Sam Porter, CEO of NeuVentus, the midstream infrastructure and hydrogen storage company backed by Lotus Infrastructure Partners, said that Treasury guidance for Section 48 currently jeopardizes the company’s pipeline of salt cavern storage and pipeline projects.
NeuVentus is developing the Moss Bluff salt cavern storage and pipeline project, an enormous undertaking located in the Houston-Baytown-Beaumont-Port Arthur corridor, which places it near the epicenter of the existing and planned Gulf Coast hydrogen economy, including HyVelocity Hydrogen Hub projects.
Section 48 guidance for energy storage is the key to ensuring the Moss Bluff project qualifies for the full 50% investment tax credit. And while guidance for Section 48 attracted considerably less attention compared to the 45V clean hydrogen tax credit — with only 340 comments in the rulemaking process compared to nearly 30,000 for 45V — the rule has important implications for the development of hydrogen projects across the U.S., especially those that rely on new pipeline and storage infrastructure.
The subjective end use test included in the guidance essentially means that hydrogen destined for ammonia as fertilizer won’t meet the law’s energy standards and thus will not qualify for the ITC, Porter said. Critics say this will be impossible for the IRS to administer as it will require tracking, tracing and verification of all use cases through a vast hydrogen ecosystem.
“Is the IRS going to play chemist?” Porter said discussing the regulations with ReSource.
In a letter to the Treasury, NeuVentus states that Moss Bluff and multiple projects in the HyVelocity Hub contemplate producing, transporting, or storing ammonia and/or methanol as low-carbon energy sources.
None of these projects would be able to take advantage of the investment tax credit for hydrogen storage as drafted.
“A developer must have certainty of tax treatment prior to spending significant resources developing major infrastructure, especially in a first-of-a-kind project like hydrogen storage,” NeuVentus materials state.
