EPI submission to Texas Climate Jobs Project Community Commission on Truth and Transparency in Texas Hydrogen.
Introduction
In 2023, the Biden-Harris administration selected the Gulf Coast as the location of one of seven Regional Clean Hydrogen Hubs (H2Hubs), designating up to $1.2 billion in federal funding to develop clean hydrogen production facilities in Texas and Louisiana. This investment will help the U.S. economy transition away from carbon-emitting energy sources and has the potential to create a long-lasting and growing workforce in Texas for hydrogen production and use.
It is vital that this large public investment creates high-quality careers for Texas workers, both those constructing new facilities as well as those who operate hydrogen plants. Without intentional policy choices, this outcome is not guaranteed. The Community Benefits Plan (CBP) being negotiated for the hub must include provisions that protect workers’ right to organize, set high wage and working standards, and create equitable pathways for workers to enter the industry. Setting high labor standards and respecting workers’ freedom to organize in unions will not only help Texas workers earn their fair share of the federal investments but also spur the hydrogen industry to grow quickly and efficiently.
Hydrogen industrial policy background
Hydrogen is an important technology for reducing carbon emissions to fight climate change, either through renewable generated hydrogen production or natural gas generated hydrogen with carbon sequestration. Scaling up the hydrogen industry will also create thousands of good jobs, reduce air pollution, and increase state and national energy resiliency.
Hydrogen technology and infrastructure is an important facet of the Biden-Harris administration’s industrial policy agenda. In 2021 and 2022, Congress passed the Bipartisan Infrastructure Law (BIL) and Inflation Reduction Act (IRA), each of which have provisions that invest large amounts of public money into the research and scaling up of hydrogen technology. Both BIL and the IRA contain requirements and incentives to increase labor standards on hydrogen projects and create community benefits.
The BIL H2Hubs program allocates $7 billion to the Department of Energy for the development of seven hubs for hydrogen production, delivery, and end-use (OCED n.d.a). The goals of the H2Hubs program are to accelerate hydrogen technology development and usage across the U.S. and create good construction and manufacturing jobs in this nascent industry.
The Gulf Coast H2Hub in Texas is likely to receive up to $1.2 billion in federal subsidies from BIL (OCED n.d.b.). Each H2Hub has a distinct mixture of investments and hydrogen technologies being developed. The Gulf Coast hub will catalyze investment in large-scale hydrogen production using both natural gas and carbon capture as well as renewable powered electrolysis.1 The hub plans to develop salt cavern hydrogen storage, a large open access hydrogen pipeline, and multiple hydrogen refueling stations. The hydrogen produced will be used to power industrial processes like creating ammonia in addition to fueling fuel cell trucks and other forms of transportation. In total, the hub is anticipated to create 35,000 construction jobs and 10,000 permanent jobs.
To be awarded funding, the Gulf Coast Hub must negotiate a Community Benefits Plan with local stakeholders to set labor standards and other community benefits for Texas hydrogen projects. The CBP must address four interdependent policy priorities: 1) engaging communities and labor; 2) investing in America’s workforce; 3) advancing diversity, equity, inclusion, and accessibility; and 4) implementing the Justice40 initiative2 (OCED n.d.c). The CBP for the hub provides an opportunity for labor and community groups to secure legally binding agreements for high labor standards in the hydrogen industry.
The federal government is not only providing billions of dollars’ worth of subsidies for hydrogen companies but is also committed to demand-side support of the hydrogen industry (CEA 2023). BIL invests up to $1 billion to ensure the early commercial viability of hydrogen during the riskiest early years of the industry (DOE 2023).
During the construction and early operation of hydrogen plants, producers in Texas are likely to receive clean energy tax credits created by the IRA. In particular, the Section 45V Clean Hydrogen Production Tax Credit and Section 48 Energy Credit both provide strong incentives for private sector investment in hydrogen production. Both hydrogen credits increase to five times in value if a tax credit recipient meets the prevailing wage and apprenticeship requirements in the IRA (Ding, Baldino, and Zhou 2024). These incentives are intended to set high labor standards during the construction of hydrogen facilities.
Texas hydrogen projects will also have access to a variety of loans through the Department of Energy’s Loan Program Office (LPO) (LPO n.d.). The IRA increased the LPO’s existing loan programs by approximately $100 billion in new loan authority (LPO 2023). Hydrogen businesses could benefit from several PLO authorities including Title 17 Section 1703 Innovative Energy and Innovative Supply Chain Projects and Title 17 Section 1706 Energy Infrastructure Reinvestment Projects (Section 1706).
