INSIGHT: Texas is closer to reviving tax breaks that helped chem projects

Al Greenwood


HOUSTON (ICIS)–The Texas legislature could revive a tax break that lapsed in 2022 and that had cut costs for numerous petrochemical plants and midstream projects while attracting ambitious low-carbon fuel projects that combined process technologies in novel ways.

  • The petrochemical and refining industry in the US is concentrated in Texas and other states on the Gulf Coast, and some of the nation’s biggest projects benefited from the expired tax break, known as the Chapter 313 School Value Limitation Agreement
  • The tax break attracted green hydrogen and ammonia plants and ambitious alternative-fuel projects that rely on direct-air capture, biomass gasification and Fischer-Tropsch reactors
  • If the tax break passes, it would add to the federal incentives for which hydrogen plants and alternative-energy projects can apply

The replacement bill is called the Texas Jobs and Security Act and it passed the state’s lower chamber as House Bill 5 in a 120-24 vote.

On Monday, the state’s upper legislative chamber received the bill.

If passed, the tax-break programme would last until the end of 2033.

Arguably, the tax-break programme did not make or break large petrochemical projects, since the US has limited sites with Texas’s mix of low-cost feedstock, energy and access to existing infrastructure and logistics.

However, the tax-break applications were often one of the first places where companies would publicly disclose their plans.

In addition to petrochemical plants, midstream projects such as natural gas processing plants and fractionators had applied for the tax breaks. These projects provided the new chemical plants with the access to the low-cost feedstock that they needed.

During its final years, the programme saw a surge in applications for chemical recycling plants, green hydrogen projects, direct-air-capture plants and advanced-fuel projects.

The replacement bill is similar to Chapter 313 with one big exception: projects that produce intermittent power cannot apply for the tax break. That rules out solar panels and wind turbines, since they do not produce a steady amount of electricity.

However, the bill defines ineligible projects in terms of whether they produce continuous power. Renewable and alternative fuel projects fall outside of this definition, so they are not automatically disqualified from the tax break.

In fact, the bill singles out hydrogen fuel or feedstock as a project that would qualify for the breaks.

If the replacement bill becomes law, then new hydrogen plants and alternative-fuel projects could applying for the tax break.

If Texas revives its tax-break law, it will offer incentives on top of those offered by other states and the federal government.

Low-carbon fuel projects have long benefitted from California’s Low Carbon Fuel Standard (LCFS).

The US states of Oregon and Washington as well as the Canadian province of British Columbia have adopted LCFS policies.

Other states considering such standards include Colorado, Illinois, Iowa, Minnesota, New York, Pennsylvania and South Dakota.

For Texas and the rest of the US, the Inflation Reduction Act (IRA) expanded existing tax credits, made others more lucrative and created new ones for a variety of low-carbon projects.

The following summarises some of the energy tax provisions in the IRA.

  • The Advanced Energy Project Credit under Section 48C is a competitive tax credit that can be rewarded to plants designed to reduce greenhouse gas emissions by at least 20%. Projects that receive the Section 48C credits cannot stack them with other Section 48 credits for any products or materials produced at the plant
  • The Clean Fuel Production Credit under Section 45Z provides a production tax credit for low-carbon fuels that increases based on the magnitude of their carbon savings. The size of the tax credit is larger for sustainable aviation fuel
  • The Sustainable Aviation Fuel Credit under Section 40B creates a $1.25/gal credit for sustainable aviation fuel that are sold or used. The size of the credit increases with the fuel’s carbon savings for a maximum of $1.75/gal
  • The Credit for Carbon Oxide Sequestration under Section 45Q provides a $17/tonne credit for carbon dioxide that is stored underground; $12/tonne for CO2 used in other processes, whether its for enhanced oil recovery or chemical production. For direct-air capture, the tax credits are worth $36 for sequestration and $26 for utilisation. The credits cannot be stacked with Section 45V hydrogen credits
  • The Clean Hydrogen Production Tax Credit under Section 45V awards tax credits for hydrogen plants that increase based on their carbon savings. These cannot be stacked with the Section 45Q carbon-capture credits

Other federal programmes are also lowering costs for sustainability projects in Texas. Houston is among the places applying for the Department of Energy’s hydrogen hub programme. This programme was created by the Bipartisan Infrastructure Law.

The federal programmes and the LCFS programmes could have a multiplier on a revived Texas tax-break law. If that’s the case, Texas could see another surge in carbon-capture, hydrogen and alternative fuel projects.

That would come on top of any proposed petrochemical and midstream projects.

The following table shows some of the projects that applied for the tax breaks under the expired Texas law.

