STAND. COM. REP. NO. 2660

Honolulu, Hawaii

RE: S.B. No. 2574

S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Second State Legislature

Regular Session of 2024

State of Hawaii

Sir:

Your Committees on Agriculture and Environment and Energy, Economic Development, and Tourism, to which was referred S.B. No. 2574 entitled:

"A BILL FOR AN ACT RELATING TO RENEWABLE FUEL,"

beg leave to report as follows:

The purpose and intent of this measure is to:

(1) Establish a temporary tax credit for the importation of renewable fuel and sustainable aviation fuel; and

(2) Expand the provisions of the Renewable Fuels Production Tax Credit for taxable years beginning after December 31, 2024, by:

(A) Increasing the amount to be claimed from 20 cents per seventy-six thousand British thermal units of renewable fuels sold for distribution in the State to 35 cents per seventy-six thousand British thermal units of renewable fuels produced and sold for distribution in the State;

(B) Removing the $3,500,000 annual aggregate cap on the credit and increasing the credit cap that each qualified taxpayer may claim each taxable year from $20,000 to $100,000;

(C) Specifying that fuels are to have lifecycle greenhouse gas emissions of at least a certain percentage below that of fossil fuels;

(D) Adding a $1 per gallon tax credit for the production of:

(i) Renewable fuels from locally sourced renewable feedstock; and

(ii) Sustainable aviation fuel within the State and produced and sold for consumption by flights originating from and within the State; and

(E) Increasing the time within which the Hawaii State Energy Office is given to respond to a request for certification from thirty to sixty days.

Your Committees received testimony in support of this measure from the Hawaiʻi Renewable Fuels Coalition; Hawaiʻi Farm Bureau; Hawaiʻi BioEconomy Trade Organization; Pacific Biodiesel, Inc.; Par Hawaii Refining, LLC; Hawaiian Airlines; Maui Land & Pineapple Company, Inc.; Airlines for America; United Steelworkers; Alaska Airlines, Inc.; Twelve; Pono Pacific Land Management, LLC; and one individual.

Your Committees received comments on this measure from the Department of the Attorney General, Department of Taxation, Hawaii State Energy Office, and Tax Foundation of Hawaii.

Your Committees find that incentivizing local renewable fuel production allows investment in the local economy, supports job creation, and accelerates the State's goals to achieve net-zero or net-negative targets as quickly as practicable but no later than 2045. Your Committees recognize that, as an island state, the total jet fuel consumption between private and military industries in the State is eighteen million barrels or 767,000,000 gallons. Your Committees further recognize that the production cost of sustainable aviation fuel is several times greater than that of conventional fuels. The tax credits proposed in this measure create a pathway to support the use and production of fossil fuel alternatives in the State.

According to testimony received by your Committees, Par Pacific, and its partner, Pono Pacific, are working with several landowners in the State to develop oil-yielding crops that produce feedstock for renewable diesel and sustainable aviation fuel. Your Committees therefore request that Par Pacific provide an inventory of the land available to grow oil-yielding crops in the State, the GIS overlay of the land available that shows which areas are cultivatable, and the amount of water needed to plant these oil-yielding crops during both winter and summer months.

Your Committees recognize the concerns raised by the Department of the Attorney General that the provision in this measure that provides taxpayers who produce renewable fuels from locally sourced renewable feedstock or sustainable aviation fuel within the State with an additional $1 per gallon tax credit under the existing Renewable Fuels Production Tax Credit and the Renewable Fuels Import Tax Credit established by this measure may be subject to a challenge under the United States Constitution's Commerce Clause, as it may be construed by a court to benefit in-state economic interests by burdening out-of-state competitors.

Accordingly, your Committees have amended this measure by:

(1) Deleting references to "locally-sourced renewable feedstock" and language that would have provided taxpayers who produce sustainable aviation fuel within the State an additional $1 per gallon tax credit; and

(2) Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

As affirmed by the records of votes of the members of your Committees on Agriculture and Environment and Energy, Economic Development, and Tourism that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 2574, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 2574, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committees on Agriculture and Environment and Energy, Economic Development, and Tourism,

________________________________ LYNN DECOITE, Chair

________________________________ MIKE GABBARD, Chair