Central Louisiana News

U.S. Senators Bill Cassidy, M.D. (R-LA), Mike Crapo (R-ID), Jim Risch (R-ID), and Pete Ricketts (R-NE) have expressed strong opposition to a new rule from the Biden administration that redefines "clean hydrogen." The senators argue that the rule imposes stringent requirements on U.S. hydrogen producers, making it difficult for them to qualify for Section 45V tax credits.

The new rule mandates that the electricity used in hydrogen production must come from renewable energy sources. In a joint statement, the senators wrote, "With the proposed rule, the IRS and Treasury strayed far away from the simple definition of clean hydrogen." They further noted that a significant buildout of renewable energy to support hydrogen production would face challenges related to permitting, supply chain issues, and inflation.

The senators urged flexibility in implementing the hydrogen tax credit, stating, "We hope you heed industry advice and revise the proposed rule to ensure flexibility for the hydrogen tax credit. The IRS and Treasury should not exceed the letter of the law to cater to a niche group."

In their letter addressed to Commissioner Werfel and Secretary Yellen, they outlined their concerns with the proposed rule on Section 45V tax credits by the Internal Revenue Service (IRS) and U.S. Department of Treasury (Treasury). They described the requirements as burdensome and exceeding statutory limits.

Opposition to these stringent requirements is widespread across various Regional Clean Hydrogen Hubs (H2Hubs). These hubs have voiced concerns about how narrow guidance could impede investments and job creation in this sector. They emphasized that many projects would no longer be economically viable under current guidelines.

The senators highlighted several specific issues with the proposed rule:

1. **Additionality Restriction**: By requiring electricity used in hydrogen production to come from new clean power sources, existing clean energy assets may be undermined.

2. **Time-Matching Requirement**: Tax credits would only apply when clean electricity is produced and consumed simultaneously during hydrogen production, which could increase costs significantly.

3. **Regional Sourcing**: The requirement for clean power sourcing from regions identified in DOE’s National Transmission Needs Study could isolate hydrogen projects from available clean electricity sources.

Greater New Orleans Inc., along with 23 local industry and university partners, also criticized these regional requirements as contradictory to DOE's recommendations and potentially increasing electrolytic hydrogen production costs.

The senators concluded by urging revisions to ensure flexibility for obtaining hydrogen tax credits without exceeding legal boundaries.