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S. 3118 (117th): Hydrogen Infrastructure Finance and Innovation Act


The text of the bill below is as of Oct 28, 2021 (Introduced). The bill was not enacted into law.


II

117th CONGRESS

1st Session

S. 3118

IN THE SENATE OF THE UNITED STATES

October 28, 2021

(for himself, Mr. Coons, Mr. Cassidy, Mrs. Capito, Mr. Heinrich, and Mr. Luján) introduced the following bill; which was read twice and referred to the Committee on Energy and Natural Resources

A BILL

To require the Secretary of Energy to establish a hydrogen infrastructure finance and innovation pilot program, and for other purposes.

1.

Short title

This Act may be cited as the Hydrogen Infrastructure Finance and Innovation Act.

2.

Study

Not later than 1 year after the date of enactment of this Act, the Secretary of Energy, in coordination with the Administrator of the Environmental Protection Agency, the Council on Environmental Quality, the Administrator of the Energy Information Administration, and the heads of other relevant Federal agencies, shall conduct a study subject to notice and public comment—

(1)

to fully assess and report the potential layout of pipeline corridors that are robust against a range of projected hydrogen demand futures;

(2)

to synthesize the results from research, development, and demonstration projects on materials and metallurgy for transporting and storing hydrogen and hydrogen-rich fuels;

(3)

to determine outstanding questions with regard to research, development, and demonstration of infrastructure for transporting and storing hydrogen and hydrogen-rich fuels;

(4)

to investigate the behavior and environmental impact of hydrogen leakage in pipelines and from geologic storage sites and nongeologic storage equipment;

(5)

to determine best practices for the construction and maintenance of hydrogen pipelines;

(6)

to determine the percentage at which hydrogen must be blended into the natural gas network to substantially reduce carbon intensity; and

(7)

to establish a framework for the measurement, reporting, and management of hydrogen leaks.

3.

Supporting hydrogen infrastructure and regional development of hydrogen

(a)

Definitions

In this section:

(1)

Board-regulated rates

The term Board-regulated rates means rates regulated by the Surface Transportation Board.

(2)

Commission-regulated rates

The term Commission-regulated rates means rates regulated by the Federal Energy Regulatory Commission.

(3)

Common carrier

The term common carrier means a transportation infrastructure operator or owner that—

(A)

publishes a publicly available tariff containing the just and reasonable rates, terms, and conditions of nondiscriminatory service; and

(B)

holds itself out to provide transportation services to the public for a fee.

(4)

Eligible activity

The term eligible activity means an activity described in subsection (g)(2) relating to, or carried out in connection with, an eligible project.

(5)

Eligible entity

The term eligible entity means a corporation, partnership, joint venture, trust, non-Federal governmental entity, agency, or instrumentality, or other entity.

(6)

Eligible project

(A)

In general

Subject to subparagraph (B), the term eligible project means an infrastructure project for hydrogen transportation, storage, or delivery, including pipeline, shipping, rail, refueling, or other infrastructure, or associated equipment, as the Secretary determines to be appropriate.

(B)

Inclusion of pipeline projects

The term eligible project includes a pipeline project only if the project is for—

(i)

the construction of 1 or more new pipelines that are capable of handling pure hydrogen; or

(ii)

the retrofitting of 1 or more existing natural gas pipelines—

(I)

to transport a blend of hydrogen and natural gas; and

(II)

in a manner that will significantly increase the capacity of the pipelines to transport hydrogen, as determined by the Secretary.

(7)

Eligible project cost

(A)

In general

The term eligible project costs means—

(i)

the costs of carrying out an eligible activity; and

(ii)

any costs described in subparagraph (B) relating to, or incurred in connection with, an eligible project.

(B)

Costs described

The costs referred to in subparagraph (A)(ii) are—

(i)

the costs of capitalized interest necessary to meet market requirements, the costs of reasonably required reserve funds, capital issuance expenses, and any other carrying costs during construction of the applicable infrastructure; and

(ii)

transaction costs associated with financing an eligible project, including the cost of legal counsel and technical consultants.

(8)

HIFIA pilot program

The term HIFIA pilot program means the hydrogen infrastructure finance and innovation pilot program established under subsection (b)(1).

(9)

Letter of interest

The term letter of interest means a letter submitted by a potential applicant prior to an application for a grant or a loan under the HIFIA pilot program that—

(A)

is in a format prescribed by the Secretary on the website of the HIFIA pilot program;

(B)

describes the project and the location, purpose, and cost of the project;

(C)

outlines the proposed financial plan, including—

(i)

the requested grant or loan assistance; and

(ii)

the proposed obligor, if applicable;

(D)

provides a status of environmental review; and

(E)

provides information regarding satisfaction of other eligibility requirements of the HIFIA pilot program.

