First Regular Session
Seventy-fourth General Assembly
STATE OF COLORADO
INTRODUCED
LLS NO. 23-0894.01 Sarah Lozano x3858
HOUSE BILL 23-1281
House Committees Senate Committees
Energy & Environment
A BILL FOR AN ACT
C
ONCERNING MEASURES TO ADVANCE THE USE OF CLEAN HYDROGEN101
IN THE STATE.102
Bill Summary
(Note: This summary applies to this bill as introduced and does
not reflect any amendments that may be subsequently adopted. If this bill
passes third reading in the house of introduction, a bill summary that
applies to the reengrossed version of this bill will be available at
http://leg.colorado.gov
.)
Section 2 of the bill defines clean hydrogen (clean hydrogen) as
hydrogen that is:
! Derived from a clean energy resource that uses water as the
source of hydrogen; or
! Produced through a process that results in lifecycle
greenhouse gas emissions rates that are less than 1.5
HOUSE SPONSORSHIP
Titone and Vigil,
SENATE SPONSORSHIP
(None),
Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.
Capital letters or bold & italic numbers indicate new material to be added to existing law.
Dashes through the words or numbers indicate deletions from existing law. kilograms of carbon dioxide equivalent per kilogram of
hydrogen, as set forth in applicable federal law.
Section 2 also directs the public utilities commission (commission)
to establish a stand-alone application, review, and approval process for
investor-owned utility projects that result in the production of clean
hydrogen (clean hydrogen project). For a clean hydrogen project to be
approved by the commission, an investor-owned utility must submit an
application to the commission demonstrating that the clean hydrogen
project involves collaboration between the investor-owned utility and a
state or federal agency. Any application for a clean hydrogen project must
include:
! Best practices utilized by the investor-owned utility to
reduce air emissions and environmental impacts, conduct
leak detection monitoring, and increase public safety;
! If the investor-owned utility's clean hydrogen production
facilities are located in a disproportionately impacted
community, a cumulative impact analysis that evaluates
past, present, and future impacts; and
! An assessment of the annual volume of water used in
electrolysis of water to produce clean hydrogen for the
clean hydrogen project.
Section 2 also requires the commission to allow an investor-owned
utility to sell clean hydrogen to third parties under a clean hydrogen tariff.
For income tax years commencing on or after January 1, 2024, but
before January 1, 2033, section 3 creates a state income tax credit in
specified amounts per kilogram of clean hydrogen used for industrial
operations, for operating a heavy-duty vehicle, or for aviation (tax credit).
Any taxpayer seeking to claim the tax credit must first apply for and
receive a tax credit certificate from the Colorado energy office.
Be it enacted by the General Assembly of the State of Colorado:1
SECTION 1. Legislative declaration. (1) The general assembly2
finds and declares that:3
