Pacific Northwest hydrogen hub appeals DOE's $1 billion grant termination

The Pacific Northwest Hydrogen Association is appealing the US Department of Energy's termination of a $1 billion grant on the grounds that the agency provided no rationale for its decision, according to a source familiar with the association's plans.

The nonprofit has said it is pressing ahead with its plan to develop a multistate green hydrogen hub, despite the Trump administration's decision to rescind funding for the project. But in the meantime, the association is still working to restore the Biden-era grant, said the source, who asked to remain anonymous due to the sensitivity of the discussions.

The Pacific Northwest hydrogen hub was one of 223 projects that lost a combined $7.56 billion in DOE funding on Oct. 1. The department gave recipients 30 days to appeal a termination.

The association's $1 billion grant was to support about a half-dozen hydrogen infrastructure projects in Montana, Oregon and Washington. The companies involved in the development include industrial gas producer L'Air Liquide SA, Colorado-based startup NovoHydrogen Inc. and Canadian energy company AltaGas Ltd.

According to the source, the DOE told the nonprofit in a brief letter that the department's Portfolio Review Committee had "conducted an individualized review and analysis" of its $1 billion award.

"DOE regrets to inform you that the subject FAA [financial assistance award] did not pass Standards of the PRP Committee review and will not proceed," the letter reportedly continued. "DOE will no longer support the FAA."

The letter did not specify why the award failed the review, the source said. The DOE did not respond to a request for comment on the letter.

Earlier in October, the DOE said all projects were evaluated under the department's new financial assistance policy, as outlined by Energy Secretary Chris Wright in a five-paragraph memo in May.

"On day one, the Energy Department began the critical task of reviewing billions of dollars in financial awards, many rushed through in the final months of the Biden administration with inadequate documentation by any reasonable business standard," Wright said in an Oct. 1 statement.

The Pacific Northwest Hydrogen Association was one of seven organizations — out of an initial field of 79 — to win competitive funding from the 2021 bipartisan infrastructure law's $8 billion hydrogen hub program. The Biden administration awarded the funds in October 2023 and finalized its agreement with the association in July 2024.

The Trump administration also canceled a $1.2 billion grant for California's ARCHES hydrogen hub, funded by the same program. The Alliance for Renewable Clean Hydrogen Energy Systems, the public-private coalition behind the hub, did not comment on whether it would appeal, though ARCHES officials have vowed to proceed irrespective of the DOE's decision.

Legal basis

Title 2 of the Code of Federal Regulations gives agencies the authority to terminate awards if the recipient fails to comply with the terms or conditions of the deal, according to legal and policy experts. Agencies may also cancel an award if it "no longer effectuates the program goals or agency priorities," the statute states.

"There are some limits," said Mona Dajani, a partner and energy sector co-chair at the law firm Baker Botts. "Once a grant is executed, the termination must be consistent with its terms and federal law, usually requiring notice and a rationale that's grounded in programmatic or policy objectives. And if the termination appears to be arbitrary, politically motivated or retaliatory, then the recipients could potentially challenge it under the Administrative Procedure Act as arbitrary and capricious."

But proving an agency acted in bad faith is "very difficult," and courts generally defer to agency discretion, Dajani continued in an interview.

"It is possible that DOE could argue that it is no longer the priority of the administration to reduce emissions or to advance particular technologies," said Rory Jacobson, former director of the DOE's carbon dioxide removal program, who is now head of policy at consulting firm Carbon Direct.

However, many of the DOE's grant programs were explicitly created by Congress to support technologies such as green hydrogen or carbon capture.

Therefore, "it's more likely that awards have been terminated as a result of perceived misalignment with the Administration's priorities," Jacobson wrote in an email.

Previous cuts

On his first day in office, President Donald Trump ordered federal agencies to pause clean energy disbursements and scrutinize the Biden administration's climate project portfolio. Four months later, the DOE withdrew more than $3 billion in awards, including $332 million for ExxonMobil to reduce the emissions of its Baytown olefins plant and $540 million for Calpine to retrofit two natural gas-fired power plants with carbon capture technology.

The May funding cuts met little pushback, although some grantees are working to restore the deals.

"Our conversations with DOE on this project are ongoing," said PPL spokesperson Liz Pratt, referring to the utility's carbon capture research and development project at the Cane Run gas-fired plant in Kentucky. The DOE canceled a $72 million award for the technology pilot.

As of August, Eastman Chemical was working to get back its $375 million grant for a chemicals recycling project in Longview, Texas, Chairman and CEO Mark Costa said during an earnings call.

"We do not have anything new to share at this time related to the DOE funding," an Eastman spokesperson said in October.

ExxonMobil and Calpine declined to say whether they had appealed the DOE's decision, or whether their projects would proceed without federal funding.

Unlike the prior round of cuts, almost all the funding canceled in October was to go to states that Trump did not win in 2024.

"Nearly $8 billion in Green New Scam funding to fuel the Left's climate agenda is being cancelled," Russell Vought, director of the US Office of Management and Budget, posted on the social media platform X a few hours before the DOE's Oct. 1 announcement.

The cuts also came on the first day of the ongoing federal government shutdown, prompting Democratic lawmakers to accuse the Trump administration of political retaliation. In an Oct. 2 interview on CNN, Wright denied the DOE's cuts were tied to the shutdown. Wright also said the announcement reflected only a "partial list" of cancellations and that there would be more to come, affecting both blue- and red-state projects.

"The way the DOE structured and communicated these cancellations was unusual enough that it could be scrutinized," Dajani said.

However, "if you're a company that's already under political or public scrutiny, fighting the DOE over a terminated grant might not be the hill to die on," Dajani added. "The legal path is long, the odds are low, and it could draw even more attention."