As the U.S. moves toward decarbonization, hydrogen is expected—in its green, blue, and grey varieties—to increasingly be an alternative to conventional fossil fuels. It can be produced in abundance from diverse domestic resources with the potential for near-zero greenhouse gas emissions.
For all that promise, however, obstacles abound. The U.S. currently lacks the nationwide network of pipelines needed to deliver this fuel source. The solution, such as when the U.S. sought to successfully implement the use of natural gas, is for the federal government to provide regulatory certainty to ensure pipeline development and open access.
To put the problem in sharp relief, there are currently about 1,600 miles of hydrogen pipelines in the U.S., primarily serving refineries and ammonia plants along the Gulf Coast. That system is painfully undersized and balkanized for the task at hand.
By contrast, our natural gas pipeline network is highly integrated, featuring about 3 million miles of mainline and other pipelines. In 2021, the network delivered about 27.6 trillion cubic feet of natural gas to about 77.7 million consumers, according to the U.S. Energy Information Administration.
Tackling the hydrogen infrastructure problem might feature using the existing natural gas pipeline network to support blending hydrogen with methane. This step would offer immediate benefits with modest modifications needed.
But the industry would need certainty as to how those pipelines would be regulated. The market is at the moment relying on vague guidance from a disparate mix of multiple federal agencies, and state and local authorities. This lack of a predictable and cohesive regulatory authority has fostered uncertainty, resulting in significant barriers to investment in hydrogen pipeline infrastructure.
Much of the regulatory confusion centers on a debate about how much power the Federal Energy Regulatory Commission (FERC) has in regard to hydrogen pipelines. Some think it odd such debate exists given the legislative history of the Natural Gas Act (NGA). According to that, the statute confers on FERC authorization to regulate interstate pipelines transporting hydrogen because the NGA defines “natural gas” as “either natural gas unmixed, or any mixture of natural and artificial gas.” In that legislative history and the statutory text, there appears ready grounds to conclude that hydrogen is an “artificial gas” under the NGA, and thus within FERC’s jurisdiction.
One proponent, former FERC Chairman Richard Glick, previously acknowledged the agency’s authority over blended hydrogen projects. There is, however, still regulatory uncertainty about when a blended pipeline becomes a hydrogen pipeline, and how a pipeline carrying unmixed hydrogen should be regulated.
Since the NGA defines natural gas as “any mixture of natural and artificial gas” but does not specify any minimum content for that mixture, an interstate hydrogen pipeline would be subject to that definition if it were to carry even a modest amount of methane. Therefore, a company planning to build an interstate hydrogen pipeline could follow FERC’s well-established regulatory regime for certificating and regulating natural gas pipelines by including a nonobtrusive amount of methane in its system. By the plain wording of the NGA, Congress did not set a de minimis exception to FERC’s jurisdiction.
FERC’s assertion of jurisdiction over interstate hydrogen pipelines would bring certainty to the hydrogen industry. It would allow pipeline operators to receive the benefit of federal regulation—such as preemption of conflicting state and local regulations, and the power of eminent domain. It would also position FERC as the lead agency in the National Environmental Policy Act (NEPA) review process for new pipeline facilities.
While it is clear that the NGA applies to hydrogen blended with methane, some have argued for a more expansive reading of “natural gas,” one that would cover hydrogen not mixed with any methane. Policy considerations also support FERC’s assertion of jurisdiction over unmixed hydrogen. In 1979, when facing an energy crisis as a result of a dwindling national gas supply, FERC held that liquified natural gas (LNG) fell under the definition of “natural gas” in the NGA.
To support this, FERC found that LNG would become “increasingly important in the future.” The agency went on to find that in embracing jurisdiction over LNG, it was fulfilling its statutory responsibility to support the nation’s environmental and economic goals.
FERC stands at a crossroads on how to apply decades-old statutes to meet the decarbonized future. The exercise of jurisdiction over unmixed interstate hydrogen pipelines would in many ways echo the previous application of the NGA to LNG.
Flash forward to today, where the U.S. is pursuing a policy of rapid decarbonization. In January 2023, the Biden administration released the “U.S. National Blueprint for Transportation Decarbonization”—the administration’s strategy for cutting all greenhouse gas emissions from the transportation sector by 2050. Key to the strategy is decarbonizing vehicular fuel and transforming the role of pipelines to move hydrogen and other sustainable fuels.
Hydrogen is poised to play an important role as an alternative fuel. Therein lies FERC’s prime opportunity to assert jurisdiction, offer regulatory certainty, and unleash future hydrogen development.
—Ken Irvin is a partner in the Washington, D.C., office of Sidley Austin LLP and co-head of the firm’s energy practice. Grace Gerbas is a managing associate in Sidley’s energy practice. The views expressed here are solely those of the authors.