Clean Hydrogen Deployment Act of 2021
Bill: H.R.5965 | Sponsor: Rep. Tonko, Paul (D-NY)
Policy area: Energy

Summary:
Clean Hydrogen Deployment Act of 2021
This bill requires the Department of Energy's Office of Fossil Energy and Carbon Management to establish a pilot program that supports the development of clean hydrogen as an energy source. Under the pilot program, the office must enter into contracts with entities to pay for their costs associated with the production or purchase of clean hydrogen. Clean hydrogen must be produced with at least 80% fewer greenhouse gas emissions than conventional hydrogen.

To direct the Secretary of Energy to establish a pilot program to enter 
  into contracts for payment of costs associated with using eligible 
                   hydrogen, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Clean Hydrogen Deployment Act of 
2021''.

SEC. 2. CLEAN HYDROGEN CONTRACT FOR DIFFERENCES PILOT PROGRAM.

    (a) Establishment of Pilot Program.--The Secretary, acting through 
the Assistant Secretary of the Office of Fossil Energy and Carbon 
Management and in consultation with the Assistant Secretary of the 
Office of Energy Efficiency and Renewable Energy and other relevant 
offices within the Department of Energy, shall establish a pilot 
program to enter into contracts, on a competitive basis, with entities 
for payment of costs associated with the production or purchase of 
eligible hydrogen that is used in projects carried out by such 
entities.
    (b) Selection.--
            (1) In general.--Not later than 2 years after the date of 
        enactment of this Act, the Secretary shall enter into at least 
        5 contracts under the pilot program established under 
        subsection (a), with each contract term for a period of no 
        longer than 5 years.
            (2) Applications.--In selecting entities to enter into 
        contracts with under the pilot program established under 
        subsection (a), the Secretary shall ensure--
                    (A) at least 1 entity selected will carry out a 
                project that uses eligible hydrogen as a feedstock in 
                an industrial application, such as synthesis of 
                ammonia, fuels, or chemicals;
                    (B) at least 1 entity selected will carry out a 
                project that uses eligible hydrogen as a fuel in an 
                industrial application;
                    (C) at least 1 entity selected will carry out a 
                project that uses eligible hydrogen as a fuel in a 
                transportation application, including use at a 
                transportation hub, such as a port, transit depot, or 
                distribution center;
                    (D) at least 1 entity selected will carry out a 
                project that uses eligible hydrogen as a fuel in a 
                power application;
                    (E) not less than 2 entities selected will carry 
                out a project that uses eligible hydrogen produced 
                using electricity, or thermal energy, generated from 
                zero-emission energy sources; and
                    (F) each entity selected addresses any necessary 
                hydrogen storage and infrastructure needs associated 
                with the project, including by procuring those services 
                from other entities.
    (c) Contract for Differences.--
            (1) Payment.--The Secretary shall provide at least one 
        payment annually to an entity with which the Secretary has 
        entered into a contract under the pilot program established 
        under subsection (a).
            (2) Amount.--Except as otherwise provided in this 
        subsection, the amount of a payment, with respect to eligible 
        hydrogen used by a project over a designated period of time, as 
        determined by the Secretary, to an entity with which the 
        Secretary has entered into a contract under the pilot program 
        established under subsection (a) shall be--
                    (A) with respect to an entity carrying out a 
                project using eligible hydrogen produced using 
                electricity, or thermal energy, generated from zero-
                emission energy sources, an amount equal to--
                            (i) the cost of such eligible hydrogen that 
                        is produced or purchased, and then used by the 
                        project; minus
                            (ii) the applicable fair market value, as 
                        determined by the Secretary, to produce or 
                        purchase an equal quantity of conventional 
                        hydrogen; or
                    (B) with respect to an entity carrying out a 
                project using any other type of eligible hydrogen, an 
                amount equal to--
                            (i) the number that is equal to--
                                    (I) the cost of such eligible 
                                hydrogen that is produced or purchased, 
                                and then used by the project; minus
                                    (II) the applicable fair market 
                                value, as determined by the Secretary, 
                                to produce or purchase an equal 
                                quantity of conventional hydrogen; 
                                multiplied by
                            (ii) the number that is equal to--
                                    (I) 1; minus
                                    (II) as determined by the 
                                Secretary, the number that is equal 
                                to--
                                            (aa) the quantity of the 
                                        greenhouse gas emissions, on a 
                                        life-cycle basis, associated 
                                        with such eligible hydrogen 
                                        that is used by the project; 
                                        divided by
                                            (bb) the quantity of 
                                        greenhouse gas emissions, on a 
                                        life-cycle basis, associated 
                                        with an equal quantity of 
                                        conventional hydrogen.
