Commodities
Biden’s green hydrogen plan hits climate obstacle: Water shortage
© Reuters. FILE PHOTO: President Joe Biden shakes hands with Rep. Al Green, D-Texas, after the State of the Union address to a joint session of Congress at the Capitol, Tuesday, Feb. 7, 2023, in Washington. Jacquelyn Martin/Pool via REUTERS/File Photo
By Valerie Volcovici
(Reuters) – The Biden administration’s climate agenda is facing an unexpected challenge in drought-prone Corpus Christi, Texas, where a proposed clean hydrogen hub would require the installation of energy-intensive, expensive and potentially environmentally damaging seawater desalination plants.
The Gulf Coast port is in the running for up to $1 billion available under President Joe Biden’s 2021 Infrastructure Investment and Jobs Act to create a regional hub to produce hydrogen, a low-emissions fuel made by electrolyzing water that can help decarbonize heavy-emitting industries and transportation.
A hydrogen hub would require access to millions of gallons of water – a challenge in Corpus Christi which is experiencing a multi-year drought. While local officials say they can provide that water by constructing a seawater desalination plant, environmental groups and some local residents and lawmakers are lining up to oppose desalination sites.
“It makes no sense to create a purported clean energy source that in turn destroys an entire ecosystem, threatens other economies reliant upon a healthy bay system, and usurps the water supply for residents,” the Coastal Alliance to Protect the Environment, a Corpus Christi activist group, wrote in a letter to U.S. Energy Secretary Jennifer Granholm, shared with Reuters.
Reuters interviewed six researchers who study hydrogen as green power and had exclusive access to an analysis by Rystad Energy consultancy that showed that the Biden administration’s vision of low-carbon hydrogen may run into a challenge that is itself exacerbated by climate change: water scarcity.
Producing hydrogen requires enormous amounts of fresh water in a world increasingly affected by climate-driven drought.
Nine of the 33 projects on the Department of Energy shortlist for the hydrogen hubs are in highly water-stressed regions, according to Rystad data.
Those locations include Southern California, Colorado, Kansas and New Mexico as well as Texas. Globally, the picture is even worse, with more than 70% of proposed green hydrogen projects located in water-stressed regions like the Middle East.
“Most of the world’s planned green hydrogen projects are to be located in water-stressed regions,” said Minh Khoi Le, renewable energy analyst at Rystad, adding that this would create demand for more desalination plants.
The Biden administration is offering companies up to $100 billion in tax credits and regions up to $7 billion in grants to build out hydrogen hubs to help reach a target of producing 50 million metric tons of clean hydrogen fuel by 2050.
The DOE will announce the hubs in September.
The DOE declined to comment on the Corpus Christi or other hydrogen hub applications, but pointed Reuters to the agency’s funding announcement, which “acknowledges that water consumption for H2Hubs could place additional stress on regional water resources.”
The U.S. Environmental Protection Agency’s Assistant Administrator for Water Radhika Fox told Reuters that “more water systems are considering desalination as source water becomes scarcer and treatment technology improves” but did not comment directly about Corpus Christi.
Peter Zanoni, the city manager for Corpus Christi, said the hydrogen project, if approved, all but requires the adoption of seawater desalination.
Even with around 100 million gallons of groundwater supply per day, the city is experiencing drought conditions and limiting the use of sprinklers and irrigation to once a week, according to its drought contingency plan.
The city is contracted to supply up to 25 million gallons of water per day to major industrial users ExxonMobil (NYSE:) and Saudi Arabia’s Basic Industries Corporation, Zanoni said, and anticipates hosting at least a half dozen green hydrogen producers at the hub, each which would need around 3 to 4 million gallons of fresh water per day.
He said the city plans to add at least 70 million gallons of water per day of capacity, including at least 30 million from the proposed seawater desalination plant. “That drought-proof source is really appealing to us,” Zanoni said.
WATER WARS
While the United States has hundreds of desalination plants scattered across the country to treat mildly brackish inland sources of water, transforming ultra-salty ocean water into fresh water carries higher risk, some water experts say.
Pumping the briny byproduct of desalination into Corpus Christi Bay could cost the fishing industry around $6 million per year by killing off seafood species like shrimp and Atlantic croaker, according to Texas A&M University-Corpus Christi’s Paul Montagna, an endowed chair at the Harte Research Institute for Gulf of Mexico Studies.
And seawater desalination plants are energy intensive and expensive to build and maintain, energy experts say. The Poseidon plant near San Diego, California – the largest seawater desalination plant in the Western Hemisphere – cost over $1 billion to build and requires nearly $275 million in upgrades to meet updated state rules to protect marine life that can get sucked into the intake pipes or are affected by the briny discharge from the plant.
In March, the EPA stepped in with a $170 million loan to offset the price spikes for local consumers.
Corpus Christi first proposed seawater desalination in 2017 to supply its rapidly growing energy and petrochemicals industries.
The city has struggled to secure federal environmental permits and local support.