(10)

Low-income or disadvantaged community

The term low-income or disadvantaged community means a community (including a city, a town, a county, and any reasonably isolated and divisible segment of a larger municipality) with an annual median household income that is less than 100 percent of the statewide annual median household income for the State in which the community is located, according to the most recent decennial census.

(11)

Obligor

The term obligor means an eligible entity that is liable for payment of the principal of, or interest on, a loan under the HIFIA pilot program.

(12)

Secretary

The term Secretary means the Secretary of Energy.

(b)

Establishment

(1)

In general

Not later than 1 year after the date of enactment of this Act, the Secretary, in consultation with the Federal Energy Regulatory Commission, the Surface Transportation Board, and the Administrator of the Pipeline and Hazardous Materials Safety Administration, shall establish a hydrogen infrastructure finance and innovation pilot program under which the Secretary shall provide—

(A)

financial assistance to eligible entities for eligible projects through—

(i)

grants; or

(ii)

long-term, low-cost supplemental loans; and

(B)

technical assistance in accordance with subsection (l).

(2)

Coordination with hydrogen hubs

To ensure that the HIFIA pilot program is compatible with and complementary to any hydrogen hubs developed under any other law, the Secretary, to the maximum extent practicable, shall coordinate the establishment of the HIFIA pilot program with—

(A)

the establishment of any program to support the development of hydrogen hubs that is required to be established under any other law; and

(B)

the development of those hubs.

(c)

Eligibility

(1)

In general

The Secretary may provide financial assistance for an eligible project under the HIFIA pilot program if—

(A)

the eligible entity proposing to carry out the project submits a letter of interest prior to submission of an application under paragraph (2) with respect to the project; and

(B)

the eligible entity and the eligible project meet all applicable requirements of this section.

(2)

Applications

(A)

In general

To be eligible for a grant or a loan under the HIFIA pilot program, an eligible entity shall submit to the Secretary an application at such time, in such manner, and containing such information as the Secretary determines to be appropriate.

(B)

Election

(i)

In general

An eligible entity may elect to apply for a grant, a loan, or both under the HIFIA pilot program.

(ii)

Decision

The Secretary shall have discretion to award any mix of grants and loans under the HIFIA pilot program as the Secretary determines to be appropriate, including with respect to each eligible entity that applies for both a grant and a loan.

(C)

Application processing procedures

(i)

Notice of complete application

Not later than 30 days after the date of receipt of an application under this paragraph, the Secretary shall provide to the applicant a written notice describing whether—

(I)

the application is complete; or

(II)

additional information or materials are needed to complete the application.

(ii)

Approval or denial of application

Not later than 90 days after the date of issuance of a written notice under clause (i), the Secretary shall provide to the applicant a written notice informing the applicant whether the Secretary has approved or disapproved the application.

(d)

Priority

In selecting eligible projects to receive a grant or a loan under the HIFIA pilot program, the Secretary shall give priority to eligible projects that—

(1)

will provide greater net impact in avoiding or reducing emissions of greenhouse gases; and

(2)

are sited in a manner that minimizes environmental disturbance and other siting concerns, including by being sited within, or adjacent to, existing pipeline or other linear infrastructure corridors.

(e)

Considerations

In selecting eligible projects to receive a grant or a loan under the HIFIA pilot program, the Secretary, to the maximum extent practicable, shall select projects—

(1)

that are large-capacity, common carrier infrastructure;

(2)

that enable geographical diversity in associated projects and supply chains to produce, use, or store hydrogen, with the goal of enabling projects in all major regions of the United States with current hydrogen demand and potential future hydrogen demand;

(3)

that will generate the greatest benefit to low-income or disadvantaged communities; and

(4)

that will—

(A)

maximize creation or retention of jobs in the United States; and

(B)

provide the highest job quality.

(f)

Loans

(1)

In general

In carrying out the HIFIA pilot program, the Secretary shall make loans to eligible entities, the proceeds of which shall be used to finance eligible projects.

(2)

Interest rate

The interest rate of a loan under the HIFIA pilot program shall be not less than the interest rate on United States Treasury securities of a similar maturity to the maturity of the loan on the date of closing on the loan.

(3)

Maturity date

The final maturity date of a loan provided under the HIFIA pilot program shall be the date that is 30 years after the date of substantial completion of the applicable eligible project.

(4)

Repayment

(A)

In general

The Secretary shall establish a repayment schedule for each loan provided under the HIFIA pilot program.

(B)

Commencement

Repayment of a loan provided under the HIFIA pilot program shall commence on the date of substantial completion of the applicable eligible project for which the loan was provided.

(C)

Deferral of repayment

If, at any time during the 5-year period beginning on the date of substantial completion of an eligible project, the project is unable to generate sufficient revenues in excess of reasonable and necessary operating expenses to pay the scheduled loan repayments of principal and interest on the loan, the Secretary may allow the borrower to defer repayment of the loan until the end of that 5-year period.

