Building a 'hydrogen hub' in San Juan County

May 24—ALBUQUERQUE, N.M. — A team of veteran energy developers is putting the building blocks in place to potentially convert San Juan County into a "hydrogen hub" to supply clean electricity to western utilities, plus non-carbon fuel for vehicles and industrial processes.

Libertad Power Project LLC says it could have its first hydrogen-fueled generating station up and running in the Farmington area by 2024 — far faster than any other commercial project currently under development in the U.S. And once operating, the power plant would provide the initial anchor for building out a broad production-and-storage center that could attract industrial partners to condense and liquify Libertad's Made-in-New-Mexico hydrogen for transport to customers across the nation.

The team began exploring alternative energy projects in the Four Corners in 2014, as pressure to shut down coal plants in New Mexico and elsewhere was gaining momentum, said Joseph Merlino, one of three managing partners on the six-member Libertad team. They initially considered building a combined-cycle natural gas plant, but later saw the potential for local hydrogen production and generation.

"We saw immense potential in San Juan County as an optimal location to supply hydrogen-based generation and clean fuel for other hydrogen-based industries, and we've aggressively pursued it," Merlino told the Journal. "The project has now grown into what we call a local hydrogen economy, or hub, anchored by clean power generation in the San Juan Basin."

Makings of a hub

Libertad is one of at least three hydrogen projects that energy companies are pursuing in the Four Corners Area. That includes a proposal by the Utah-based renewable firm Big Navajo Energy to capture methane emissions from a local refinery run by the Navajo National Oil and Gas Co. The project would convert the gas into hydrogen to be used for electric generation, and as fuel for vehicles.

New Point Gas LLC and Brooks Energy Co. are also pursuing a joint project to transform the coal-fired Escalante Generating Station near Grants — which Tri-State Generation and Transmission Association shut down last year — into a hydrogen production and generating facility.

But Libertad's goals are more ambitious. Rather than convert an existing facility, it aims to build an entirely new hydrogen-run generating plant near Farmington, and then expand the site into an industrial center for hydrogen fuel supply in many markets.

Libertad and the other local projects reflect a rapidly-emerging national and international focus on hydrogen as one of the key resources needed to build a non-carbon economy with net-zero emissions by mid-century. Hydrogen is a clean-burning fuel that can be used for many purposes, potentially allowing carbon-intensive industries like steel and cement manufacturing to eliminate emissions, while providing a clean alternative for transportation across the board, including land vehicles, ocean shipping and even airplanes.

"Decarbonization has largely focused on the power sector, with major progress achieved to date," Merlino said. "The kicker is, electric power today represents only about one-third of total U.S. emissions, with the other two-thirds generally coming from transportation, industrial processes, and heating and cooling for commercial and residential sectors. Hydrogen is one of the few technologies with the ability to potentially decarbonize all those sectors."

It may also become a critical crutch for renewable generation in the next 10 to 20 years, since clean-burning hydrogen power plants can supply electricity around the clock, picking up the slack for solar and wind facilities when the sun doesn't shine and the wind doesn't blow. Battery storage is rapidly improving and decreasing in cost, and most utilities are counting on battery back-up to transform their grids to maybe 70% or 80% renewables.

But to get to 100% clean, reliable generation, an around-the-clock non-carbon source like hydrogen may be essential as natural gas-based generation is phased out.

As a result, the U.S. and other countries are focusing heavily on hydrogen development. President Joe Biden's new $2.3 trillion infrastructure plan, for example, includes proposed funding for 15 "decarbonized hydrogen demonstration projects," plus a production tax credit to move the technology forward.


Still, hydrogen development is not without controversy. That's because nearly all current production is based on natural gas that manufacturing facilities use in a process called steam methane reforming, or SMR, which extracts hydrogen from methane. In the process, carbon dioxide is released into the atmosphere.

Now, however, two new clean forms of hydrogen production are emerging as potential alternatives. One, called "blue" hydrogen, continues to use natural gas for SMR, but with carbon-capture technology to sequester the emissions. The other, called "green hydrogen," uses electricity from renewable generation to separate oxygen and hydrogen molecules in water in a process known as electrolysis, which has no carbon emissions.

