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2024

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Republican-led Oklahoma legislature set to introduce subsidy for hydrogen projects after hub failed to win federal funding

Author:

Leigh Collins


The Republican-dominated legislature in the US state of Oklahoma — which continues to legislate against climate-mitigation measures — is set to introduce a new subsidy for hydrogen producers and users in the state.

Senate Bill 1428 is offering an “investment rebate payment” equal to 6.25% of the capital expenditure (capex) of a hydrogen project, providing that total capex is more than $800m, and that the facility is in a municipality with a population of between 20,000 and 30,000 people.

 

The money would come from a new Commerce Manufacturing Activity Development Fund created by the bill, which would “not [be] subject to fiscal year limitations”, but would amount initially to $50m, according to one of the state representatives supporting SB 1428.

Claims for the rebates will be approved or rejected by the Oklahoma Department of Commerce.

The bill was passed by the Oklahoma Senate on 12 March by 40 votes to six, and was yesterday recommended for approval by the Oklahoma House Natural Resources Subcommittee and now passes to the House Appropriations and Budget Committee, ahead of a final floor vote.

Oklahoma’s legislature is dominated by the Republican Party, which holds 40 of the 48 seats in the Senate, and 81 of 101 seats in the House of Representatives.

It is also one of the most anti-ESG legislatures in the country, which has blacklisted banks with climate-protection policies, and has passed the “Energy Discrimination Elimination Act” that prevents state pension funds from investing in firms that use ESG criteria in their decision making.

 

SB 1428 does not actually set out any conditions as to whether the subsidised hydrogen should be green, blue, low-carbon or anything else, merely stating that it would be open to “capital expenditures… that refine, manufacture or process compounds or elements into hydrogen-based products in industries defined or classified in the NAICS Manual under Industry Group No. 324 or 325”.

This North American Industry Classification System is used by federal agencies for classifying businesses into specific sectors. Code 325 is for chemical manufacturing, including hydrogen and ammonia production; while 324 refers to petroleum and coal products, including oil refineries.

Given that Republicans in the state are very pro-oil and have little interest in climate mitigation measures, it could be that new oil refinery projects using unabated grey hydrogen made from fossil fuels could benefit from the new subsidy.

However, it is worth noting that there are no anti-climate-mitigation measures in the bill text, and that new projects would be able to access the federal clean hydrogen production tax credits of up to $3/kg, providing they meet lifetime clean hydrogen standards of emitting less than four kilograms of CO2-equivalent per kilo of H2.

 

The new bill is believed to be a response to the Biden administration’s decision last October not to offer funding to the state-backed Halo Hydrogen Hub, which contained dozens of green and blue H2 projects, as part of the $7bn Regional Hydrogen Hubs programme.

State officials in Oklahoma said after the decision in January that it would consider financially supporting hydrogen projects.

 

Source: Hydrogeninsight

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