PRINTER'S NO. 3544
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 2521
Session of
2024
INTRODUCED BY WEBSTER, GUENST, HOHENSTEIN, KINKEAD, HILL-EVANS,
SANCHEZ, D. WILLIAMS AND DALEY, JULY 30, 2024
REFERRED TO COMMITTEE ON ENVIRONMENTAL RESOURCES AND ENERGY,
JULY 30, 2024
AN ACT
1 Providing for duties of Environmental Quality Board, for
2 investigatory proceedings for clean hydrogen projects, for
3 regulations for clean hydrogen projects, for applications for
4 clean hydrogen projects and for duties of investor-owned
5 utilities; and establishing the Clean Hydrogen Tax Credit
6 Program.
7 TABLE OF CONTENTS
8 Chapter 1. Preliminary Provisions
9 Section 101. Short title.
10 Section 102. Scope of act.
11 Section 103. Definitions.
12 Chapter 3. Duties of Board
13 Section 301. Investigatory proceedings for clean hydrogen
14 projects.
15 Section 302. Regulations for clean hydrogen projects.
16 Section 303. Additional requirements for clean hydrogen project
17 regulations.
18 Section 304. Federal funding eligibility and marketing
19 mechanisms.
 1 Section 305. Coordination with department.
2 Section 306. Applications for clean hydrogen projects.
3 Section 307. Consideration of applications.
4 Chapter 5. Duties of Investor-Owned Utilities
5 Section 501. Notice of applications for Federal funding.
6 Section 502. Annual reports.
7 Chapter 7. Clean Hydrogen Tax Credit Program
8 Section 701. Tax credit program.
9 Section 702. Applications for tax credit.
10 Section 703. Use of tax credits.
11 Section 704. Carryover, carryback and refund.
12 Section 705. Sale or assignment.
13 Section 706. Pass-through entity.
14 Section 707. Reports to General Assembly.
15 Section 708. Expiration.
16 Chapter 9. Miscellaneous Provisions
17 Section 901. Regulations.
18 Section 902. Effective date.
19 The General Assembly of the Commonwealth of Pennsylvania
20 hereby enacts as follows:
21 CHAPTER 1
22 PRELIMINARY PROVISIONS
23 Section 101. Short title.
24 This act shall be known and may be cited as the Clean
25 Hydrogen Production Act.
26 Section 102. Scope of act.
27 This act relates to hydrogen production.
28 Section 103. Definitions.
29 The following words and phrases when used in this act shall
30 have the meanings given to them in this section unless the
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 1 context clearly indicates otherwise:
2 "Alternative energy source." Any of the following existing
3 and new sources for the production of electricity:
4 (1) Solar photovoltaic or other solar electric energy.
5 (2) Solar thermal energy.
6 (3) Wind power.
7 (4) Large-scale hydropower.
8 (5) Nuclear power.
9 "Board." The Environmental Quality Board of the department.
10 "Clean hydrogen." A form of hydrogen generated for energy
11 that satisfies any of the following:
12 (1) Hydrogen used in a project that has been determined
13 by the United States Department of Energy to demonstrably aid
14 achievement of the clean hydrogen production standard under
15 the Energy Policy Act of 2005 (Public Law 109-58, 11 Stat.
16 594) by mitigating emissions across the supply chain through
17 aggressive carbon capture, by measures to mitigate fugitive
18 methane emissions or by the use of clean electricity or other
19 technologies or practices approved by the United States
20 Department of Energy.
21 (2) Green hydrogen.
22 (3) Hydrogen that is produced through a process that
23 results in lifecycle greenhouse gas emissions rates that are
24 within the lifecycle greenhouse gas emission ranges specified
25 under 26 U.S.C. § 45V(b)(2)(C) and (D) (relating to credit
26 for production of clean hydrogen).
27 "Clean hydrogen project." A project that results in the
28 production of clean hydrogen by an investor-owned utility,
29 including a project involving a pipeline, electrolyzer,
30 environmental controls, monitoring equipment, a dedicated
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 1 renewable energy source for electrolysis, the purchase of clean
2 hydrogen from a third party and an upgrade to a turbine at an
3 electric generating station if the upgrade is part of a Federal
4 or State application for a regional clean hydrogen hub under 42
5 U.S.C. § 16161a (relating to regional clean hydrogen hubs).
6 "Commission." The Pennsylvania Public Utility Commission.
7 "Cumulative impacts." The incremental effects of a clean
8 hydrogen project on the environment, including effects on air
9 quality, water quality, water resource availability, climate and
10 public health, when added to the effects from other past,
11 present and reasonably foreseeable future development of any
12 type on the relevant area, including an airshed or watershed, as
13 determined by the board's regulations, or on a
14 disproportionately impacted community.
15 "Department." The Department of Environmental Protection of
16 the Commonwealth.
