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(Bloomberg) — A new Gold Rush is taking shape on a quiet stretch of Kansas prairie. There, a clutch of startups backed by the likes of Bill Gates are searching below the surface for naturally occurring hydrogen, a fuel that can generate power without adding to climate change. 

Finding it in vast quantities would revolutionize the energy transition. But the hunt is clean energy wildcatting, with a real possibility of failure — and the added risk of diverting limited climate venture capital at a time when the world needs proven emissions-cutting technologies.

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Kansas sits atop a geological quirk: The Midcontinent Rift is a subterranean scar a billion years old created when North America started to split down the middle and then stopped. Iron-rich rocks within the rift can produce hydrogen when exposed to water, pressure and heat. And records left over from several old oil exploration wells in the area decades ago show the gas is — or at least was — present.

Other sites around the world also offer tantalizing hints of housing the lightest element in the universe, and the search is starting to attract money. One company, Koloma, has raised more than $300 million, including from Bill Gates’ Breakthrough Energy Ventures. Mining giant Fortescue Ltd. recently spent $22 million to buy a 40% stake in Australia-based HyTerra, one of the startups looking in Kansas. All told, approximately 50 geologic hydrogen companies are in operation, including explorers, equipment makers, and oil and gas conglomerates funding research, according to BNEF. 

Naturally occurring hydrogen holds the potential for what Wood Mackenzie analyst Richard Hood calls a “Spindletop moment,” referring to the 1901 Texas oil gusher that helped create the modern world. If it exists in commercial quantities, pumping hydrogen from the ground would be cheaper than stripping it from water using electricity and cleaner than making it from natural gas, the most common method.

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“No question, there’s risk,” said Bruce Nurse, co-founder of PureWave Hydrogen, which has leased sites in three Kansas counties for exploration. “But it’s an energy source we need to go after here in the US, because manufactured hydrogen is not going to cut it.” 

Recently, scientists have begun earnestly attempting to answer how much hydrogen is under the Earth’s surface. 

Geoffrey Ellis is at the forefront of that work. A research geologist for the United States Geological Survey (USGS), Ellis spent two decades researching petroleum geochemistry. About five years ago, Ellis pivoted to hydrogen when he heard about Mali. 

Mali is the great origin story of the quest for geologic  hydrogen, which industry refers to as “white” and sometimes “gold.” In the late 1980s, residents of a village drilling for water in the West African country stumbled upon a pocket of gas. Not knowing what it was, they plugged it back up. Decades later, workers heard of this discovery and drilled a new well to uncover what they had hoped was natural gas, only to find nearly pure hydrogen. 

Ellis’s group has been modeling the subsurface globally, drawing on oil and gas industry tools and methods. 

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His estimate is wide-ranging: anywhere from billions of tons on the conservative end to trillions of tons. Tapping even a fraction of the estimated hydrogen would meet hundreds of years of demand, Ellis said.

He ascribes the several orders of magnitude of uncertainty to the nature of the model he and his team built, based on what is known about hydrogen and better-understood resources like petroleum. The question for him — and investors and companies — isn’t whether it exists, but how much of it is accessible and accumulated in large, pure quantities. The only way to know for sure is to start drilling.

“You have to operate in uncertainty,” said Koloma’s Chief Business Officer Paul Harraka.

To maximize their chances of success, prospectors are leaning on paper records in dusty archives and oil and gas documents that have mentioned accidental hydrogen discoveries. But they’re also using tech like sophisticated machine learning to identify what are known as “fairy circles” in satellite images. These circular depressions on the Earth’s surface sometimes emit hydrogen and could point to subsurface reservoirs. 

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Viacheslav Zgonnik is the co-founder and former chief executive officer of Denver-based Natural Hydrogen Energy, which went prospecting in 2023 near Geneva, Nebraska. Drilling more than 11,000 feet into the ground, they found hydrogen, though Zgonnik declined to say how much. But he left the company this year to create a startup to provide software to companies looking for hydrogen deposits. 

