Koloma's Bet on Buried Hydrogen for Farmers
Pete Johnson is the co-founder and CEO of Koloma, a geologic hydrogen exploration company working to discover naturally occurring hydrogen trapped beneath the Earth's surface. Built on more than 25 years of proprietary subsurface hydrogen data, Koloma has assembled one of the world's largest natural hydrogen exploration programs, with approximately 20 million acres under exploration across the United States, the Philippines, Australia, and Canada.
In this episode of Inevitable, Johnson explains why natural hydrogen could become the first new primary energy source since nuclear power. Rather than focusing first on transportation or power generation, Koloma believes its earliest commercial opportunity lies in producing low-cost hydrogen for ammonia fertilizer in the U.S. Midwest, where demand is enormous but supply is largely imported.
The conversation explores how natural hydrogen forms underground, why exploration is far more difficult than many assume, and how Koloma is applying decades of geological data and AI to improve discovery rates. Johnson also discusses why commercial success depends as much on location as geology, the company's exploration strategy, and what it will take for natural hydrogen to become a globally significant energy resource.
Episode recorded on June 24, 2026 (Published July 14, 2026)
In this episode, we cover:
[2:02] What "Koloma" means — and the gold rush origin story
[3:31] Where geologic hydrogen actually forms
[7:07] The Iowa project and why the resource lines up with demand
[7:51] The $150/ton ammonia premium hitting Midwest farmers
[10:53] Why hydrogen pipelines aren't the real bottleneck
[13:52] Koloma's model: exploration engine, not driller
[15:12] What makes hydrogen exploration so hard
[18:13] How big a discovery needs to be to matter commercially
[22:39] Power vs. ammonia: how end use changes the math
[23:50] The Philippines opportunity and energy security stakes
[28:48] Pete's path: solar, Monolith Materials, and stumbling into hydrogen
[35:53] Sorting real clean hydrogen from a tax credit grab
[38:52] Current state of Koloma: 20 million acres and what's next
[42:04] Where Koloma needs help — policy and data
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[Cody Simms] (0:00 - 1:44)
Today on Inevitable, our guest is Pete Johnson, co-founder and CEO of Koloma. Koloma is a geologic hydrogen company. It draws on a 25-year proprietary database of subsurface hydrogen samples to find and produce naturally occurring hydrogen from deep in the earth, a clean fuel that forms when groundwater reacts with iron-rich rock.
The company has raised more than $400 million from Khosla Ventures, Breakthrough Energy Ventures, Amazon's Climate Pledge Fund, Osaka Gas, and Mitsubishi Heavy Industries, and now holds roughly 20 million acres of exploration rights across the U.S. midcontinent, the Philippines, Australia, and Canada. Natural hydrogen would be the first new primary energy source since nuclear power in the 1950s, and that alone is an incredible thing to explore. But lately, Koloma has been putting real focus somewhere more specific, the potential for natural hydrogen to reshape fertilizer production in the U.S. Midwest. I was eager to ask Pete how that became the first market and what it says about where this goes next. From MCJ, I'm Cody Simms, and this is Inevitable. Climate change is inevitable.
It's already here, but so are the solutions shaping our future. Join us every week to learn from experts and entrepreneurs about the transition of energy and industry. Pete, welcome to the show.
[Pete Johnson] (1:45 - 1:46)
Hey, nice to be here. I'm a big fan.
[Cody Simms] (1:46 - 2:01)
The burning question I want to start with is, you know, I think any of us who've been following the energy transition space are familiar with the company you're building with Koloma and this quest for geologic hydrogen, but I have no idea what the name means.
What is Koloma?
[Pete Johnson] (2:02 - 2:28)
Oh, this is a fun one. So Koloma is a valley in California where Sutter's Mill is located. So this is where the very first kind of big gold nugget was discovered that launched the whole California gold rush that launched San Francisco and sort of launched the Silicon Valley mindset, in my opinion.
So it's spelled with a C on the map, but K is a better letter for branding, better letter for a website. But that's really what we named the company after.
[Cody Simms] (2:29 - 2:41)
And what an apt metaphor for what you're trying to do, which is, as I understand it, discover the first new primary energy source that potentially will come online since nuclear fission in the 1950s.
[Pete Johnson] (2:41 - 2:55)
This is a big swing. And as I looked hard at it when we were deciding whether to jump into this or not, I just recognized that if this works out the way we think it could, it'll be a big dogleg in the way we think about energy. It's exciting.
[Cody Simms] (2:55 - 3:30)
As I've thought about geologic hydrogen, I've come at it from that lens as well, which is like, hey, hydrogen can be this power source that can power all sorts of industrial process. It could be a potentially even a primary baseload power, but it feels like where you are finding kind of your initial go to market is on the fertilizer and ammonia track. Maybe start with some of the developments you guys have had in the Midwest and how, if those come to fruition, you feel like geologic hydrogen can be a unique lever in those markets.
[Pete Johnson] (3:31 - 4:28)
Let me step back for a second. Just talk about where the most prospective places for hydrogen, because hydrogen is like any energy source, where you find it helps to determine how it's used. Natural hydrogen or geologic hydrogen, those words are kind of used interchangeably, but you typically find the most prospective areas in two places.
One is in rifts or failed rifts, where you've got this iron-rich rock that's come up close to the surface or come out of the surface. And the Midcontinent Rift is this huge, huge failed rift in the middle of the North American continent that starts down in Oklahoma and winds its way all the way up through Minnesota and then up into Canada and back around. And it's one of the world's largest contiguous pieces of ultra mafic or mafic rock with hydrogen generated potential happens to sit right on top of the Corn Belt, where you actually have the highest hydrogen use and form of ammonia.
You have the highest hydrogen use per acre of any place on the planet.
