Carbon gasification with steam to produce H-2 and CO is an important reaction widely used in industry for hydrogen generation. Although the literature is vast, the. mechanism for the formation of H-2 is still unclear. In particular, little has, been done to investigate the potential of molecular orbital theory to distinguish different mechanism possibilities. In this work, we used molecular orbital theory to demonstrate a favorable energetic pathway where H2O is first physically adsorbed on the virgin graphite surface with negligible change in molecular structure. Chemisorption occurs via O approaching the carbon edge site with one H atom stretching away from the O in the transition state. This is followed by a local minimum. state in which the stretching H is further disconnected from the O atoms and the remaining OH group is still on the carbon edge site. The disconnected H then pivot around the OH group to bond with the H of the OH group and forms H-2. The O atom remaining on the carbon edge site is subsequently desorbed as CO. The reverse occurs when H-2 reacts with the surface oxygen to produce H2O.