            (3) Alternative amount calculation.--With respect to an 
        entity with which the Secretary has entered into a contract 
        under the pilot program established under subsection (a) that 
        will carry out a project that uses eligible hydrogen to 
        displace a nonhydrogen fuel or feedstock, the Secretary may 
        determine and apply a formula that is different than the 
        otherwise applicable formula under paragraph (2) for 
        calculating payments to such entity, taking into consideration 
        the differences between the eligible hydrogen to be used in the 
        project and the nonhydrogen fuel or feedstock being displaced 
        with respect to--
                    (A) cost;
                    (B) emissions; and
                    (C) heating value, as applicable.
            (4) Additional payment.--To the extent appropriations are 
        available, and notwithstanding subsection (d), the Secretary 
        may provide a payment to an entity with which the Secretary has 
        entered into a contract under the pilot program established 
        under subsection (a) at the beginning of such contract--
                    (A) that is additional to any other payment under 
                this subsection;
                    (B) that is not more than 50 percent of the 
                expected total payments for the first year of the 
                contract; and
                    (C) for capital expenditures or procurement of 
                services related to the project carried out by such 
                entity, including equipment and infrastructure for 
                storage, delivery, and distribution of eligible 
                hydrogen.
            (5) Applicable fair market value.--Before entering into a 
        contract with an entity under the pilot program established 
        under subsection (a), the Secretary shall communicate to such 
        entity the expected dollar amount of, and method for 
        calculating, the applicable fair market value of conventional 
        hydrogen or a relevant displaced fuel that will apply for the 
        duration of such contract for the purposes of this subsection.
    (d) Maximum Payment Per Year.--
            (1) In general.--The amount of payments to an entity under 
        a contract entered into under this section (other than a 
        payment described in subsection (c)(4)) shall not exceed 
        $50,000,000 per year.
            (2) Payment adjustment.--Subject to the availability of 
        appropriations, the Secretary may increase the maximum amount 
        of payments described in paragraph (1) to an entity to up to 
        $100,000,000 per year, as determined appropriate by the 
        Secretary.
    (e) Applications.--To be eligible to enter into a contract under 
this section, an entity shall submit an application to the Secretary 
that includes--
            (1) a description of the applicable project;
            (2) the location of any facility included in the project;
            (3) the method of production, including expected 
        feedstocks, and expected cost, of eligible hydrogen to be used 
        in the project;
            (4) a description of any infrastructure and equipment 
        investments, including modification, conversion, and retooling, 
        that will be done to support increased use of eligible hydrogen 
        at any facility of the project;
            (5) an estimate of annualized expected greenhouse gas 
        emissions associated with the production of the eligible 
        hydrogen expected to be used in the project, calculated using 
        methods and procedures determined appropriate by the Secretary; 
        and
            (6) any additional information determined to be appropriate 
        by the Secretary.