[Cody Simms] (4:28 - 4:41)
On the geology there, I'm from the Midwest. I'm from Kansas, born in Texas, grew up in Kansas. That also happens to be where a lot of the fracking revolution happened.
Is there a parallel there? Is that a similar reason or not?
[Pete Johnson] (4:41 - 4:55)
No, it's not. The oil and gas region in Kansas is really actually Western Kansas, and the Midcontinent Rift is really moving through the Eastern part of Kansas up through a little part of Nebraska, then through Iowa and Minnesota. So it's actually not...
[Cody Simms] (4:55 - 4:57)
Totally unrelated...
[Pete Johnson] (4:57 - 7:06)
It's not an oil and gas region. I mean, that's one of the pluses and minuses. The pluses are like you can come in, you can lease land for pretty low cost, you can move pretty quickly.
A lot of people are really interested in this. I think the minuses are because it hasn't been explored much, you're starting from a standing start as far as data gathering and trying to really understand the area. I think that's led to this taking a little bit longer than what I think a lot of people and pundits and people who write blogs or news are sort of expecting miracles within three years.
Reality is like, it's a tough slog to go out and get all the data you need to enter into a geology informed enough to go find traps. And so that's kind of the double-edged sword of geologic hydrogen is you come in, you can lease up big tracts of land, you can get all these great land positions, but you've got a lot of work to do around data. Stepping back just about the geology is where we find this.
So we find it in rifts. And so Midcontinent Rift is an example of that. There's rifts in Africa, there's rift zones in other places.
The Mid-Atlantic Ridge is an example of that, the outcrops of Iceland. And then you've got places where plates are colliding. So continental oceanic plates.
And so the Pacific Ring of Fire is a really interesting area as well. Different geology, you have a lot of people talking about these ophiolite structures that you see in Japan and the Philippines and even California. Those are the other types of things that are really interesting.
So geographically, what's interesting is the fact that you find the most prospective source rocks like that we're looking at in places where you have massive agricultural demand, which is fantastic. And in the case of the Pacific Rim where you have massive populations and huge geopolitical implications of domestic energy sources. And so finding hydrogen in Kansas or Iowa or Minnesota where ammonia demand is really high is just a huge win.
Finding hydrogen along the Pacific Rim where you have major geopolitical implications for new primary domestic energy sources is also just a huge win. So those are two places where we're really active. It's exciting because the market is so perfect for what we're looking for.
[Cody Simms] (7:07 - 7:51)
So let's dig in or dive in to the Iowa project that you're going after. It sounds like then, yes, there is a market, but obviously you have to start with where is the resource. And so you've started with, we believe there's significant resource here for these geological reasons that you were articulating.
And then it just so happens that there is also a market. So you've hit this sort of combination of these two where potentially if you can uncover endemic resource here of a under-the-ground hydrogen, you have a potential real use case for why it matters in that location. Can you talk a little bit about why that's important from a hydrogen perspective?
[Pete Johnson] (7:51 - 9:28)
Look, today hydrogen is used primarily for ammonia production, which goes into fertilizer for the most part, and it's used in oil refining. And those are the two uses today. And the reason why hydrogen isn't used in other places is because it costs too much.
And so if you can find hydrogen as a primary energy resource, you're going to be able to find it at a cost that makes it so you can compete directly on with hydrogen coming from fossil fuels. And then you can start to produce these things at really low costs and no green premium. In the Midwest, we import 2 million tons of ammonia, which is ironic.
I mean, this is the place in the world that uses the most ammonia-based fertilizer of any place, you know, any location in the world. They import 2 million tons. There's a big pipeline that comes up from Donaldsonville, Louisiana, that brings in ammonia from Russia and Ukraine and Trinidad and Tobago, and you get some of the marginal tons come down from Canada.
Because of that, there's actually a $150 ton premium for ammonia prices that they're paying in Iowa and Kansas and Minnesota relative to what you pay for ammonia in Texas. So there's no better place on God's earth to go find natural hydrogen that's really low cost that could actually fill up the storage facilities for ammonia-based fertilizer in the Midwest. Because you're not only sort of addressing a supply shortage, you're also selling the hydrogen in a place where just the transportation costs make it so the ammonia is more expensive today.
You know, like the people who took the biggest hit when Russia attacked Ukraine, and even this Middle East issues, right? Ammonia spiked. The people who take the biggest hits are Iowa farmers.
And so that's a really important thing to think about.
[Cody Simms] (9:29 - 9:40)
Without going too far into a history and chemistry lesson, why is that? Why does that part of the United States import so much ammonia versus producing it locally?
[Pete Johnson] (9:40 - 10:19)
The ammonia industry is a pretty complex industry and is dominated by a few very large companies. And they have various rationales as to why they build producing plants in the places they have. But one of the things that you want to do today is you want to build ammonia plants on top of the lowest cost natural gas you can.
That's why a lot of ammonia is produced in Texas or in other places like that. But there is ammonia produced in Nebraska. There's ammonia produced in Iowa.
It's just a bit of an imbalance of where it's produced and where it's used. And, you know, that's probably an interview for somebody from Koch or from Nutrien to talk more about that. What I know now is that there's just a huge imbalance of where it's produced and where it's used.
[Cody Simms] (10:20 - 10:52)
And a lot of it's steam methane reformation. You're sitting, you're co-located, as you said, next to a natural gas plant. And you just talked about at the start how this rift that you're exploring along in Iowa and eastern Kansas actually is not a natural gas producing region by default, right?
So you don't have this sort of local resource where you could set up ammonia production. As I understand it, with hydrogen, one of the big challenges of it as a molecule, which I think you can also produce ammonia using hydrogen without natural gas. Is that correct?
[Pete Johnson] (10:53 - 11:02)
That's right. Almost every ammonia plant today uses natural gas. They split it into hydrogen and then it's a hydrogen plus air equals ammonia.
