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EPA grants primacy to Louisiana over CO2 injection and sequestration

More than 20 Class VI applications before the EPA will eventually transfer to Louisiana's Office of Conservation.

The US Environmental Protection Agency has granted primacy to the state of Louisiana in the permitting and regulation of underground sequestration of carbon dioxide.

Louisiana Gov. John Bel Edwards and Louisiana Department of Natural Resources (DNR) Commissioner of Conservation Monique M. Edwards made the announcement last week.

Permitting of such wells and operations, known as Class VI permits, is generally directly regulated by the EPA, though the EPA can grant primary regulatory authority to individual states that develop a regulatory framework that matches or exceeds the EPA’s Class VI standards, as is now the case in Louisiana’s Office of Conservation.

Gov. Edwards said that Louisiana’s geology and existing base of industry and pipeline infrastructure position the state to be a major player as a hub for Carbon Capture and Sequestration (CCS) projects, enabling industry to shrink its carbon footprint in a global market that is ever more carbon sensitive.

After the state Legislature made an adjustment to state law in 2019 to bring it in line with federal requirements, the Office of Conservation’s Injection and Mining Division (IMD) worked on preparing a package of CO2 sequestration regulations for about two years. That work included a painstaking review of all existing and proposed state regulations on CO2 sequestration in comparison to federal requirements.

The Office of Conservation made those state rules official in January 2021, a package of regulations that exceeds the EPA requirements in several areas, including:

  • Louisiana will not grant waivers to injection depth requirements
  • Louisiana prohibits sequestration of CO2 in salt caverns
  • Louisiana will not issue area permits for multiple wells at once, requiring each individual well to be reviewed and permitted on its own
  • Louisiana requires additional measures for monitoring systems and operating requirements

Commissioner Edwards said her office will be reaching out to EPA Region 6 to discuss handover of the more than 20 Class VI applications for Louisiana that have already begun the permitting process with the EPA.

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Atome seeking project finance for Paraguayan fertilizer project

The UK-based developer is seeking investors for a green fertilizer project in Paraguay to serve the South American and European markets.

Atome, the UK-based green hydrogen, ammonia, and fertilizer project development company, has issued a notice to seek project financing for a fertilizer project in Paraguay, according to information from the company.

The financing is for Phase 1 of the Villeta project, issued by Natixis Corporate & Investment Banking. The project will deliver green fertilizer to both South American and European markets.

The publicly traded company has large-scale projects in Latin America and Europe.

Carbon footprint analytics indicate a significant amount of carbon credit revenue generation, with some 500,000 credits potential each year, an alert sent out by the company states.

Management will present to all shareholders on 6 September at 11 a.m. BST. IDB Invest, the Washington DC based multilateral for the Americas, is already onboard with a signed mandate.

Initial carbon footprint analysis indicates a potential displacement of some 500,000 tons of carbon dioxide-equivalent each year from the production of green fertilizer at Villeta.

“As a result, the company estimates that it has the potential to generate approximately 500,000 valuable carbon credits each year,” company materials state.

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Gulf Coast Ammonia hydrogen plant comes onstream

The Air Products plant providing hydrogen to the Gulf Coast Ammonia facility has come onstream.

Air Products executives today said the plant providing hydrogen to Gulf Coast Ammonia has come onstream and is generating revenues.

Pennsylvania-based Air Products invested $500m into the steam methane reformer and hydrogen pipeline capacity, as well as an air separation unit for nitrogen and a steam turbine unit for the GCA world-scale ammonia plant.

Lotus Infrastructure and Mabanaft GmbH own the GCA facility and provided equity for the project. The project financing closed on December 30, 2019.

Jefferies last year was leading a sale of the plant, which was paused until it reached commercial operations. An official at Lotus did not immediately respond to a request for comment.

The approximately 175 million standard cubic feet per day (mmscfd) SMR built by Air Products will include the addition of over 30 miles of hydrogen pipeline from Texas City to Baytown, to be connected to its Gulf Coast Pipeline system, the company announced previously. The GCA project will use approximately 270 mmscfd of hydrogen from the SMR and Gulf Coast Pipeline. 

GCA’s ammonia facility, which will produce approximately 3,600 metric tons per day of ammonia, will also receive Air Products’ supply of approximately 90 mmscfd of nitrogen from a new ASU to be built and operated at the Texas City site.

While the hydrogen plant is onstream, Air Products CEO Seifi Ghasemi today declined to comment on the ammonia portion of the project, saying he’s like the owners of that facility to make a statement if necessary.

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NextEra leads Series A round for DAC start-up

NextEra has led a $36m Series A funding round for a start-up that’s developing hybrid direct air capture technology.

