Hydrogen Laws and Incentives in Kentucky

The list below contains summaries of all Kentucky laws and incentives related to hydrogen.

State Incentives

Alternative Fuel Production Tax Incentives

Companies that engage in alternative fuel production and hydrogen transmission pipelines may be eligible for the Kentucky Business Investment (KBI) Program. The Kentucky Cabinet for Economic Development (Cabinet) provides income tax credits and wage assessment incentives to eligible companies that locate or expand operations in Kentucky. Energy-efficient alternative fuels are defined as homogeneous fuels that are produced from processes designed to densify feedstocks such as coal, waste coal, or biomass resources and have an energy content that is greater than the feedstock. The incentive offsets eligible expenses for up to 15 years for an economic development project located in an enhanced incentive county or 10 years for an economic development project located in another county. An approved company may be eligible for a credit of up to 100% of the Kentucky corporate income or limited liability entity tax liability and wage assessment fees are available. For more information, including qualifications and the application process, see the Cabinet Business Incentives website.

(Reference House Bill 303, 3023 and Kentucky Revised Statutes 154.32-020)

Point of Contact
Sarah Butler
Director, Incentive Administration Division
Kentucky Cabinet for Economic Development
Phone: (502) 782-1978

Laws and Regulations

Alternative Fuel Tax

An excise tax rate of 9% of the average wholesale price on a per gallon basis applies to all special fuels, including diesel, natural gas, propane, ethanol, biodiesel, hydrogen, and any other combustible gases and liquids, excluding gasoline, used to propel motor vehicles. Additionally, a highway motor fuel tax of $0.02 per gallon applies to all special fuels. For taxation purposes, one gasoline gallon equivalent of compressed natural gas (CNG) is equal to 5.66 pounds (lbs.) or 126.67 cubic feet. One diesel gallon equivalent of liquefied natural gas (LNG) is equal to 6.06 lbs.

(Reference Kentucky Revised Statutes 131.130, 138.220, and 138.226)

Alternative Fuel Vehicle (AFV) Acquisition Requirements

By January 1, 2026, the Kentucky Finance and Administration Cabinet (Cabinet) must increase the use of ethanol, biodiesel, and other alternative transportation fuels and replace at least 50% of light-duty state fleet vehicles with new AFVs or vehicles equipped with low-emission technology. Beginning December 1, 2024, the Cabinet must compile annual reports detailing the progress made towards these requirements, including a life-cycle cost assessment, vehicle replacement timeline, and targets for increased alternative fuels in state agency vehicles.

(Reference Senate Bill 281, 2023 and Kentucky Revised Statutes 45A.625 and 152.715)

Alternative Fuel and Conversion Definitions

Clean transportation fuels include propane, compressed natural gas (CNG), liquefied natural gas (LNG), electricity, and other transportation fuels determined to be comparable with respect to emissions. Propane is defined as a hydrocarbon mixture produced as a by-product of natural gas processing and petroleum refining and condensed into liquid form for sale or use as a motor fuel. CNG is defined as pipeline-quality natural gas that is compressed and provided for sale or use as a motor vehicle fuel. LNG is defined as pipeline-quality natural gas treated to remove water, hydrogen sulfide, carbon dioxide, and other components that will freeze and condense into liquid form for sale or use as a motor vehicle fuel.

A bi-fuel system is defined as the power system for motor vehicles powered by gasoline and either CNG or LNG. Bi-fuel systems are considered clean fuel systems. Conversion is defined as repowering a motor vehicle or special mobile equipment by replacing its original gasoline or diesel powered engine with one capable of operating on clean transportation fuel or retrofitting a motor vehicle or special mobile equipment with parts that enable its original gasoline or diesel engine to operate on clean transportation fuel.

(Reference Kentucky Revised Statutes 186.750)

More Laws and Incentives

To find laws and incentives for other alternative fuels and advanced vehicles, search all laws and incentives.