Last month, CNX unveiled plans to turn coal mine methane — a potent greenhouse gas that gets vented to the atmosphere at mines around the country — into ‘sustainable’ aviation fuel.
The plan needs the Biden administration to change a key rule to go forward, but would seemingly address two big climate problems in one fell swoop: the scourge of methane from coal mines, which account for nearly 1% of all greenhouse gas emissions in the U.S., and the growing climate footprint of air travel.
To boot, the plan would create 3,000 construction jobs, according to CNX. To Ken Broadbent, head of the local steamfitters’ union in Pittsburgh, this is a no-brainer.
“Let’s use this to save the environment, and help lower pollution by capturing the natural gas,” Broadbent said. “It’s a win-win situation.”
In a statement, Brian Aiello, a CNX spokesman, called it “an environmental and economic win-win that’s coalescing elected officials, labor unions, and business leaders of all stripes.”
Perry Babb, CEO of KeyState, CNX’s partner on the project, called hydrogen the state’s “next energy revolution.”
CNX and KeyState accrued endorsements to the proposal from a lineup of Pennsylvania Democrats — from Sen. Bob Casey, (who called it an “exciting new project”) to Gov. Josh Shapiro (who said the project would “create thousands of jobs and cut fuel costs for airlines, all while reducing pollution”) to Allegheny County Executive Sara Innamorato, a progressive who has criticized the fracking industry in the past, who called the plan a “transformational collaborative project.”
Darrin Kelly, head of the Allegheny/Fayette Central Labor Council of AFL-CIO, called it a “rare instance where everyone truly wins and no one loses….(t)hat almost never happens.”
“The fugitive methane is already here, right now, polluting our atmosphere every day,” Kelly said, in a statement. “I hope and expect that the administration will give us the chance to take advantage of it. There’s simply no good reason not to.”
‘Bad for the climate’?
But embedded in the CNX plan is one potentially large hang-up that Danny Cullenward, senior fellow at the Kleinman Center for Energy Policy at the University of Pennsylvania, called an accounting “gimmick.”
“We’re basically talking about the federal government giving what is potentially the most generous tax credit in U.S. energy policy history to the fossil fuel production process,” Cullenward said. “That’s bad for the climate. That’s bad for taxpayers.”
CNX says the project’s viability hinges on whether the U.S. Treasury agrees to alter rules it’s currently writing for a “clean hydrogen” tax credit. The credit, known as 45V, was created by the Inflation Reduction Act, President Biden’s signature 2022 climate law.
The credit gives companies a potentially large payout if they can produce large amounts of hydrogen without creating carbon emissions – the main cause of climate change.
The way the credit is determined is through a complicated process that tries to measure precisely how much carbon dioxide a hydrogen project will create. CNX and KeyState Energy, are asking the Treasury to subtract any coal mine methane gas they use for the project from the greenhouse gas assessment formula.
Since methane is such a potent greenhouse gas — it’s 30 times more potent than carbon dioxide — this change to the math could catapult the project into a higher tax credit. On paper, the project could in theory account for negative emissions.
Cullenward estimates that under CNX’s proposal, only a quarter of the gas used in hydrogen production would need to come from coal mines for the company to get the full hydrogen tax credit, even if the project’s operators don’t capture any CO2 emissions created during the hydrogen-making process.
“It’s entirely feasible that you wouldn’t have to capture any pollution at all at this facility,” Cullenward said.
At the highest level of subsidy, $3 per kilogram, the project would stand to receive $204 million per year in tax credits for a decade. The lowest subsidy level — $.60 per kilogram of hydrogen, would still net around $40.8 million in tax credits per year.
Cullenward said a number of other companies and industry trade groups are pushing for similar changes to the tax credit rules.
“Because the subsidy is so incredibly generous, everybody’s trying to figure out ways to sort of squeeze their idea into the box,” he said. “The subsidy hunters are out in force.”
A potential zero-carbon source of hydrogen
The proposal comes as the Biden administration pushes for a clean hydrogen industry. When it’s used as a power source, hydrogen creates no carbon emissions — and is considered a leading candidate to lower carbon pollution from heavy industry, like steel and cement manufacturing, and potentially shipping or aviation.
But making hydrogen is energy intensive. If you make it using renewable energy, so-called ‘green hydrogen,’ that produces no CO2 emissions.
Most hydrogen today — like the kind used in fertilizer production and oil refining — is currently made from natural gas and produces a lot of CO2 emissions. There are ways to reduce that carbon footprint, like capturing the emissions and burying them underground – that technology exists but it’s not widespread yet. This type of production is called “blue hydrogen.”
The clean hydrogen tax credits, created by the Inflation Reduction Act, and federal funding for hydrogen hubs, from the Bipartisan Infrastructure Law, were intended to accelerate the development of these technologies, says Wilson Ricks, a research fellow at Princeton. He says they’re not intended to support cleanup of coal mine methane.
The CNX plan “is directing massive amounts of federal funding to something that should be the responsibility of polluters to address,” Ricks says.
Mine methane: ‘noxious’ greenhouse gas
Mining coal releases a lot of methane — the main component of natural gas. If it builds up in the mine, it can explode, so coal mine operators vent it to the atmosphere.
Methane leaks from oil and gas wells are regulated. But not from coal mines. Ricks says they should be.
Ricks worries that allowing companies like CNX to count “negative emissions” from cleaning up methane will undercut hydrogen projects that net fewer carbon emissions.
“If you are a green hydrogen producer that’s being undercut by a (conventional hydrogen)… facility that’s just buying cheap, coal mine methane credits and still getting the exact same large subsidy, you’re going to be undercut,” Ricks said.
Another problem Ricks foresees with CNX’s proposed rule change is it could create incentives for some of the biggest methane emitters, like coal mines and dairy farms, to produce more methane in order to capture the tax credit.
“It would make agricultural methane …extremely valuable, to the point where dairy farms will be incentivized to create the manure lagoons that create this methane in the first place, rather than disposal methods that don’t create methane,” Ricks says.
Still, some climate experts are more accepting of the CNX plan.
Catherine Wolfram, a professor of energy economics at MIT, said she understands the “unease” some may have with “paying a fossil fuel producer to extract or to use fossil fuels.”
Wolfram says the best scenario would be regulations or a carbon tax on methane from coal mines. But lacking that – she sees a legitimate case for CNX’s proposal to capture those methane emissions
“If they’re not using (the methane) to make sustainable aviation fuel, the methane is going to go into the atmosphere. And methane is this noxious, horrible greenhouse gas that’s super potent,” she said.
Right now, Biden’s Treasury department is reviewing thousands of comments it received on the tax credit rules. It’s expected to come out with a final set of rules later this year.
Reporting for this story was supported by the MIT Environmental Solutions Initiative Fellowship.
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