Many environmental groups oppose blue hydrogen because it perpetuates natural gas production, and even when the emissions are captured, the carbon must still be disposed of through deep underground storage in wells certified by the U.S. Environmental Protection Agency. In addition, carbon capture and storage technology is expensive and has yet to be successively deployed on a large commercial scale, said Dennis Wamsted, energy analyst with the Institute for Energy Economics and Financial Analysis, a think tank that favors renewable energy.

"Hydrogen is having its moment in the sun, with a lot of research and commercial-scale development underway for blue and green hydrogen," Wamsted told the Journal. "We're not fans of blue hydrogen. It's a costly endeavor that can be energy intensive, and you're still left with carbon dioxide that must be stored underground."

Blue hydrogen

The Libertad project will produce blue hydrogen, at least at first, drawing on the abundant natural gas reservoirs and installed pipeline infrastructure in the San Juan Basin. The captured carbon would then be stored in the basin's deep geological formations.

Those wells, however, must be able to store carbon for at least 99 years without any escaping into the atmosphere to receive a needed "class VI" federal certification.

"New Mexico still needs class VI certification from the EPA, and the Farmington area doesn't yet have that infrastructure in place," Wamsted said. "If it's not green hydrogen, I'm skeptical about the project's prospects."

Merlino said Libertad plans to start with blue hydrogen production and then later transition to green as more renewable generation becomes available for electrolysis, and as hydrogen electrolyzer technology becomes more efficient and less expensive.

"The technology needs to improve more in the electrolyzer process to increase efficiency and reduce costs, so it's not just a matter of enough renewable power being available," Merlino said. "In the meantime, we need to develop more options and alternatives now like blue hydrogen, because as decarbonization moves forward, utilities are concerned about just relying on wind, solar and batteries."

Other energy experts agree.

"Blue hydrogen seems to be kind of a bridge — a way in which the hydrogen economy can get started without the enormous expense of electrolysis to produce it," said Doug Howe, a 35-year industry veteran and former commissioner at the New Mexico Public Regulation Commission.

It's counterproductive, Howe added, to discard emerging technologies like blue or green hydrogen as decarbonization gains momentum.

"I think hydrogen has a place in the energy future," Howe said. "Wind and solar can't do it by itself, so we will need other energy technologies, whether that be nuclear energy, battery storage, hydrogen, or some mixture of all of that."

'A good tool'

Industry needs to draw on all potential alternatives as technologies like green hydrogen emerge on a commercial scale, said Cristopher Moore, a physicist and professor at the Santa Fe Institute — an interdisciplinary research center that analyzes complex issues.

"There will be a time when we have more solar and wind than we need that can then be used for electrolysis, and as the cost for green hydrogen comes down, Libertad can switch from blue to green," Moore said "... It's a good tool to have in our toolbox to help decarbonize the economy."

The San Juan Basin's abundant natural gas supplies, the extensive pipeline infrastructure already in place, plus the potential to store captured carbon in underground reservoirs there offer immense competitive advantages for Libertad to build its hydrogen hub in the Farmington area, Merlino said. In addition, once Libertad production is underway, the company can also store its hydrogen in underground formations to draw on as needed for power production or transport to other markets.

The company is already in advanced discussion with industry partners, including Tucson Electric Power and Arizona Public Service Co. to buy its hydrogen-powered electricity. It has memorandums of understanding with GE Gas Power to supply the power plant's generating technology, and with Kiewit construction and engineering firm to design and build the Libertad infrastructure.

The Connecticut-based private equity firm Starwood Energy Group is also ready to invest in Libertad when the team launches the project, which could cost up to $1.9 billion to fully build out the hydrogen hub.

"We are seeing a lot of interest globally in clean hydrogen as an important tool in advancing decarbonization," said Starwood CEO Himanshu Saxena in an email. "... We have evaluated a number of opportunities and like the Libertad Power Project team's focus on real-world opportunities for clean hydrogen in today's market, particularly in San Juan County."