(a) In 2019, Colorado adopted the following goals for the4
statewide reduction of greenhouse gas pollution from a 2005 baseline:5
(I) Reducing greenhouse gas pollution by more than twenty-six6
percent by 2025;7
(II) Reducing greenhouse gas pollution by more than fifty percent8
HB23-1281-2- by 2030; and1
(III) Reducing greenhouse gas pollution by more than ninety2
percent by 2050;3
(b) The Colorado Greenhouse Gas Pollution Reduction Roadmap,4
published by the Colorado energy office and dated January 14, 2021,5
recognizes that:6
(I) Achieving the state's greenhouse gas pollution reduction goals7
will require further technical innovation and economies of scale to bring8
costs down to generate energy through innovative methods such as clean9
hydrogen; and10
(II) Clean hydrogen may be an important resource to lower11
greenhouse gas emissions from sectors that are harder to decarbonize,12
such as heavy-duty transportation and heavy industry;13
(c) The federal government enacted the "Inflation Reduction Act14
of 2022", Pub.L. 117-169, which recognizes the importance of clean15
energy production in the fight against climate change and creates16
important incentives that make investments in clean hydrogen more17
affordable and attainable;18
(d) To support diversification of the state's energy production and19
create well-paid clean energy jobs, Colorado has joined three other20
regional states in a partnership to pursue funding from the United States21
department of energy for a regional hydrogen hub; and22
(e) As Colorado diversifies and decarbonizes its energy economy23
with clean energy sources, clean hydrogen may play an important role in24
the resilience of the state's electric grid and for dispatchable electricity25
generation that complements the use of wind and solar resources, while26
also helping achieve Governor Polis's goal of one hundred percent27
HB23-1281
-3- renewable electricity generation in the state by 2040.1
(2) The general assembly therefore declares that state law should:2
(a) Provide for various methods to advance the use of clean3
hydrogen in the state;4
(b) Allow for agencies of the state and users of clean hydrogen in5
the state to coordinate with each other to take advantage of available6
federal funding and tax credits; and7
(c) Ensure that the use of clean hydrogen in the state is in8
alignment with the state's greenhouse gas emission reduction goals.9
SECTION 2. In Colorado Revised Statutes, add 40-2-138 as10
follows:11
40-2-138. Projects for the production of clean hydrogen -12
application process - rules - definitions. (1) A
S USED IN THIS SECTION,13
UNLESS THE CONTEXT OTHERWISE REQUIRES :14
(a) "C
LEAN HYDROGEN" MEANS:15
(I) G
REEN HYDROGEN, AS DEFINED IN SECTION 40-3.2-108 (2)(j);16
OR17
(II) H
YDROGEN THAT IS PRODUCED THROUGH A PROCESS THAT18
RESULTS IN LIFECYCLE GREENHOUSE GAS EMISSIONS RATES THAT ARE19
WITHIN THE LIFECYCLE GREENHOUSE GAS EMISSIONS RATE RANGES SET20
FORTH IN 26 U.S.C. SECS. 45V (b)(2)(C) AND 45V (b)(2)(D), AS21
AMENDED.22
(b) (I) "C
LEAN HYDROGEN PROJECT " MEANS A PROJECT THAT23