That's how you actually produce ammonia.
[Cody Simms] (11:02 - 11:20)
As I understand it, with hydrogen, one of the biggest challenges of it is that it's hard to move because it's such a small molecule. It's a challenge to move. And so if you can generate a local resource of it, you solve that co-location problem just using hydrogen instead of using natural gas.
Am I following the thread correctly there?
[Pete Johnson] (11:20 - 13:31)
I would frame it a little differently. So first off, we have 1600 miles of hydrogen pipeline in this country. We know how to move it.
We know what the pipeline should be. ASME has a whole book about how to pipe hydrogen around it. Every refinery and ammonia plant has miles of pipe that's moving hydrogen.
So it's expensive to move. It's just expensive to build pipelines in general. That's the broader thing.
The large industrial gas companies are really good at moving hydrogen. There's a little bit of a boogeyman concept that's coming up saying you can't move hydrogen. You can.
We do it. It's hard to build pipelines in general because you have to get a lot of people to say yes. There's a lot of people on the line that can say no.
The advantage of finding hydrogen in the Midwest is, you know, when you kind of look at what's happening today to try to address the imbalance, you had a lot of people trying to develop, I would say, green hydrogen or electrolyzer hydrogen driven ammonia facilities in the Midwest. When we went to those groups and we said, hey, we're starting to explore in this area. And if we find a large amount of hydrogen under the ground, would you be interested in instead of building an electrolyzer driven ammonia plant close to a interconnect node in the grid, would you be interested in moving it over 50 miles to build on what will be the world's lowest cost clean hydrogen supply?
And the answer is always yes, it's not. Well, we like this site. So why don't you build a 50 mile pipeline over to us?
It's always, yeah, we're going to go build on top of the best supply. And if you step back historically, when oil was discovered in East Texas, that's the reason why there's refineries there now. It's not like somebody said, hey, let's build refineries in Kansas and we'll figure out how to pipe the oil up from East Texas.
The first big discoveries of world changing resources tend to have infrastructure located on top of them. And only kind of 10 years down the road are people doing the calculus of, okay, do I build new derivative infrastructure? Or do I build pipeline to the existing infrastructure?
And so our view is the demand for ammonia-based fertilizer is pretty consistent across the Midwest. If you find large hydrogen supply, it's going to make the most sense to just build the derivative ammonia plant right on top of the hydrogen.
[Cody Simms] (13:32 - 13:38)
And you basically delete the reformer out of the production process and replace it with a hydrogen source.
[Pete Johnson] (13:38 - 13:52)
That's right. Becomes a very simple plant, which is basically wells going into a hydrogen purification system, going into a Haber-Bosch. There's not a big reformer in the middle.
And the great thing about that is it's a lower cost ammonia plant processing lower cost hydrogen.
[Cody Simms] (13:52 - 14:07)
And where are you with these projects? You guys are the exploration engine, as I understand it. You wouldn't drive the wells yourself.
You're not building a vertically integrated production company, or maybe you are, but as I understand it, you are the exploration engine here. Is that right?
[Pete Johnson] (14:07 - 15:11)
We have this massive data advantage that we've built out over 25 years. We can go into the story.
Koloma is not really a startup company. Koloma is kind of a rebranded lab testing company that realized that we had a dataset that was going to give us a huge advantage. So we've got this big data advantage.
We're accelerating that data advantage by being the most active explorer. We've drilled the most wells. We've sampled 1.5 million rocks from all over the world, trying to figure out the best source rocks and best basins. What we want to do is become the world's best natural hydrogen explorer and just make discovery after discovery after discovery. And then we're going to borrow a page out of oil and gas exploration book, which is really good explorers. They're small explorers.
They find, they appraise, and then they sell down ownership to a development partner who's going to go out and drill and operate a hundred wells. What I would like to do is find assets, appraise the assets, and then sell down and hold onto a minority stake while somebody else who's really good at drilling a hundred wells and operating that field operates, and I'm going to reinvest that capital and do more exploration.
[Cody Simms] (15:12 - 15:13)
What's hard about discovery?
[Pete Johnson] (15:14 - 16:26)
What's not hard about discovery? It's a tough business. Look, when you step back and you look at our business and what we're trying to do, one of the things that you just have to be clear-eyed about is the fact that oil and gas exploration is quite mature.
We've been doing it for a long time. And your probability of success for a frontier well in a frontier basin, depending on what company you are and are you top tier or not, you're somewhere between 10 and 20% probability of success in drilling a well. Now, that gets really expensive for oil and gas because exploration has driven them offshore, and so offshore wells are $100 million, $150 million commitments.
We're exploring mostly onshore, so wells are more like $5 million, so you can take a little more risk and you can move a little faster. But ultimately, you are much more likely to get knocked down than you are to land a punch. Every time you're drilling a well, you're realistically, it's a well that's probably going to be a dry hole, but it's going to teach you something, so the next well or the next well is going to be a discovery.
Look, exploration's tough. And what people don't realize, right, because drilling wells is kind of the sexy part of exploration, and everybody's seen the movies. You got oil raining down or you got a big gas blowout and everybody's hugging each other.
[Cody Simms] (16:26 - 16:27)
There Will Be Blood is a great movie.
[Pete Johnson] (16:28 - 17:39)
It's a good movie in some ways, not good for the kids, but it's all right for other things. But the reality is 90% of exploration is around data gathering and data analysis and doing the heavy lifting and the hard work to go out and shoot 2D seismic lines and then follow that up with shooting 3D seismic and identifying traps.
And most of your work is basically just finding fatal flaws and crossing things off your list. We shot out of the gate. We came out.
We drilled a number of wells. We drilled wells in four different states. The wells really built our confidence that we were really good at picking basins and we understood source rock and we were finding pore space that was full of hydrogen.