The EPA in January said it will not recognize a state-issued pollutant discharge permit for one of the proposed desalination plants on Harbor Island until Texas regulators conduct a more thorough environmental impact review of groundwater use and conservation efforts.
In a letter to the Texas Commission on Environmental Quality in September, the EPA said it “continues to have concerns regarding reporting and monitoring requirements for total dissolved solids, chlorides, and sulfates.”
In October, a local residents’ association from the Hillcrest neighborhood, a majority black area that is already home to refineries, filed a Civil Rights Act complaint saying the proposed Inner Harbor desalination plant would worsen pollution.
The city is seeking regulatory approval for three other desalination sites.
Errol Summerlin, founder of local environmental group CAPE, said the environmental costs of seawater desalination were too high, even if it is in support of a low-carbon fuel.
“This plan would destroy an ecosystem to create an unproven solution to the world’s climate crisis,” he told Reuters.
Brandon Marks, a regional campaigner for the Texas Campaign for the Environment, said heavy industrial users, not residents, have the most to gain from the proposed desalination plants.
A report released in November by consultancy Autocase Economic Advisory said that over the last decade, nearly 70% of the increase in water use in the Corpus Christi area came from industrial users compared to just under 6% from households, commercial uses, fire protection, public recreation, and sanitation.
“The whole reason they are pursuing this water is to enable unfettered growth, which would not only harm the bay but harm communities of the bay area,” Marks said.
Charles Zahn, chairman of the Port of Corpus Christi and a major proponent of desalination, said desalination plants could be a boon for the region, even offering the opportunity to sell water to the city of San Antonio, if there was a surplus.
“We need desalination to bring in industry that brings us jobs and increases our tax base,” he said. “I think water is probably the number one issue in Texas and we have the ability to help Texas.”
By Anna Hirtenstein
LONDON (Reuters) -Oil prices surged on Friday and were on track for a third straight week of gains as traders focused on potential supply disruptions from more sanctions on Russia and Iran.
futures gained $2.66, or 3.5%, to $79.58 a barrel by 1154 GMT, reaching their highest in more than three months. U.S. West Texas Intermediate crude futures advanced $2.64, or 3.6%, to $76.56.
Over the three weeks to Jan. 10, Brent has climbed 9% while WTI has jumped 10%.
“There are several drivers today. Longer term, the market is focused on the prospect for additional sanctions,” said Ole Hansen, head of commodity strategy at Saxo Bank. “Short term, the weather is very cold across the U.S., driving up demand for fuels.”
Ahead of U.S. President-elect Donald Trump’s inauguration on Jan. 20, expectations are mounting over potential supply disruptions from tighter sanctions against Iran and Russia while oil stockpiles remain low.
This could materialise even earlier, with U.S. President Joe Biden expected to announce new sanctions targeting Russia’s economy before Trump takes office. A key target of sanctions so far has been Russia’s oil and shipping industry.
“That would be the farewell gift of the Biden administration,” said PVM analyst Tamas Varga. Existing and possible further sanctions, as well as market expectations of draws on fuel inventories because of the cold weather, are driving prices higher, he added.
The U.S. weather bureau expects central and eastern parts of the country to experience below-average temperatures. Many regions in Europe have also been hit by extreme cold and are likely to continue to experience a colder than usual start to the year, which JPMorgan analysts expect to boost demand.
“We anticipate a significant year-over-year increase in global oil demand of 1.6 million barrels a day in the first quarter of 2025, primarily boosted by … demand for , kerosene and LPG,” they said in a note on Friday.
Meanwhile, the premium on the front-month Brent contract over the six-month contract reached its widest since August this week, potentially indicating supply tightness at a time of rising demand.
Inflation worries are also delivering a boost to prices, said Saxo Bank’s Hansen. Investors are growing concerned about Trump’s planned tariffs, which could drive inflation higher. A popular trade to hedge against rising consumer prices is through buying oil futures.
Oil prices have rallied despite the U.S. dollar strengthening for six straight weeks, making crude oil more expensive outside the United States.
By Karen Braun
NAPERVILLE, Illinois (Reuters) -If anything can derail a price rally, it is a curveball from the U.S. Department of Agriculture.
Chicago corn futures have ticked slightly lower to start the year, but they had climbed nearly 12% in the final two months of 2024, an unusually strong late-year run.
Speculators now hold their most bullish corn view in two years, and luckily for them, the trade has already accepted that last year’s U.S. corn yield was a whopper.
Friday will feature USDA’s biggest data release of the year, with primary focus on the most recent U.S. corn and soybean harvests. U.S. quarterly stocks, U.S. winter wheat seedings and routine global supply and demand updates will also compete for attention.
U.S. CORN AND BEANS
On average, analysts peg U.S. corn yield at 182.7 bushels per acre, down from 183.1 in November. The trade estimate is more than 5 bushels above last year’s record and above USDA’s initial trendline yield for the first time in six years.