RESULTS IN THE PRODUCTION OF CLEAN HYDROGEN .24
(II) "C
LEAN HYDROGEN PROJECT " INCLUDES ALL PIPELINES,25
ELECTROLYZERS, TURBINE UPGRADES , ENVIRONMENTAL CONTROLS ,26
MONITORING EQUIPMENT, DEDICATED RENEWABLE ENERGY SOURCES FOR27
HB23-1281
-4- ELECTROLYSIS, AND THE PURCHASE OF CLEAN HYDROGEN FROM THIRD1
PARTIES.2
(c) "L
IFECYCLE GREENHOUSE GAS EMISSIONS RATE " MEANS3
LIFECYCLE GREENHOUSE GAS EMISSIONS , AS DEFINED IN 26 U.S.C. SEC.4
45V (c)(1)(A),
AS AMENDED, MEASURED IN ACCORDANCE WITH ANY5
APPLICABLE FEDERAL INTERNAL REVENUE SERVICE REGULATIONS OR6
GUIDANCE, SUBJECT TO SUBSECTION (7) OF THIS SECTION.7
(2) T
O FACILITATE THE PRODUCTION OF A CLEAN HYDROGEN8
ECONOMY IN THE STATE AND TO BEST POSITION THE STATE AND9
INVESTOR-OWNED UTILITIES IN THE STATE TO CAPTURE ANY AVAILABLE10
FEDERAL FUNDING AND TAX BENEFITS FOR THE PRODUCTION OF CLEAN11
HYDROGEN, THE COMMISSION SHALL ESTABLISH A STAND -ALONE12
APPLICATION, REVIEW, AND APPROVAL PROCESS FOR CLEAN HYDROGEN13
PROJECTS. FOR A CLEAN HYDROGEN PROJECT TO BE APPROVED BY THE14
COMMISSION, AN INVESTOR -OWNED UTILITY MUST SUBMIT AN15
APPLICATION TO THE COMMISSION , AND THE PROJECT MUST INVOLVE16
COLLABORATION BETWEEN THE INVESTOR -OWNED UTILITY AND A STATE17
OR FEDERAL AGENCY.18
(3) I
N EVALUATING AN APPLICATION FOR A CLEAN HYDROGEN19
PROJECT, THE COMMISSION SHALL CONSIDER :20
(a) I
MPACTS ON THE UTILITY WORKFORCE LOCATED IN THE STATE21
AS PART OF A JUST TRANSITION;22
(b) T
HE "BEST VALUE" EMPLOYMENT METRICS REQUIREMENTS23
DESCRIBED IN SECTION 40-2-129 (1)(b); AND24
(c) A
NY POTENTIAL RATE AND BILL IMPACTS THAT ANY PROPOSED25
COST-RECOVERY MECHANISM OR STRUCTURE MAY HAVE ON AN26
INVESTOR-OWNED UTILITY'S CUSTOMERS, INCLUDING POTENTIAL IMPACTS27
HB23-1281
-5- ON RATE STABILITY.1
(4) A
NY APPLICATION FOR A CLEAN HYDROGEN PROJECT MUST2
INCLUDE:3
(a) A
DESCRIPTION OF BEST PRACTICES UTILIZED BY THE4
INVESTOR-OWNED UTILITY TO REDUCE AIR EMISSIONS AND5
ENVIRONMENTAL IMPACTS , CONDUCT LEAK DETECTION MONITORING , AND6
INCREASE PUBLIC SAFETY;7
(b) I
F THE INVESTOR-OWNED UTILITY'S CLEAN HYDROGEN8
PRODUCTION FACILITIES ARE LOCATED IN A DISPROPORTIONATELY9
IMPACTED COMMUNITY , AS DEFINED IN SECTION 24-4-109 (2)(b)(II), A10
CUMULATIVE IMPACT ANALYSIS THAT EVALUATES PAST , PRESENT, AND11
FUTURE IMPACTS; AND12
(c) A
N ASSESSMENT OF THE ANNUAL VOLUME OF WATER USED IN13
ELECTROLYSIS OF WATER TO PRODUCE CLEAN HYDROGEN FOR THE CLEAN14
HYDROGEN PROJECT.15
(5) T
HE COMMISSION SHALL POST ANY APPLICATION FOR A CLEAN16
HYDROGEN PROJECT RECEIVED PURSUANT TO THIS SECTION ON THE17
COMMISSION'S WEBSITE.18
(6) (a) T
HE COMMISSION SHALL ALLOW AN INVESTOR -OWNED19
UTILITY TO SELL CLEAN HYDROGEN TO THIRD PARTIES , INCLUDING20
COMMERCIAL, INDUSTRIAL, AND TRANSPORTATION CUSTOMERS , UNDER A21
CLEAN HYDROGEN TARIFF . THE AMOUNT OF THE TARIFF MAY INCLUDE22
COSTS TO DEVELOP CLEAN HYDROGEN THROUGH ELECTROLYSIS .23
(b) T
HE COMMISSION SHALL PROMULGATE RULES TO IMPLEMENT24
AND ADMINISTER THE REQUIREMENTS OF SUBSECTION (6)(a) OF THIS25
SECTION.26
(7) I
F THE FEDERAL INTERNAL REVENUE SERVICE DOES NOT ADOPT27
HB23-1281
