NEW ORLEANS - Backed by President Trump and many congressional Republicans, the "One Big Beautiful Bill Act" includes a proposal to repeal tax credits for clean hydrogen production and threatens to derail the emerging hydrogen industry in the U.S., pushing investments abroad or stalling and shuttering existing projects.
Section 45V Tax Credit
The bill phases out the Inflation Reduction Act's Section 45V tax credit, which is worth up to $3/kg of clean hydrogen, after 2025. These incentives are required for making hydrogen economically viable. The House Budget Committee approved the bill in a 17–16 vote on May 18.
"This is what clean hydrogen developers feared would happen," said Nathan Howe, an energy lawyer with K&L Gates LLP's power practice group. "The tax credits are a core piece of their financial models, and with all of this uncertainty around them, any savvy developer is going to be plotting out alternative paths if the tax credit goes away."
Hydrogen industry corporations, including major players like ExxonMobil and Chevron which have invested in hydrogen technologies, are actively lobbying against the repeal of the 45V credit saying the repeal could stall U.S. progress in green or lower-emission hydrogen production and force developers to either abandon projects or pivot to less sustainable "blue hydrogen" options.
Impact on Louisiana
In Louisiana, the 45V tax credit has been a significant driver for proposed “blue” hydrogen and ammonia projects. The tax credit, coupled with Louisiana’s geological advantages, make the state a major attractor for carbon capture and sequestration expansion, with over a third of U.S. projects proposed already established here including 11 ammonia or hydrogen plants and a network of existing CO₂ pipelines.
Air Products, which is working to build the “Louisiana Clean Energy Complex” in Ascension Parish, promotes its hydrogen production as a key contributor to the energy transition, emphasizing low- and zero-carbon solutions. In practice, however, the majority of its hydrogen output is classified as "blue hydrogen" which is produced by burning fossil fuels while capturing and storing the resulting carbon emissions.
In May, Air Products announced it will delay the $4.5 billion Louisiana Clean Energy Complex and seek equity partners to take over its planned ammonia production and carbon capture and sequestration (CCS) components, which include storing CO₂ beneath Lake Maurepas.
In addition, an active lawsuit filed by Healthy Gulf, represented by Earthjustice, against the State of Louisiana in the 19th Judicial District Court challenges the state's approval of Air Products' plan to construct the carbon dioxide (CO₂) pipeline through the Maurepas Swamp Wildlife Management Area.
If Air Products sells its carbon capture function, losing full control of the CCS infrastructure, then it will no longer qualify as a “low emissions” facility under federal guidelines. The project’s anticipated start-up has been pushed back from its original 2026 target to late 2028 or early 2029, as Air Products aims to reduce its capital outlay and financial risk.
Another Louisiana “blue” ammonia and hydrogen facility is the St. Charles Clean Fuels Blue Ammonia Facility situated in St. Rose approximately 20 miles west of downtown New Orleans on the east bank of the Mississippi River in St. Charles Parish.
As with the Air Products facility, the proposed $4.6 billion St. Charles Clean Fuels Blue Ammonia Facility project will use natural gas and carbon capture to make its ammonia product “blue”. It aims to produce approximately 8,000 metric tons of ammonia per day using fossil-fuel-derived hydrogen with plans to capture and sequester over 90% of the resulting carbon dioxide emissions.
The Meaning of “Blue”
Leading scientists have argued that “blue” hydrogen technologies emit large amounts of greenhouse gases including methane which is a potent greenhouse gas. They further argue that industry claims of high carbon capture rates are exaggerated with a high risk of CO₂ pipeline leaks.
Dr. Robert Howarth, a professor of ecology and environmental biology at Cornell University, has co-authored a widely cited 2021 study with Dr. Mark Jacobson of Stanford University titled “How green is blue hydrogen?”, which concludes that blue hydrogen relies heavily on methane which leaks during extraction and transport.
The study also finds that “blue” technologies emit more greenhouse gases than burning the fossil fuels directly due to methane leakage and the energy required for carbon capture, providing limited or no climate benefits compared to conventional hydrogen production.
A study led by Matteo Bertagni at Princeton's High Meadows Environmental Institute modelling the effects of hydrogen emissions on atmospheric methane has also determined that hydrogen leaks lead to increased atmospheric methane levels, potentially offsetting the climate benefits of switching to hydrogen fuels.
The Louisiana Department of Energy and Natural Resources, now overseeing CO₂ injection wells, is widely considered to be underfunded. This year the department had a $15 million reduction in federal funding due to delays in receiving grants from the Infrastructure Investment and Jobs Act (IIJA). Additionally, the state's general fund contribution to the Louisiana Department of Energy and Natural Resources decreased by $10.9 million, bringing it down to $26.19 million.
