Pennsylvania Conversation on Industrial Decarbonization

Hello, everyone, and thank you for the introduction.

Thanks to Team Pennsylvania and the Clean Air Task Force for the invitation to speak and for bringing together practitioners and experts from industry, government, labor, NGOs, academia and others to explore opportunities and strategies for industrial decarbonization to help Pennsylvania build a clean energy and industrial economy.

It is fitting to have this conversation here at the Energy Innovation Center, given its role in advancing clean energy, business incubation and workforce development in the greater Pittsburgh region.

Pittsburgh and the surrounding region are important to the Department of Energy and to our Office of Fossil Energy and Carbon Management, or FECM as we call it. Of course, the National Energy Technology Laboratory is part of FECM and has a major presence here in Pittsburgh and nearby in Morgantown, West Virginia.

And FECM's portfolio of carbon management, critical minerals, methane mitigation and other environmental best practices in oil and gas production are critical to the future of Pennsylvania's - and the broader region's --energy and industrial economy.

And together, we are poised for an important partnership - both in energy and in industrial decarbonization.

In fact, during our Annual Carbon Management Project Review Meeting in August here in Pittsburgh we hosted a dialogue focused on Industrial Decarbonization in Appalachia - both the opportunities, based on the resources and work force here, and the challenges that are unique to this region.

Some of you may have taken part in those discussions, so following on that dialogue, I am happy to be here to today to talk about the important opportunities for meeting the challenges and to continue our conversation with you on ways that we can partner on the opportunities.

The good news is that thanks to unprecedented federal funding, financing and incentives in the Bipartisan Infrastructure Law and Inflation Reduction Act, we have begun to deploy the technologies and approaches needed to advance industrial decarbonization across the country and especially here in Pennsylvania and the Appalachian Region.

For example, in 2021 the Department of Energy's budget for carbon management was between $300 and $500 million annually. With passage of the Bipartisan Infrastructure law that year, about $12 billion more was allocated over the five years between 2022 and 2026-roughly an eightfold annual increase.

This funding includes:

• $3.5 billion for regional direct air capture hubs,
• Nearly $3.5 billion for commercial carbon capture demonstrations and large-scale pilot projects-this includes $2.5 billion for six large commercial-scale carbon capture demonstrations and $1.0 billion for large-scale pilot projects.
• $2.1 billion for financing CO2 transport infrastructure with a credit subsidy of about $20 billion;
• $100 million for a front-end engineering and design program for CO2 transport infrastructure; and
• $2.5 billion for the development of regional geologic storage sites.
• And in the $8 billion clean hydrogen hubs program, there is a substantial commitment to clean hydrogen production from natural gas and biomass that involves carbon capture and storage.

As many of you know, Pennsylvania is part of two of the seven selected Clean Hydrogen Hubs, the Appalachia Hydrogen Hub, or ARCH2 - which was awarded $925 million - and the Mid-Atlantic Hydrogen Hub, or MACH2.

Following the Bipartisan Infrastructure Law, the Inflation Reduction Act passed the following year. As part of the Inflation Reduction Act's historic package of clean energy and industrial tax credits, it further enhanced the 45Q tax credit for carbon capture and storage. The legislation significantly increased the value of the incentive, making it available for ten years to projects beginning construction by the end of 2032 and expanding eligibility to a wide range of industry facilities, power plants and future direct air capture projects.

As a result, we are now seeing billions of dollars in investments in carbon management projects and infrastructure coming into the market. In fact, according to the Clean Air Task Force's project tracker, roughly 220 carbon management projects have been announced in response to the revamped 45Q credit-representing the potential for roughly 200 million metric tons of annual carbon capture and storage capacity.

Pennsylvania is at the center of this energy transformation, given its history as a coal producer and now as the country's second largest producer of national gas, with more than 20 percent of the country's gas supply.

There are more than 24 industrial facilities across the state, including blast-furnace-steel, refining, chemicals, lime, cement, pulp and paper, as well as seven natural gas processing facilities-all sectors where carbon capture will be an important and essential solution in the broader decarbonization toolkit.

With those numbers in mind, in the Commonwealth today there are already 15 carbon management projects being funded by FECM.

Five carbon capture projects are taking carbon out of flue gas stacks -- three at gas and coal plants here in Pittsburgh, one project at a steel mill in Braddock, and the other at a glass manufacturer in Meadville.

And in addition to carbon capture, two carbon removal projects have been funded in Lancaster and Bethlehem, five carbon conversion projects in Lancaster, Pittsburgh, and Warminster, and three CO2 transport and storage projects that will link storage sites to facilities with carbon capture through pipelines, trucking and barges.