-6- REGULATIONS OR GUIDANCE FOR THE MEASUREMENT OF LIFECYCLE1
GREENHOUSE GAS EMISSIONS RATES ON AN HOURLY BASIS BEFORE2
J
ANUARY 1, 2031, THE COMMISSION SHALL ADOPT GUIDANCE FOR THE3
MEASUREMENT OF LIFECYCLE GREENHOUSE GAS EMISSIONS RATES ON AN4
HOURLY BASIS.5
SECTION 3. In Colorado Revised Statutes, add 39-22-549 as6
follows:7
39-22-549. Clean hydrogen tax credit - qualified uses - tax8
preference performance statement - definitions - legislative9
declaration - repeal. (1) (a) I
N ACCORDANCE WITH SECTION 39-21-30410
(1),
WHICH REQUIRES EACH BILL THAT CREATES A NEW TAX EXPENDITURE11
TO INCLUDE A TAX PREFERENCE PERFORMANCE STATEMENT AS PART OF A12
STATUTORY LEGISLATIVE DECLARATION , THE GENERAL ASSEMBLY FINDS13
AND DECLARES THAT THE PURPOSE OF THE TAX CREDIT PROVIDED IN THIS14
SECTION IS TO INDUCE CERTAIN DESIGNATED BEHAVIOR BY TAXPAYERS .15
S
PECIFICALLY, THE TAX EXPENDITURE IS INTENDED TO PROVIDE TAX16
RELIEF FOR CERTAIN BUSINESSES OR INDIVIDUALS FOR PURPOSES OF17
ENCOURAGING THEM TO ENGAGE IN CERTAIN QUALIFIED USES OF CLEAN18
HYDROGEN.19
(b) T
HE GENERAL ASSEMBLY AND THE STATE AUDITOR SHALL20
MEASURE THE EFFECTIVENESS OF THE CREDIT IN ACHIEVING THE PURPOSE21
SPECIFIED IN SUBSECTION (1)(a) OF THIS SECTION BASED ON THE22
INFORMATION REQUIRED TO BE MAINTAINED BY AND REPORTED TO THE23
STATE AUDITOR BY THE OFFICE PURSUANT TO SUBSECTION (4)(b) OF THIS24
SECTION.25
(2) A
S USED IN THIS SECTION, UNLESS THE CONTEXT OTHERWISE26
REQUIRES:27
HB23-1281
-7- (a) "CLEAN HYDROGEN" HAS THE MEANING SET FORTH IN SECTION1
40-2-138 (1)(a).2
(b) "D
EPARTMENT" MEANS THE DEPARTMENT OF REVENUE .3
(c) "I
NDUSTRIAL OPERATIONS" INCLUDES THE OPERATION OF MEAT4
PACKING PLANTS, DAIRIES, IRON AND STEEL MILLS, CEMENT PLANTS,5
CONCRETE MANUFACTURING FACILITIES , FOUNDRIES, PULP PAPER6
MANUFACTURING FACILITIES , PAPERBOARD MILLS , AND MINING7
OPERATIONS.8
(d) "L
IFECYCLE GREENHOUSE GAS EMISSIONS RATE " MEANS9
LIFECYCLE GREENHOUSE GAS EMISSIONS , AS DEFINED IN 26 U.S.C. SEC.10
45V (c)(1)(A),
AS AMENDED, MEASURED IN ACCORDANCE WITH ANY11
APPLICABLE FEDERAL INTERNAL REVENUE SERVICE REGULATIONS OR12
GUIDANCE, SUBJECT TO SUBSECTION (7) OF THIS SECTION.13
(e) "O
FFICE" MEANS THE COLORADO ENERGY OFFICE CREATED IN14
SECTION 24-38.5-101.15
(f) "Q
UALIFIED USE" MEANS THE USE OF CLEAN HYDROGEN IN THE16
STATE FOR:17
(I) I
NDUSTRIAL OPERATIONS;18
(II) T
HE OPERATION OF A HEAVY -DUTY MOTOR VEHICLE , AS19
DEFINED IN SECTION 25-7.5-102 (11); AND20
(III) A
VIATION.21
(g) "T
AXPAYER" MEANS A PERSON SUBJECT TO TAX PURSUANT TO22
THIS ARTICLE 22 OR A PERSON OR POLITICAL SUBDIVISION OF THE STATE23
THAT IS EXEMPT FROM TAX PURSUANT TO SECTION 39-22-112 (1).24
(h) "T
IER ONE GREENHOUSE GAS EMISSIONS RATE " MEANS A25
QUALIFIED USE OF HYDROGEN THAT RESULTS IN LIFECYCLE GREENHOUSE26
GAS EMISSIONS RATES THAT ARE WITHIN THE RANGE SET FORTH IN 2627
HB23-1281
-8- U.S.C. SEC. 45V (b)(2)(D), AS AMENDED.1
(i) "T
IER TWO GREENHOUSE GAS EMISSIONS RATE " MEANS A2
QUALIFIED USE OF HYDROGEN THAT RESULTS IN LIFECYCLE GREENHOUSE3
GAS EMISSIONS RATES THAT ARE WITHIN THE RANGE SET FORTH IN 264
U.S.C.
