The Fossil Fuel Industry Campaign to Dirty Up Hydrogen Fuel Tax Credits
Oil and gas companies are deploying revolving door lobbyists to shape tens of billions in tax credits for hydrogen fuel.
In the months ahead, the Biden administration will issue guidance on tax credits for hydrogen fuel production that could kickstart clean energy—but if a fossil fuel industry lobbying blitz succeeds, it could instead subsidize the continued extraction and burning of fossil gas.
Oil and gas companies like BP and ConocoPhillips have deployed dozens of revolving door lobbyists to press federal policymakers on their case that hydrogen fuel produced with fossil gas—also known as natural gas—should qualify for subsidies. Environmentalists are hoping the credit is only available for hydrogen fuel that is produced with renewable energy. At stake is whether the tax credit achieves its goal of decarbonizing some of the heaviest-polluting sectors, or whether it props up fossil gas companies with public funding and helps them repurpose their existing pipelines for the production of hydrogen.
The Inflation Reduction Act (IRA), signed into law last year, contained a hydrogen fuel production tax credit known as “45V” intended to scale up the growing industry for a potentially multi-trillion dollar global market. The 45V tax credit’s value will be tied to a calculation of all greenhouse gas emissions in its production, including upstream industrial activities, that makes it worth up to $3 per kilogram of hydrogen that is made with at least 95% fewer emissions than with current practices.
The Department of the Treasury and the Internal Revenue Service are required to issue final guidance on the rule by August 16, one year after the IRA’s enactment, according to the U.S. Code. The tax credit could pay out up to $100 billion over its lifetime. When produced at scale from renewable energy sources, clean-burning hydrogen fuel stands to be used to decarbonize major sectors such as steelmaking, long-haul trucking, and air transport.
Since last year, fossil fuel companies have been spending big on lobbying to convince the administration to make the 45V tax credits available for companies that produce so-called “blue hydrogen” powered by fossil gas facilities that claim to have reduced emissions through deployment of carbon capture technologies. This effort would dilute the 45V tax credits’ focus on incentivizing “green hydrogen,” fuel whose production is 100% powered by renewable energy and reduces warming emissions in line with international climate agreements.
Scores of fossil fuel industry groups and their lobbyists submitted comments to the Treasury’s 45V rulemaking in November and December last year, including trade associations the American Petroleum Institute, the American Gas Association, utilities trade group Edison Electric Institute, and trade group Fuel Cell & Hydrogen Energy Association. Many of their member companies had recently lobbied in favor of legislation that would subsidize “blue” hydrogen, thereby continuing fossil gas extraction and underwriting its transport. The lobbying push and regulatory comments arrive after a years-long PR campaign by Big Oil claiming that blue hydrogen is climate-friendly, even as utility-scale renewable energy is coming online nationwide and renewables are projected to overtake oil and gas in decades ahead as a share of the energy grid.
Environmental justice advocates such as New York Lawyers for the Public Interest warn that building more gas pipelines would pose public health risks from leaks, especially in marginalized communities. For example, oil major Shell is touting an expansion of its Louisiana petrochemical plant, which produces toxic emissions, as being more “sustainable” with the promised integration of hydrogen fuels.
Sara Gersen, senior attorney at the nonprofit environmental law organization Earthjustice, told Sludge of the forthcoming 45V rules, “It is essential that the Treasury Department doesn’t dole out tax credits for hydrogen production that isn’t as clean as industry claims. To achieve that goal, the Biden Administration needs to use accurate carbon accounting. A hydrogen producer that uses grid power should only be allowed to claim it is using renewable electricity if it adds new renewable resources to its grid that feed in energy during the same hour that its facility uses grid electricity.”
In Earthjustice’s 45V rulemaking comment, Gersen emphasized peer-reviewed studies that found that fossil gas that is leaked during oil and gas transport is more than twice as high as assumed in the model used by Treasury—called the Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) model—in its calculation of climate impacts.
“When the Treasury Department calculates the climate impact of producing hydrogen from fossil fuels, it must use realistic estimates for methane leakage from the gas sector,” Gersen said. “This will require an update to the assumptions in the GREET model, which currently assumes a leakage rate that is less than half of what scientists have observed.”
Many comments submitted by oil and gas companies embrace the GREET model as the basis for the Treasury and IRS’ tax credit awards. French multinational Air Liquide wrote, regarding any potential enhancements to the GREET model, “Current hydrogen production facilities must regularly report emissions through the local, state, and federal regulatory bodies. We would encourage the IRS to leverage these existing reporting structures to minimize the additional program administration costs associated with reporting under 45V.” Comments entered by the American Petroleum Institute, BP, Valero, and others similarly name the GREET model as the baseline assumption for calculating emissions.
