NextDecade Corporation NEXT has decided to withdraw its application for the proposed carbon capture and sequestration (CCS) projection at its Rio Grande LNG facility in Brownsville, TX.

NextDecade’s subsidiary Rio Grande LNG, LLC withdrew its application at the Federal Energy Regulatory Commission (“FERC”). This incident followed a major setback faced by the LNG export project two weeks before the D.C. Circuit Court of Appeals negated the FERC’s approval for the project.

In a letter to the FERC, the subsidiary mentioned that the project was not sufficiently developed and requested the regulatory body to discontinue the review process for the carbon capture project. However, NEXT remains committed to further developing and utilizing carbon capture technology, while reducing costs. This should also support companies that are trying to reduce emissions and achieve their clean energy target.

The ruling by the D.C. Circuit Court came in only a day after Rio Grande LNG signed a $4.3 billion contract with Bechtel for the fourth train at the LNG facility. NEXT had expressed its disappointment regarding the court’s decision. At present, the first three liquefaction trains and the associated infrastructure are under construction at the LNG facility.

NextDecade had highlighted that its carbon capture projects would capture at least 90% of the carbon emissions from the facility. This move would also allow the company to reap the benefits of valuable 45Q tax credits. The tax credits are taxpayer subsidies awarded to CCS projects. However, environmental groups were not satisfied by NEXT’s proposal to add a CCS project to the LNG export project.

The company’s plans to capture 5 million tons of carbon dioxide annually, accounted for a mere 3% reduction in the project's estimated climate impact, which was nearly 163 million tons of carbon dioxide equivalent per year. Additionally, opponents of the Rio Grande LNG project raised concerns about the voluntary addition of the CCS project, questioning the company's commitment to reducing CO2 emissions.

Zacks Rank and Key Picks

Currently, NEXT carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the energy sector are SM Energy SM, Northern Oil and Gas, Inc. NOG and MPLX LP MPLX. SM Energy presently sports a Zacks Rank #1 (Strong Buy), while Northern Oil and Gas and MPLX carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

SM Energy is an upstream energy firm operating in the prolific Midland Basin and the South Texas regions. For 2024, the company expects its production to increase from the prior-year reported figure, signaling a bright production outlook.