(5)

Requirements

(A)

Creditworthiness

(i)

In general

Each obligor with respect to a loan provided for an eligible project under the HIFIA pilot program shall be creditworthy, such that there exists a reasonable prospect of repayment of the principal and interest on the loan, as determined by the Secretary under clause (ii).

(ii)

Reasonable prospect of repayment

The Secretary shall base a determination of whether there is a reasonable prospect of repayment under clause (i) on a comprehensive evaluation of whether the obligor has a reasonable prospect of repaying the loan for the eligible project, including evaluation of—

(I)

the forecast of noncontractual cash flows supported by market projections from reputable sources, as determined by the Secretary, and cash sweeps or other structural enhancements;

(II)

the strength of the contractual terms of an eligible project (if available for the applicable market segment);

(III)

the projected financial strength of the obligor—

(aa)

at the time of loan close; and

(bb)

throughout the loan term, including after the project is completed;

(IV)

the financial strength of the investors and strategic partners of the obligor, if applicable; and

(V)

other financial metrics and analyses that are relied on by the private lending community and nationally recognized credit rating agencies, as determined to be appropriate by the Secretary.

(B)

Dedicated source of revenue

An eligible project for which a loan is provided under the HIFIA pilot program shall have a dedicated source of revenue separate from any financial assistance received under the HIFIA pilot program.

(g)

Use of financial assistance

(1)

In general

A grant or loan provided under the HIFIA pilot program may be used for any eligible project costs.

(2)

Eligible activities

A grant or loan provided under the HIFIA pilot program may be used to carry out any of the following activities with respect to an eligible project:

(A)

Development phase activities, including—

(i)

planning;

(ii)

preliminary engineering;

(iii)

design;

(iv)

environmental review;

(v)

revenue forecasting; and

(vi)

other preconstruction activities.

(B)

Construction, reconstruction, rehabilitation, and replacement activities, including the training of construction personnel in handling and safety.

(C)

Acquisition of—

(i)

real property or an interest in real property; or

(ii)

equipment.

(D)

Environmental mitigation activities.

(E)

Activities relating to construction contingencies.

(h)

Federal requirements

(1)

In general

Nothing in this section supersedes the applicability of any other requirement under Federal law (including regulations).

(2)

NEPA

Federal assistance may only be provided under the HIFIA pilot program for a project that has received an environmental categorical exclusion, a finding of no significant impact, or a record of decision under the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).

(i)

Leak detection

Each eligible entity that receives a loan or grant under the HIFIA pilot program shall conduct—

(1)

a hydrogen leakage monitoring, reporting, and verification (also known as MRV) program; and

(2)

a hydrogen leak detection and repair (also known as LDAR) program.

(j)

Maximum Federal involvement

The maximum Federal share of an eligible project for which a loan is provided under the HIFIA pilot program shall not exceed 80 percent of the eligible costs of the project.

(k)

Amendment

Section 1703(b)(3) of the Energy Policy Act of 2005 (42 U.S.C. 16513(b)(3)) is amended by striking Hydrogen fuel and inserting Hydrogen technologies applicable to 1 or more end-use sectors, such as power generation, transportation, aviation, storage, industrial, and chemicals, including hydrogen fuel.

(l)

Technical assistance

(1)

In general

The Secretary and the National Laboratories may provide technical assistance under the HIFIA pilot program to assess the grading and readiness of existing infrastructure to transport, store, or deliver hydrogen with respect to informal State and regional planning for investments in that grading and readiness.

(2)

Priority

In providing technical assistance under paragraph (1), the Secretary and the National Laboratories shall prioritize—

(A)

preexisting infrastructure corridors;

(B)

geologic storage potential for hydrogen; and

(C)

industrial clusters.

(m)

Regulatory assessment To encourage hydrogen transportation infrastructure deployment

Not later than 270 days after the date of enactment of this Act, each of the Federal Energy Regulatory Commission, the Surface Transportation Board, and the Administrator of the Pipeline and Hazardous Materials Safety Administration, in coordination with the Secretary, shall—

(1)

assess jurisdiction over the siting, construction, safety, and regulation of hydrogen transportation infrastructure, including, at a minimum, the blending of hydrogen in natural gas pipelines;

(2)

if that assessment indicates that additional authority is needed to support the deployment of hydrogen transportation infrastructure, submit to Congress a report describing the needed authority; and

(3)

identify the eligibility of, and process for, hydrogen transportation infrastructure to receive cost recovery under the HIFIA pilot program through Commission-regulated rates, Board-regulated rates, or other applicable regulated rates, as appropriate, for the transportation of hydrogen in interstate commerce.

(n)

Authorization of appropriations

There is authorized to be appropriated to the Secretary to carry out the HIFIA pilot program $100,000,000 for each of fiscal years 2022 through 2026.