CNX Resources Shares Plunge Amid Tax Credit Concerns

Investing.com -- Shares of CNX Resources Corporation (NYSE:CNX) fell 8% in response to investors reacting to the company's assessment of the Treasury Department's final rules regarding the Section 45V Hydrogen Production Tax Credit. CNX Resources expressed concerns on Friday, after the market close, that the new tax credit rules do not provide sufficient incentives to advance its hydrogen project utilizing coal mine methane.

The company's stock price experienced its largest one-day drop since April 2020, declining 11% on Friday. Analysts are closely monitoring the impacts of these tax credit rules on CNX Resources. Piper Sandler analyst Mark Lear stated, "We anticipate that the company hopes the IRS will allow additional credits for coal mine methane capture under a basic credit discussed in the language assuming captured gas will be flared." Lear rates the company with a price target of $23.

In a recent press release, CNX Resources noted that the Treasury Department's recognition of captured waste coal mine methane as a feedstock for hydrogen production is a positive validation, but the final 45V rules are seen as excessively restrictive. The company believes that these rules do not provide enough economic incentives to expand operations involving captured coal mine methane (CMM) for hydrogen use.

Despite the characteristics of the 45V rule, CNX Resources plans to explore other incentive avenues using the recognition of waste mine methane capture. These include voluntary markets, alternative tax incentives, and commercial opportunities related to compliance programs that accept waste mine methane capture.

This setback comes at a time when the company is evaluating the economic feasibility of its project in light of the newly established guidelines. CNX Resources now faces the challenge of finding alternative strategies to monetize its unique asset without the expected level of support from the 45V tax credit.