The path forward for Texas’ hydrogen policy

Hydrogen carries enormous potential as a low-emission, highly efficient energy resource. In fact, hydrogen could play a critical role in Texas’ energy expansion, where continued oil and gas production combined with hydrogen, carbon capture and a broader renewable energy base provide more, cleaner energy for a growing state economy and a world market in search of power.

Some rightfully call this an “all-of-the-above” energy strategy.

Currently, hydrogen has some existing limited applications, including for fertilizer production and oil refining. Looking forward, hydrogen energy has potential for other demands, including transportation, power storage, eclectic generation and manufacturing. In addition to these earthly applications, a hydrogen production facility is planned for development on the South Texas coast to furnish rocket fuel for the state’s emerging space industry.

Fortunately, Texas hosts several comparative advantages that position it well to lead the nation in hydrogen production. For starters, hydrogen can be manufactured by reforming natural gas. Currently 95% of hydrogen is manufactured through this process. Texas’ extensive natural gas resources and pipeline infrastructure give the state a natural edge here.

According to a report by Texas 2036 and the Center for Public Finance at Rice University’s Baker Institute for Public Policy, Texas hosts a plethora of other resources, including an existing hydrogen pipeline network, underground storage capacity and robust port export capacity, that prime it to lead the nation in hydrogen development.

Laying legislative groundwork for hydrogen’s development

Given the opportunities associated with hydrogen energy, one of the key questions leading up to the 88th session of the Texas Legislature was what role, if any, the state would need to play in hydrogen’s development. Hydrogen’s current and anticipated growth trajectory, and its likelihood for success in meeting that trajectory, depends on regulatory certainty and policy frameworks for continued market development.

The Legislature answered this question by approving HB 2847, authored by Rep. Drew Darby, R-San Angelo and sponsored by Sen. Kevin Sparks, R-Midland. The legislation accomplishes two key things:

  1. HB 2847 clarifies that the Railroad Commission of Texas has regulatory jurisdiction over hydrogen pipelines and underground storage facilities.
  2. Perhaps more importantly, HB 2847 establishes the Texas Hydrogen Production Policy Council within the RRC.

This new council is a big deal. In addition to assessing the development of Texas’ hydrogen industry, the council can play a leading role in coordinating state agencies’ efforts toward establishing a regional clean hydrogen hub and, more importantly, develop a plan for hydrogen production oversight by the RRC. The essential upshot here is that Texas now has a deliberative, methodical and focused approach for developing a policy and regulatory framework for hydrogen’s growth and development.

HB 2847 takes effect on Sept. 1.

Hydrogen will play a critical role in Texas’ energy expansion. Its development within Texas’ energy ecosystem offers the opportunity for both more energy production and greater economic returns in the forms of job creation and GDP growth.

In the coming months, Texas 2036 will release the results from a year-in-the-making modeling study of how an energy expansion could contribute to the state’s continued economic growth and development. Stay tuned.

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