17 "Disproportionately impacted community." Any of the
18 following:
19 (1) A community that is in a census block group, as
20 determined in accordance with the most recent Federal
21 decennial census, where the proportion of households that:
22 (i) are low income is more than 40%;
23 (ii) identify as minority is more than 40%; or
24 (iii) are cost-burdened is more than 40%.
25 (2) A community identified or approved by a State agency
26 as a disproportionately impacted community if any of the
27 following apply:
28 (i) The community has a history of environmental
29 racism perpetuated through redlining, anti-Indigenous,
30 anti-immigrant, anti-Hispanic or anti-Black laws.
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 1 (ii) The community is impacted by multiple factors,
2 including socioeconomic stressors, disproportionate
3 environmental burdens, vulnerability to environmental
4 degradation and a lack of public participation, which may
5 act cumulatively to affect the health and environment and
6 contribute to persistent disparities.
7 "Green hydrogen." Hydrogen derived from an alternative
8 energy source that uses water as the source of the hydrogen.
9 "Greenhouse gas emission reduction goals." All of the
10 following:
11 (1) A reduction in emissions 50% to 52% below 2005
12 levels, covering all sectors and all gases, by 2030.
13 (2) One hundred percent carbon pollution-free
14 electricity by 2035.
15 (3) Net-zero emissions no later than 2050.
16 "Hard to decarbonize end use." The generation of heat of at
17 least 150 degrees Celsius for industrial purposes and the
18 addition as feedstock for industrial purposes, including the
19 manufacture of steel, ammonia, fertilizer or chemicals. The term
20 does not include the direct use of hydrogen for residential or
21 commercial heating.
22 "Investor-owned utility." A utility company owned and
23 operated by a private investor.
24 "Large-scale hydropower." The production of electric power
25 by harnessing the hydroelectric potential of moving water
26 impoundments, including pumped storage that does not meet the
27 requirements of low-impact hydropower.
28 "Lifecycle greenhouse gas emissions rate." Lifecycle
29 greenhouse gas emissions as defined in 26 U.S.C. § 45V(c)(1)(A)
30 and measured in accordance with applicable Internal Revenue
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 1 Service regulations or guidelines.
2 "Program." The Clean Hydrogen Tax Credit Program established
3 under section 701.
4 "Project facility." A facility located in this Commonwealth
5 that is owned by a qualified taxpayer which is part of a
6 regional clean hydrogen hub designated by the United States
7 Department of Energy under the Energy Policy Act of 2005.
8 "Qualified taxpayer." A company that satisfies all of the
9 following:
10 (1) Owns and operates a project facility located within
11 a regional clean hydrogen hub designated by the United States
12 Department of Energy authorized under the Energy Policy Act
13 of 2005.
14 (2) Has entered into a commitment letter under section
15 1752-L(b) of the act of March 4, 1971 (P.L.6, No.2), known as
16 the Tax Reform Code of 1971, to purchase clean hydrogen from
17 a regional clean hydrogen hub within this Commonwealth for
18 use in manufacturing at a project facility in this
19 Commonwealth that has been placed in service on or after
20 January 3, 2023.
21 (3) Has made a capital investment of at least
22 $500,000,000 to construct the project facility and place the
23 project facility into service in this Commonwealth.
24 (4) Has created a minimum aggregate total of 1,200 new
25 jobs and permanent jobs.
26 (5) Has made good faith efforts to recruit and employ,
27 and to encourage a contractor or subcontractor to recruit and
28 employ, workers from the local labor market for employment
29 during the construction of the project facility.
30 (6) Has demonstrated that the new jobs created at the
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 1 project facility or for work covered under Subarticle F of
2 Article XVII-L of the Tax Reform Code of 1971, are paid at
3 least the prevailing minimum wage and benefit rates for each
4 craft or classification as determined by the Department of
5 Labor and Industry.
6 (7) The construction work to place a project facility
7 into service is performed in accordance with the act of March
8 3, 1978 (P.L.6, No.3), known as the Steel Products
9 Procurement Act.
10 "Qualified use." The use of clean hydrogen in this
11 Commonwealth for any of the following:
12 (1) A hard to decarbonize end use.
13 (2) The operation of a heavy-duty diesel vehicle.
14 (3) Aviation.
15 "Taxpayer." An individual, partnership, association,
16 society, company, corporation, estate, trust, trustee, receiver,
17 liquidator, fiduciary or other entity subject to or claiming
18 exemption from a tax administered by the Department of Revenue.
19 "Tier one greenhouse gas emissions rate." A qualified use of
20 hydrogen that results in lifecycle greenhouse gas emissions
21 rates that are within the range specified under 26 U.S.C. §
22 45V(b)(2)(D).
23 "Tier two greenhouse gas emissions rate." A qualified use of
24 hydrogen that results in lifecycle greenhouse gas emissions
25 rates that are within the range specified under 26 U.S.C. §
26 45V(b)(2)(C).
