US Carbon Removal Hub Funding May Face Energy Department Cuts, Sources Say

WASHINGTON, March 28 (Reuters) – The U.S. Department of Energy is weighing cuts of hundreds of millions of dollars in grants to two projects in Texas and Louisiana aimed at demonstrating technology to capture carbon from the atmosphere at commercial scale, three sources familiar with the matter said.

The Direct Air Capture hubs, part of former President Joe Biden's effort to slash U.S. greenhouse gas emissions, were launched by the DOE's Office of Clean Energy Demonstrations to help commercialize the expensive and nascent carbon removal technology. At full operation, the two hubs could remove more than 2 million metric tons of carbon emissions per year, far more than the world's biggest operating DAC plant in Iceland.

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The two largest U.S. hubs are Louisiana's Project Cypress, run by research and development firm Battelle, Climeworks and Heirloom Carbon Technologies, and the South Texas DAC Hub, proposed by Occidental Petroleum subsidiary 1PointFive, Carbon Engineering, and engineering firm Worley.

The projects are on a list of Biden-era programs targeted to be eliminated to fund tax cuts in Congress's budget reconciliation bill, which is being reviewed by Energy Secretary Chris Wright, the sources said. They requested anonymity because they are not authorized to speak publicly.

The two hubs were awarded $550 million and $500 million respectively under Biden, but have so far only received their first tranche of $50 million each.

An Energy Department spokesperson said it was conducting a department-wide review to ensure programs align with the Trump administration's priorities.

“This review is ongoing, and speculation by anonymous sources about the results of the review are just that – speculation,” the spokesperson said.

The roughly 20 smaller DAC research projects identified by Biden’s administration for grants were not on the list, and their status was unclear, the sources said.

The capital-intensive demonstration projects cannot continue without receiving the rest of their grants and cannot survive even two more months of uncertainty as Wright makes his final funding decisions, said a source involved in one of the projects.

Louisiana state officials turned up the pressure on Wright and the state's congressional delegation this week to save funding for its DAC hub.

"I urge you to contact DOE Secretary Chris Wright and ask him to take every necessary step to advance this critically needed federal grant," Louisiana's Secretary for Economic Development Susan Bonnett Bourgeois wrote in a letter on Thursday to the state's U.S. senators and representatives, which was seen by Reuters.

Occidental did not respond to a request for comment on the potential DAC hub cuts but said on the company's February investor call that it has had several conversations with President Donald Trump about the need for DAC technology and for subsidies.