We brought 90% plus hydrogen to the surface and people started to get really excited about this. And it started to feel like a when and not an if type of a question. But that when is still a really hard question to answer.
You look at analogs in oil and gas exploration. I mean, sometimes it's the 15th well in the basin that finally unlocks it and tells you the answer. And so, you know, I've got a great set of investors who sort of understand what they're into and we are just hammering away really focused on data and then we're taking those shots when we can.
[Cody Simms] (17:40 - 18:13)
To use the There Will Be Blood metaphor, the line at the end of the movie is, you know, I'll drink your milkshake, right? I'm going to stick my straw in and suck up all of your oil from underneath your land. With hydrogen, as I understand it, the challenge has been you stick your straw in and you get like a quarter of a straw of hydrogen back up.
You don't have enough of it to actually be a consistent resource and that's ultimately what you need to find. How large of a resource do you need to find to solve some of the initial commercial use cases you're trying to solve in terms of ammonia production, for example?
[Pete Johnson] (18:13 - 19:47)
Look, a world scale ammonia facility is 500,000 to a million tons of ammonia a year. And so, let's work backwards from that and start 500,000 tons a year of ammonia, roughly 100,000 tons of hydrogen per year. So, you can generate 100,000 tons of natural hydrogen per year if you find a TCF size gas discovery.
And that's a big discovery. But people have found 100 TCF gas discoveries. If you're looking at natural gas as an analog, it's a good discovery, but it's within the realm of what people find every year, gas discoveries.
The big thing around gas is you're looking for traps. You're looking for high points in sedimentary rock that has high porosity or sometimes fractured rock, where that gas can all be gathering and that gas can be separating itself from the subsurface water. There's no real such thing as purely dry gas.
It's always going to be some gas, some water. But you're looking for gas that might be 50% gas, 50% water, 30% gas, 70% water. And if you can find those sort of bubbles of gas that are sitting in the top of these sedimentary layers, now you can produce that gas really similar to the way we produce natural gas or we produce helium.
There's views that I see expressed of, you know, like, you can't find dry hydrogen. It always is going to coexist with water. And there's some reasonable arguments for that.
Because this is a reaction between water and iron-rich rock, water's got to be in and around it for it to form. The goal is to find places where that hydrogen is migrating upwards and buoyancy is driving it in and it's finding kind of a bubble position.
[Cody Simms] (19:47 - 19:52)
And there's enough of a shelf above it that it's not escaping back out through the porous rock, right?
[Pete Johnson] (19:52 - 21:16)
There's lots of different ways it could work. But simplistically speaking, you want to find, if you really kind of draw a layer cake, you want to find mafic rock that's reacting with water. And if I think about a really simple prospect and then sandstone or limestone sitting on top of that, that's high porosity and a producible reservoir rock.
And then on top of that, maybe something really tight, like a tight shale or something else that's holding the gas in. And you want to find a shape like an upside down cereal bowl. If you've ever been a kid and you've ever like gone down in a swimming pool with a bucket and you've got that air trap, that's what it looks like when we find natural gas.
And when we find oil at subsurfaces, the buoyancy is kind of holding it in place. That's what we're looking for. The issue with hydrogen exploration is we're so early in this that most people are not yet drilling based on 3D seismic surveys.
And that's the gold standard for making sure you're in a top trap. There's just a few of us that are now starting to acquire 3D seismic to be able to confidently drill traps. And so a lot of the early drilling we've done, a lot of the early drilling other people have done, has kind of been strat wells where we're trying to understand these systems, kind of check, you know, are these hydrogen.
I think the next two to three years is really where the rubber hits the road, where people are finally gathering the data you need to confidently drill traps. I think that's when you're going to start to see discoveries.
[Cody Simms] (21:16 - 21:40)
Back to the question then, if I'm a ammonia producer and I'm saying, hey, Pete's showing up and he's going to solve the fact that I don't have access to enough natural gas here to build a, easily build a steam reformation plant. And I'm tired of trucking in hydrogen to produce locally. How much do I need to feel confident that I can set my plant on top of a well that you're going to discover?
[Pete Johnson] (21:41 - 22:17)
It depends on how big of a plant. There are groups that have developed, I would say more midstream like ammonia conversion, which could go down pretty small and could work with 10,000 tons a year of hydrogen. And so multiply that number by 20 to 25.
And that's kind of the way you think about a discovery size that's producing over 20 years. So think about like a 200,000 ton reservoir is probably like a minimum commercially interesting reservoir. And then think about if I'm going to build a world-scale ammonia plant, it's more like a two and a half million ton.
So it's kind of an order of magnitude there.
[Cody Simms] (22:18 - 22:39)
And does that math change based on different hydrogen use cases? If you're talking about sustainable aviation fuel production, or you're talking about long duration energy storage, or other things that hydrogen may be used for, do you have different size resources that you're trying to find? Or are you somewhat agnostic to that problem?
[Pete Johnson] (22:39 - 23:50)
We've partnered with a company and we've got access to technology and people who want to build it out for actually doing kind of small midstream like ammonia. I can find something small and we can start to put ammonia molecules into the market. But that wouldn't make sense if I made the discovery far off in a desert somewhere and the ammonia markets were down.
So that's interesting in one area. We're actually actively exploring in the Philippines now, which is really exciting. That's a country that their marginal power comes from burning diesel and 98% of their energy is imported.
So if I find hydrogen in the Philippines, what you're going to do with that is you're just going to make power. You're going to try to offset the marginal cost. And that's not only a major value in hydrogen discovery, just the energy value.
It's an energy security win. The Philippines was the first country to declare a national emergency when the Strait of Hormuz shut. The Philippines has more hydrogen seeps than any other place on the planet.
