Trump Administration Cuts $3.7 Trillion from Green Energy Projects

The Trump administration has cut $3.7 trillion in funding for 24 green energy projects. Of these, 70% were approved during the Biden administration. This move affects oil giant ExxonMobil (NYSE: XOM), which will lose $332 million in funding for a carbon capture and sequestration (CCS) project at its Baytown, Texas refinery. Additionally, a customer linked to Exxon will also lose funding.

Exxon sees carbon capture and storage as a potential $4 trillion global market opportunity. The funding cuts raise questions about the viability of Exxon’s CCS ambitions and overall growth in shareholder value.

Details on the Baytown Project

Exxon aims to develop the world’s largest low-carbon hydrogen and ammonia production facility at its Baytown refinery. This facility would generate 1 billion cubic feet of low-carbon hydrogen daily from natural gas and produce over 1 million tons of low-carbon ammonia annually. The hydrogen is intended for use in Exxon’s olefins plant, which manufactures essential ingredients for products like plastics and adhesives. Recently, Exxon secured a deal to sell low-carbon ammonia to Japan’s Marubeni.

A crucial component of the Baytown project is its associated CCS initiative, which aims to store up to 10 million metric tons of carbon dioxide per year. This capacity is equivalent to the emissions from over 2 million cars. Exxon estimates that the project would capture 98% of the carbon dioxide produced by the facility each year, a selling point for potential clients like Marubeni, which plans to use this ammonia for steelmaking energy.

Exxon has labeled the Baytown project a landmark initiative. The company hoped to finalize investment decisions this year, targeting production to begin between 2027 and 2028. However, this timeline now depends on supportive government policies, which are currently uncertain.

Impact on Calpine’s Project

Calpine, a power producer, is also facing funding cuts from the Trump administration. The company previously received up to $270 million for a CCS project at its Baytown facility, along with a similar amount for a project in California. The Texas initiative aims to capture 95% of emissions from its Baytown Energy Facility.

This funding cut could indirectly affect Exxon’s CCS efforts. In April, Exxon and Calpine entered into a deal to transport and store up to 2 million metric tons of carbon dioxide from the Baytown Energy Center, which would enhance Exxon’s lower-carbon offerings.

Anticipated Challenges Ahead

ExxonMobil is actively pursuing up to $30 billion in lower emissions investments, including projects like Baytown. These initiatives can provide new growth avenues, as many low-carbon projects promise more stable earnings compared to the oil and gas sector, backed by long-term contracts.

While CCS holds substantial promise, Exxon’s near-term growth strategy remains focused on its $140 billion investment in major projects and development in the Permian Basin. This plan is projected to generate an additional $20 billion in earnings and $30 billion in cash flow by 2030. Therefore, the loss of Baytown funding is unlikely to derail Exxon’s plans for shareholder value growth.

Investment Considerations for ExxonMobil

Before investing in ExxonMobil, note that it was not included among the top investment recommendations from industry analysts. Other stocks may present more promising returns in upcoming years.

Matt DiLallo has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.