UPDATED with news of federal rejection of state request for $850 million subsidy.

Whoever wrote the latest advertising copy for Gov. Mike Dunleavy about the state plan for a “clean hydrogen energy industry” left out the most important detail.

The state sales pitch, printed in full by the Anchorage Daily News as a Dunleavy opinion column, didn’t make clear that Dunleavy wants an $850 million subsidy from the federal government to get things moving. Unidentified private companies would have to put up nearly $3.75 billion, according to Dunleavy.

And Dunleavy didn't make clear that all this hinges on getting the gasline built from the North Slope, a project that will cost $40 billion or more and require various federal subsidies. One of those is the federal loan guarantee to cover debts if the borrower defaults. In early 2021, the Dunleavy administration was asking for $4.5 billion from the federal government to pay 75 percent of the cost of a gas pipeline to Fairbanks.

“Alaska has what it takes to become a global hydrogen powerhouse and lead the world into a new clean energy era,” Dunleavy now says, oversimplifying a complex situation in extreme fashion.

Dunleavy is going to have to do much more than ask for billions in federal handouts, while claiming the Biden administration is “anti-Alaska,” if Alaska is to develop a major hydrogen project and carbon storage operation in Cook Inlet.

The Department of Energy has already told the Dunleavy administration that it doesn’t think much of the state application—one of 79 competing for billions in grants. The DOE said it discourages the Alaska Gasline Development Corp. from submitting a full application for an $850 million grant.

AGDC now needs to release its full proposal to the energy department, as well as the full response so that Alaskans can better understand the context and the competition for a federal subsidy.

The state wants to use some of the natural gas from the North Slope to make ammonia in Cook Inlet, taking the carbon dioxide released in the process and injecting it into old oil and gas fields to keep it out of the atmosphere.

The state argues this is a “green” project because the carbon would be trapped underground and would not contribute to climate change.

Not everyone agrees this logic justifies a $40 billion natural gas pipeline across Alaska, a project that would export most of its fuel as liquified natural gas and use some to make ammonia. Ammonia is easier to ship than hydrogen and does not emit carbon dioxide when burned.

As part of the federal infrastructure bill, the federal government plans to provide $7 billion to subsidize six to 10 hydrogen hubs across the U.S.

The Biden administration says the projects it will support “would mean another pathway for decarbonizing heavy industry and transportation.”

The infrastructure law says a “regional clean hydrogen hub” is “a network of clean hydrogen producers, potential clean hydrogen consumers, and connective infrastructure located in close proximity.”

The state has refused to release the “concept paper” it submitted to the federal government, asking for the $850 million for the hydrogen hub in Cook Inlet.

The energy department says it has already notified the 79 entities and sent letters of encouragement to 33, while discouraging 46 from submitting a complete application, including the Alaska plan.

The federal agency said it analyzed proposals on this basis:

“The encouraged concept papers plan to develop all elements critical to a H2Hub: comprising production, end-uses, and connective infrastructure; demonstrating capabilities to execute a project plan or to attract and hire such capabilities; planning to deploy proven technologies; and indicating commitments to clean hydrogen and meaningful community benefits,” the department said.

“The 46 concept papers were discouraged for many reasons, but one of the most common reasons was papers that described concepts focused on only one element of the hub. Concept Papers were also discouraged that would depend on technologies unready for commercial scale demonstrations and projects whose elements were not readily suited to help catalyze a national clean hydrogen network.”

If the Alaska project makes so much sense that it justifies a federal subsidy and is essential to Alaska becoming a “early dominant hydrogen provider,” what happens now that the feds have said no?

Dunleavy keeps saying that private industry will lead a pipeline project, while at the same time he is seeking federal subsidies. If there is a case to be made for state subsidies, he hasn’t made it.

Selling that to the Legislature and Alaskans would be a lot harder than promising big dividends, issuing press releases about the mythical pipeline and filing lawsuits against the feds.

As a campaign stunt he set up an “Office of Energy Innovation” Sept. 30 in the governor’s office with no budget and no staff. The “Office of Energy Innovation” is not mentioned in the governor’s proposed budget.

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