SEC. 45V (b)(2)(C), AS AMENDED.5
(3) (a) S
UBJECT TO THE LIMITATIONS SET FORTH IN SUBSECTION6
(3)(b)
OF THIS SECTION, FOR INCOME TAX YEARS COMMENCING ON OR7
AFTER JANUARY 1, 2024, BUT BEFORE JANUARY 1, 2033, A TAXPAYER IS8
ALLOWED A CREDIT AGAINST THE INCOME TAXES IMPOSED BY THIS9
ARTICLE 22 IN AN AMOUNT EQUAL TO:10
(I) O
NE DOLLAR PER KILOGRAM OF CLEAN HYDROGEN USED FOR A11
QUALIFIED USE THAT RESULTS IN A TIER ONE GREENHOUSE GAS EMISSIONS12
RATE IN THE INCOME TAX YEAR; OR13
(II) F
IFTY CENTS PER KILOGRAM OF CLEAN HYDROGEN USED FOR14
A QUALIFIED USE THAT RESULTS IN A TIER TWO GREENHOUSE GAS15
EMISSIONS RATE IN THE INCOME TAX YEAR .16
(b) I
N ORDER TO CLAIM THE CREDIT , THE TAXPAYER MUST17
ANNUALLY APPLY FOR AND RECEIVE A TAX CREDIT CERTIFICATE FROM THE18
OFFICE PURSUANT TO SUBSECTION (4) OF THIS SECTION. IF THE OFFICE19
DETERMINES THAT AN APPLICANT IS NOT ENTITLED TO A TAX CREDIT20
CERTIFICATE UNDER THIS SECTION , THE OFFICE SHALL NOTIFY THE21
APPLICANT OF ITS DISAPPROVAL IN WRITING.22
(c) (I) F
OR INCOME TAX YEARS COMMENCING ON AND AFTER23
J
ANUARY 1, 2024, BUT BEFORE JANUARY 1, 2026, THE OFFICE SHALL NOT24
ISSUE A TAX CREDIT CERTIFICATE TO A TAXPAYER INDICATING ELIGIBILITY25
FOR A TAX CREDIT FOR AN AMOUNT EXCEEDING ONE MILLION DOLLARS IN26
A TAX YEAR.27
HB23-1281
-9- (II) FOR INCOME TAX YEARS COMMENCING ON AND AFTER1
J
ANUARY 1, 2026, BUT BEFORE JANUARY 1, 2029, THE OFFICE SHALL NOT2
ISSUE A TAX CREDIT CERTIFICATE TO A TAXPAYER INDICATING ELIGIBILITY3
FOR A TAX CREDIT FOR AN AMOUNT EXCEEDING FIVE HUNDRED THOUSAND4
DOLLARS IN A TAX YEAR.5
(III) F
OR INCOME TAX YEARS COMMENCING ON AND AFTER6
J
ANUARY 1, 2029, BUT BEFORE JANUARY 1, 2033, THE OFFICE SHALL NOT7
ISSUE A TAX CREDIT CERTIFICATE TO A TAXPAYER INDICATING ELIGIBILITY8
FOR A TAX CREDIT FOR AN AMOUNT EXCEEDING TWO HUNDRED FIFTY9
THOUSAND DOLLARS IN A TAX YEAR .10
(4) (a) A
TAXPAYER SHALL SUBMIT AN APPLICATION TO THE OFFICE11
FOR A TAX CREDIT CERTIFICATE TO CLAIM THE CREDIT ALLOWED BY THIS12
SECTION ON A FORM AND IN A MANNER PRESCRIBED BY THE OFFICE . THE13
APPLICATION MUST INCLUDE INFORMATION TO ALLOW THE OFFICE TO14
MAKE A DETERMINATION THAT THE USE IS A QUALIFIED USE AND TO15
VERIFY THE AMOUNT FOR WHICH THE TAX CREDIT CERTIFICATE IS APPLIED .16
A
TAXPAYER IS ENTITLED TO RECEIVE ONE TAX CREDIT CERTIFICATE PER17
INCOME TAX YEAR.18
(b) (I) T
HE OFFICE SHALL MAINTAIN A DATABASE OF ANY19
INFORMATION DETERMINED NECESSARY BY THE OFFICE TO EVALUATE THE20
EFFECTIVENESS OF THE INCOME TAX CREDIT ALLOWED IN THIS SECTION IN21
MEETING THE PURPOSE SET FORTH IN SUBSECTION (1)(a) OF THIS SECTION22
AND SHALL PROVIDE SUCH INFORMATION , AND ANY OTHER INFORMATION23
THAT MAY BE NEEDED, IF AVAILABLE, TO THE STATE AUDITOR AS PART OF24
