Overview
E&E News quoted Steve Dixon and Hunter Johnston in a recent article, "Hydrogen industry preps legal challenge to Biden tax rules." The article addresses the possible litigation over the Proposed Regulations for the hydrogen production credit under section 45V. Opponents to those rules are concerned that they will slow growth of the industry. Dixon stated that if Treasury and the IRS were to finalize the Proposed Regulations, "[i]t's reasonable to expect that some or many of those opponents will be considering a challenge to the validity of the final regulation."
The most controversial feature of those proposed regulations are the "three pillars," which limit the availability of 45V credits with a set of emissions-based rules. Dixon and Johnston said that because these pillars were not expressly included in the IRA, the omission means that "attorneys could argue there was no opportunity for Treasury to adopt the three pillars." Moreover, because the law already considers emissions in determining credit amounts, Dixon and Johnston observed that there is a sense in which "Congress has already accounted for the carbon intensity of any given hydrogen producer." Among other things, the three pillars look to the possible knock-on emissions effects that hydrogen production would have on the rest of the power grid. Dixon explained that some challenges might "question whether Treasury can adopt its proposed method to account for emissions caused by hydrogen production's use of the grid."
Challenges to final regulations under 45V may come under the Administrative Procedure Act (APA), Dixon noted that the changes to the relevant emissions measurement model "could be seen as rulemaking that would need to be subject to a notice-and-comment period under the APA." Given the current uncertainty about agency deference and the Chevron doctrine, a challenge to regulations under 45V might happen in a markedly different administrative law environment. In that regard, Dixon observed that a diminished Chevron would presumably give courts more power to strike down agency action, even where that action is arguably "reasonable."