Avnos, Inc. (Avnos), the Los Angeles-based company developing novel Hybrid Direct Air Capture (HDAC) technology for carbon dioxide removal, has closed $36 million in Series A funding, according to a news release.

Avnos will use the new funds to grow its world-class team, deploy additional HDAC assets across North America and Europe, and open a new, state-of-the-art research and development facility located just outside New York City.

NextEra Energy, one of America’s largest utilities and investors in clean energy infrastructure, led the round. Other investors include Safran Corporate Ventures, Shell Ventures, Envisioning Partners, and Rusheen Capital Management. The funding supplements Avnos’ previously announced capital raises and strategic commercial agreements with Shell Ventures, ConocoPhilips, JetBlue Ventures and the Grantham Foundation, as well as pilot projects with the U.S. Department of Energy and the U.S. Office of Naval Research.

Avnos has pioneered HDAC using proprietary materials and processes to capture both carbon dioxide and water simultaneously from the atmosphere, according to a news release. The process eliminates the need for external heat input and produces approximately 5 tons of water for every 1 ton of carbon dioxide captured. Avnos’ resource-intelligent technology means lower impact on and expanded employment opportunities for the communities surrounding HDAC facilities.

“At Avnos, we believe our novel HDAC technology is the world’s best shot at reaching the much-needed gigaton scale of carbon dioxide removal,” said Will Kain, CEO of Avnos. “We feel the urgency to roll out HDAC more broadly so as to deliver on the enormous, positive climate and economic opportunities in front of us. With this substantial funding, Avnos continues to expand its unparalleled roster of partners supporting our rapid acceleration.”

The new, multi-million-dollar research and development facility, equipped with best-in-class equipment and infrastructure, will enable Avnos to accelerate the pace of scaling the company’s HDAC technology while ensuring its systems continue to operate at peak performance. The 20,000 square foot facility will be fully operational in February 2024 and will employ an estimated 20 new employees.

“Our state-of-the-art lab underscores our mission to push the frontiers of innovation and deliver scalable and efficient carbon removal solutions,” said Ben McCool, Senior VP of Technology at Avnos. “As we expand our dynamic technical team, I’m proud to cultivate a collaborative environment that brings together top-notch talent, actively shaping and advancing the cutting-edge technologies driving Avnos towards impactful solutions.”

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EXCLUSIVE: 8 Rivers co-founder departs firm

A co-founder and executive has departed the North Carolina-based firm, which recently announced an ammonia project in Texas.

Bill Brown, a co-founder of the technology commercialization firm and clean fuels developer 8 Rivers Capital, has retired from the company, a spokesperson confirmed via email.
According to Brown’s LinkedIn profile, he is serving now as CEO of New Waters Capital. He co-founded 8 Rivers and also served as CEO and CTO in this nearly 16 years there.
Brown did not respond to a request for comment.
According to 8 Rivers’ website, Dharmesh Patel is serving as interim CEO. The company recently announced development of the Cormorant Clean Energy ammonia production facility in Port Arthur, Texas
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EnCap’s Shawn Cumberland on the fund’s approach to clean fuels

Cumberland, a managing partner with EnCap Energy Transition, discusses how the clean fuels sector compares to the emergence of other new energy technologies, and outlines the firm’s wait-and-see approach to investment in hydrogen and other clean fuels.

EnCap Energy Transition, the energy transition-focused arm of EnCap Investments, is evaluating scores of opportunities in the hydrogen and clean fuels space but doesn’t feel the need to be an early mover if the risk economics don’t work, Managing Partner Shawn Cumberland said in an interview.

Houston-based EnCap prefers to invest in early stages and grow companies deploying proven technologies to the point that they’re ready to be passed onto another investor with much deeper pockets. There are hundreds of early-stage clean fuels companies looking for growth equity in the space, he said, but the firm believes it’s not necessary to deploy before the technology or market is ready.

Given the fund’s strategy of investing in the growth-equity stage, EnCap gains exposure to a niche set of businesses that are not yet subjected to the broader financial markets.

For example, when EnCap stood up Energy Transition Fund I, a $1.2bn growth capital vehicle, the manager piled heavily into storage, dedicating some $600m, more than half of the fund, to the sector.

“That was at a time when all we saw were some people putting some really dinky 10 MW and 20 MW projects online,” he said. “We absolutely wanted to be a first and fast mover and saw a compelling opportunity.”

The reasons for that were two converging macro factors. One was that the battery costs had come down 90% because of EV development. Meanwhile, the demand for batteries required storage to be built out rapidly at scale. So, that inflection point – in addition to the apparent dearth of investor interest in the space at the time – called for early action.

