Pull-quote: The Infrastructure Bill is expected to stimulate the rapid decarbonization of the energy sector through billions of dollars in appropriations for research and development, grants, and other programs to advance the hydrogen and CCUS industries in the United States.
Rapid decarbonization of the energy sector is becoming increasingly important to achieve state and national clean energy targets. The emerging low carbon hydrogen (“clean hydrogen”) and Carbon Capture Utilization and Storage (“CCUS”) industries could play a vital role in the transition to a lower-carbon future in the United States. Hydrogen has many potential uses, including as a carrier of energy and a source of heat, and, when produced in a low-carbon manner, it shows great promise as a tool for hard-to-decarbonize industries to achieve lower emissions, including particular importance for the hydrocarbon-heavy fuels sector. The capture of carbon from industrial emissions (including during the production of hydrogen from hydrocarbons) or through “direct air capture” and the subsequent permanent underground sequestration or conversion into useful products is seen by many as a necessary component of reducing global emissions.
Despite the potential for these technologies as drivers of decarbonization, high costs and uncertain regulatory environments in the United States have hampered development. Key players in the energy industry have voiced their support for clean hydrogen and CCUS and have been more vocal in advocating for increased federal funding for hydrogen and CCUS projects. In response, the Bipartisan Infrastructure Investment and Jobs Act (the “Infrastructure Bill”), as passed by the Senate, would bridge that gap by including billions of dollars in appropriations for research and development, grants, and other programs to advance hydrogen and CCUS industries in the United States.
Infrastructure Bill, Passed by the Senate, Faces Delay in the House
The Infrastructure Bill was first introduced on June 4, 2021. It passed the House of Representatives on July 1, 2021. The Senate made numerous amendments to the Infrastructure Bill before ultimately passing it by a margin of 69-30 on August 10, 2021. The Infrastructure Bill returned to the House of Representatives where it awaits debate. Although the Bill was expected to experience delays, on August 24, 2021, the House of Representatives passed a rule that set September 27, 2021 as the deadline to vote on the Bill.
Stimulating the Hydrogen Industry
The Infrastructure Bill supports the development and expansion of the hydrogen industry in the United States through the establishment of national standards through a mix of regulatory initiatives, federal grants and incentives, and other programs.
The Infrastructure Bill instructs the Secretary of Energy, in cooperation with the heads of relevant offices of the Department of Energy, to develop a national strategy and roadmap that focuses on facilitating the production, processing, delivery, storage and use of clean hydrogen. The Secretary of Energy shall also work with the Administrator of the Environmental Protection Agency to develop an initial standard for the carbon intensity of clean hydrogen after considering input from industry and other stakeholders. Importantly, the Infrastructure Bill defines clean hydrogen to include, not only hydrogen produced through electrolysis, but also hydrogen produced using hydrocarbons, CCUS, nuclear energy, and biomass.
The Infrastructure Bill provides initiatives clean hydrogen manufacturing and recycling by permitting the Secretary of Energy to provide multiyear grants and to enter into agreements with eligible entities working on clean hydrogen manufacturing and recycling projects. The Infrastructure Bill directs the Secretary of Energy to promote the production of clean hydrogen via electrolysers by establishing a program that concentrates on the efficiency, durability and costs of electrolysers and awarding grants to projects that would achieve those goals. In addition, to promote the efficient production of clean hydrogen, the Infrastructure Bill establishes the creation of regional clean hydrogen hubs and instructs the National Laboratories to act as clearinghouses to collect and distribute information concerning the hydrogen programs.
Promoting the Carbon Capture Industry
Congress recognizes that the high capital costs, lack of transport and storage infrastructure, and lack of state and federal support impede the rapid deployment of carbon capture technologies. With the Infrastructure Bill, Congress would provide assistance to overcome significant obstacles obstructing the growth of the carbon capture sector. To stimulate carbon capture in the United States, the Infrastructure Bill takes several approaches, including requiring the development of standards, providing federal funding, and creating federal programs that will reduce carbon emissions and advance carbon capture technologies.
The Infrastructure Bill requires the Secretary of Energy to develop carbon utilization standards and certifications to facilitate the commercialization of carbon products. It paves the way for carbon storage and sequestration as it promotes the exploration of geologic carbon storage and development of strategies and resources to enable geologic carbon storage deployment and sequestration.
Carbon capture technologies benefit from the significant proposed outlays in the Infrastructure Bill. Congress has included federal funding for commercial or industrial products that reduce greenhouse gas emissions, and the Secretary of Energy is required to establish four regional direct air capture hubs. In addition, the Bill requires the Secretary of Transportation to establish a carbon reduction program to reduce transportation emissions.
Federal programs designed to promote the deployment of carbon capture include the proposed use of federal lands, increased funding for carbon sequestration permitting activities, and engineering and design programs. The Infrastructure Bill grants the Secretary of the Interior the authority to convey leases, easements or rights of way on the outer Continental Shelf for long-term geologic carbon sequestration and authorizes appropriations for the Administrator of the Environmental Protection Agency to award grants to states for underground injection control programs for permitting Class VI wells. The Secretary of Energy will also focus on multiple facets of carbon dioxide transportation infrastructure by creating an engineering and design program and finance and innovation program for carbon dioxide transportation infrastructure.
Infrastructure Bill Instrumental to Low-Carbon Energy Future
With the Infrastructure Bill, Congress has taken important steps to stimulate the rapid decarbonization of the energy sector by including billions of dollars in appropriations for research and development, grants, and other programs to advance the hydrogen and CCUS industries in the United States. Both industries will benefit from the federal support and funding provided by the Infrastructure Bill. These industries long have faced uncertainty due, in part, to a lack of a regulatory framework and high cost. The Infrastructure Bill provides some initial steps towards regulatory certainty, provides federal support through appropriations, and appoints relevant departments and agencies to develop clean hydrogen and CCUS programs in conjunction with the private sector. Further, the Infrastructure Bill creates incentives for industry players to invest in the and clean hydrogen and CCUS industries. Although clearer regulations are needed, the passage of the Infrastructure Bill will be instrumental to progressing towards clean energy goals as the successful deployment of clean hydrogen and carbon capture technologies is critical to the rapid decarbonization of the energy sector.
ABOUT BAKER BOTTS L.L.P.
Baker Botts is an international law firm whose lawyers practice throughout a network of offices around the globe. Based on our experience and knowledge of our clients' industries, we are recognized as a leading firm in the energy, technology and life sciences sectors. Since 1840, we have provided creative and effective legal solutions for our clients while demonstrating an unrelenting commitment to excellence. For more information, please visit bakerbotts.com.