Report Title:

Energy; geothermal royalties


Allocates $250,000 per year from the State's portion of the geothermal royalties to DBEDT to fund hydrogen research and development.


H.B. NO.









RELATING TO geothermal royalties.



SECTION 1. Scientists have recognized hydrogen as a potential source of fuel for many years. Currently, hydrogen is used in industrial processes, rocket fuel, and spacecraft propulsion. With further research and development, hydrogen could competitively serve as an alternative source of energy for fueling vehicles and generating electricity.

Recognizing the potential of hydrogen fuel, the United States Department of Energy and the private sector have for several years funded hydrogen research and development programs. The federal government alone allocates an average of $18,000,000 annually for hydrogen research and development. Currently, the market capitalization of fuel cell companies that rely on hydrogen as the fuel source for the cell is in excess of $10,000,000,000.

The legislature finds that Hawaii represents an excellent site to attract government and industry investment in hydrogen. Hawaii's major advantages include:

(1) The availability of indigenous renewable resources, including geothermal energy;

(2) The excellent research capabilities at the University of Hawaii;

(3) Hawaii's central location for trade opportunities with Pacific Rim nations; and

(4) Hawaii's high transportation fuel costs.

There has been significant progress in hydrogen research and development in Hawaii. For example, in 1999, University of Hawaii chemists discovered a new way to store hydrogen energy that may result in more economical, pollution-free vehicles. Tackling one of hydrogen's major challenges, the team found a catalyst that will release hydrogen from lightweight materials at a moderate temperature. This has major implications for developing effective fuel cells for vehicles. As a result of these accomplishments, the Hydrogen Technical Advisory Panel and the United States Department of Energy named the Hawaii team leader as the "1999 Research Success Story."

In addition, the 2000 legislature requested a study to recommend options that could result in hydrogen becoming a future ingredient in the State's energy economy. The Hawaii natural energy institute (HNEI) of the University of Hawaii concluded that large-scale hydrogen use for transportation can be competitive this decade. The study also determined that fleet and military transportation on Oahu has the largest potential for hydrogen and fuel cell use.

On the national level, many advancements are taking place to develop technologies that will utilize hydrogen as a fuel source. Major companies are investing in the development of fuel cells for both stationary and mobile power. Automakers are projecting the commercial availability of fuel cell powered vehicles that could be fueled by hydrogen within this decade. Significant amounts of investments are being made to develop fuel cells and other distributed generation technologies.

With its traditional high fuel costs and a wealth of renewable energy resources, Hawaii could attract these advanced technology development companies for both research and development, testing, and deployment. The University of Hawaii is recognized as a "center for excellence in hydrogen research" by the United States Department of Energy. These factors can lead to the development of a hydrogen-based economy where Hawaii produces more of its own environmentally clean fuels, thus reducing its dependence on fossil fuels, and resulting in job growth, reduced pollution, and a more robust state economy.

The legislature finds that the use of geothermal royalties is a logical nexus for the promotion of hydrogen as an energy source and the State's efforts to increase and enhance hydrogen use in Hawaii. Accordingly, the purpose of this Act is to provide for a dedicated source of funding for hydrogen research and development by allocating $250,000 of all royalties received by the State from geothermal resources to the department of business, economic development, and tourism.

SECTION 2. Section 182-7, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) The payments to the State as fixed by the board shall be specified; provided that:

(1) In the case of bauxite, bauxitic clay, gibbsite, diaspore, boehmite, and all ores of aluminum, the amount of royalties for each long dry ton of ore as beneficiated shall not be less than twenty-five cents or the equivalent of the price of one pound of virgin pig aluminum, whichever is higher, nor shall it exceed the equivalent of the price of three pounds of virgin pig aluminum;

(2) The rate of royalty for ore processed into aluminous oxide in the State shall be set at eighty per cent of the rate of royalty for ore not processed to aluminous oxide in the State; and

(3) The royalty shall be fixed at a rate which will tend to encourage the establishment and continuation of the mining industry in the State.

The prices of virgin pig aluminum for the purpose of determining the royalties under this section shall be the basic price on the mainland United States market for virgin pig, not refined, f.o.b. factory. The royalties shall be in lieu of any severance or other similar tax on the extracting, producing, winning, beneficiating, handling, storing, treating, or transporting of the mineral or any product into which it may be processed in the State, and shall not be subject to reopening or renegotiating for and during the first twenty years of the lease term.

In the event the lessee desires to mine other minerals, the lessee, before mining the minerals, shall so notify the board in writing, and the board and the lessee shall negotiate and fix the royalties for the minerals.

Any other law to the contrary notwithstanding, thirty per cent of all royalties received by the State from geothermal resources shall be paid to the county in which mining operations covered under a state geothermal resource mining lease are situated.

Notwithstanding any other law to the contrary, $250,000 per year of the State's portion of the royalties from geothermal resources shall be allocated to the department of business, economic development, and tourism to fund hydrogen research and development as an alternative energy source."

SECTION 3. New statutory material is underscored.

SECTION 4. This Act shall take effect on July 1, 2003.