“We were sanctioning the build of these things with no IRA,” Cumberland said.

‘If it works’

To be sure, EnCap is not a technology venture capital firm and waits for technologies to be proven.

As such, the clean fuels sector could end up being a longer play for EnCap, Cumberland noted, but the fund continues to weigh whether there will be a penalty for waiting. In the meantime, regulatory issues like IRS guidance on “additionality” for green hydrogen and the impact of the EU’s rules for renewable fuels of non-biological origin should get resolved.

Still, market timing plays a role, and the EnCap portfolio includes a 2021 investment into Arbor Renewable Gas, which develops and owns facilities that convert woody biomass into low-carbon renewable gasoline and green hydrogen.

Cumberland also pointed to EnCap’s investment in wind developer Triple Oak Power, which is currently for sale via Marathon Capital. That investment was made when many industry players were moving toward solar and dropping attention to wind.

Now, clean fuels are trading at a premium because of investor interest and generous government incentives for the sector, he noted.

“Hydrogen, if it works, may be more like solar,” Cumberland said, describing the hockey-stick growth trajectory of the solar industry over 15 years. If the industry is cost-competitive without subsidies, there will be a flood of project development that requires massive funding and talented management teams

“We won’t be late to the party,” he said.

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Carbon credit project developer planning equity raise

A Texas-based carbon credit firm is preparing to sell credits from its first project in the US southeast and planning its first equity raise in 2024.

Sky Harvest Carbon, the Dallas-based carbon credit project developer, is preparing to sell credits from its first project, roughly 30,000 acres of forest in the southeastern US, while looking toward its first equity raise in 2024, CEO and founder Will Clayton said in an interview.

In late 2024 the company will seek to raise between $5m and $10m in topco equity, depending on the outcome of grant applications, Clayton said. The company is represented by Scott Douglass & McConnico in Austin, Texas and does not have a relationship with a financial advisor.

Sky Harvest considers itself a project developer, using existing liquidity to pay landowners on the backend for timber rights, then selling credits based on the volume and age of the trees for $20 to $50 per credit (standardized as 1 mtpy of carbon).

The company will sell some 45,000 credits from its pilot project — comprised of acreage across Virginia, North Carolina, Louisiana and Mississippi – in 2024, Clayton said. The project involves 20 landowners.

Clayton, formerly chief of staff at North Carolina-based renewables and P2X developer Strata Clean Energy, owns a controlling stake in Sky Harvest Carbon. He said he’s self-funded operations to date, in part with private debt. The company is also applying for a multi-million-dollar grant based on working with small and underrepresented landowners.

“There’s a wall of demand… that’s coming against a supply constraint,” Clayton said of companies wanting to buy credits to meet carbon reduction goals.

Sky Harvest would be interested in working with companies wanting to secure supply or credits before price spikes, or investors wanting to acquire the credits as an asset prior to price spikes, Clayton said.

“Anybody who wants to go long on carbon, either as an investment thesis or for the climate benefits to offset operational footprint, it’s a great way to do it by locking supply at a low cost,” he said.

A novel approach to credit definition

Carbon credits on the open market vary widely in verifications standards and price; they can cost anywhere from $1 to $2,000.

“There’s a long process for all the measurements and verifications,” Clayton said.

There are many forestry carbon developers paying landowners for environmental benefits and selling those credits. Where Sky Harvest is unique is its attempt to redefine the carbon credit, Clayton said.

The typical definition of 1 mtpy of CO2 is problematic, as it does not gauge for duration of storage, he said. Carbon emitted into the atmosphere can stay there indefinitely.

“If you’re storing carbon for 10, 20, 30 years, the scales don’t balance,” Clayton said. “That equation breaks and it’s not truly an offset.”

Sky Harvest is quantifying the value of carbon over time by equating volume with duration, Clayton said.

“If you have one ton of carbon dioxide going into the atmosphere forever on one side of the scale, you need multiple tons of carbon dioxide stored on the other side of the scale if it’s for any time period other than forever,” he said, noting that credit providers often cannot guarantee that the protected trees will never be harvested. Sky Harvest inputs more than 1 ton per credit, measured in periods of five years guaranteed storage at a time. “We compensate for the fact that it’s not going to be stored there forever.”

Monitoring protected land is expensive and often difficult to sustain. Carbon markets work much like conservation easements, but those easements often lose effect over time as oversight diminishes (typically because of staffing or funding shortages at the often nonprofit groups charged with monitoring).

“That doesn’t work in any other industry with real physical commodities,” Clayton said. “The way every other industry works is you pay a fund delivery. That’s our measure-as-you-go approach.”

A similar methodology has been put forward by the United Nations and has been adopted in Quebec, Clayton said.

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