Ethanol producers not ready to fill mandate
Gasoline makers will have to import the additive for the next year to fulfill a state blending law
As Hawaii prepares to carry out a policy requiring that 85 percent of gasoline contain at least 10 percent ethanol, would-be producers say they are still a year or more away from creating local facilities needed to make the fuel.
Until then, gasoline companies will have to import ethanol to blend with gasoline refined here.
Daniel KenKnight, chief executive of Oahu Ethanol Corp., said it will be the second quarter of next year before its planned Oahu facility is in operation at Campbell Industrial Park. William Maloney, president of Kauai Ethanol and Maui Ethanol, predicted a similar time frame for projects on the neighbor islands.
In the meantime, KenKnight said that Oahu Ethanol is in talks with Kamehameha Schools and Dole Food Co. to help resolve another issue the company will face once its ethanol production facility is operable: how to grow huge amounts of sugary food crops that will be needed to produce the fuel.
Altogether, the company is aiming for 15,000 acres to grow sweet sorghum, which is used to produce a syrup traditionally used in the Southeastern U.S., where it is often grown. Initially, Oahu Ethanol wants 5,000 to 7,200 acres to get started, KenKnight said.
"These are just discussions, and I need to stress that," KenKnight said.
In the meantime, the company will import about $15 million to $18 million worth of molasses to refine into ethanol at a facility that KenKnight likened to a giant rum distillery.
Maloney's projects have the benefit of raw materials. On Kauai, he is working with the Gay & Robinson sugar plantation, and on Maui he is partnering with Alexander & Baldwin Inc.'s Hawaii Sugar & Commercial Co.
Using sugar cane as a feedstock for ethanol rather than food makes economic sense, notwithstanding the startup costs, Maloney said. One ton of sugar cane can generate about $50 in revenue if used for sugar, Maloney said. The same ton of cane used for ethanol can generate about $61 in revenue, he said.
Although the ethanol mandate is meant to reduce the Aloha State's dependence on imported fossil fuels, critics have charged that it will simply mandate the importation of a different kind of fuel -- ethanol -- until Hawaii's facilities can be built.
Those critics have said that the ethanol facilities should have been built before the policy went into effect, so that gasoline producers could have a local supply. But the ethanol producers say they needed an established market to get financing. They said financial backers were not willing to throw millions of dollars at enterprises whose fortunes were tied to policies that Hawaii lawmakers had not yet imposed.
One of the leading former critics of the ethanol mandate yesterday offered more muted comments on the policy. Melissa Pavlicek, a lobbyist for the Western States Petroleum Association, said refineries in Hawaii face increased costs and technical challenges associated with creating blending systems. But she said there was is now "no disagreement between the petroleum industry and the ethanol industry."
Despite the need to import molasses for the short term, KenKnight said the ethanol policy and the projects that are coming online will enable Hawaii to replace a substantial amount of gasoline with a renewable fuel that can be grown here. And that creates new economic opportunities for local agriculture.
"The impetus for any return to agriculture on Oahu in terms of energy-fuel crops can only happen if you have an ethanol plant up and running," he said.
