Investing.com -- Shares of CNX Resources Corporation (NYSE:CNX) dropped by 8% as investors reacted to the company's assessment of the final rules for the Section 45V Hydrogen Production Tax Credit issued by the Treasury Department. CNX Resources expressed concerns postmarket on Friday that the new tax credit rules do not provide enough incentive to advance its hydrogen project, which involves utilizing coal mine methane.
The company's stock experienced its most significant one-day decline since April 2020, plunging 11% on Friday. Analysts have been paying close attention to the implications of these tax credit rules for CNX Resources. Piper Sandler analyst Mark Lear (NYSE:LEA) noted, "We suspect the company was counting on the IRS allowing additional credit for coal mine methane capture where the language discussed a baseline credit assuming captured gas would be flared." Lear rates the company as underweight with a price target (PT) of $23.
In a recent press release, CNX Resources stated that while the Department of Treasury's acknowledgment of captured waste coal mine methane as a feedstock for hydrogen production is a positive validation, the final 45V rules are seen as overly restrictive. The company believes these rules do not provide enough economic incentives to expand its captured coal mine methane (CMM) operations for hydrogen use.
Despite the specifics of the 45V rule, CNX Resources plans to leverage the recognition of waste mine methane capture to explore other incentive avenues. These include voluntary markets, alternative tax incentives, and compliance program commercial opportunities that acknowledge the capture of waste mine methane.
This setback comes as the company evaluates the economic viability of its project in light of the newly established guidelines. CNX Resources is now tasked with finding alternative strategies to monetize its unique asset without the expected level of support from the 45V tax credit.
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