Bearish yield outcomes are less likely when the estimates are already large, and only four of 19 polled analysts see corn yield rising from November. However, the range of trade estimates (2.4 bpa) is smaller than usual, flagging the potential for surprise.
In the last decade, analysts anticipated the wrong direction of U.S. corn yield in January only once (2019). They did so three times for soybean yield (2016, 2019, 2022).
But bets are somewhat off for U.S. soybean yield outcomes because USDA’s slashing of the forecast in November was the month’s largest cut in 31 years. Trade estimates indicate some uncertainty around U.S. soybean production as the ranges for both yield and harvested area are historically wide.
Regardless, U.S. soybean supplies are expected to remain ample and at multi-year highs. However, USDA last month pegged 2024-25 U.S. corn ending stocks below the prior year’s level for the first time.
If USDA cuts U.S. corn ending stocks on Friday as expected, it would be the agency’s seventh consecutive monthly reduction. Such a streak has not been observed in at least two decades, reflective of the strong demand that has recently lifted corn prices.
From a market reaction standpoint, these demand dynamics could be somewhat insulating if the U.S. corn crop comes in larger than expected. The last two times CBOT corn had a distinctly negative reaction on January report day were 2012 and 2024, the latter sparked by a huge yield above all trade estimates.
U.S. WHEAT
USDA will not officially issue 2025-26 outlooks until May, but the wheat market will receive its first piece of 2025-26 U.S. crop intel on Friday with the winter wheat planting survey. Total (EPA:) U.S. winter wheat acres are pegged at 33.37 million, very close to both last year and the five-year average.
Analysts have had a rough time anticipating the planting survey in the last two years, coming in almost 1.4 million acres too high last year but lowballing by nearly 2.5 million acres in 2023.
Wheat traders have struggled to find viable bullish narratives despite wheat stocks among major exporters seen dropping to 17-year lows, so another big miss in the U.S. wheat acreage could either support or undermine the recent sentiment.
SOUTH AMERICA
The U.S. crops will probably dominate the headlines on Friday, but it is not too early to watch out for forecast changes in South America. Analysts see USDA upping Brazil’s 2024-25 soybean harvest to a record 170.28 million metric tons from the previous 169 million.
USDA has increased Brazil’s soy crop in three of the last eight Januarys, both on area and yield improvements, and many industry participants have already been factoring in a number north of 170 million tons.
For Argentina, there are already fears that ongoing dry weather could eventually warrant more significant cuts to soybean and corn crops than are anticipated for Friday. American and European weather model runs on Thursday remained stingy with the rainfall over the next two weeks.
USDA already hiked Argentina’s soybean output last month on higher area. The agency increased the crop last January but reduced it in the prior three Januarys. Current crop conditions are slightly worse than a year ago but better than in the prior three years.
Karen Braun is a market analyst for Reuters. Views expressed above are her own.
Investing.com– Oil prices steadied Thursday as traders digested data showing an unexpected increase in US product inventories, while weak economic data from top importer China weighed.
At 05:25 ET (10:25 GMT), expiring in March gained 0.1% to $76.25 a barrel, while rose 0.1% to $73.37 a barrel.
The crude benchmarks had slumped more than 1% on Wednesday, but trading ranges, and volumes, are likely to be limited throughout Thursday with the US market closed to honor former President Jimmy Carter, ahead of a state funeral later in the session.
China inflation muted in December
Chinese inflation, as measured by the , remained unchanged in December, while the shrank for a 27th consecutive month, data showed on Thursday.
The reading pointed to limited improvement in China’s prolonged disinflationary trend, even as the government doled out its most aggressive round of stimulus measures yet through late-2024.
China is the world’s biggest oil importer, and has been a key source of anxiety for crude markets. Traders fear that weak economic growth in the country will eat into oil demand.
The country is also facing potential economic headwinds from the incoming Donald Trump administration in the US, as Trump has vowed to impose steep trade tariffs on Beijing.
US oil product inventories rise sharply
U.S. gasoline and distillate inventories grew substantially more than expected in the week to January 3, government data showed on Wednesday.
inventories grew 6.3 million barrels against expectations of 0.5 mb, while grew 6.1 mb on expectations of 0.5 mb.
Overall crude also shrank less than expected, at 0.96 mb, against expectations of 1.8 mb.
The build in product inventories marked an eighth straight week of outsized product builds, and spurred concerns that demand in the world’s biggest fuel consumer was cooling.
While cold weather in the country spurred some demand for heating, it also disrupted holiday travel in several areas.
EIA data also showed that US imports from Canada rose last week to the highest on record, ahead of incoming U.S. president Donald Trump’s plans to levy a 25% tariff on Canadian imports.
Canada has been the top source of U.S. oil imports for many years, and supplied more than half of the total U.S. crude imports in 2023.
Strength in the also weighed on crude prices, as the greenback shot back up to more than two-year highs on hawkish signals from the Federal Reserve.
A strong dollar pressures oil demand by making crude more expensive for international buyers.
(Ambar Warrick contributed to this article.)
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