Pennsylvania hydrogen, carbon storage project tapping into all the trends

Pittsburgh — For as long as the Marcellus Shale has been pumping out more natural gas than the state knows what to do with, Perry Babb has been hatching schemes to alleviate the glut.

He’s been involved in projects to compress the gas, liquefy it, put it on trucks, and make things out of it. He’s the kind of prolific entrepreneur whose bankers have actually pleaded with him to stop launching new companies, Babb once confessed.

His latest venture is such a collection of hot topics that government and university scientists who’ve spent careers writing “what if” papers can hardly believe they might see their work tested in a live experiment.

It’s got hydrogen, carbon capture and storage, shale drilling, chemical production, economically distressed communities, a possible solar tie-in and an elk habitat.

“I don’t have a problem using the word miracle,” Babb, a former pastor, said of the $410 million project that’s slated to be built on a large tract of mostly empty land in central Pennsylvania's Clinton County.

Without a single permit filed or the financing secured, the central Pennsylvania project — called KeyState to Zero — sums up a zeitgeist in the energy industry. After years of being the next big thing, hydrogen is having a moment inspired by the tidal wave of corporate and government commitments to reach net zero carbon emissions by various self-imposed deadlines to forestall catastrophic climate change.

“If we were talking about reducing emissions by 20-30-50%, I’m not sure we’d be having a conference about hydrogen,” said Capella Festa, COO of Genvia, at S&P Global’s Second Annual Hydrogen Markets Conference in May.

A newly established hydrogen venture, Genvia is backed by the world’s largest oilfield services company, Schlumberger. The other oil and gas service giants, Baker Hughes and Halliburton, also have announced hydrogen projects.

Here’s why they are all chasing hydrogen: the path to net zero means electrifying as much as possible and churning out that electricity through increasing amounts of carbon-free sources. Hydrogen — a colorless, odorless, highly flammable gas — is a leading candidate to power industries that can’t be electrified, at least not easily, like marine transportation, cement and steel production, and long-haul freight. Hydrogen has no carbon and thus emits none when burned or reacted in fuel cells.

It also might be a lifeline for the oil and gas industry in an increasingly carbon conscious world because hydrogen is most commonly made from natural gas.

When Babb spoke at the inaugural Appalachian Hydrogen & Carbon Capture Conference at Southpointe in April, he declared: “Hydrogen is the next chapter.”

“Thank God, if you’re in the Marcellus industry, that this is not the end of natural gas,” he said.

“The best environmental thing we can do on a large scale,” Babb said, “is to have everything running on natural gas.”

A chance encounter

Babb’s project did not start out with hydrogen. It started with a stranded asset — a 7,000-acre slot of land in Clinton County where a small natural gas company, Frontier Natural Resources, leased the rights to the natural gas and inherited four producing wells.

Frontier hired Babb to figure out what to do with that gas since there were no pipelines nearby to get it to market. Babb decided he would bring the market to the gas instead. The team built a small plant, now in the start-up phase, to liquefy the gas and load the compressed fuel into tanker trucks for local delivery.

But there was much more fuel left in the ground, so Babb — looking at the many economic development studies that predicted a slew of manufacturing plants would spring up around shale gas supplies — set out to build one that uses natural gas as a power source and a feedstock.

At first, he thought it would be a fertilizer plant. Then an ammonia and urea facility. Ammonia, made from natural gas, is used in agriculture and chemical industries. Urea, which is ammonia combined with carbon dioxide, is mostly used as a diesel exhaust fluid to reduce emissions from vehicles.

He pitched the idea at a meeting with two senior officials at the U.S. Department of Energy in December 2019. Shawn Bennett, then the deputy assistant secretary for oil and gas at DOE, was one of them.

At the time, Bennett was several months into researching a hydrogen roadmap for the U.S., which DOE released in November 2020. As a well-connected former oil and gas lobbyist in Ohio, he was also hearing rumblings about the promise of hydrogen and carbon capture in keeping the oil and gas industry relevant during the energy transition to a zero emission future.

With all that swirling around in his brain, Bennett asked Babb if he’d considered capturing and storing the carbon from his proposed manufacturing plant.

“No sir, we haven’t,” Babb said.

Had he considered making hydrogen?

“No sir, but we’ll find out about it,” Babb promised.

They never spoke again.

Bennett was tickled to find out recently that his suggestion materialized. (He is now a consultant for companies looking at hydrogen and carbon storage, but Babb’s project wasn’t on his radar.)

The hydrogen color wars

Like many trendy items, hydrogen comes in different colors.

If it’s derived from electrolysis — where renewable energy is used to power the splitting of water molecules into hydrogen and oxygen — it’s referred to as green hydrogen.

Today, the vast majority of the hydrogen that’s produced is gray. It is done through a process called steam methane reforming where very hot steam is used to produce hydrogen from methane, the primary component of natural gas. The chemical reaction also yields carbon dioxide, as does the burning of whatever fuel is used to heat the steam — most often also natural gas.

If that CO2 were captured and sequestered, that hydrogen would be called blue.

There is also pink hydrogen (where electrolysis is powered by nuclear energy) and turquoise (which involves pyrolysis), but the oil and gas industry is squarely focused on the blue variety, which it claims has the biggest decarbonization potential in the shortest time.

Pennsylvania, with its abundance of natural gas and geological pockets that might be able to store vast amounts of CO2, is a natural fit for the development of a blue hydrogen economy, proponents argue.

Former Pennsylvania Public Utility Commissioner Andrew Place, who now serves as director for U.S. State Energy & Climate Policy at the Clean Air Task Force, made that case last month at a Pennsylvania House Democratic Policy Committee hearing.

