Exxon halts plans for massive low-carbon hydrogen facility in Texas

Exxon Mobil has pulled the plug on what would have been one of the world’s largest hydrogen plants, the latest setback for the effort to scale production of low-carbon versions of the fuel.

In 2022, the oil giant announced plans to build a facility at its refining and petrochemical complex in Baytown, Texas, with the capacity to produce 1 billion cubic feet per day of so-called blue hydrogen, which is made using natural gas and carbon-capture equipment. It won a nearly $332 million grant from the Biden administration’s Department of Energy to finance the project.

But the Trump administration yanked that funding this spring. Since blue hydrogen typically costs about one-third more than the ​“gray” version of the fuel made with unmitigated gas, Exxon Mobil CEO Darren Woods said the company could not find enough buyers willing to pay the premium.

“There’s been a continued challenge to establish committed customers who are willing to provide contracts for off-take,” Woods said in an interview with Reuters.

Exxon Mobil Corp. did not return Canary Media’s call Wednesday requesting comment.

The pullback highlights mounting problems for the clean hydrogen industry. Green hydrogen, the zero-carbon version of the fuel made with clean electricity and water, costs even more than the blue or gray types. In October, the Trump administration terminated federal funding for two regional hydrogen hubs on the West Coast that were meant to help bring down the cost of the green fuel. Blue hydrogen, in theory, was seen as less politically vulnerable since its production ensures a market for gas. But that, too, now appears to be running into similar problems.

“Exxon’s decision reflects a broader reality: Large-scale hydrogen projects depend on long-term market signals, stable policy environments, and customers ready to commit,” said Roxana Bekemohammadi, the founder and executive director of the United States Hydrogen Alliance, an industry group. ​“These dynamics take time to mature.”

But it’s not just the Energy Department’s decision to shutter its Industrial Demonstrations Program, which had given Exxon Mobil the grant, and the cuts to the 45V federal tax credits, which support low-carbon hydrogen production, that have put the industry on shaky ground.

Trump administration moves have also undermined demand for low-carbon hydrogen. In October, the U.S. government thwarted an effort at the United Nations’ International Maritime Organization to put a price on carbon emissions from the shipping sector, pressuring foreign delegates to back off a proposal that would have expanded the market for low-carbon hydrogen.

Blue hydrogen also faces some specific headwinds.

Late last month, the European Parliament passed legislation outlining rules for low-carbon hydrogen that require producers to demonstrate not only that carbon-capture equipment catches at least 70% of emissions but also ​“pretty rigorous accounting of upstream methane leakage,” according to Pete Budden of the Natural Resources Defense Council. A study published last year in the International Journal of Hydrogen Energy found that carbon-capture equipment could reduce emissions by 60%, below the threshold set in the European Union law.

“Based on the work we’ve done tracking emissions from blue hydrogen, it’s going to be really tough for U.S. hydrogen producers to meet that reduction with fossil fuels and [carbon capture and storage],” said Budden, the lead hydrogen advocate at the Natural Resources Defense Council. ​“It’s a really ambitious emissions reduction because you need a really, really high capture rate, and you need to minimize all your upstream leakage.”

In the U.S., California remains the biggest market for the fuel. While state regulators slashed their 2030 forecast for hydrogen-powered vehicles, a giant power plant in Los Angeles just received approval to convert from gas to hydrogen.

“Yes, there have been significant reductions to federal funding for programs. Yes, we took a hit this year. Yes, it caused uncertainty in the markets. And yes, it caused some projects to pause,” said Katrina Fritz, the chief executive of the California Hydrogen Business Council, the nation’s largest and oldest statewide trade group for the fuel. ​“But in California, we still have offtake markets that are moving forward. There’s still demand. And we still have new production projects moving forward.”

Among those projects: a solar-powered green hydrogen facility. Its owner? Chevron.

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