There is hydrogen seeping out of the ground. We're operating and exploring in an area where there's a 10 megawatt energy hydrogen seep coming out of an area smaller than a soccer field. You know, maybe you make ammonia there because the Philippines uses ammonia and fertilizer, but you're probably just making power.
[Cody Simms] (23:50 - 23:56)
And that would just be, you'd put a fuel cell there and generate electricity out of it. Is that the idea? Or you just combust it?
[Pete Johnson] (23:56 - 24:50)
Fuel cell, maybe. Honestly, you'd probably put a recip engine. It's just lower cost, but kind of the same application.
And so, you know, if you've got 3000 tons a year of hydrogen coming out of one well, you can go put five megawatts of energy on the grid. That's just unit economics. You can drop those on anywhere you want.
I mean, I even talked to a group that wanted to do big power from a hydrogen discovery, and we were kind of laying out, well, what does this look like? And they were kind of looking at costs of gathering hydrogen to a central location and building a big power plant versus just putting like a recip engine next to each well and using transmission to gather power. And like, there's a lot of ways you can commercialize hydrogen.
What's the word? Some people say it's like the skeleton key. You can use it for power.
You can use it for steel. You can use it for a sustainable aviation fuel, fertilizer. It really comes down to price.
Can you produce it at a price that's meaningful?
[Cody Simms] (24:51 - 25:09)
It's sounding to me most realistically that with natural gas, you can have a 300 megawatt natural gas power plant, and that's like not abnormally sized. I think with hydrogen, it sounds like more realistically, you'll end up with a lot of smaller distributed plants, five megawatt, 10 megawatt, 20 megawatt resource.
[Pete Johnson] (25:09 - 26:10)
I think it'll depend. So for example, we're working in a place in the Philippines where we're measuring gas at the surface that is flowing at a very fast clip. It's 9 million years old.
So 9 million years old gas coming out of the surface tells you it's coming from a really big accumulation. Is that accumulation commercially producible? Is the porosity right?
Is the permeability right? We don't know. If it is, and it's that big of an accumulation, you may be talking about 200,000 tons a year of hydrogen being produced from there, and you'd produce 300 megawatts from that production field.
It really just depends on field size. I mean, the point I'm making is we have solutions for small fields. Solutions for big fields are really, really easy.
It's squinting at small fields and saying, okay, what would we do with a small amount of energy out here on the coast of the Philippines? That's the one where you got to be a little bit more creative and thoughtful. But some of these fields, I mean, we're looking at some things that could be two TCF type size.
I mean, we just drilled into something that our initial estimates might be four TCF and we're working the process on it right now. That's a big field.
[Cody Simms] (26:12 - 26:31)
So from a power production, essentially, if you discover smaller resources, you can still build sustainable businesses. With the ammonia use case, you need a larger resource for it to be a viable facility, it sounds like. It sort of depends on how you're planning to use it in terms of what size resource ultimately you need to discover.
[Pete Johnson] (26:31 - 27:11)
There's always going to be people who say, you know, hydrogen is just a, if you find it too far away, it's going to be hard to use. And I think that's a rational view. If I find hydrogen out in a desert somewhere and there's no electrical transmission, there's no power demand and there's no ammonia demand.
If I can coax somebody to come out and try to put a steel plant there, great. But there are places in the world where if you find hydrogen, it's kind of a big deal question. It's a shoulder shrug.
Our goal is we filter those out early on our ranking process. I have a good commercial team who's sold a lot of hydrogen and knows the business well. And some places they say, you know, we know you guys love this rock, but we don't think we can sell it here.
[Cody Simms] (27:12 - 27:32)
That's a tough decision for you as the founder, right? Because you ultimately still need to have that eureka moment where you discover a resource that's sizable enough that you can say, yeah, we did it. And yet if you do it in a place where no one can use it, like you said, it's not really a business.
So who cares? But it is from a science perspective, it's a big deal.
[Pete Johnson] (27:32 - 28:08)
It's a really good question. And I would say there is still value in that proof point. If I make some discovery in a far flung place, all the financial guys are shrugging their shoulders saying, what are you going to do with that?
Well, it turns out the way that we're finding oil and gas today is we basically go find big discoveries here, and then we go find an analog basin over here and say, OK, this worked here. Let's try there. So there's still a lot of sort of learning value and exploration, acceleration value for making the discovery.
And it's harder to market. But yeah, it's you got to weigh that against, I really want to sell the gas.
[Cody Simms] (28:09 - 28:20)
You could argue that discovering oil in Saudi Arabia when it initially happened maybe wasn't in the most convenient location for using said oil, right? It's just that oil is much easier to move around, I think.
[Pete Johnson] (28:21 - 28:47)
That's the difference is we can pretty confidently explore for oil in really far flung places. But if you just step back and look at hydrogen, hydrogen is going to be a little more like natural gas, where the infrastructure to be able to handle it, move it, you know, gas, we can put it in LNG, we can put it in pipelines, we can do stuff with it near the wellhead. But nobody's really interested in finding gas in like really, really remote places.
It's hard to use, right? Hydrogen is going to be similar.
[Cody Simms] (28:48 - 29:07)
Pete, we didn't do the service of actually talking through your background and like why you're the guy to go try to solve this problem. Yeah, but you know, you've got your credibility in terms of trying to solve this problem is pretty top tier. So maybe just give us the highlights here for listeners who don't have familiarity with you.
[Pete Johnson] (29:08 - 33:01)
Early in my career, I ended up at Stanford in a PhD program studying engineering because I kind of wanted to be in the mecca of energy entrepreneurship. They'd lined up that right when I did that, you started to see this big ramp up of interest into cleantech 1.0. I was lucky enough to get pulled into a solar company that was backed by Khosla and Kleiner and I was given leadership roles beyond my years because nobody really knew what the heck they were doing. And we ended up doing a really good job - we built a company, we sold it for good profit, good multiple for the investors.