It is also important to acknowledge that there are major barriers to industrial carbon management in Pennsylvania as well.

• There is challenging geology and a need for more data and further characterization of geologic formations for storage of CO2, especially evaluating the feasibility of using depleted shale gas wells as part of the storage infrastructure.
• The region has many smaller facilities from a diverse set of industries that require shared capture and storage facilities and infrastructure yet, unlike some other regions, there is no existing legacy CO2 transport and storage infrastructure to expand upon.
• The region does not have the same access to renewable energy or nuclear generation capacity as some other regions, making the path to a decarbonized grid more difficult.

Yet, these challenges have not stopped progress. To the contrary, when considering the entire four states within the Appalachian region - West Virginia, Pennsylvania, Ohio and Kentucky - there are now 154 Department of Energy-supported research, development and deployment projects-just from our FECM office alone-that total nearly $195 million in funding.

In Pennsylvania itself, there have been 47 projects worth $45.7 million and covering the gamut of technologies from hydrogen production with carbon capture and storage, CO2 transport, carbon removal and conversion, methane mitigation, carbon capture from industry and power generation, and minerals sustainability.

And Pennsylvania has a tremendous opportunity to complement federal funding and incentives with a new U.S. Environmental Protection Agency grant-funded program run by the state's Department of Environmental Protection, the Reducing Industrial Sector Emissions in Pennsylvania initiative, which specifically targets businesses interested in decarbonization projects.

The $396 million in available funding is significant and seeks to reduce greenhouse gas emissions and co-pollutants from the state's industrial sector by over 8 million metric tonnes by 2050. The program will be accepting applications in 2025 with three separate categories based on whether the applicant is a small, medium or large business.

Let me now turn to hydrogen, which has a pivotal role to play in industrial deindustrialization. And the opportunity to produce hydrogen from natural gas with carbon capture represents a strategic and low-carbon use of the state's abundant resource.

As I mentioned, you will have two DOE-funded hydrogen hubs in the state and broader region, positioning Pennsylvania for leadership in the clean hydrogen economy, with one hub in the eastern part of the state working with New Jersey and Delaware and focusing on producing hydrogen from zero-carbon electricity, and the other in the west and centered around West Virginia, which will prioritize hydrogen production from carbon capture.

Another example of major DOE funding is $1.5 billion in allocations of the 48C tax credit to projects in traditional energy communities that advance industrial decarbonization, clean energy manufacturing and critical materials production. These 30 percent investment tax credits target communities impacted by coal mine and power plant closures-communities that have helped power America's economy for generations.

Regarding carbon removal, in May 2024, DOE announced 24 semifinalists would receive $1.2 million to scale up their carbon dioxide removal technologies. This Carbon Dioxide Removal Purchase Pilot Prize allows companies to compete for the opportunity to deliver carbon dioxide removal credits directly to the Department of Energy. 

DOE is also encouraging the shift to low-carbon ammonia for fertilizer production and other applications.

And in June, we announced $16 million in funding for the large-scale conversion of carbon dioxide emissions into valuable products.

In the carbon conversion arena, we continue to push the envelope on making fuels and chemicals from captured CO2 and carbon monoxide emissions. At the end of the day, converting carbon emissions into products is technically and commercially challenging-essentially reversing the process of combustion in most cases-but it allows us to tap into a near-limitless supply of sustainable carbon to meet the needs of a net-zero economy, especially in industrial states like Pennsylvania.

There are several additional Department of Energy and FECM programs that are relevant to the region in support of industrial decarbonization.

• The Carbon Utilization Procurement, or Carbon UP Grants, support carbon conversion, or the transformation of captured carbon emissions into useful products, by making $100 million available to states, local governments and utilities to purchase such products as part of their broader procurement programs.
• There is industrial decarbonization funding-$6 billion worth in the Bipartisan Infrastructure Law-from sister offices within the Department of Energy, including the Office of Clean Energy Demonstrations and the Industrial Efficiency and Decarbonization Office.
• And last but not least, the Carbon Storage Assurance Facility Enterprise Program, also called CarbonSAFE, which was conceived and implemented by FECM almost a decade ago to address knowledge gaps associated with commercial scale geologic CO2 storage complexes and which is now investing with the private sector in the development, permitting and construction of 20-40 regional geologic storage sites, each of which must store at least 50 million metric tons of CO2 over 30 years-and some will be capable of storing hundreds of millions of tons.

As we build up these technological systems of carbon management, we expect to see the development of carbon 'hubs' that share CO2 transportation and storage infrastructure to achieve economies of scale and reduce costs. In the Appalachia Deploy Dialogue, the participants compared the concept of shared CO₂ infrastructure to vital public infrastructure such as as highways and bridges.

