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Senate Committee Probes FERC Regulation of Hydrogen, but Industry Says Tax Credits Are the Priority

By July 20, 2022 3   min read  (528 words)

July 20, 2022 |

Fuel Cells Works, Senate Committee Probes FERC Regulation of Hydrogen, but Industry Says Tax Credits Are the Priority

Dive Brief:

  • Members of the Senate Committee on Energy and Natural Resources showed interest in developing new, hydrogen-specific infrastructure as well as in converting existing natural gas pipelines to move hydrogen, during a hearing Tuesday. Some Republican senators expressed concern that the Federal Energy Regulatory Commission would use any authority to regulate hydrogen to also curtail natural gas development.
  • “It appears there is uncertainty today around which federal laws apply to interstate hydrogen infrastructure, and about which federal agencies could or should be involved in siting this infrastructure and setting service rates,” committee Chairman Joe Manchin, D-W.Va., said, adding that Congress should set up an “effective” regulatory framework for hydrogen infrastructure.
  • While an energy attorney testified that FERC may already have the authority to regulate hydrogen pipelines, other industry leaders said the most important thing Congress could do is create hydrogen-specific tax credits.

Dive Insight:

A Tuesday morning hearing before the Senate Energy and Natural Resources Committee seemed to approach a consensus that FERC is the most qualified body to assume oversight of the growing U.S. hydrogen industry.

FERC could already have the authority to regulate the construction of hydrogen pipelines that cross state lines under existing law, Richard Powers, a partner and head of the energy law group at Venable LLP, told the committee.

“Clearly if [hydrogen] is generated from fossil fuels, FERC can regulate it under the Interstate Commerce Act,” Powers said. “On the other hand, FERC has decided they can regulate other things that are not just from fossil fuels but are energy producing and can compete with other energy sources, and that are transported in pipelines.”

But there is some uncertainty around whether FERC has jurisdiction over hydrogen pipelines, Powers said, and more clarity could help to spur private investment.

However, not all members of the Senate committee agreed with the idea that merely integrating hydrogen into existing regulatory frameworks was a good idea. The status quo, they argued, comes with significant costs and permitting delays that could hinder a transition to hydrogen.

“I don’t want to take hydrogen and say, we have such a good structure now, let’s do it like that,” Sen. James Lankford, R-Oklahoma, said. “I think it’s a terrible idea to say let’s do it like that because it’s not working very well.”

Others, including Sen. John Barrasso, R-Wyo., argued FERC could use any authority over hydrogen to impose further restrictions on natural gas. Excessive regulation could also “kill hydrogen while it is still in the cradle,” he said.

Industry leaders, including Plug Power CEO Andy Marsh and Chad Zamarin, senior vice president of corporate strategic development for Williams Companies, later testified that they believed the creation of a tax credit for the production of hydrogen would be the most effective action Congress could take to encourage the adoption of hydrogen as a low-carbon fuel.

“The proposed clean hydrogen production tax credits pave the most well-defined path to a domestic clean hydrogen economy by providing qualifying projects the right tax incentives that would offset initial capital outlays that are not currently supported by market premiums,” Zamarin said.

By Emma Penrod

SOURCE: UTILITY DIVE

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