On April 10, 2024, Department of Treasury and the Internal Revenue Service (collectively, "IRS") issued further guidance on the "Provisional Emission Rate" or "PER" process for the Inflation Reduction Act's ("IRA") Hydrogen Production Tax Credit (often referred to by its designation in the Tax Code, Section 45V). The guidance expands on certain elements of "emissions value request process" that Department of Energy ("DOE") will administer and requests additional comment from stakeholders. The deadline to submit comments is May 13, 2024. While this additional guidance is useful, the 30-day comment period suggests that the emissions value request process, initially slated to open on April 1, 2024, may not open for another month or more, while IRS and DOE consider stakeholder comments and iron out the details.

The April 10 IRS guidance follows proposed regulations for the IRA's Hydrogen Production Tax Credit that IRS issued on December 26, 2023. Among other things, the December 26 proposed regulations set out how IRS and DOE would determine if hydrogen producers have met the lifecycle greenhouse gas ("GHG") emissions thresholds, establishing that the hydrogen they are producing is "qualified clean hydrogen" and thus eligible for tax credits. The proposed regulations pointed to a new iteration of the Greenhouse gases, Regulated Emissions, and Energy use in Technologies ("GREET") model, 45VH2-GREET, which producers can use to assess their hydrogen's lifecycle GHG emissions. That model, however, accounts for only eight specific pathways to produce hydrogen. Producers seeking to make hydrogen using other feedstocks or processes not accounted for in the model would instead need to seek an individualized "Provisional Emissions Rate." The first step of this process, according to the proposed regulations, would be to request an emissions value from DOE. This DOE process, which is the focus of IRS's April 10 guidance, will be crucial for producers seeking to manufacture hydrogen using processes other than steam methane reforming or autothermal reforming with carbon capture, or electrolysis of water using renewable electricity. (For more information on the proposed regulations, see our summary here.) 

The proposed regulations stated that DOE's emissions value request process would open on April 1, 2024, and that additional guidance from DOE would be issued before that date. Yet April 1 came and went without indication that the process was opening. The April 10 IRS guidance offers some additional information about the process but suggests that DOE guidance, in the form of "Instructions," is still forthcoming. Below are the key takeaways.

Additional Guidance

  • The December 26 proposed regulations state that a "front-end engineering and design (FEED) study or similar indication of project maturity, such as project specification and cost estimation sufficient to inform a final investment decision" will be a prerequisite to obtaining an emissions value from DOE. According to the April 10 IRS guidance, DOE has determined that, "at this time, a FEED study completed based on an Association for Advanced Cost Engineering Class 3 Cost Estimate is necessary to sufficiently indicate commercial project maturity for robust emissions analysis," though the guidance notes that IRS continues to seek comments on alternatives to demonstrating "project readiness."
  • The emissions rate process will require submitting the following information to DOE: "(1) specific sections of the FEED study, as described in the DOE's emissions value request process instructions (Instructions); and (2) a completed Emissions Value Request Form, as described in the Instructions."

Those Instructions, as mentioned, have yet to be issued. The guidance states that DOE will publish the Instructions before the emissions value request process opens at this website: https://www.energy.gov/eere/emissions-value-request-process. As of the date of this writing, the website is a dead link.

The guidance also states that applicants in the process would first be required to send an email to this DOE address—45VemissionsRequest@ee.doe.gov—stating their intent to submit an Emissions Value Request Application and the name of the applicant's organization so that DOE can send a link to a secure system for uploading application materials.

Request for Comment

The guidance provides few clues about when the process will open. However, the 30-day comment period suggests a delay of at least a month, and perhaps more for the agencies to consider comments to incorporate into further guidance. 

IRS is requesting comments on three topics:

  1. Whether additional procedures should be implemented to effectuate the Emissions Value Request Application process; 
  2. Information to be collected and whether additional information should be considered by the DOE in evaluating an Emissions Value Request Application; and 
  3. Any other aspects of the emissions value request process.

Comments are due on May 13, 2024. Despite the potential delay, the comment period could be a helpful opportunity for hydrogen producers to express their views on how to streamline the process so that requests are efficiently reviewed and approved. Similar individualized processes involving lifecycle GHG emissions assessments, for example, under the Renewable Fuel Standard, can take significant time. Hopefully, DOE can structure this emissions value request process to avoid serious delays.

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