Some West Coast states have blocked Wyoming’s fossil fuel exports. But lawmakers are trying to get around that with new legislation.
HB 120, Energy product reclassification and sovereignty act, would financially incentivize companies to convert natural gas into different products while it’s still in Wyoming. The hope is those products would “no longer be defined as fossil fuel feedstocks” and couldn’t be blocked by other states.
Because Wyoming is landlocked, it can’t solely export natural gas to international markets. The primary access points are far flung, like the East Coast, Gulf of Mexico and Alaska.
The closer option would be the West Coast, however, it lacks infrastructure and interest to export liquified natural gas (LNG), according to reporting from the Casper Star Tribune.
Wyoming’s loophole
Rep. Kevin Campbell (R-Glenrock) said the language he crafted in HB 120 offers a solution.
“These West Coast blockades can stop our raw feedstock [LNG], but they cannot stop a manufactured product,” Campbell said to lawmakers on the House Minerals, Business & Economic Development Committee, Feb. 16.
Campbell elaborated that gas can be rearranged into three other marketable products: carbon black, hydrogen and ammonia. Carbon black is primarily used in tire manufacturing. But the other two products are Campbell’s focus.
Hydrogen can be used for power that doesn’t produce climate-warming emissions when burned. Emerging research shows that ammonia has the potential to reduce emissions from coal production, and it can transfer hydrogen. Combining nitrogen and hydrogen forms ammonia, which is safer and cheaper to transfer and store than hydrogen alone. Both still face technological hurdles and concerns over climate impacts, the latter because fossil fuels like natural gas are often used to produce them.
But some Asian countries are betting on hydrogen and ammonia to be part of their clean energy future. And they’re looking for suppliers as there’s a global ammonia shortage. Both Japan and South Korea have invested in U.S. operations to meet that demand.
“I want the state of Wyoming to make that pivot,” Campbell said.
Campbell’s bill would create “industrial sovereign zones” across Wyoming. Those zones would be determined by the Wyoming Energy Authority and local communities.
In the zones, natural gas companies that chose to manufacture their product into carbon black, hydrogen or ammonia would only be taxed at 2% instead of the typical 6% severance rate.
Additionally, permitting for production would be fast tracked to 45 days. Campbell said it otherwise could take years.
“That is the carrot to come to Wyoming to build,” he said.
Committee lawmakers had some concern that West Coast states still won’t be interested in the natural-gas derivative products.
“I don't know how we would win them over just by changing definitions and things like that,” said J.R. Riggins (R-Casper).
But Campbell said the other states may not have a choice. To try to simplify things, he compared LNG markets to wool. In his example, he pretended California, Oregon and Washington had a ban on raw wool.
“What we're doing is turning this into a blanket [from] raw wool,” Campbell said. “We're turning it into a suit of clothes. Under the United States commerce clause and the U.S. Constitution states cannot block other states from commerce.”
Don’t forget coal
The Wyoming Department of Environmental Quality (DEQ) requested that the bill’s language prioritize permitting these projects above others in order to meet the fast track requirements.
Additionally, several people testified that these types of products can also be made from coal, not just gas.
But there was some concern that adding in “coal” could prevent rolling out the bill, if passed, quickly. That’s because coal falls under a different state statute than natural gas.
Campbell noted that time is of the essence. For example, Japan is looking to partner with other countries to ramp up the global supply chain of hydrogen and ammonia by 2030.
In the U.S., much of the hydrogen and ammonia production focus has been on states in the Gulf Coast and Ohio River Valley. But whether these production facilities will come to fruition is unclear. A handful of ammonia projects were either cancelled or put on hold last year largely because the technology isn’t advancing quick enough to meet a key federal incentive deadline. Notably, that deadline was bumped up five years by the GOP policy bill passed in July.
Wyoming’s legislative committee moved the bill forward with an amendment including DEQ’s language and coal. However, another amendment was later added that took coal back out.
The latter version went before the House Appropriations Committee on Feb. 18 and passed. To help meet the needs of the bill, appropriations of $90,000 to the Wyoming Energy Authority and $43,956 to the Department of Revenue were included. The bill will now go before the full House.
In other hydrogen news
Campbell also introduced HB 121, Hydrogen severance taxation, to the House Minerals committee on Feb. 13. Right now, a specific hydrogen severance tax doesn’t exist in Wyoming. Severance taxes tax minerals removed from the ground. But some worried it would discourage the industry from coming to the state.
Lawmakers tabled the topic for the 2026 interim.
HB 116, Destruction of water is not beneficial use, is also moving forward. It’s sponsored by the Select Water Committee, and it specifies that “separating the hydrogen and oxygen atoms for the purposes of the industrial production of hydrogen” isn’t a “beneficial use of water.” The last four words are a key requirement for water rights in the ever shrinking supply in the Colorado River Basin.
The hydrogen production process specified in the bill is called electrolysis. It’s considered a “green” hydrogen because the process can be powered by solar or wind. It’s an alternative to the more common method of steam-methane reforming, which uses natural gas to produce hydrogen, and is the thesis for the first bill mentioned in this article, HB 120. However, environmental groups have flagged both methods for being water intensive.
HB 116 failed its first introduction in the House, Feb. 11, but was resurrected on Feb. 13 and passed 47 to 12. According to the bill’s status listed online, it’s yet to be assigned to a committee.
The last day for bills to be reported out of committee is Thursday.
