Report Title:

Renewable Energy; Biodiesel Fuel

Description: Allows for the delivery of biodiesel to state harbors. Reduces harbor fees for alternative fuel vessels. Reduces total fuel taxes for ethanol, methanol, biodiesel, and other alternative fuels, other than liquefied petroleum gas. Establishes a preference in public contracts for the use of biofuels. (SB1239 HD1)

 

THE SENATE

S.B. NO.

1239

TWENTY-SECOND LEGISLATURE, 2003

S.D. 1

STATE OF HAWAII

H.D. 1


 

A BILL FOR AN ACT

 

relating to energy.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

PART I

SECTION 1. The legislature finds that biodiesel is becoming a mainstream alternative fuel. In the past decade, according to the National Biodiesel Board, biodiesel moved from a nearly non-existent market position to use in more than one hundred major fleets. Biodiesel is now used in trucking, public transit, school districts, agriculture, public utilities, and military fleets.

Biodiesel is made from soybean oil or other vegetable oils and from animal fats. To produce biodiesel, the fat or oil is reacted with an alcohol, such as methanol, in the presence of a catalyst, such as sodium. The catalyst can be recovered for re-use.

Biodiesel use by state and fuel provider fleets multiplied more than sixfold between 1999 and 2000. Biodiesel's success is due to its logical fit in the nation's desire for a diverse portfolio of transportation fuels. Biodiesel can be blended in any proportion with petroleum diesel. B20 is one common blend. Pure unblended biodiesel is called B100, or "neat fuel." Covered fleet operators can meet up to half of their Energy Policy Act of 1992 (EPAct) alternative fuel vehicle acquisition requirements using biodiesel. One credit is earned through every four hundred fifty gallons of B100 (or two thousand two hundred fifty gallons of B20) purchased.

Biodiesel blends may require minor changes to existing fueling infrastructure. They are commonly stored in standard tanks used otherwise for petroleum diesel. Engines running on B20 generally need no modifications. But blends with higher biodiesel content are more likely to require modifications, particularly to the fuel system.

Using biodiesel in a conventional diesel engine can reduce unburned hydrocarbons, carbon monoxide, and particulate matter. A 1998 life-cycle analysis by the U.S. Department of Agriculture and Department of Energy showed a seventy-eight per cent reduction in carbon dioxide emissions from B100 compared to petroleum diesel. Acid rain-causing sulfur oxides and sulfates, components of conventional diesel, can also be reduced significantly. But emissions of nitrogen oxides tend to show a slight increase.

Pure biodiesel can cause rubber and other components to fail; therefore, some engine modifications may be necessary to use pure biodiesel in existing engines. There is often a reduction in fuel economy and power for pure biodiesel, varying among different engines. And because it is not widely available, biodiesel is currently more expensive than petroleum diesel.

Fluctuating oil prices have energy security issues and a desire to reduce foreign energy dependence has increased the interest in biodiesel.

In its share of the overall market for domestic transportation diesel fuel, biodiesel is still small, accounting for less than one-tenth of one per cent. But annual production has grown rapidly, from five million gallons in 2000 to an estimated twenty million gallons in 2001. Future growth could be substantial, but is difficult to quantify at the present time.

Although most biodiesel usage involve fleets, demand by individual users has spawned several publicly accessible fueling stations nationwide, including a facility on Nimitz highway on Oahu. Biodiesel now is produced in nine plants nationwide, with approximately fourteen more in development or under construction, setting the stage for increased use in the future.

The purpose of this part is to encourage the use of biodiesel fuel in Hawaii as an important source of renewable energy by facilitating the use of biodiesel in the marine industry.

The legislature finds that biodiesel spills are completely biodegradable, most commercial vessels use diesel fuel and require no modification, and biodiesel fuel is safer to handle and a healthier alternative for crew members and passengers.

This part:

(1) Allows for the delivery and fueling of biodiesel to all state harbors; and

(2) Allows the installation of biodiesel fuel pumps in all state harbors.

SECTION 2. Chapter 266, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§266- Delivery of biodiesel fuel to harbors; installation of biodiesel fuel pumps. (a) Notwithstanding any law to the contrary, the department, by rules adopted pursuant to chapter 91, shall:

(1) Allow for the delivery of biodiesel fuel to all harbors; and

(2) Provide for the installation of biodiesel fuel pumps at all harbors.

(b) As used in this section, "biodiesel fuel" means a renewable, biodegradable, mono alkyl ester combustible liquid fuel derived from agricultural plant oils or animal fats that meets American Society of Testing and Materials Specification for Biodiesel Fuel Blend Stock for Distillate Fuels and is suitable for blending with petroleum-based diesel fuel for use in diesel engines."

PART II

SECTION 3. The increased use of alternative fuels in internal combustion engines can reduce the amount of air pollution generated by cars, increase mileage, and reduce dependency on fossil fuel. The purpose of this part is to encourage fuel diversity and reduce Hawaii's reliance on imported fossil fuel by providing incentives that facilitate the increased use of alternative fuels.

