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Air Products scraps Louisiana hydrogen project
Company says expected returns failed to meet criteria for the clean energy complex
Key Takeaways:
- Air Products canceled its Louisiana Clean Energy Complex on June 30, citing expected financial returns below its criteria.
- The company will take a pretax charge of up to $2.9 billion tied to the Louisiana project and other clean energy initiatives.
- Air Products also will discontinue a zero-carbon liquid hydrogen facility in Arizona and smaller clean energy distribution projects.
Air Products and Chemicals Inc. is scrapping plans to develop a multibillion-dollar project in Louisiana that would have produced of hydrogen and captured carbon dioxide.
The company will take a pretax charge of as much as $2.9 billion in its fiscal third quarter tied to canceling the Louisiana Clean Energy Complex and other initiatives, Air Products said June 30 in a statement. The firm said it made the decision to halt the project based on expected financial returns not meeting its “stringent” criteria.
Allentown, Pa.-based Air Products ranks No. 72 on the Transport Topics Top 100 list of the largest private carriers in North America.
The move is the latest setback in the push to develop hydrogen as a clean fuel in the U.S. after the Trump administration’s signature tax bill slashed a tax credit for the gas. It’s also another blow for carbon capture and sequestration, which the oil and natural gas industry has long promoted as key to fighting global warming.
“What you are seeing here is about reduced government support for the industry long term,” said Joseph Majkut, a director at the Center for Strategic and International Studies, a Washington-based research group. “The future for hydrogen projects in the United States is in great question given lack of support for climate action, no federal climate policy and a more challenging fiscal picture coming into the future.”
Once seen as a climate-friendly way to power heavy industry from ships to steel and cement factories, hydrogen projects around the world have been cancelled or scaled-back amid weak demand and high costs. The Trump administration has canceled billions of dollars in hydrogen projects destined for the West Coast, which the previous Biden administration envisioned as helping start a market for the nascent fuel.
Air Products announced the Louisiana Clean Energy Complex in 2021 in what would have been its largest-ever U.S. investment, with an expected $4.5 billion cost. The project as envisioned would have used natural gas to produce 750 million cubic feet of so-called blue hydrogen, in which hydrocarbons are used as a feedstock in combination with carbon capture. The CEO overseeing the project, Seifi Ghasemi, was later ousted. The project was expected to be operational in 2026.
Air Products also said June 30 it will discontinue a zero-carbon liquid hydrogen facility in Casa Grande, Ariz., and other smaller-scale projects supporting clean energy distribution.
“These exits are being driven by challenging commercial conditions, project-specific economic factors, and slower-than-expected development in certain markets, largely hydrogen for mobility,” the company said.
Research firm Capstone said in an email that the decision by Air Products to stop developing the project is more likely the result of factors including potentially unexpected costs or challenges to secure offtake agreements.
“Market reality is not matching the exuberance the industry had a few years ago,” said Majkut, who is the director of CSIS’ Energy Security and Climate Change Program. “We are are not seeing the demand for hydrogen projects that were imagined.”
