AFAICT, thescriptkiddie is talking about an electrolysis plant to create hydrogen, and then a Sabatier plant to create methane from that hydrogen and atmospheric CO2 from the air liquidation stack.
This would not make sense economically, but they have two good reasons for doing this.
1: using a carbon-neutral fuel would be on-message for Elon Musk and would mitigate a major criticism of frequent spaceflight.
2: They're going to have to do something similar on Mars to create fuel for the return flight home. So doing it at scale on Earth first may help them debug the process before trying to do it on Mars.
It can be protected from exploding rockets by berms, concrete, etc. It isn't as if an exploding rocket is a shaped charge; the force of an explosion would go up and out and be easily deflected.