27 CHAPTER 3
28 DUTIES OF BOARD
29 Section 301. Investigatory proceedings for clean hydrogen
30 projects.
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 1 No later than 60 days after the effective date of this
2 section, the board shall initiate an investigatory proceeding to
3 consider all of the following:
4 (1) The potential for a clean hydrogen project operated
5 by an investor-owned utility, subject to regulation by the
6 board, to contribute to meeting Federal greenhouse gas
7 emission reduction goals, including lifecycle greenhouse gas
8 emissions rates, with a preference for qualified uses.
9 (2) The impact of a clean hydrogen project on the
10 emission of air pollutants, other than greenhouse gases, and
11 human health.
12 (3) Potential markets for clean hydrogen in this
13 Commonwealth.
14 (4) The impact of clean hydrogen production on water
15 quality and quantity in this Commonwealth.
16 (5) The potential impact of pipeline leakage and best
17 practices for mitigation.
18 (6) The potential for the development of clean hydrogen
19 to help create or sustain jobs in this Commonwealth,
20 including utility jobs.
21 (7) The cost, capabilities and market availability of
22 clean hydrogen technology, including a pipeline investment.
23 (8) The appropriate roles for an investor-owned utility
24 in the production, sale or use of clean hydrogen, including
25 considering whether costs may be recovered from ratepayers.
26 (9) The potential impact of investor-owned utility
27 investments in a clean hydrogen project on ratepayers,
28 including on bills, rates and rate stability, and options for
29 avoiding potential cross-subsidization and cost-shifting
30 across rate classes.
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 1 (10) Principles and requirements for tariffs for the
2 sale of clean hydrogen to a third party, including principles
3 and requirements to ensure that costs arising from the
4 development, production, transport and delivery of the clean
5 hydrogen under the tariffs are not borne by customers who do
6 not take service from the tariffs.
7 (11) The process and data necessary and available to
8 implement a requirement for the adoption of methods for all
9 of the following:
10 (i) The measurement of lifecycle greenhouse gas
11 emissions rates, including for hourly matching of
12 electricity used.
13 (ii) The tracking of the deployment of new renewable
14 energy resources or use of curtailed renewable energy to
15 meet electricity requirements for production of clean
16 hydrogen in the same load balancing area.
17 (iii) The board to determine when at least 200
18 megawatts of electrolyzers are operational in this
19 Commonwealth.
20 (12) The process and data necessary for an investor-
21 owned utility to conduct a cumulative impact analysis of a
22 clean hydrogen project and the process necessary to avoid
23 adverse cumulative impacts on disproportionately impacted
24 communities. For the purpose of this paragraph, the board may
25 consider any of the following:
26 (i) The time period when a cumulative impact
27 analysis should be conducted.
28 (ii) The geographical scope of a cumulative impact
29 analysis.
30 (iii) Whether the cumulative impact analysis should
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 1 be compared to alternative projects.
2 (13) Requirements for an application for a clean
3 hydrogen project in addition to the requirements specified
4 under sections 302(4), 306 and 307.
5 (14) Data or information necessary or available to
6 evaluate a clean hydrogen project against alternative
7 projects, including how to measure, track and report
8 lifecycle greenhouse gas emissions rates, cumulative impacts
9 and the cumulative impacts and individual impacts on jobs,
10 local economic benefits and water use.
11 (15) Opportunities to encourage nonutility production of
12 clean hydrogen in this Commonwealth, including opportunities
13 for an investor-owned utility to propose a tariff for the
14 sale of renewable energy that would otherwise be curtailed.
15 (16) Any other relevant issues that the board determines
16 necessary to consider for the purpose of this act.
17 Section 302. Regulations for clean hydrogen projects.
18 No later than two years after the effective date of this
19 section, unless the board files a notice with the commission
20 stating that the United States Department of Energy has extended
21 or otherwise altered the deadline regarding funding for a
22 hydrogen hub project, the board shall promulgate regulations to
23 implement all of the following:
24 (1) Unless the board determines that an investor-owned
25 utility should not develop a clean hydrogen project for cost
26 recovery from ratepayers, establish requirements for the
27 presentation of a clean hydrogen project to the board for the
28 board's approval.
29 (2) Establish requirements for lifecycle greenhouse gas
30 emissions rate accounting for a clean hydrogen project.
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 1 (3) Address the appropriate role of an investor-owned
2 utility in the production, sale and use of clean hydrogen,
3 including whether and how costs may be recovered from
4 ratepayers and appropriate treatment of revenues from clean
5 hydrogen sales.
6 (4) Address how an investor-owned utility may use
7 competitive solicitations in a clean hydrogen project and any
8 limitations for the use of competitive solicitations to
9 develop the clean hydrogen project.
10 (5) Establish a requirement that a planned or potential
11 use for the clean hydrogen in buildings or g