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Tax breaks offered
to promote ethanol

By Pat Omandam
Star-Bulletin

Take some sugar cane, add molasses and toss in garbage typically dumped in a landfill, process it all, and what you get could eventually lessen Hawaii's dependence on imported crude oil and save the environment.

State officials and others are touting a bill signed yesterday by Gov. Ben Cayetano that offers investment tax credits for companies that build commercial fuel grade ethanol plants in Hawaii.

They say large-scale production of the alternative alcohol fuel will help address the state's energy and environmental polices while helping the economy.

State Rep. Hermina Morita (D, Hanalei) said Hawaii had looked at ethanol fuel in the past but only as a way to save Hawaii's sugar industry. But today, with concerns over crude oil prices, federal air standards, groundwater contamination and global climate change, there is renewed interested in local ethanol production for a cheaper and safer fuel that lessens the dependence on crude oil, she said.

Morita said car manufacturers are routinely building ethanol vehicles each year -- 500,000 are on the road today -- that use a blend of gasoline and ethanol. She said a mixture of up to 10 percent ethanol in gasoline is approved under the warranties of most car makers. The 10 percent blend produces a cleaner-burning fuel that decreases auto emissions.

"Simply put, a renewal and flexible fuel such as ethanol may be the transition from petroleum-based products by allowing the usage of the same kinds of vehicles and equipment that we have right now," Morita said.

Kauai's sweet idea

Currently, the focus is on a project headed by Hawaii-based Worldwide Energy Group, which over the past three years has put together a plan with $1 million in seed money to develop the "Kauai Ethanol Project," a 12-million to 15-million gallons per year ethanol facility at the Gay & Robinson's sugar mill location.

Daniel Kenknight, president of the 3-year-old company and a Maui resident, said the ethanol industry is important to Hawaii because it serves as a link between the old and new economy. For instance, ethanol facilities on Maui and Kauai will create new skilled jobs as well as help preserve existing agricultural jobs, he said.

The company has secured rights to technology that converts a broad variety of feedstocks to ethanol, a process that goes hand in hand with sugar mill operations and keeps overhead costs down for both products. Three feedstocks sources are planned for the Kauai plant. The main feedstock will be bagasse, the fibrous byproduct of sugarcane processing.

The facility will also process molasses and municipal solid waste, primarily garbage dumped at landfills to produce ethanol.

The new law requires participating companies to build an ethanol plant that produces at least 75 percent of its stated capacity before it is eligible for the investment tax credit, which is about 30 percent.

From 0 to 1.8 billion gallons

According to Clean Fuels Hawaii, a new membership-based group that promotes the development and use of alternative fuels, ethanol capacity in the U.S. over the past two decades has risen from zero to 1.8 billion gallons per year. Today, one out of every eight gallons of gasoline sold in the U.S. contains ethanol. Still, the cost of producing ethanol is higher compared to the market price of gasoline.

Meanwhile, Cayetano said he is not ready to mandate that ethanol be used in gasoline but it may come to that point someday.

"That's something we've been thinking about but we have not gone forward with it because, first of all, the state of ethanol development in this state is not at the level (as) in other states ..." the governor said.

"Second, these are things that, preferably, I'd like to see the market address itself, rather than the government coming in and saying that you must do this."