“From a system perspective, reforming Pennsylvania’s natural gas with (carbon capture and storage) to produce hydrogen could allow us to remain a keystone of energy supply in the region,” he said.

The state has the gas. It already has pipelines, which could be repurposed to ferry hydrogen, either blended in with natural gas or by itself, and as Place noted, there is plenty of heavy industry — especially in the western part of Pennsylvania — that could avail itself of a carbon capture and hydrogen hub if one were available.

The challenges

Hydrogen isn’t exactly a plug-and-play fuel for current pipelines. It is a much smaller molecule than natural gas and more easily leaks out of steel pipelines. It can also cause steel to become brittle, is easier to combust and burns with an invisible flame. These issues aren’t unsolvable, but would take a huge investment to solve.

Critics argue that basing a hydrogen economy on natural gas would lock in the use of fossil fuels and divert investment from green hydrogen initiatives.

Babb, who also spoke to the Democratic Policy Committee last month, believes that blue hydrogen will build the house that green hydrogen can occupy when it becomes as cost effective, which the European Union and Bloomberg New Energy Finance project might be as soon as 2030.

But cost is just one part of the equation, he said. The ability to scale up, and quickly, is perhaps more important.

“Net zero is a great policy and goal, but what happens between now and net zero?” he said.

Babb has become a go-to voice for natural gas in the energy transition. Three times within a month this winter, he was a featured presenter at state House and Senate environmental committee meetings to discuss his project.

During debate over whether to create a $667 million state tax credit for manufacturers that turn methane into petrochemicals and fertilizer, the KeyState project was touted by supporters as a key possible beneficiary of the incentive. The tax break was approved by large margins in the Legislature and signed by Gov. Tom Wolf last year.

Laboratory at scale

At this point, the list of major oil and gas companies that aren’t looking at hydrogen might be shorter than those that have made announcements over the past year.

Earlier this year, Pittsburgh-based EQT Corp., the largest producer of natural gas in the country, said it was partnering with U.S. Steel, local universities and government researchers in exploring a hydrogen and carbon storage hub in southwestern Pennsylvania. The details are still fuzzy, but EQT’s CEO Toby Rice said he expects the company could make the cheapest hydrogen from its gas and would start experimenting with pumping CO2 down its depleted wells.

The buzz from that announcement has served Babb’s much smaller project well.

“It’s nice when you hear that substantial, mature companies are thinking about something you’re talking about,” he said. “You don’t sound so crazy.”

If things work out as Babb expects, KeyState is likely to be the first project in Pennsylvania and anywhere in the Northeast to begin commercially storing carbon dioxide in the ground.

To do so, it would need authorization from the U.S. Environmental Protection Agency for a carbon storage well. The EPA has only permitted one such project, in Illinois, and is reviewing three other applications.

Babb has said that even if it takes years to get the carbon storage permit, that won’t keep the project from breaking ground. The ammonia and urea off-take contracts are the profit center of the deal, not the carbon capture aspect, he said, although it’s what will make the project a “laboratory at scale.”

Tom Murphy, who co-directs Penn State’s Marcellus Center for Outreach and Research, said there are about a dozen researchers at the university interested in different aspects of Babb’s project.

For example, KeyState is working with Penn State researchers on the design of the carbon capture system, which will scale up technology they have demonstrated in smaller settings.

“It is every researcher’s dream to get their inventions and developed technologies commercialized and into practical application,” said Xiaoxing Wang, an associate research professor at Penn State who specializes in carbon capture. “Perry and his KeyState project offer us this great opportunity.”

Other members of the team will have to drill and assess possibly miles of geological layers to find out if any are suitable for storing the carbon after it is captured.

“They would have to still prove it out before they would call this a storage project,” said Kristin Carter, assistant state geologist of the Pennsylvania Geological Survey.

Still, she said, “I remember when I first met Perry and he was explaining to me what they wanted to do, I was struck by — whether it’s fortuitous or intended — they’ve got a lot going for them in this location.”

Crucially, KeyState has the right to access both the surface and subsurface on the 7,000-acre parcel. That will allow them to drill both wells for the natural gas they need for power and feedstock and wells to store carbon dioxide in perpetuity.

The carbon storage needs for the KeyState project would be modest — between 100,000 and 200,000 tons of CO2 per year, compared to a power plant that might need millions of tons of CO2 storage annually, Carter said.

Some sandstone layers a mile or less underground that had once been the target of gas drillers in the area would possibly be suitable for the relatively low volumes of CO2 that KeyState is seeking to store.

But there’s a business case for drilling much deeper.

The Appalachian Basin in Pennsylvania is at its deepest just west of the ridge and valley that cuts roughly diagonally across the state. From West Keating Township, it could take 20,000 feet or more of drilling to reach the geologic basement. If KeyState can assess all those rock layers, it may find it has more storage than it needs and can sell the space to other companies looking to sequester their CO2.

“You know what, it probably is one of the better spots to pick,” to pilot a carbon storage project in Pennsylvania, Carter said. “If you’re going to do a really good test, I would say go for where you think it might be really deep. That would be the most bang for the buck of permitting the test well and having to pay for the drilling and coring.”

Babb is already planning for just such an expansion of the yet-to-be-built project. He envisions a pipeline being built to carry CO2 from northeastern Pennsylvania.

“We want to be in a position to take other people’s emissions,” he said.

For the moment, Babb is focused on lining up financing for his next round of studies: He is in the pre-engineering and design phase now, he said, and is projecting construction might begin sometime in 2023.

“A lot of the envisioning that a person like me would do, it’s to build stamina for the big one, or the harder one,” Babb said recently, reflecting on his previously unsuccessful attempts to find a big-enough market for shale gas.

“Do those misses make me less passionate about this one? No,” he said. “If you have no hope for the future, it’s a terrible way to live.”