The Department of Energy has decided to maintain funding for two large direct air capture projects that had been flagged last year for potential cancellation as part of a broader review of prior administration awards. The agency placed the South Texas DAC Hub and Louisiana’s Project Cypress on a list of nearly 2,000 projects that will keep their funding, according to materials the DOE sent to Congress this week.
Last October, the DOE considered cancelling billions of dollars in awards across multiple clean-energy initiatives, including grants tied to auto manufacturing, hydrogen development and carbon capture. Among the projects originally slated for cancellation were two high-profile direct air capture hubs that together were awarded about $1.2 billion under the previous administration - one in Texas involving oil company Occidental (OXY.N) and another in Louisiana.
The department indicated last year it was conducting an "individualized and thorough review of financial awards made by the previous administration." That review has now produced a list of projects the DOE says it supports continuing to fund.
Energy Secretary Chris Wright addressed the matter at a congressional hearing on Thursday, saying the department examined the candidate projects and backed those it judged "had a credible way to be helpful." In his remarks he noted the level of engagement the agency undertook with applicants: "We've had hundreds of dialogues with applicants, back and forth," Wright said.
Direct air capture hubs formed a central element of the previous administration's plan to reduce U.S. greenhouse gas emissions by scaling up nascent carbon removal technologies. If the two hubs reach full operation, their combined capacity could remove more than 2 million metric tons of carbon dioxide from the atmosphere each year.
Under the earlier awards, Project Cypress received $550 million and the South Texas DAC Hub received $500 million, but each project had so far received only an initial $50 million tranche. The DOE's Hydrocarbons Geothermal and Energy Office (HGEO) will play a role in the next steps to deploy the hubs and in efforts to unlock both appropriated and obligated funds.
Some of the carbon captured by the hubs is intended for use as a feedstock to produce jet fuel and other fuels. That use comes at a time when the global fuel supply chain is under pressure due to the war in Iran, a factor the agency noted in describing the potential applications of captured carbon.
Implications for affected sectors
- Energy and industrial sectors engaged in carbon capture and utilization stand to see continuity in project development and funding flows.
- Aviation and fuel producers may gain access to additional feedstocks derived from captured carbon as these hubs advance their operations.
- Oil and gas companies involved in hub development, including partners like Occidental (OXY.N) in Texas, remain tied to the projects' future execution and financing.