Oil industry seeks delay
for ethanol blending rules
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If adopted, the rules would mandate that each gallon of gasoline sold at local pumps contain 10 percent of the renewable fuel, which produces less carbon monoxide than gasoline when burned.
Ethanol industry representatives said the requirement would reduce imports of increasingly expensive petroleum as well as greenhouse gas emissions, and would spark the creation of a local ethanol-production industry.
"Yes, that's good for us, but it's also good for the state. It creates jobs and more revenue and so the state economy will be the long-term beneficiary," said Dan KenKnight, president of Oahu Ethanol Corp., which plans to build an ethanol plant.
Several states concerned about air pollution have had similar requirements in place for years, using ethanol derived mainly from Midwest corn. Studies have shown that adding ethanol to gasoline has no significant effect on fuel economy or a car's engine.
KenKnight said pump prices in some mainland cities have been lowered by the ethanol mandates. But he added that there was no guarantee that would happen in Hawaii, where two refineries -- owned by Tesoro and Chevron -- supply all of the state's gasoline needs.
"I can't say prices will be lower here. That's up to (the refineries) because they control the prices," KenKnight said.
The state government estimates a potential Hawaii ethanol market of 41 million gallons a year and expects this to be easily met by future ethanol plants now being planned on Oahu, Maui and Kauai. A 2003 state study projected those plants could produce ethanol for sale at $1.25-$1.30 per gallon.
Hawaii's ethanol requirement first became codified in a 1994 law aimed at throwing a lifeline to cane growers. But a lack of implementation rules and deadlines meant the law was never enforced.
Gov. Linda Lingle wants the mandate to go into effect 18 months after the draft rules are finalized.
That would be none too soon for local cane producers, said Charles Okamoto, treasurer for Kauai cane growers Gay & Robinson.
The family-owned company operates a mill on Kauai's west side but is being squeezed by high input costs and low sugar prices, he said. It is now working with Worldwide Energy Group, which plans to build a plant to turn Gay & Robinson's bagasse, a sugar byproduct, into ethanol.
"We must find an alternative to our core sugar business," Okamoto said.
In addition to the planned Oahu and Kauai operations, Maui Ethanol LLC plans to build a facility on the Valley Isle to produce ethanol from cane supplied by Alexander & Baldwin Inc.'s Hawaiian Commercial & Sugar plantation.
Even the petroleum industry, which would shoulder new infrastructure costs associated with blending the fuels, voiced support for the intent of the rules yesterday.
But Melissa Pavlicek, a local lawyer representing the Western States Petroleum Association, said the 18-month implementation period was "simply not enough time," citing the time it can take to acquire land for new mixing facilities and the slow pace of Hawaii's permit approval process. She suggested the deadline be extended to three years.
Other speakers said that though the proposed rules are aimed at boosting Hawaii's cane and ethanol industries, they do nothing to ensure Hawaii products will be used.
Tesoro representative Susan Shintani said this could result in an influx of ethanol produced elsewhere, creating a situation in which Hawaii trades in one dependency for another.
"There is no guarantee that a single drop of the ethanol will be made in Hawaii or come from local sugar," she said.
But imposing any such local-content requirements would violate interstate commerce laws, said Maurice Kaya, energy branch administrator for the Department of Business, Economic Development and Tourism, who oversaw the hearing.
KenKnight said ethanol producers and cane-growers need a mandatory deadline so that they can move forward with their plans knowing there will be a market for their ethanol.
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