In April 2006, Hawaii's E10 mandate went into effect, along with an 11-cent general excise tax reduction on ethanol-blended fuels to help defer added costs. Attempts to extend the tax exemption during the 2006 legislative session failed, and thus it expired Dec. 31. However, a $346 million comprehensive tax relief package proposed in January 2007 by Hawaii Gov. Linda Lingle seeks to reinstate and improve the biofuels tax exemption.

According to the governor's office, the proposal to the legislature would reinstate the exemption for ethanol blends and indefinitely extend it to include all biofuels, including biodiesel. This extension would result in $32 million in tax relief over the next two years. At press time, the bill hadn't made it out of committee.

The exemption is intended to encourage the use of renewable fuels and to defer the cost of importing ethanol to the islands to meet the E10 mandate. Despite producer incentives, construction on six proposed ethanol facilities in the state hasn’t started.

Developers of the Kauai Ethanol LLC, owned by Pacific West Energy LLC, applied for an air permit in March 2006, and approval was pending at press time, according to Pacific West Energy President William Maloney. He said other permit applications are in progress, as well. The 12 MMgy plant, which will use sugarcane juice and molasses as feedstock, is slated to break ground in April 2007 and start producing in June 2008. The project involves the acquisition of a sugar plantation and mill. Maloney said the complexity of the transaction has created overall project delays, although most issues are now resolved.

Construction on Maui Ethanol, also owned by Pacific West Energy, is on hold, awaiting decisions from a third party regarding site location and feedstocks, Maloney said. The air permit application has been filed, but Maloney said the development timeline was unknown at press time.

Aloha Ethanol Corporation changed its name to Pacific Biofuels and Energy Corporation in December after a company merger was conducted. The company's proposed ethanol plant was formerly called Hamakua Ethanol, as well as Global Power Generation Inc. The project is expected to be built on the island of Oahu, but project spokesman Sam Monet said ground wouldn’t be broken any time soon. He said the decision to break ground will be based on the national price of ethanol, federal and state support, and test results of new varieties of switchgrass.

Monet added that legislative policies could greatly affect the ethanol industry in Hawaii. For example, sugar subsidies affect the industry's ability to acquire feedstock, he said. Monet suggested that the industry in Hawaii be considered separately from the mainland. "We're 100 percent dependent on imported petroleum products and ethanol," Monet said. "This is a matter of national security for Hawaii."

Hawaii BioEnergy LLC will present the findings of a feasibility study in March, according to Senior Vice President Brian Orlopp. He said initial plans favor a 20 MMgy sugarcane-to-ethanol facility on Kauai. A timeline hadn't been announced at press time. The company, which was announced in July 2006, is a six-partner international consortium led by three of the state’s largest landowners: Grove Farm Company, Maui Land & Pineapple Company and Kamehameha Schools. Other partners include Brazil Renewable Energy Corporation, Khosla Ventures and an agriculture biotech venture capital company, whose name hadn't been declared at press time.

ClearFuels Kauai Ethanol LLC, owned by Clearfuels Technology Inc., and Oahu Ethanol Corporation—Hawaii's other two proposed ethanol projects—also could not be reached at press time.

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