Hydrogen hub seeks to adapt to shifting fertilizer market, loss of Marathon

September 3, 2024

North Dakota's Energy and Environmental Resource Center is looking to fill the void left in its hydrogen hub program after a dramatic shift in the fertilizer market and a key partner pulling out. 

"We're working with the DOE (Department of Energy) about, how do we fill this gap?" John Harju, vice president for strategic partnerships, said in an interview with the North Dakota Monitor.

Harju said that the EERC is working with an energy-industry partner after Marathon Petroleum announced last month that it would end its Prairie Horizon project in Dickinson. Prairie Horizon had been a key part of the Heartland Hydrogen Hub, led by the EERC. 

On the new partner, "It's a good North Dakota project with a long-term North Dakota energy player," Harju said, though he was not yet able to share details about the project. 

Marathon Petroleum and TC Energy had partnered on Prairie Horizon, a potential low-carbon energy project. It was intended to use natural gas and other energy sources to create low-carbon ammonia-based fertilizer. 

"We are focusing our North Dakota resources on maximizing the efficiency and optimizing the operations of our many existing assets in the state, including our Dickinson Renewable Diesel Facility, our Mandan Refinery, our joint venture soybean processing facility with ADM, our logistics systems, and our natural gas processing facilities," Marathon said when announcing it would pull out of the Heartland Hydrogen Hub project. 

Hydrogen can be produced from natural gas and then combined with nitrogen to create ammonia fertilizer. 

Harju said the market for fuels and fertilizer from hydrogen is not developing as quickly as some had hoped. 

Harju pointed to a major drop in fertilizer prices from two years ago, when the EERC was putting together its proposal for the Department of Energy. 

Fertilizer prices had risen sharply with Russia's invasion of Ukraine and other global market factors. Now, prices are almost half of what they were at their peak. 

"Clearly that's a huge change in terms of the prospect of their monetization," Harju said of Marathon Petroleum. 

Harju said a replacement project needs to be lined up by November, but he wants it to be sooner than that. 

In addition to fertilizer, hydrogen has many other industrial uses. Charles Gorecki, CEO of the EERC, has referred to it as the Swiss Army knife of energy. 

As a clean-burning, consistent source of power, hydrogen is being used to power ocean-going ships and can be used indoors for things such as powering forklifts in giant warehouses. It has even been used to power a Zamboni ice resurfacing machine at Ralph Engelstad Arena on the campus of the University of North Dakota, where the EERC is based. 

Frank Wolak, president and CEO of Fuel Cell and Hydrogen Energy Association, said government incentives such as tax credits and the hydrogens hubs are needed to scale up hydrogen production and bring down the cost. 

He said the best way to lower the carbon intensity of fertilizers in the food supply chain is with clean hydrogen. 

 "Shifting from cheap and dirty to cleaner comes with a higher price," Wolak said. 

To make cleaner hydrogen cheaper, Wolak said there's a need for a large amount of natural gas, which North Dakota has as an off-shoot of oil production. Then there is a need for large scale carbon separation technology and then a place to put the carbon. 

North Dakota also has geology that Harju says is well-suited to underground carbon storage. 

"Any fossil fuel used for the hydrogen hub would require carbon management," Harju said. He said that could be either just storing the carbon underground or utilizing it.  

The EERC also is involved in research using carbon dioxide for enhanced oil recovery – using the gas to make aging oil wells more productive. 

Low-carbon natural gas hydrogen is referred to as "blue" hydrogen. EERC also is looking at "green" hydrogen, produced with renewable energy, such as wind. 

The Department of Energy selected EERC from a pool of 79 applications to be one of seven hydrogen hub leaders from across the country. 

Harju said the EERC saw its niche using hydrogen to create fertilizer. Farmers rely on fertilizer to boost crop yields but North Dakota is at the tail end of a supply chain that relies on the Mississippi River to transport fertilizer, much of which is imported. 

The 2023 legislative session created a $25 million forgivable loan as an incentive for developing a hydrogen-based fertilizer plant in the state. Prairie Horizon was awarded $75 million and NextEra Energy Solutions $50 million, but Prairie Horizon ultimately decided it could not adhere to the state's loan requirement that the hydrogen be created through the electrolysis of water and declined the loan. The full $125 million went to NextEra.  

Harju said it is wrapping up its research related to Prairie Horizon into a report that could be used on similar projects in the future. 

Wolak said, "Good projects never die, you just have to find the right time for them to happen." 

The North Dakota Industrial Commission provided some state funding related to Prairie Horizon. A $10 million grant through the Clean Sustainable Energy Authority went to EERC for engineering and design of the Liberty Hydrogen Facility, which later became the Prairie Horizon project. 

The Department of  Energy will provide up to $925 million to the Heartland Hydrogen Hub. The total depends in part on the projects EERC presents and the contract it negotiates with the Department of Energy. 

Harju said EERC also is paying more attention to applying hydrogen to iron ore mining and steel production in Minnesota, as well as shipping through the Great Lakes. 

"The notion of using hydrogen as a shipping fuel seems to have a lot of traction right now," he said. 

But he said the market demand for hydrogen projects in general has not ramped up as quickly as expected. 

"We are hoping it is just around the corner," Harju said. 

He said he thinks it will arrive eventually. 

"The global push for decarbonization is not going away," Harju said. 

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