It was a solar thermal company and I saw our industry basically dying on the vine as silicon prices came down and natural gas prices came down with the shale revolution. And so I started to think about fuels and what are we going to do with really low cost hydrogen rich fuel like natural gas. And that led me to founding a company called Monolith Materials.
It's the world's leading methane pyrolysis business. And that kind of landed me eyeballs deep in the hydrogen business. I had no intention of dedicating a career to hydrogen in any respect. But when you're splitting natural gas into carbon nanoparticles and hydrogen, you got to figure out how to sell both.
And so started to really understand who are the buyers and who are the talkers, who just wants to put something on their front 40 to greenwash the plant, who really wants to buy volumes, really understand the market. 2018, 2019 rolls around, people started getting really interested in hydrogen. I stepped out and took a role in an oil and gas private equity firm that wanted me to build basically a clean fuels investment strategy, energy transition strategy.
So I was looking at hydrogen and renewable diesel and geothermal and lithium, all the things that an oil and gas firm should be thinking about if they want to make money outside of their core area. So I was kind of in this happy place working in private equity, coaching soccer and raising my kids. And the Breakthrough Energy guys came to me and they said, hey, we are really interested and we want to stand up this natural hydrogen business.
We think we've got an angle, you've built hydrogen businesses, you've built businesses, you know the oil and gas space well enough, come do this with us. My first reaction was guys, give me a break. This sounds too good to be true.
Hydrogen coming out of the ground. I mean, all these people are just killing themselves trying to figure out how to produce this affordably and it's challenging. And they introduced me to Tom Darrah, who's my co-founder of the business.
And Tom had spent 20 years of his life basically running a small commercial lab while he was building his academic career at Duke and then Ohio State. Running a small commercial lab that was the world's leading lab for measuring oddball hydrogen samples. Like that's a niche business within a niche business.
But over time he ended up with 30,000 samples of elevated hydrogen across the world. And a bunch of those samples were 50% plus hydrogen content at the bottom of wells, drilled for oil, gas, water, uranium. You know, when we started to look at that data and where it was showing up and how this could accelerate an exploration program, it started to get really exciting.
The science of hydrogen generation in the ground is very well established. People understand that. The question is, well, where do you start?
Where should an exploration program start? And Tom's database really gave us a headstart. We could use that for two things.
We could use it as not a drill here treasure map, but a bit of a, here are the best basins in the world where the hydrogen systems appear to be most active. This is where you should start your exploration programs. And then also with this training dataset, we could build AI tools.
We could build a bunch of other things that we could backtest against it and just really accelerate. That's kind of how I ended up in this business. It was a bit of a rolling and tumbling into it.
Ultimately, I asked a couple of friends in the oil and gas industry, really accomplished explorers, to come in and kick the tires and diligence this with me with the express request to talk me out of it. And in the end, they ended up investing in it. And so that was kind of like I was stuck at that point.
So I got it started.
[Cody Simms] (33:02 - 33:31)
I love it. Thanks for sharing that backstory. I had two questions that jumped to my mind as you were going through it.
The first, which we didn't cover when we were talking about how the discovery may end up being used with natural gas, you talked about, it's usually some mix of gas and water and it has to go through ultimately a bit of a refining process before it turns into actual natural gas. What happens with hydrogen coming out of the ground at the plant itself? What processing needs to be done on it?
[Pete Johnson] (33:31 - 35:16)
Normally, when you produce natural gas and you produce hydrogen or you produce helium, you're going to take this through basically a separator tank where the water is separated off from the gas. And then the water is going to get processed, cleaned, reinjected, disposed of, whatever's appropriate. And then you've got this gas stream and there's no such thing as a pure gas stream coming out of the ground.
Maybe somebody in Saudi Arabia has found something somewhere, but in general, you've got your target gas and then you've got some cats and dogs with it. And with hydrogen, with the hydrogen we found, what we tend to find existing with it is primarily nitrogen. Sometimes we see a little bit of helium.
Sometimes you see a little bit of methane. The good thing is when we produce hydrogen commercially now in the world, we run it through these steam methane reformers, you end up making this soup of hydrogen and CO and CO2 and methane. And there are systems designed called PSA, pressure swing absorption systems, or membranes that have basically been designed to be able to separate hydrogen out from those other gases.
So the great thing about Koloma, we don't have to invent any of that. That has already all been designed. Even to the point, we actually store hydrogen in the ground today.
So the hydrogen well, the casing, the cement, the wellhead, all off the shelf. I can just go talk to an engineering firm and say, I want this, that, that, and they can do that. So for natural gas, there's natural gas processing plants to purify the natural gas, dispose of the other gas.
For hydrogen, we'll do hydrogen processing plants and the engineering technology is 30 years old, 40 years old. So very straightforward. It adds a little bit of cost.
So the lower the purity to hydrogen you have, the higher cost of separation and purification you're going to have. But anything that you find that's sort of 30, 40% hydrogen or above is going to be pretty darn competitive in the market.
[Cody Simms] (35:16 - 35:53)
And then the other question that jumped out of your backstory is, you mentioned you got good at understanding what the hydrogen greenwashing flags were in the industry. There's this thing in the back of my head when I hear any pitch on hydrogen, which is like, what's the motivation here? And I'm not sure why I have that question.
I think it's because so many of the projects are oil and gas sponsored, but I'm curious to hear your thought on what have you seen that you would qualify as like a clean energy story of hydrogen versus something that is a tax credit grab or something else like that in an oil and gas business?
[Pete Johnson] (35:53 - 36:38)
Let me boil it down really simply. The cost of producing hydrogen from natural gas, I'll use American prices where gas is cheap. It's like a buck 30 a kilogram.
