California utility wants customers to pay for carbon capture and hydrogen

"A view of the State Capitol building in Sacramento, California."

Sempra is pitching lawmakers on industry-friendly climate solutions paid by ratepayers.

By Aaron Cantú, Capital & Main

This story is produced by the award-winning journalism nonprofit Capital & Main and co-published here with permission.

In the final days of California’s 2023 legislative session, a major utility is seeking industry-friendly legislation through a tactic sometimes used to avoid public scrutiny on contentious proposals.

Lobbyists for Sempra, and its subsidiary, SoCalGas, are asking lawmakers to introduce a bill that would allow gas companies to charge ratepayers for company investments in carbon capture and storage (CCS) and methane gas infrastructure.

Other proposed legislation would speed up the approval process for hydrogen production and transportation. Although hydrogen can be produced with renewable sources such as wind and solar, the vast majority is made with fossil gas. The proposal uses a definition of clean hydrogen that leaves the door open for blends with fossil gas.

The late-hour proposals, which compress months of analysis and scrutiny into just a few weeks, have sent climate and environmental justice groups scrambling. They have opposed CCS as a technology that enables continued oil, gas and coal production, and advocate strict guidelines on hydrogen — in contrast with the industry’s promotion of fossil fuel-generated hydrogen.

“If we are going to invest in stuff, it needs to be stuff that gets us out of the fossil fuel world, not the stuff that perpetuates it,” said Ari Eisenstadt, the energy equity manager at the California Environmental Justice Alliance. “There’s only so much money we can give as a state to things like the energy and electricity sector, and if we consider that amount to be finite, we can’t spend it on this stuff; we have to spend it on real renewable energy.”

The two draft bills did not have any lawmaker’s names on them, but did have Request Numbers, meaning a lawmaker submitted them to the California Legislative Council to iron out the legal language.

As of publication time, there was no guarantee the proposals would be introduced as legislation. For that to happen, a state senator or assemblymember would have to put their name on it. And if the bills are picked up, it’s possible they would be altered, perhaps significantly.

SoCalGas spokesperson Chris Gilbride said in a statement that “SoCalGas supports efforts to give California companies the tools needed to deploy the clean fuels and carbon removal infrastructure called for in the State’s Climate Plan.

“By supporting clean, renewable hydrogen and carbon management projects, the Legislature would further enhance the state’s bid for billions of dollars in historic federal infrastructure investments, support thousands of good paying, in-state union jobs, and help secure California’s spot as one of America’s first clean, renewable hydrogen hubs,” he said.

Sempra’s political influence is far-reaching. Several of its lobbyists were once political staffers in Sacramento, and the company holds court with top-ranking legislators and agencies. 

The late hour maneuvering has historically been employed to avoid scrutiny for unpopular measures.

This late in the legislative sessions, bills can be introduced through a technique called “gut and amend,” a tactic in which lawmakers put new language into an old bill, thereby completely changing it. The change is usually the result of special interest lobbying.

Proposal Would Charge Ratepayers for CCS

Sempra’s CCS proposal would allow gas companies to seek reimbursements by charging ratepayers for company investments in carbon capture and storage. Any additional charge to ratepayers would have to be approved by the California Public Utilities Commission, but the proposed legislation essentially directs the commission to approve such requests.

The document doesn’t say where the CCS would be installed. Facilities to capture flue gas — which has a very high concentration of carbon dioxide — are usually installed near smokestacks or other industrial sources of heavy emissions.

California’s plan to eliminate climate pollution by 2045 relies heavily on CCS. Yet the technology’s reputation suffers from an underwhelming track record and its association with fossil fuels.

As Capital & Main has reported, oil companies have captured carbon and injected it underground for decades to pull more oil out of reservoirs. Now this process is being retooled as a solution to climate change, but it’s never managed to make a meaningful dent in global climate emissions.

The U.N. has said there is a role for carbon capture in mitigating climate change after society massively reduces its overall emissions through direct cuts on greenhouse gas pollution. Yet, some companies have alluded to using CCS or Direct Air Capture, a related technology, to continue producing and burning fossil fuels.

The document viewed by Capital & Main would also allow gas companies to charge customers for the cost of installing connection equipment for “biomethane,” which is refined gas produced from organic sources like dairy farms or landfills.

Gas companies heavily promote waste fuels collected from dairy farms, a system backed with state financial incentives. The state says use of waste fuels cuts emissions by replacing diesel with renewable gas, but biogas network systems have detrimental local pollution side effects. And there’s evidence that the gas leaks from these systems, possibly negating some climate benefits.

Streamlining Hydrogen at the Public Utilities Commission

The second proposal would give gas companies options for obtaining approval from the Public Utilities Commission to build hydrogen production and transportation infrastructure. The commission would have 270 days to decide whether to issue a permit to construct.

Environmental advocates and lobbyists who viewed the proposal said the language may benefit SoCalGas’ proposed hydrogen superproject in Southern California.

Last year, it announced plans to build out the Angeles Link, which it envisions bringing hydrogen energy from renewable sources into Southern California via pipeline. SoCalGas has written that hydrogen in the Angeles Link would be produced with “renewable electricity resources like solar and wind,” but details are scant.

SoCalGas still needs approval from the commission to construct the project as proposed, which would allow the company to recover costs from ratepayers. But a final decision is still years away and contingent on environmental reviews.

Some 95% of hydrogen is produced with fossil gas, and one of the biggest points of contention around hydrogen is what qualifies as clean or renewable. The state supports waste-to-energy methods. The industry also promotes and intends to make hydrogen from fossil gas paired with CCS.

Environmental and climate groups, meanwhile, have voiced skepticism around hydrogen, and have said that it should be made using only truly renewable sources and for limited purposes, such as steel and cement manufacturing or aviation and long-haul trucking.

Hydrogen can be made without fossil energy by gasifying (heating) organic material, or by splitting oxygen and hydrogen molecules in water, an energy-intensive process that can be completely renewable if powered by solar, wind, geothermal or another clean source. 

California is applying for a grant from the federal Department of Energy to build out a hydrogen hub. The application envisions an interconnected system of production sites, mostly in the Central Valley, which send hydrogen to fueling stations along freight corridors as well as the ports in Oakland and Los Angeles.

Among the state’s partners in the application process are Sempra, Chevron and dozens of other companies.

In March, groups including the Natural Resources Defense Council, ​​Earthjustice, Pacific Environment and the Center on Race, Poverty & the Environment released a statement claiming they’d been shut out of the application process. Among the concerns they cited were the potential for blending hydrogen with fossil gas, and risks for communities if notoriously volatile hydrogen pipelines ruptured nearby.

SoCalGas says the change at the commission could also help make the state more appealing for Inflation Reduction Act funds as Washington decides where to send federal climate money.

The Newsom administration has spoken positively about the Angeles Link, and is working to secure DOE hydrogen funding. 

With the state supportive of more investments in CCS and hydrogen, Sempra’s proposals may carry weight — especially in the Legislature.  

A former chief of staff for Senate President pro tem Toni Atkins, Gregory Campbell, is among the lobbyists pitching the company’s proposed bills.

Other former staffers for high-ranking legislators, including Neil Clark, a former legislative consultant to Anthony Rendon, are also now lobbyists for the company, as is Marybel Batjer, a former Public Utilities Commission president under Newsom.

Sempra and its subsidiaries have donated more than $1.04 million to lawmakers since 2021.

Copyright 2023 Capital & Main

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