Company Product Plant type Capacity Construction Start Commerical Operations School District
Air Liquide Large Industries US O2, N2 air separation unit 2,000 tonnes/day Oct 2020 Oct 2021 Ingleside
Air Products CO, H2 methane reformer 33MM cf/day CO, 18MM cf/day H2 March 2022 Nov 2023 La Porte
Arbor Renewable Gasoline – Phase 1 renewable fuel or H2 gasification, methanol NA Q1 2022 Q4 2023 Beaumont
Arkema Intermediates NA October 2023 Jan 2025 Beaumont
Brazos Delaware Gas LLC natgas, NGLs natgas processing plant 200MM cf/day 1 Jan 2023 31 Dec 2023 Pecos-Barstow-Toyah
Brightmark Plastics Renewal Texas pyrolysis oil chemical recycling 8.4m tonnes of waste plastic 1 May 2022 Dec 31, 2024 Dayton
Chevron Phillipos Chemical 1-hexene 1-hexene NA Q1 2022 Q4 2023 Sweeny
Chevron Phillips Chemical polymer grade propylene propylene splitter 1bn lb/year PGP Q1 2022 Q4 2023 Goose Creek
Covestro MDI, PC MDI, PC NA 1 Jan 2025 2027 Goose Creek
Eastman PET chem recycling methanolysis/PET 150,000 tonnes/year rPET Q4 2024 Q4 2026 Texas City
Eastman PET chem recycling methanolysis/PET 150,000 tonnes/year rPET Q4 2024 Q4 2026 Hallsville
Enterprise Product ethylene cracker 2m tonnes/year Q2 24 15 June 2027 Beaumont
Enterprise Products purity NGLs fractionator 150,000 bbl/day Q2 24 5 Nov 2027 Barbers Hill
Enterprise Products ethylene cracker 2m tonnes/year ethylene Q2 24 5 Nov 2027 Barbers Hill
Enterprise Products propylene metathesis 1.1bn lb/year Q2 24 12 Oct 2027 Barbers Hill
Enterprise Products ethane export terminal terminal 300,000 bbl/day Q3 2022 30 Dec 2024 Orangefield
Enterprise Products ethylene cracker 2m tonnes/year Q2 2024 2027 Orangefield
Enterprise Products propylene, propane propylene/propane splitter 45,000 bbl/day Q2 2022 30 June 2024 Barbers Hill
Equistar (LyondellBasell propylene NA 950m lb/year 1 June 2025 1 Jan 2029 Sheldon
Equistar (LyondellBasell) polyethylene polyethylene worldscale 1 Jan 2027 Dec 2028 Calallen
ETC Texas Pipeline natgas, NGLs natgas processing plant 200MM cf/day 1 Aug 2022 31 Dec 2022 Wink-Loving
Formosa Plastics EDC/VCM EDC/VCM NA 2021 2023 Calhoun County
Formosa Plastics Corporation Texas 1-hexene 1-hexene NA Jan 2024 2026 Palacios
Fulcrum Trinity renewable fuel gasification/Fischer Tropsch 31m gal/year fuel Q3 2023 2026 Barbers Hill
HIF USA renewable fuel electrolyser, methanol, methanol-to-gasoline 200m gal/year fuel Q2 2023 Q4 2025 Palacios
HIF USA renewable fuel electrolyser, methanol, methanol-to-gasoline 200m gal/year fuel Q2 2023 Q4 2025 Tidehaven
HIF USA LLC renewable fuel electrolyser, CO2-to-methanol, methanol-to-gasoline 200m gal/year fuel Q2 2024 Q4 2027 Glen Rose
HyFuels Big Spring green hydrogen, ammonia, methanol, natgas electrolyser 400,000 tonnes/year H2 Q1 2027 Dec 2027 Big Spring
HyFuels Green Lake green hydrogen, ammonia, natgas, methanol electrolyser 400,000 tonnes/year H2 Q1 2027 Dec 2027 Calhoun County
Martin Operating Parnership ultra-pure sulphuric acid ultra-pure sulphuric acid NA 1 Jan 2023 Dec 31, 2023 Plainview
Nacero gasoline methane reformer, methanol, methanol-to-gasoline 90,000 bbl/day 1 Nov 2021 1 Sept 2024 Ector County
OCI Clean Ammonia ammonia, urea, UAN ammonia, urea, UAN, nitric acid 6,000 tonne/day ammonia, 2,200 tonne/day urea 2023 2027 Beaumont
OCI Fuels USA renewable fuel gasification, methanol, gasoline unit 1m tonnes/year methanol, 100,000 tonnes/year gasoline 2023 2027 Beaumont
Oxy Vinyls chlorine, caustic soda chlor-alkali plant NA Q3 2023 Q2 2026 Deer Park
Permico Midstream purity NGLs fractionator 2 150,000 bbl/day fractionation trains Jan 2026 Jan 1, 2028 Robstown
Petrologistics PDH propylene PDH 700,000 tonnes/year June 2025 Jan 2028 Alvin
Phillips 66 purity NGLs fractionator 150,000 bbl/day Jan 2026 Dec 2027 Sweeny
Plug Project green H2 electrolysis 45 ton/day H2 Q3 2022 Q3 2023 Newcastle
Proman methanol waste gasification, electrolyser 200,000 tonne/year methanol Jan 2024 June 2027 Pampa
Roehm America MMA LiMA NA Q4 2021 Q4 2023 Bay City
Sandpiper Chemicals methanol SMR, methanol unit 3,000 tonnes/day Jan 2026 Dec 2027 Texas City
Stateline Processing natgas, NGLs natgas processing plant 400MM cf/day 1 Sep 2022 1/1/2024 Pecos-Barstow-Toyah
Stepan alkoxylates alkoxylation NA Q3 2021 Q3 2023 La Porte
Targa Downstream purity NGLs fractionator 120,000 bbl/day 1 Aug 2023 31 Dec 2024 Barbers Hill
Texas Renewable Fuels (Phase I) renewable diesel, naphtha gasification, Fischer-Tropsch 33m gal/year fuel Jan 2025 Dec 2027 Newton
Texas Renewable Fuels (Phase II) renewable diesel, naphtha gasification, Fischer-Tropsch 33m gal/year fuel Jan 2028 Dec 2029 Newton

Insight article by Al Greenwood

Thumbnail shows money. Image by Shutterstock.


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