And if the gas is $3 or $4, it's going to swing a little bit. And then the cost of producing the same amount of hydrogen over in Asia, where you're driven by LNG costs, it's probably like $2 a kilogram of hydrogen. So anytime you see somebody who's buying hydrogen for $5 a kilogram or $6 a kilogram, you have to ask this question, well, why?
There's going to be three reasons. One is their volume use is so small that their cost of delivery of getting it from a truck just makes it so you're not getting it at a buck 30, you're getting it at eight because cost of delivery.
[Cody Simms] (36:38 - 36:40)
That's the transport cost issue that we keep talking about.
[Pete Johnson] (36:40 - 38:38)
Yeah. I mean, moving hydrogen by truck is really, really hard. If you're a small user, like you're some semiconductor fab and you use a little bit of hydrogen, it probably makes sense for you to just drop a small electrolyzer on your plant.
And so when you're paying this way high price, when you start thinking, okay, well, I'm going to build a giant electrolyzer and it's still going to be challenging to hit those costs, then it becomes, okay, I'm doing this because it's a cleaner path to a product. I don't want to cast stones. Greenwashing is a term that's really pejorative.
From my standpoint, I think a lot of companies want to do the right thing and they want to figure out how to decarbonize their supply chain and doing something more cleanly. The challenge I see is when it's completely out of the money, then it becomes, it's a one-off project that I'm going to do, but it's not something that I can just sweep through and do in all of my manufacturing lines all over the country. And that's where it becomes, okay, I'm trying to do the right thing.
I'm hoping that I can get this cost curve to come down over time. I mean, ultimately my view, and I think you're starting to hear this more and more is like, if you can't see a path for something five years down the road to exist without tax credits or five or 10 years down the road, it's hard to justify wanting to do it. Born and raised in Northern Utah, I've got a little bit of a libertarian bent, but I think the government's role of creating tax credits to try to incentivize technical innovation is great.
And I'm very supportive of that. Government setting up sort of perpetual tax credits for things, I don't think it's a great way to think about it. I think we have to eliminate the way we think about ongoing, continuous, perpetual green premiums and just think about trying to find things that are really going to compete on their own two feet.
Maybe they need a little bit of a push out of the gate. That's really what attracted me to this. I constantly sort of say, I don't want to work in businesses where 20 years down the road, 10 years down the road, if a subsidy is canceled, the business is under.
It's hard enough to build businesses and trying to predict what Washington's going to do is really challenging.
[Cody Simms] (38:39 - 38:52)
All right. Just to wrap us up here, I think, give me a bit on the current state of the company. You guys have raised a decent amount of money.
You've talked about a couple of the projects you have underway. Maybe just bring us current with where you are today.
[Pete Johnson] (38:52 - 40:01)
One of the things we've done, we shot out of the gate early. We raised a lot of capital so that we could build an honest to goodness international exploration program where we were focusing on drilling the best wells in the best places. And that's hard to do.
You have to have capital to be able to do it. We drilled some wells. We got very confident in our ability to high grade basins and know the right places to be working.
And then we built a land strategy that is very broad and far reaching. And we went from basically 200,000 acres leased to about 20 million acres today. And those are across the US, in the Philippines, in Australia and Canada through partners.
We're going to be expanding into a couple of other countries very shortly. So at this point, we've got this massive land position. And we are in the middle of doing the heavy lifting now to really find the biggest traps and the biggest plays within all those different positions and high grading them.
And so like mostly we're in the 2D, 3D seismic. We're in that knife fight right now. And we're going to start drilling exploration wells at a pretty fast clip.
And nine months is about when we're going to kick off. And then it's going to be like a well every month or two for the next two or three years. And I think that's when you're going to see big discoveries start happening.
[Cody Simms] (40:02 - 40:07)
With a land position, that means you've taken out a lease on the land and own the underground mineral rights. Is that the idea?
[Pete Johnson] (40:08 - 41:03)
Yes. So in the US, you lease the mineral rights typically from private owners and sometimes from the federal government. It's fairly straightforward and you can do that through private deals.
Internationally, you tend to make proposals of exploration commitments for blocks of acreage. And so it's a different game internationally. The Philippines, for example, said, hey, we've got these blocks of acreage that we want to see explored because the Philippines, the government owns all the mineral rights in most foreign countries.
And so they want to see private company willing to come in and spend some money to assess the resource. And so you basically win those nominations by proposing a program, an exploration program. And so it's a lot lower cost up front to secure acreage internationally than in the US.
And then it ends up starting to cost you because you have to fulfill your commitments over time. And so it ends up being net equal, but it's a good way to balance out US leasing and global nominations.
[Cody Simms] (41:03 - 41:05)
How are you measuring success along the way?
[Pete Johnson] (41:06 - 42:04)
We challenged our team to build a really diverse and strong land position, and they knocked it out of the park. So I checked that box. We challenged the team to come in and really demonstrate expertise in basin selection and high grading.
And we think we knocked it out of the park on that. At this point, it's really acquiring valuable 3D seismic and geophysics that's going to give us confidence in traps. Ultimately, the big box that needs to be checked is we have to achieve commercial flow from wells.
That's it. Exploration is a kind of a binary thing. You can go out and drill a lot of wells, and if you don't find anything that's commercially relevant, if everything's either low flow or this or that, you can talk a lot about how much you learned.
But it's different from building a machine and trying to get it to work, and it kind of works, and then almost works. It's a very nonlinear value creation curve. We're in that point where I think we've done everything right.
We're building into it. And I think in two years, we're going to see some discoveries, and that's going to be really exciting.
[Cody Simms] (42:04 - 42:05)
Where do you need help?
