CNX Issues Statement on Section 45V Hydrogen Production Tax Credit Implementation Guidance

Rhea-AI Summary

CNX Resources (NYSE: CNX) has responded to the Department of Treasury's final rules regarding the Section 45V Hydrogen Production Tax Credit under the Inflation Reduction Act. While the company welcomes the recognition of captured waste coal mine methane (CMM) as a feedstock for hydrogen production, CNX finds the implementation rules too restrictive and economically insufficient to warrant expanding their CMM capture operations for hydrogen production.

Despite these limitations, CNX plans to explore alternative incentive pathways for CMM volumes, including voluntary markets, other tax incentives, and compliance program commercial opportunities that acknowledge waste mine methane capture.

Positive

• Recognition of CMM as valid feedstock for hydrogen production, validating its environmental and economic value
• Multiple alternative monetization pathways available for CMM volumes

Negative

• 45V implementation rules deemed too restrictive for economic viability
• Company unable to expand CMM capture operations for hydrogen production under current incentives

Insights

Environmental Policy Analyst

<p>The Treasury Department's decision to recognize captured waste coal mine methane (CMM) as a hydrogen feedstock represents a nuanced policy development, but the restrictive nature of the final 45V rules significantly diminishes its practical value. The implementation framework appears to have created a <b>misalignment between environmental objectives and economic feasibility</b>.</p><p>CNX's pivot toward alternative monetization pathways, including voluntary markets and other tax incentives, suggests that the 45V credit structure falls short of providing sufficient economic motivation for expanded CMM operations. This strategic shift indicates that the regulatory framework may need refinement to effectively incentivize methane capture projects, particularly given the critical role of CMM reduction in achieving broader climate goals.</p>

Energy Market Strategist

<p>The Treasury's guidance creates a complex dynamic for CNX's business model. While the recognition of CMM as a hydrogen feedstock validates the company's asset base, the stringent requirements effectively <b>limit the economic upside</b> of hydrogen production. This forces CNX to explore alternative commercialization routes, which could actually prove more profitable than the 45V pathway.</p><p>The company's emphasis on voluntary markets and compliance programs suggests potential revenue streams that might offer better returns compared to the hydrogen production tax credit. This strategic flexibility could actually benefit shareholders by allowing CNX to optimize its CMM monetization strategy across multiple markets rather than being constrained by rigid tax credit requirements.</p>

PITTSBURGH, Jan. 3, 2025 /PRNewswire/ -- Today, in response to the issuance of final rules regarding the Inflation Reduction Act's Section 45V Hydrogen Production Tax Credit, CNX Resources Corporation (NYSE: CNX) released the following statement: 

"The Department of Treasury's recognition of captured waste coal mine methane (CMM) as a feedstock for hydrogen production is validation of its inherent environmental and economic benefits and an important step in continuing to monetize the value of this unique asset. However, we believe that the final 45V implementation rules are overly restrictive across a range of feedstocks and do not currently appear to create sufficient economic incentives for the Company to expand its CMM capture operations for hydrogen end use.

"Notwithstanding the specifics of the 45V rule, the Company intends to utilize this important validation of the product to pursue other incentive pathways for CMM volumes including voluntary markets, other tax incentives, and compliance program commercial opportunities that recognize waste mine methane capture."

About CNX Resources
CNX Resources Corporation (NYSE: CNX) is unique. We are a premier, ultra-low carbon intensive natural gas development, production, midstream, and technology company centered in Appalachia, one of the most energy abundant regions in the world. With the benefit of a 160-year regional legacy, substantial asset base, leading core operational competencies, technology development and innovation, and astute capital allocation methodologies, we responsibly develop our resources and deploy free cash flow to create long-term per share value for our shareholders, employees, and the communities where we operate. As of December 31, 2023, CNX had 8.74 trillion cubic feet equivalent of proved natural gas reserves. The company is a member of the Standard & Poor's Midcap 400 Index. Additional information is available at www.cnx.com.

Cautionary Statements
We are including the following cautionary statement in this press release to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of us. With the exception of historical matters, the matters discussed in this press release are forward-looking statements (as defined in 21E of the Securities Exchange Act of 1934 (the "Exchange Act")) that involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. These forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income, and capital spending. When we use the words "believe," "intend," "expect," "may," "should," "anticipate," "could," "estimate," "plan," "predict," "project," "will," or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. When we describe a strategy that involves risks or uncertainties, we are making forward-looking statements. The forward-looking statements in this press release speak only as of the date of this press release; we disclaim any obligation to update these statements. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies, and uncertainties, most of which are difficult to predict and many of which are beyond our control. Specific factors that could cause future actual results to differ materially from the forward-looking statements are described in detail under the captions "Forward-Looking Statements" and "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (SEC) and any subsequent reports filed with the SEC. Those risk factors discuss, among other matters, pricing volatility or pricing decline for natural gas and NGLs; local, regional and national economic conditions and the impact they may have on our customers; the impact of events beyond our control, including a global or domestic health crisis; dependence on gathering, processing and transportation facilities and other midstream facilities owned by others; conditions in the oil and gas industry; our current long-term debt obligations, and the terms of the agreements that govern that debt; strategic determinations, including the allocation of capital and other resources to strategic opportunities; cyber-incidents targeting our systems, oil and natural gas industry systems and infrastructure, or the systems of our third-party service providers; and changes in safety, health, environmental and other regulations.

 

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SOURCE CNX Resources Corporation

FAQ

How does the new Section 45V Hydrogen Production Tax Credit affect CNX's operations?

The tax credit rules recognize CMM as a feedstock for hydrogen production, but CNX finds them too restrictive and economically insufficient to expand their CMM capture operations for hydrogen production.

What alternative pathways is CNX pursuing for CMM volumes?

CNX plans to pursue voluntary markets, other tax incentives, and compliance program commercial opportunities for CMM volumes.

Why is CNX not expanding its CMM capture operations for hydrogen production?

CNX considers the final 45V implementation rules overly restrictive and lacking sufficient economic incentives to justify expansion of CMM capture operations for hydrogen end use.

What is the significance of CMM being recognized as a hydrogen production feedstock for CNX?

The recognition validates CMM's environmental and economic benefits and represents an important step in monetizing this unique asset for CNX.