The historic and multifaceted investment by the federal government into Texas hydrogen production has successfully created private-sector investment in the industry. The Gulf Coast Hub is led by an industry group called HyVelocity, Inc., which in turn includes large energy corporations including AES Corporation, Air Liquide, Chevron, ExxonMobil, Mitsubishi Power Americas, Orsted, and Sempra Infrastructure (HyVelocity n.d.). These companies are investing in the nascent industry because hydrogen production is expected to become extremely economically valuable. The Gulf Coast Hub could generate $100 billion in additional GDP in Texas by 2050 (Ati et al. 2023).
The massive outlay of public dollars to develop the hydrogen industry demands intentional investment in the Texas workers who will build and operate hydrogen plants. The CBP for the Gulf Coast Hub should include legally binding agreements between hydrogen producers and labor that will protect workers’ right to organize, set high wage and working standards, and create equitable pathways for workers to enter the industry.
Securing high job quality for the hydrogen workforce
According to the U.S. Department of Energy, the Gulf Coast Hub will create approximately 45,000 jobs (OCED n.d.b). The Rhodium Group splits these jobs into two categories: plant investment jobs and operation and maintenance (O&M) jobs (Bower et al. 2023). Plant investment jobs are those needed to construct, engineer, and build hydrogen facilities, while O&M jobs are the permanent ongoing jobs needed to operate the plant.3 Most jobs associated with hydrogen will be plant investment jobs. The Rhodium Group estimates that for a conventional hydrogen plant being retrofitted for carbon capture, 520 jobs will be created for building and implementing the retrofits, while 80 jobs will be created for the ongoing operation of the plant (Bower et al. 2023).
Plant investment
Some of the key types of jobs involved in a hydrogen plant’s development include workers in the construction trades; metal workers and assemblers; and machinery installers, maintenance, and repairers. Prevailing wage standards are the first essential policy for ensuring high job quality for workers building hydrogen facilities.
The federal Davis-Bacon Act mandates that contractors and subcontractors on federally funded construction must pay workers at least the prevailing wage. The prevailing wage is a standard hourly rate of wages and benefits paid to workers performing similar work in a specific geographic area. Prevailing wage standards like Davis-Bacon have been shown to boost workers’ pay and benefits and reduce racial pay gaps (Mangundayao, Poydock, and Sherer 2022). All projects receiving federal money in the Gulf Coast Hub will be subject to Davis-Bacon prevailing wage standards.
The Community Benefits Plan in the H2Hubs program also provides a powerful opportunity to strengthen job standards through the inclusion of Project Labor Agreements (PLAs). PLAs specify workers’ wages and fringe benefits and may include provisions requiring contractors to hire through union hiring halls or develop procedures for resolving employment disputes. PLAs also often include language that prevents workers striking or from employers locking workers out.
PLAs are not union contracts and both union and nonunion employers can bid on projects, but incentivizing the use of union labor has other benefits. Research shows that unionized construction labor is 14% more productive than nonunion labor (McFadden, Santosh, and Shetty 2022). PLAs are effective at reducing construction costs, making the completion of projects more efficient, while also setting high health and safety standards (Mangundayao, McNicholas, and Poydock 2022). Unionized construction workers also earn higher, and more often family-sustaining, wages. On average, unionized construction workers earn 35.6% more than other construction workers accounting for education, geography, and other characteristics (Scott et al. 2022). Unions also have long been shown to decrease wage disparities between white workers and workers of color and between men and women.
PLAs can also help create better and more equitable pathways into construction jobs (Belman and Bodah 2010). Hydrogen projects should set high requirements for hours worked by qualified apprentices. A qualified apprentice is a worker participating in a high quality, structured education and training programs vetted and approved by the U.S. Department of Labor or a state apprenticeship agency, otherwise known as a registered apprenticeship (ApprenticeshipUSA n.d.a). Registered apprenticeships are essential to developing a skilled and equitable workforce because they work directly with employers to meet industry standards and prioritize diversity of hiring while paying apprentices fairly for their hands-on work (ApprenticeshipUSA n.d.b).
Texas hydrogen projects can also strengthen local communities by using local hire policies (sometimes called targeted hire) to prioritize recruitment of individuals who reside in the area where a project is being built (Lawliss, Finfer, and Sherer 2022). Targeted hire can also be aimed towards groups such as people of color, women, veterans, or people with disability. Texas should require PLAs with local hire provisions for hydrogen projects to ensure local community members benefit from the new job opportunities.
The Inflation Reduction Act also includes tax credits to incentivize high labor standards and workforce development. Texas hydrogen projects will likely be eligible for IRA tax credits for clean hydrogen production and/or carbon sequestration. These credits quintuple in value if a project commits to prevailing wage and specific apprenticeship targets (Ding, Baldino, and Zhou 2024). Projects receiving BIL funding must already meet Davis-Bacon standards, so they will be eligible for the expanded tax credit if they meet the apprentice targets as well. PLAs can ensure that hydrogen projects meet the IRA tax credit criteria, benefiting both the firms building new facilities and the workers and communities who will be part of the industry.
