundstrom’s committee before hitting the floor of the House of Representatives, “that smells pretty bad,” Solomon said. 

Lujan Grisham hopes to move swiftly to develop the framework for the new hydrogen industry so New Mexico could draw some of the $8 billion for the industry included in the massive federal infrastructure bill approved by Congress and signed into law last year by President Joe Biden.

That law calls for four initial leading “hydrogen hub” states in the nation and offers an additional $1 billion in assistance for hydrogen technology research and development.

During the House energy committee’s debate, Lundstrom said money from the federal infrastructure act could help make New Mexico the nation’s leader in hydrogen production. She also said the state would move forward with the initiative even if it didn’t receive the federal funds.

Small said New Mexico could get a head start on applying for those funds if it puts a hydrogen hub act together. He noted other states, including Texas and New Jersey, are working on similar proposals to create hydrogen hubs. 

The process of separating hydrogen from natural gas includes capturing carbon dioxide and storing it underground. The remaining hydrogen has a wide range of uses, from powering electric plants to fueling transportation to heating homes.

Besides the differences in emission and methane gas standards, it was not immediately clear whether HB 227, introduced through what is known as a “dummy bill,” is a revised version of HB 4 or largely the same bill.

Both bills are 68 pages long.

Dummy bills are filed in the first half of a legislative session but left blank so lawmakers can later tailor them for a particular purpose.

House members have filed about 45 dummy bills in this session. Members of the Senate have filed about 35.

Staff reporter Daniel J. Chacón contributed to this report.