They may have lost at the Louisiana Legislature, but concerned residents and carbon capture and sequestration foes picked up a win courtesy of the politician who backed the opponent of the U.S. Senate candidate they supported, pointing the way to future successes.
Today, the other shoe dropped when Air Products confirmed that it would abandon its so-called Louisiana Clean Energy Complex, after last year suspending continuation of work on it. The project would have produced “blue” hydrogen, meaning through a process that didn’t emit a lot of carbon. That carbon would have been sequestered around and under Lake Maurepas, which generated significant opposition from those near it including some local governments.
Such was the alarm, with fears that without any history of sustained large scale sequestration to draw upon and isolated past instances of crises in transportation rendered CCS too risky, that dozens of bills hit the Legislature this past session to restrict or prohibit CCS, including a few aimed specifically around Lake Maurepas. Legislative leaders and Republican Gov. Jeff Landry’s tacit acceptance of CCS caused these to go nowhere.
But the die had been cast months earlier by GOP Pres. Donald Trump and Republican congressional leaders. The heralded budget bill that came into fruition slashed the timeframe for coming into production by five years, meaning a facility had to be up and running by the end of 2027 to qualify for the 45V tax credit, which applies on a sliding scale depending upon how far below 4 kg carbon/1 kg of hydrogen the output was, although it retained the prevailing wage requirement that drives labor costs significantly higher that if not followed cut the credit by four-fifths.
These constraints contributed to the project’s demise, along with stubbornly high production costs compared to fossil fuels, weakening demand, and the growing realization by the main drivers of the move towards hydrogen and reduced reliance on fossil fuels, most European counties short of fossil fuels, that backing such a policy to the extent they have has become too politically prohibitively expensive and thus cut targets. Simply, it became clear that even if the race to go online in 18 months could succeed, the demand wouldn’t be there even with the subsidization, and a handoff to anther concern fizzled out.
Remarkably, the European pullback is such that the project otherwise could have been advantage if it hadn’t been so severe. The European Union’s targets concentrate on “green” hydrogen, or that made totally through renewable resources. Blue hydrogen, made using the cleanest of fossil fuels natural gas, could have been a less ambitious fallback position, but state after state has made such retreats that apparently Air Products analysts didn’t see a profitable path forward (a few EU members have not relented).
Further, the termination could have a knock-on effect. Hyundai’s planned steel plant nearby has been intended to use hydrogen when it starts up in 2029. But the Air Products bailout might be a canary in a coal mine that leads Hyundai to abandon all together its blue hydrogen plans with some supply removed from the local market, which also would lower demand for carbon capture: with its miss on the 45V credit, it still might enjoy the 45Q credit for CCS from that process.
Indisputably the presence of tax credits drives this process of a grossly uneconomic enterprise of taking the world’s most prevalent gas and stuffing it down pores to remain perhaps forever, akin to making useless widgets. The bankruptcy of catastrophic anthropogenic global warming as a serious, evidence-backed theory and Europe’s retreat from draconian emissions targets – CCS supporters often allege economic benefits will accrue to the U.S. through sale of carbon credits even as these become less lucrative and reality sinks in the impact of CCS is microscopic on total carbon output – reveal the only thing driving CCS and hydrogen production are the tax credits.
Ironically, Trump didn’t endorse in the recent Louisiana Republican Senate nomination battle a candidate who pledged to work against this wasteful subsidization if elected, backing his opponent. In fact, Trump’s original budget bill would have axed the 45V credit entirely. Maybe it didn’t, but real-world economics increasingly are mooting it, and may yet blunt further CCS spread in Louisiana.
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