Operations and maintenance
Once hydrogen facilities in Texas are built, operations and maintenance workers must produce hydrogen effectively and safely. At a conventional hydrogen facility retrofitted for carbon capture, these O&M occupations include machinery installers, maintenance, and repairers; metal workers and assemblers; freight movers; and production occupations (Bower et al. 2023).4 The CBP can be used to make sure these jobs are well paid, safe, and provide opportunity to key communities.
Texas, particularly the Houston and Gulf region, is a global hub for the oil and gas industry. The state also has a large base of chemical manufacturing, gas production, and other manufacturing industries (CHF 2022). Texas produces a third of total hydrogen production in the U.S. (Day 2024).5 Many occupational skills already used in oil, gas, and other gas manufacturing industries in Texas should be transferable to hydrogen production (Wells 2022). The exact distribution of skills and occupations in O&M is not clearly developed, but many jobs will not require college degrees (DOE 2008; Bezdek 2019).
Business groups, labor partners, and educational institutions in Texas must collaborate to develop training and education pathways for hydrogen workers. As with construction and other trade apprenticeships, these training programs should be paid apprenticeship opportunities, and intentionally recruit local workers, workers of color, and women. There should also be clear pathways for Texas oil and gas workers to transition to the hydrogen workforce, with wage insurance, retraining support, and re-employment guarantees (Pollin et al. 2021). The CBP can be used to negotiate these partnerships and create an equitable workforce development pipeline into the industry.
Although hydrogen does not release toxins like fossil fuels when burned, in many contexts it is more flammable, and its flame is almost invisible, putting hydrogen O&M workers at considerable risk (OEERE n.d.). Skilled and empowered workers are the front line for ensuring proper hydrogen safety practices.
Research shows that by giving workers a stronger voice on the job, unions improve workplace safety and health across a wide range of industries (Dean, McCallum, and Venkataramani 2022; Manzo IV, Jekot, and Bruno 2021; Leigh and Chakalov 2021). To that end, it is vital that hydrogen O&M workers have the chance to organize into unions. The Gulf Coast Community Benefits Plan should include language that requires labor peace agreements (LPAs) for workers at hydrogen facilities.
LPAs are contracts between an employer and a union where the employer agrees to remain neutral and not interfere with union organizing. In turn, unions agree not to engage in picketing, work stoppages, or other economic interference with employers. U.S. employers are charged with violating federal law in more than 40% of union elections and spend more than $400 million a year on “union avoidance” consultants (McNicholas et al. 2019; McNicholas et al. 2023). These strategies undermine workers’ legal right to organize but are treated by many employers as a cost of doing business. Requiring LPAs for hydrogen would help prevent illegal employer behavior, secure smooth plant operation, and give workers a fair opportunity to organize.
Conclusion
The single greatest influence on job quality is workers’ bargaining power. When policies set high standards and workers can form unions, it leads to better jobs. Union jobs typically have higher wages, better health care benefits, better retirement safety, and safer working conditions. In 2023, 64% of Texas workers said unions are good for workers, but only 5.4% of Texas workers were covered by a union contract (Posson, Halbrook, and Cervantes 2024). This disconnect is a product of Texas state policies like its so-called “right-to-work” law and other limitations on collective bargaining rights.
When policy does not support worker power, the results are predictable. Workers in the rapidly growing Texas solar and wind energy industries report low wages and high levels of injuries and illness (Behgam et al. 2024). To avoid this path with the Gulf Coast Hub, Texans must build on the strong labor standards incentivized through the federal BIL and IRA. The Community Benefits Plan for the Gulf Coast Hub should include project labor agreements, labor peace agreements, and related measures that empower the Texas hydrogen workforce.
Notes
1. Other hydrogen hubs have different technological makeups and will focus on other technologies like car fuel cells (OCED n.d.b).
2. The Justice40 initiative directs 40% of the overall benefits of certain federal investments to flow to disadvantaged communities. The Justice40 initiative was established by executive order by the Biden-Harris administration.
3. The Rhodium Group’s definition of plant investment jobs also includes the workers who maintain supply chains for hydrogen plant construction, but this report focuses on workers directly building hydrogen facilities.
4. Production occupations include inspectors, testers, processing technicians, and chemical equipment operators and tenders.
5. Most of this hydrogen is created with natural gas, which means it must be retrofitted with carbon capture technology to reduce emissions.
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