SECTION 4. Section 243-4, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) The tax shall not be collected in respect to any benzol, benzene, toluol, xylol, or alternative fuel sold for use other than for operating internal combustion engines. With respect to these products, other than alternative fuels, the department by rule shall provide for the reporting and payment of the tax and for the keeping of records in respect thereto, in such manner as to collect, for each gallon of such product sold for use in internal combustion engines for the generation of power, or so used, the same tax or taxes as apply to each gallon of diesel oil. With respect to alternative fuels, the only tax collected shall be that provided in paragraphs (1), (2), and (3) of this subsection. This subsection shall not apply to aviation fuel sold for use in or used for airplanes.

(1) Every distributor of any alternative fuel for operation of an internal combustion engine shall pay a license tax to the department of [1] one-quarter of one cent for each gallon of such alternative fuel sold or used by the distributor[.];

(2) Every distributor, in addition to the tax required under paragraph (1) of this subsection, shall pay a license tax to the department for each gallon of alternative fuel sold or used by the distributor for operating a motor vehicle or motor vehicles upon the public highways of the State at a rate proportional to that of the rates applicable to diesel oil in subsection (b), rounded to the nearest one-tenth of a cent, as follows:

(A) Ethanol, [0.29] 0.145 times the rate for diesel;

(B) Methanol, [0.22] 0.11 times the rate for diesel;

(C) Biodiesel, [0.50] 0.25 times the rate for diesel;

(D) Liquefied petroleum gas, 0.33 times the rate for diesel; and

(E) For other alternative fuels, the rate shall be based on the energy content of the fuels as compared to diesel fuel, using a lower heating value of one hundred thirty thousand British thermal units per gallon as a standard for diesel, so that the tax rate, on an energy content basis, is equal to [half] one-quarter the rate for diesel fuel.

The taxes so paid shall be paid into the state treasury and deposited in special funds or paid over in the same manner as provided in subsection (b) in respect of the tax on diesel oil[.];

(3) If any user of alternative fuel furnishes to the distributor a certificate, in such form as the department shall prescribe, or the distributor who uses alternative fuel signs such certificate, certifying that the alternative fuel is for use in operating a motor vehicle or motor vehicles in areas other than upon the public highways of the State, the tax as provided by paragraphs (1) and (2) of this section shall not be applicable; provided that no certificate shall be required if the alternative fuel is used for fuel and heating purposes in the home. In the event a certificate is not or cannot be furnished and the alternative fuel is in fact used for operating an internal combustion engine or operating a motor vehicle or motor vehicles in areas other than upon the public highways of the State, the user thereof may obtain a refund of all taxes thereon imposed by such paragraphs. The department shall adopt rules to administer the refunding of such taxes imposed."

PART III

SECTION 5. Biofuel is an alternative energy source derived from plant material, is comparable in quality to conventional petroleum fuels and can be used for transportation, heating, and air-conditioning. Biodiesel, a type of biofuel, is a renewable energy source with great potential, as it burns cleaner than its petroleum-based counterpart, produces much less air pollution, and diverts used cooking oil from landfills. One facility on Maui diverts three hundred and fifty tons of cooking oil out of the landfill and into a biodiesel product every month.

Biodiesel can be used by itself or in a blend with petroleum-based diesel oils. It does not require costly engine modifications before use. Moreover, biodiesel is simple to use, renewable, locally-produced, and readily available.

The purpose of this part is to provide an incentive for the State and counties to use alternative fuels that promote important state energy and environmental objectives by establishing a preference in public contracts for the use of biofuels.

SECTION 6. Chapter 103D, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§103D- Biofuel preference. (a) Notwithstanding any other law to the contrary, contracts for the purchase of fuel shall be awarded to the lowest responsible and responsive bidders, with preference given to bidders using or selling biofuel. The preference shall be equal to the per gallon tax rates in section 243-4 (c) for pure biofuel. The policy board shall adopt rules in accordance with chapter 91 establishing lesser preferences for mixed biofuel products.

(b) When purchasing diesel fuel for transportation, state agencies shall, and county agencies may, give preference to biofuel to assist in the diversion of cooking oil wastes from the waste stream.

(c) When purchasing low-grade fuel for power generation, state agencies shall, and county agencies may, give preference to bidders using biofuel.

(d) As used in this section, "biofuel" means:

(1) Biodiesel fuel produced from recycled or recyclable cooking oil, fats, and greases, which meets the American Society of Testing and Materials Specification for Biodiesel Fuel (B100) Blend Stock for Distillate Fuels, as amended; and

(2) Fuel produced from waste cooking oils, fats, or greases, including grease trap waste, that can be used for power generation."

SECTION 7. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 9. This Act shall take effect on July 1, 2003.