There is infrastructure bill funding to finance CO2 transport and to help developers to build out more CO2 transport capacity up front-say for example, a larger diameter CO2 pipeline-than what would actually be necessary to support the first carbon capture projects in a given region. This will enable additional future projects to tap into existing, higher-capacity infrastructure at lower cost and reduced overall environmental footprint.

As part of the $2.1 billion in funding for CO₂ transport, FECM is working with our DOE Loan Programs Office to offer access to capital for large-capacity, common-carrier CO2 transport projects, such as pipelines, rail, shipping, and other transport methods. Under this same funding, FECM is offering "Future Growth Grants" to extend or enlarge planned carbon transport infrastructure to connect additional CO2 sources, enhancing both the beneficial economic impact and overall emissions reductions.

CarbonSAFE is also particularly important in this regard because it is the establishment of storage complex that allows for everything else to follow.

Once a group of CO2 storage wells is established and connected to pipelines, water shipping, and rail and trucking systems, CO2 transport and storage costs are shared across more users, making it cheaper to install carbon capture. This will entice more emitters to commit to this path-and to a lower-emissions future.

There are 20 CarbonSAFE Phase III storage site characterization and permitting projects currently active, meaning that they are only one step away from their construction phase, and another 30 or so sites are in earlier phases of the program.

In fact, through CarbonSAFE we aim to have integrated carbon capture and storage complexes in operation within the 2025-2030 timeframe.

So, we are making real progress on the ground. But if we are to deploy carbon management projects and infrastructure at truly climate scale, we must engage meaningfully with communities and other impacted stakeholders-and deliver high-quality projects that create economic, jobs and environmental benefits in communities where projects are built.

And by meaningfully, I mean engagement that seeks not just to inform, but also provides real opportunities for local engagement and stakeholder input that demonstrably helps shape the design and development of projects and their associated benefits.

At DOE, we recognize that effective partnerships are those that are rooted in trust, transparency, and accountability to deliverables identified in direct consultation with communities.

That is why we have developed a Community Benefits Plan framework as a core initiative to institutionalize best practice community engagement in project development. This framework aims to ensure that projects receiving public funding, particularly from the Bipartisan Infrastructure Law and the Inflation Reduction Act, create tangible economic and environmental benefits for local communities.

Community Benefits Plans, in turn, can evolve into Community Benefit Agreements, which are legally binding agreements between community groups and developers that stipulate the benefits a developer agrees to fund or furnish in exchange for community support of a project.

DOE does not require Community Benefit Agreements but encourages them as an outcome of developing a Community Benefits Plan. Ideally, strong Community Benefits Plans result in formal agreements to create lasting benefits that will continue after DOE's involvement in a project ends.

To date, 81 percent of Bipartisan Infrastructure Law and Inflation Reduction Act funding has been awarded to projects in counties with below average wages and 86 percent to counties with below average graduation rates. This represents real progress and a welcome change from past patterns of federal investment.

And the benefits of building a clean energy and industrial economy to the region's energy workforce are also significant. Estimates by the Rhodium Group and the Great Plains institute estimate that just carbon capture and storage deployment in the four states in this region-again, Pennsylvania, Ohio, West Virginia and Kentucky-could create over 47,000 annual jobs, with more than 14,000 annual jobs in Pennsylvania.

It is also estimated that the Appalachia Regional Clean Hydrogen Hub will create more than 21,000 direct jobs in construction and operations.

These potential benefits are one of the reasons why I am excited to be going on this site tour to the IBEW Training Facility later today.

Workforce development efforts are really at the heart of what we are trying to do, which is to develop a robust local workforce to support and help accelerate the region's ongoing shift to a clean energy and industrial economy in the decades to come.

I would just add that efforts to decarbonize the industrial sector in Pennsylvania are well positioned for success because of these broader workforce and economic benefits, which in turn lead to local support for projects.

In many regions of the country there is growing community and stakeholder opposition to deployment of new projects and infrastructure, often from both sides of the political spectrum. Yet, for greater Pittsburgh and the state of Pennsylvania, where traditional manufacturing has played such an important historic role, there is greater comfort with this type of development and a broad appreciation of the need for the energy transition to work economically for everyone.

Now, with the path forward much clearer than in the past, and our policy tools much more robust and comprehensive than before, Pennsylvania has the potential to lead our nation's industrial decarbonization agenda to the benefit of our climate and the region's economy, workers and communities.

All of you in this room have an important role to play in this transformation, from project engineering, permitting and construction to raising the capital needed to policy development and implementation-and many other contributions.

Thank you for being a part of this vital effort, and I look forward to taking questions.

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