THE STATE AUDITOR'S EVALUATION OF THIS TAX EXPENDITURE REQUIRED25
BY SECTION 39-21-305.26
(II) T
HE OFFICE SHALL, IN A SUFFICIENTLY TIMELY MANNER TO27
HB23-1281
-10- ALLOW THE DEPARTMENT TO PROCESS RETURNS CLAIMING THE INCOME1
TAX CREDIT ALLOWED IN THIS SECTION, PROVIDE THE DEPARTMENT WITH2
AN ELECTRONIC REPORT FOR THE PRECEDING TAX YEAR LISTING EACH3
TAXPAYER TO WHICH THE OFFICE ISSUED A TAX CREDIT CERTIFICATE AND4
THAT INCLUDES THE FOLLOWING INFORMATION :5
(A) T
HE TAXPAYER'S NAME;6
(B) T
HE AMOUNT OF THE INCOME TAX CREDIT THAT THE7
CERTIFICATE INDICATES THE TAXPAYER IS ELIGIBLE TO CLAIM ; AND8
(C) T
HE TAXPAYER'S SOCIAL SECURITY NUMBER OR THE9
TAXPAYER'S COLORADO ACCOUNT NUMBER AND FEDERAL EMPLOYER10
IDENTIFICATION NUMBER.11
(III) T
HE OFFICE SHALL DEVELOP STANDARDS FOR THE QUALIFIED12
USES FOR WHICH AN INCOME TAX CREDIT UNDER THIS SECTION IS13
ALLOWED. THE OFFICE SHALL POST THE STANDARDS ON THE OFFICE 'S14
WEBSITE.15
(5) I
N ORDER TO CLAIM THE CREDIT AUTHORIZED BY THIS SECTION ,16
A TAXPAYER SHALL FILE THE TAX CREDIT CERTIFICATE WITH THE17
TAXPAYER'S STATE INCOME TAX RETURN , AND, IF THE TAXPAYER IS18
EXEMPT FROM TAX PURSUANT TO SECTION 39-22-112 (1), THE TAXPAYER19
SHALL FILE A RETURN PURSUANT TO SECTION 39-22-601 (7)(b). THE20
AMOUNT OF THE CREDIT THAT THE TAXPAYER MAY CLAIM PURSUANT TO21
THIS SECTION IS THE AMOUNT STATED ON THE TAX CREDIT CERTIFICATE .22
(6) I
F AN INCOME TAX CREDIT AUTHORIZED IN THIS SECTION23
EXCEEDS THE INCOME TAX DUE ON THE INCOME OF THE TAXPAYER FOR24
THE TAXABLE YEAR, THE EXCESS CREDIT MAY NOT BE CARRIED FORWARD25
AND MUST BE REFUNDED TO THE TAXPAYER .26
(7) I
F THE FEDERAL INTERNAL REVENUE SERVICE DOES NOT ADOPT27
HB23-1281
-11- REGULATIONS OR GUIDANCE FOR THE MEASUREMENT OF LIFECYCLE1
GREENHOUSE GAS EMISSIONS RATES ON AN HOURLY BASIS BEFORE2
J
ANUARY 1, 2031, THE OFFICE SHALL ADOPT GUIDANCE FOR THE3
MEASUREMENT OF LIFECYCLE GREENHOUSE GAS EMISSIONS RATES ON AN4
HOURLY BASIS.5
(8) T
HIS SECTION IS REPEALED, EFFECTIVE DECEMBER 31, 2036.6
SECTION 4. Act subject to petition - effective date. This act7
takes effect at 12:01 a.m. on the day following the expiration of the8
ninety-day period after final adjournment of the general assembly; except9
that, if a referendum petition is filed pursuant to section 1 (3) of article V10
of the state constitution against this act or an item, section, or part of this11
act within such period, then the act, item, section, or part will not take12
effect unless approved by the people at the general election to be held in13
November 2024 and, in such case, will take effect on the date of the14
official declaration of the vote thereon by the governor.15
HB23-1281
-12-