[Pete Johnson] (42:05 - 43:13)
If you're talking about in D.C., it's permanent reform. It's just being able to move quickly. I mean, this is like everybody, the interconnect, the transmission systems.
Everybody's kind of suffering from the same thing. We kind of can't get out of our own way in the U.S. Great thing about working internationally is it's a little slow up front, but once you've got it, the key stakeholder in the mineral rights ownership is the government. And so they tend to want to push you to go as fast as you can.
And in the U.S., you sometimes find that you've got lots and lots of people who can say no. So that's an area where we're pushing, and we're engaged with really great people in D.C. with senators and congressmen who really want to do the right thing and want to push things along and recognize if you want to change the way we produce energy or do that, and you want to get to cleaner energy sources, the only way through it is to build your way. You've got to build your way through it.
There's no other way. So we've got a lot of people who are copacetic to that. You know, the other area, we are constantly looking at opportunities and making deals and discussions with large companies that have lots of data.
And so securing data, accelerating how much data we have access to, it's a big priority for us. This is a data game.
[Cody Simms] (43:14 - 43:49)
Are there areas of the ecosystem that need to be built out around you, or do you feel like you're mostly able to leverage existing mature, whether it's oil and gas or other infrastructure? Meaning, do you see areas where other startups, founders who may be listening to this could think, oh, I could see how I could take my technology and help support this growing, emerging, whatever you want to call it, space of natural hydrogen? What are those?
What are those gaps of innovation that you think other players could help you with?
[Pete Johnson] (43:50 - 45:17)
I'll start. One side is around geophysics data. Better different ways to acquire geophysics data, better ways to analyze it, process it.
You know, there's companies working on AI tools to be able to interpret seismic faster. I mean, a lot of those things are just, can you accelerate steps that we're already taking with better and simpler tools? I talk to people who have different mousetraps.
They say, hey, here's a geophysics tool that I can mount on a satellite and I can see this. And we tend to look at those and we look at those skeptically, but we're open to looking at new tools. For the most part, looking for natural hydrogen, you're using tools that were developed out of the mining industry, the geothermal industry, the oil and gas industry.
And then we have some modifications on top of that for how we're looking at the rocks that we're interested in. We have some really good partners who are tuning the way they tend to use their tools when they sell them to oil and gas companies or mining companies. And they're working really closely with us to figure out, okay, we need to do it a little bit differently for you guys.
For startup companies, there's groups kind of thinking down the road, where's the puck going to be? What are good midstream solutions for natural hydrogen? Are you going to need to be able to separate helium from hydrogen in different ways than it currently is?
There's definitely some opportunities there. To be perfectly honest, if I'm going to take risks and skate to where the puck's going to be on natural hydrogen explorations, I would want exposure to a natural hydrogen exploration company because that's where the biggest upside is going to be.
[Cody Simms] (45:17 - 45:18)
That's a convenient answer for you.
[Pete Johnson] (45:20 - 46:02)
Yeah, that's my answer for the VCs, for the capital. But I also tell them, I'm like, if you want to take a compound risk and build something that's going to be really valuable when I make a discovery, you got to realize it's a much higher return for me than for you, and you're taking the same risk. Building stuff on the front end, like the picks and shovels, makes a lot of sense.
I think building equipment that's going to be really useful in the success case, this is an honest answer, probably not a popular answer, but you'd be way better off as a capital provider getting into the exploration side than trying to say, oh, once natural hydrogen's a big thing, this little widget's going to be really important, so I'm going to invest in that widget. You're taking the same risk, honestly, but you're not going to have the same return.
[Cody Simms] (46:02 - 46:29)
Last question. We all have in our head the now outdated 1930s era picture of an oil well where the black gold is coming out of the ground for the first time. I'm sure you have visualized this yourself to the day when you do make this commercial scale eureka discovery at Koloma.
What does it actually look like? What is that day's experience like?
[Pete Johnson] (46:30 - 47:52)
Number one, the black gold rain around you is actually a pretty big safety issue. You said 1930s, I don't think they do that anymore. When that well blows out and there's a giant fire, yeah, maybe somebody's celebrating, but that's pretty scary. What success looks like is you drill a well, and as you're drilling that well, you get a big gas kick. Your rig is designed to be able to handle that.
It's got pressure compensators, it's got a blowout preventer, but you get that big gas kick, and you know it's there. Then when you're done drilling that well, you put a production testing unit on, which has a flow meter and a flare on it. Now you're going to run this, and for 30 days, you're watching this high volume come out of this well.
After 30 days, the pressure is still basically the same. That tells you your well is connected to a really big gas supply. If you're connected to a tiny gas supply, you might get a lot of flow on day one, and then day 30, it's a little squeak.
Success means I'm flowing almost the same amount of gas on day 30 as I'm flowing on day one, and it's the gas I'm looking for, and it's a high volume. It won't be quite as dramatic as the raining thing, but that's going to be a really exciting moment. We'll have that production data, and we'll have that well humming.
Trust me, every single shareholder, every single employee is going to be there and going to be celebrating. It's going to be a big, giant party.
[Cody Simms] (47:52 - 48:07)
Amazing. Pete, thank you so much. I learned a ton.
Really appreciate you taking the time to share more about the exploration you're doing, and it's a unique thing in that you are truly trying to find a new resource on this great earth we all live on.
[Pete Johnson] (48:07 - 48:12)
Well, thanks for having me. I appreciate it. This is a big swing, but it's a lot of fun, and we're enjoying every minute of it.
[Cody Simms] (48:12 - 48:40)
All right.
Cheers. Inevitable is an MCJ podcast. At MCJ, we back founders driving the transition of energy and industry and solving the inevitable impacts of climate change. If you'd like to learn more about MCJ, visit us at mcj.vc and subscribe to our weekly newsletter at newsletter.mcj.vc. Thanks, and see you next episode.