“The Biden Administration must also reject the fossil fuel industry’s request to use a scheme called book-and-claim accounting, which would allow companies to count the fossil gas they use as a carbon-negative resource by purchasing dubious biogas credits,” Gersen said. “Without these common-sense rules, the Biden Administration could waste billions of dollars subsidizing hydrogen production that worsens the climate crisis and threatens public health.”
Revolving Door Lobbying
Over the past three quarters, and as Big Oil banked record profits in 2022, fossil fuel companies have used lobbyists who previously worked in government to argue for blue hydrogen production. Companies lobbying on the 45V credits included ExxonMobil, BP, Air Liquide, and the holding company of utility giant NextEra Energy. The offices contacted included the U.S. Senate and House, the Treasury Department, the IRS, the EPA, the Department of Energy, and the Department of the Interior.
BP America sent a letter to the IRS on the 45V credits that was signed by lobbyist Downey Magallanes, head of policy advocacy and federal government affairs for the company, who previously worked as deputy chief of staff for policy at the Department of the Interior, according to disclosures filed with the Senate. Magallenes is a corporate board member of the Congressional Hispanic Institute, a leadership development nonprofit, which received donations last year from the American Petroleum Institute, Chevron, ExxonMobil, and gas company PG&E, among others.
Ethanol and biofuels trade association Growth Energy sent a letter to the IRS on the clean fuel tax credits from lobbyist Chris Bliley, senior vice president of regulatory affairs for the group. Bliley previously worked as associate administrator of the Office of Congressional and Intergovernmental Relations at the Environmental Protection Agency (EPA).
Fossil fuel industry trade association the American Fuel & Petrochemical Manufacturers (AFPM) submitted a regulatory comment that was signed by lobbyist Conner Brace, formerly senior manager for government relations for the group. Brace formerly worked at the Department of Energy (DOE), which runs the GREET model sponsored by the Argonne National Laboratory. Earlier this year, Brace began as director of policy and government relations for the Climate Leadership Council, a nonprofit whose organizational partners include oil majors BP, TotalEnergies, Shell, and others, as well as gas utility Exelon and energy company Vistra.
ConocoPhillips’ lobbyist on the 45V tax credits, who met with the U.S. Senate in Q4 of 2022 and both chambers of Congress in Q1 of this year, is Kevin Avery, vice president of federal government affairs and former legislative counsel to former Democratic Senator Mary Landrieu. Avery worked for the centrist Louisiana senator from 2001-2007. Landrieu is now a corporate lobbyist, with clients this year including pipeline firm Enterprise Products and Williams Companies, and in recent years including several oil and gas exploration companies like the Baton Rouge-based APTIM. Landrieu also founded a climate nonprofit that shares staff with an ExxonMobil and Dow Chemical-funded group.
Landrieu is one of a few Democratic former members of Congress who recently appeared in ads for what watchdogs describe as a fossil gas industry front group, Natural Allies for a Clean Energy Future, whose funding members include pipeline firms Kinder Morgan and Williams Companies. Armed with a PR budget of around $10 million, the front group has spent hundreds of thousands of dollars in recent months on Facebook ads promoting fossil gas as clean energy, often with a focus on communities of color.
Another ConocoPhillips lobbyist who works on energy and environmental issues is Kjersten Drager, interim vice president of external affairs for ConocoPhillips Alaska. Formerly, Drager worked as a special assistant for a cabinet-level task force on energy policy that was assembled by President George W. Bush, and as special assistant of energy policy for Vice President Dick Cheney. She then registered to lobby for energy industry clients starting in 2003.
Other groups that employed revolving door lobbyists on the issue of hydrogen fuel in Q1 of this year include AirLiquide, gas company TC Energy (formerly TransCanada), Chevron, Marathon Petroleum, NextEra Energy, and Southern Company. The U.S. Chamber of Commerce’s roster that lobbied on hydrogen fuel in Q1 includes former Republican Rep. Evan Jenkins of West Virginia, who held a seat on the Energy & Natural Resources Committee, as well as lobbyist Christopher Guith, formerly a deputy assistant secretary for congressional affairs at DOE.
Two years ago, the International Energy Agency published a report finding that no new oil and gas projects could be approved by governments if the planet was to avoid the catastrophic effects of climate degradation that scientists expect will happen if global average temperatures rise more than 1.5 Celsius above pre-industrial levels.
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