    (f) Priority.--In selecting entities to enter into contracts with 
under this section, the Secretary shall give priority to an entity 
based on--
            (1) with respect to the project to be carried out by such 
        entity using eligible hydrogen, the extent to which such 
        project would--
                    (A) use hydrogen as a fuel or feedstock as a 
                portion of total fuels or feedstocks used at the 
                facility;
                    (B) use eligible hydrogen as a portion of total 
                hydrogen used at the facility;
                    (C) support or encourage future use, 
                commercialization, or cost reduction of eligible 
                hydrogen and associated infrastructure, including 
                development of centralized hubs for hydrogen 
                production, distribution, delivery, and storage and use 
                of existing infrastructure;
                    (D) reduce greenhouse gas emissions;
                    (E) seek to mitigate emissions of nitrogen oxides 
                from the production and use of eligible hydrogen; and
                    (F) seek to source fuels and feedstocks used in the 
                production of eligible hydrogen that are associated 
                with fewer greenhouse gas emissions; and
            (2) the extent to which such entity commits to making or 
        contracting for additional investments to support the 
        production, distribution, delivery, storage, and use of 
        eligible hydrogen, including modifying, installing, and 
        constructing equipment and infrastructure.
    (g) Assurances.--Before entering into a contract under this section 
with an entity that will produce or purchase, and then use eligible 
hydrogen produced from fossil fuels where carbon capture technologies 
are used during the production of such eligible hydrogen, the Secretary 
shall secure a written assurance from such entity that such entity 
shall seek to ensure--
            (1) the reduction of upstream fugitive greenhouse gas 
        emissions associated with any feedstock used in the production 
        of such eligible hydrogen; and
            (2) with respect to the carbon dioxide captured from the 
        production of such eligible hydrogen, the long-term storage or 
        utilization, if such utilization results in long-term storage, 
        of such captured carbon dioxide, where such captured carbon 
        dioxide is stored in a manner that the Secretary determines is 
        consistent with existing relevant regulations for long-term 
        storage of carbon dioxide and is otherwise appropriate.
    (h) Report to Congress.--Not later than 1 year after all funding 
made available for the pilot program established under subsection (a) 
is expended, the Secretary shall submit to Congress and make available 
to the public a report that describes--
            (1) any challenges or benefits that entities under such 
        pilot program reported with respect to the integration or use 
        of eligible hydrogen;
            (2) an assessment of the national market potential for 
        eligible hydrogen;
            (3) an assessment of barriers and opportunities for 
        widespread use of eligible hydrogen;
            (4) recommendations for how future Federal, State, and 
        local programs can best support the adoption and widespread use 
        of eligible hydrogen; and
            (5) any other data and analysis the Secretary determines to 
        be necessary to describe the implementation, outcomes, or 
        effectiveness of such pilot program.
    (i) Definitions.--In this Act:
            (1) Conventional hydrogen.--The term ``conventional 
        hydrogen'' means hydrogen produced from steam methane reforming 
        of nonrenewable feedstocks, such as natural gas, where carbon 
        capture technology is not used during such production.
            (2) Eligible hydrogen.--The term ``eligible hydrogen''--
                    (A) means hydrogen, the production of which 
                releases at least 80 percent less greenhouse gas 
                emissions into the atmosphere per kilogram of hydrogen 
                as compared to the production of conventional hydrogen, 
                as determined by the Secretary taking into 
                consideration greenhouse gas emissions released from--
                            (i) the applicable hydrogen production 
                        facility;
                            (ii) the production of electricity consumed 
                        in the applicable hydrogen production process;
                            (iii) conventional hydrogen production 
                        facilities; and
                            (iv) the production of electricity consumed 
                        in conventional hydrogen production processes; 
                        and
                    (B) includes hydrogen produced using electricity, 
                or thermal energy, generated from zero-emission energy 
                sources.
            (3) Secretary.--The term ``Secretary'' means the Secretary 
        of Energy.
    (j) Authorization of Appropriations.--There is authorized to be 
appropriated to carry out this Act--
            (1) $375,000,000 for fiscal year 2022; and
            (2) $250,000,000 for each of fiscal years 2023 through 
        2026.
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