“When there is a gold rush, you sell picks and shovels,” Zgonnik said. 

Most of the exploration happening today is in the US and Australia, not just because there’s evidence hydrogen could exist underground but because of the two countries’ supportive regulatory environments. In the US, landowners have the rights to exploration permits rather than the state, a stark contrast to other countries where government-controlled licenses can result in long delays. 

As a result of all these factors, many wildcatters are concentrated in Kansas and other states along the Midcontinent Rift. “It’s expensive, and you can’t just go digging random holes in the ground,” said Mark Gudiksen, a managing partner at venture firm Piva Capital, which invested in Koloma. “So you have to be thoughtful about using all of the tricks of the trade.”

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Even if prospectors hit hydrogen, its commercial prospects are highly uncertain. The reason green hydrogen produced by renewable energy hasn’t taken off yet is because of its high cost. The Department of Energy has set a goal for hydrogen producers and prospectors to get costs down to $1 per kilogram. That would unlock a wave of demand critical to growing the hydrogen industry, which is currently lacking. 

The world currently uses about 94 million metric tons of hydrogen per year, according to BloombergNEF. The research firm forecasts that for the global economy to reach net-zero emissions by mid-century, hydrogen use will rise slowly, hitting 118 million metric tons in 2030, before entering a period of rapid growth. Worldwide use could reach 234 million metric tons in 2040 and 390 million metric tons in 2050, according to BNEF’s New Energy Outlook 2024. 

“The market is really, really, really big if the unit economics work,” said Mark Daly, head of technology and innovation at BloombergNEF. But that’s a big “if.” 

One critical cost factor: purity. The well in Mali is nearly 100% pure hydrogen. But hydrogen is often co-located with other gasses, including helium. Australian company Gold Hydrogen, for example, said it found hydrogen as well as high levels of helium in initial drill tests conducted in 2023 on South Australia’s Yorke Peninsula and is now working to drill its first new wells. While helium is a valuable product, separating the two gasses adds expense. 

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One of the biggest complications to bringing down costs is transport, which involves compressing the gas into a liquid and trucking it or moving it through underground pipelines. Both are expensive and in the case of pipelines, closer to fantasy than reality. At high pressure, hydrogen can react with steel pipes, causing them to become brittle and crack.  

There’s also the potential for hydrogen leakage, an issue that scientists and startups haven’t yet properly confronted. 

Hydrogen “is a very promiscuous gas. It diffuses all over the place,” said Douglas Wicks, a program director at the Energy Department’s Advanced Research Projects Agency-Energy (ARPA‑E) who’s in charge of two geologic hydrogen research programs.

Transporting hydrogen makes sense economically within a 100-kilometer radius, said Daly. He pointed out that raising enough money to build a pipeline requires evidence that the resource it’s transporting will exist for 20 to 40 years. 

Many startups exploring in Kansas and Nebraska could overcome transportation issues by selling it locally. The states are two top agricultural producers, and companies see farmers as their biggest potential customers. Hydrogen discovered in the region could be converted to ammonia, which is widely used to make fertilizer. 

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“There’s absolutely a chance we may lose all our money.”

The myriad unknowns are not stopping wildcatters. They’re also not stopping venture capitalists and large corporate investors alike from placing big bets. 

One of the industry’s biggest boosters is also one of the most influential climate tech investors in Breakthrough Energy Ventures.

“The discovery of geologic hydrogen could be one of the single most important events in our lifetimes, and perhaps the lifetimes of our children,” said the firm’s technical lead Eric Toone in a speech at the Breakthrough Energy Summit in London in June. “It offers the possibility of limitless zero-carbon reactive chemical energy.”

That’s part of the reason the firm participated in Koloma’s $245 million Series B round, making it one of the biggest startups on the hydrogen frontier. Still, investors acknowledge that the territory still comes with many unanswered questions, enough to give many others pause. 

If Koloma succeeds, “that changes the cost structure of hydrogen,” said Gudiksen. But he also sounded a cautionary note: “There’s absolutely a chance we may lose all our money.”

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