Air Products will commit an additional $500m to a sustainable aviation fuel (SAF) project in California thanks to the Inflation Reduction Act, bringing the company’s investment in the facility to $2.5bn.
Pennsylvania-based Air Products teamed with World Energy earlier this year to build an expansion project at World Energy’s SAF production and distribution hub in Paramount, California.
The change in the design of the SAF facility results from the passage of the Inflation Reduction Act in the US, Air Products executives said on its fiscal 4Q22 earnings call today. The IRA includes a new $1.25 per gallon SAF credit where the fuel reduces greenhouse gas emissions by at least 50% compared to petroleum-based jet fuel.
While the total capacity at the plant remains the same at 340 million gallons per year, the portion of the output dedicated to SAF will increase, adding additional costs, company CEO Seifi Ghasemi said.
The long-term, take-or-pay agreement with World Energy includes Air Products’ construction and ownership of a new hydrogen plant to be operated by Air Products and renewable fuels manufacturing facilities to be operated by World Energy, the company said in an April news release. The project is scheduled to be onstream in 2025.
Air Products is also building a $4.5bn blue hydrogen complex in Louisiana, where plans to capture 5 million tons per year of CO2 will result in an annual benefit of roughly $425m after tax from incentives in the IRA, Ghasemi said on the call. The legislation provides a tax credit of $85 per metric ton of captured CO2.
“The numbers are very clear with regard to CO2sequestration,” Ghasemi said.
The company is conducting further evaluations of the expected impact of the IRA’s tax benefits for the Louisiana facility that could result in an expansion of the project’s scope, he added.
Also during the quarter, Air Products announced a long-term supply agreement for Imperial Oil’s proposed Strathcona renewable diesel complex, with Air Products supplying about half the low-carbon hydrogen output from its net-zero hydrogen energy complex in Edmonton, Alberta, Canada.
In addition, the company said it would invest approximately $500m to build, own and operate a 35 metric-ton-per-day facility to produce green liquid hydrogen at a greenfield site in Massena, New York, as well as liquid hydrogen distribution and dispensing operations for industrial decarbonization and mobility.
