Louisiana's Growing CCUS Market Complements RD/SAF Role

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Written by Paul Wiseman for IIR News Intelligence (Sugar Land, Texas)

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Summary

Louisiana leads the nation in current and proposed renewable diesel and sustainable aviation fuel production capacity, as well as being second in CCUS projects.

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In Louisiana, It's Not Just Fossil Fuels Any More

For decades Louisiana has been among the U.S. leaders in production of oil and natural gas. Now, it is gaining traction in the production of environmentally friendly renewable diesel (RD) and sustainable aviation fuel (SAF).

Industrial Info's Vice President of Energy Intelligence Hillary Stevenson muses that the reason for the latter could be that the state is also second in permitting of Class VI wells used for carbon capture, usage and storage (CCUS) permitting.

According to Industrial Info Resources data, Louisiana's 1.3 billion gallons per year of operational RD/SAF capacity trails California's 1.75 billion gallons per year. But, should currently planned projects be completed, Louisiana would jump into the lead with 3.2 billion gallons per year, compared with California's 1.9 billion.

One question Stevenson asks: Why is Louisiana suddenly jumping ahead of California, the state known for its leadership in the energy transition in all sectors? One answer could be that clean fuel production credits under Section 45Z of the U.S. Tax Code are due to expire in 2029. So, RD and SAF producers must look elsewhere after that.

That would be to 45Q incentives (also under the U.S. Tax Code) for employing CCUS in production; these tax breaks that continue for 12 years, as long as they are in place by 2033. And in December 2023, Louisiana received what's known as "Class VI primacy," allowing the Louisiana Department of Energy and Natural Resources (LDENR) to process and issue permits for CCUS wells, which allow deep sequestration of carbon dioxide (CO2), instead of the U.S. Environmental Protection Agency (EPA).

Louisiana joined five other states in its ability to expedite permitting within its borders by removing them from the EPA's significant backlog in processing. Texas, which leads Industrial Info's list of CCUS projects, is among the six total, but California is not.

By the Numbers

• 3.2 billion: Gallons per year of RD/SAF capacity in operation or in planning in Louisiana
• 1.9 billion: Gallons per year of RD/SAF capacity in operation or planning in California

Why Class VI Primacy Matters

Stevenson explains why Class VI primacy could be helping Louisiana's RD/SAF growth: "Alternative fuel producers cannot stack the 45Z for renewable fuel production and 45Q carbon sequestration tax credits, but the two credits have different time frames.

"Credits for 45Z expire in 2029, but renewable fuel producers using carbon capture to reduce the carbon intensity of their production processes could then shift to 45Q credits. The latter are applicable for 12 years (minus the years they claimed 45Z), as long as they begin construction on the 45Z projects by 2033.

"That $85/ton 45Q credit could be really appealing to producers, making Louisiana a prime location for them to build."

Louisiana's CCUS Also Advantages Are Geological

"The state has many types of secure geologic formations for storage, so that's a great start. It has oil and gas fields which could benefit from enhanced oil recovery (EOR) carbon sequestration and other industries that could utilize captured carbon dioxide," Stevenson said."

See the attached charts showing Industrial Info Resources data on RD/SAF facilities and projects, and on Class V and VI CCUS well projects.

Strategic Biofuels a Case in Point

Late in June, carbon-negative power producer Strategic Biofuels announced the LDENR had issued the company the state's first Class VI permit for multiple wells. It will "significantly advance the company's Louisiana Green Fuels (LGF) project in Caldwell Parish," the company said in a press release.

Industrial Info Resources is tracking Strategic Biofuels' two fuel projects with which the wells are associated. Industrial Info Resources offers more information on these projects in its Global Market Intelligence (GMI) Alternative Fuel Project Database, where readers can find details--including construction schedules, investment values and necessary equipment--in detailed reports for the renewable fuels plant and renewable diesel plant.

The release added, "It provides sufficient permanent storage capacity for the CO2 associated with up to 600 MW of carbon-negative electric power generation."

"In the last 12 months, these credits have been changed by several events, including the 'One Big Beautiful Bill,' executive orders and regulatory updates, but this is where they stand at this time," Stevenson said. "Hopefully, things will stabilize so the industry can continue to plan the massive capital expenditures these projects require."

Key Takeaways

• Optimal CCUS storage options in Louisiana with 45Z credit benefits, along with Class VI primacy make the state a prime location for RD/SAF location.
• Louisiana leads the nation in RD/SAF when current production and projects are included.

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About Industrial Info Resources
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news, and analysis on the industrial process, manufacturing, and energy-related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified, and verified plant and project opportunities. Across the world, Industrial Info Resources is tracking over 250,000 current and future projects worth $30.2 trillion (USD).