Honolulu, Hawaii



RE:    H.B. No. 1689

       H.D. 2

       S.D. 1




Honorable Ronald D. Kouchi

President of the Senate

Twenty-Eighth State Legislature

Regular Session of 2016

State of Hawaii




     Your Committee on Transportation and Energy, to which was referred H.B. No. 1689, H.D. 2, entitled:




begs leave to report as follows:


     The purpose and intent of this measure is to amend the existing ethanol facility income tax credit to include facilities that produce other renewable fuels.


     Your Committee received testimony in support of this measure from Ulopono Initiative; BioEnergy Hawaii; Renewable Energy Action Coalition of Hawaii; Hawaii Renewable Energy Alliance; Hawaii Renewable Resources, LLC; and one individual.  Your Committee received comments on this measure from the Department of Business, Economic Development, and Tourism; Department of Taxation; Tax Foundation of Hawaii; and Hawaii Gas.


     Act 289, Session Laws of Hawaii (SLH) 2000, established an investment tax credit to encourage the construction of an ethanol production facility in the State.  Act 140, SLH 2004, changed the credit from an investment tax credit to a facility tax credit.  This measure proposes to further amend the ethanol facility tax credit to encompass facilities that produce other renewable fuels.


     Your Committee finds that ethanol has become obsolete as a fuel additive.  The demand for feedstock that is used to produce ethanol basically redirects that feedstock away from traditional uses, causing products derived from the feedstock to substantially increase in price.


     Your Committee finds that this measure has the potential to open the door for significant renewable energy investment in the State, therefore helping Hawaii become more self-sufficient in its energy supply.


     Your Committee has amended this measure by:


     (1)  Clarifying a facility's nameplate capacity by defining that one gallon shall be equal to 76,330 British thermal units, as defined by the United States Department of Energy;


     (2)  Changing the date in which a qualifying renewable fuels production facility must be in production to qualify for the credit from January 1, 2017, to January 1, 2020; and


     (3)  Amending the definition of "qualifying renewable fuel" by deleting the requirement that to qualify for the tax credit, any renewable feedstock that was transported more than five hundred miles be determined to serve a legitimate public purpose.


     As affirmed by the record of votes of the members of your Committee on Transportation and Energy that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1689, H.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 1689, H.D. 2, S.D. 1, and be referred to your Committee on Ways and Means.


Respectfully submitted on behalf of the members of the Committee on Transportation and Energy,