House Standing Committee on Economic Development & Technology

Welcome everyone to the Committee on Economic Development and Technology as well as Committee on Tourism. We have a Joint Hearing and it is Wednesday, February 12, 2025. We are also. It is also not 10:15, but 11:01 and we're at conference room 423. Before we start, I have to share some guidelines.

If you are disconnected unexpectedly, you may attempt to rejoin the meeting. If disconnected while presenting testimony, you may be allowed to continue if time permits. Please note that the House is not responsible for any bad Internet connections on the testifier's end.

In the event of a network failure, it may be necessary to reschedule the hearing or schedule a meeting for decision making. In that case, an appropriate notice will be posted. Please avoid using any trademark or copyrighted items. Also, please keep your testimony civil, respectful and focused on the issue.

Recording in progress.

Oh, all that time. Do we have to reset now? I'm just joking. Thank you, everyone. Let's start at the top of the agenda. We have HB 1077 and at this time, Hawaii Emergency Management Agency is coming up to testify and support. Okay, we'll move on to the next person. Hawaii Green Infrastructure Authority and support. Thank you.

Hawaii State Energy Office in support.

Morning, Chair. Vice Chair, Representatives. We stand on our testimony and support.

Thank you. We have the Hawaii. We have the Hawaii Office of the Governor Recovery and Resiliency Unit.

Morning Chairs. Vice Chairs, Vice Chairs, Committee Members. We stand on support number testimony available for questions. That's right. Thank you.

Thank you. Thank you, everyone. Moving on to our next testify, we have DBED in support.

Good afternoon, Chair.

Thank you. We have the Attorney of Attorney General with comments in zoom. zero, in person. Sorry.

Good morning, Chairs. Vice Chairs. Thank you. I'm John Cole with the Department of the Attorney General.

I just wanted to point out that section two of the bill that establishes the Climate Mitigation and Resiliency Special Fund, in that it includes that the monies to be deposited into the special fund are the fees collected under the chapter and any rule adopted under it. However, the chapter doesn't authorize the collection, imposition or collection of fees.

So we recommend either deleting that portion or to authorize the imposition and collection of fees through the rulemaking process. And I have a suggested amendment in my testimony.

Thank you. Moving on to our next testifier, we have the Department of Taxation with comments. Good morning, Chairs. Vice Chairs. Gary Sugunuma, Director of Taxation. The Department stands on its written testimony offering comments. Thank you. Thank you. We have DLNR in support.

I'm Emma Yuen with DLNR. We'll stand on our testimony. In support.

Thank you. We have the Climate Change Mitigation Adaptation Commission in support. Thank you. We have the Office of the Governor. Thank you. We have the State of Hawaii Office of Planning and Sustainable Development support. Thank you. We have the Kohala Coast Resort Association in opposition in Zoom.

Aloha, Chairs. Thank you for the opportunity to testify via Zoom. And I realize that you are short on time, so I appreciate the opportunity just to give a point of clarification to my written testimony.

And that is I believe that there are hundreds of millions of dollars that the State of Hawaii is not currently collecting from short term vacation rentals. If you look at just Hawaii County's collection of tat where the Kohala coast paid 17 million of the 24 million that was collected and that's only from the hotels and timeshares.

If you extrapolate out based on that math, there's hundreds of millions to be collected from all of the accommodations types. So before any increase in TAT is considered for this or any other measure, the state needs to fully collect from everyone who is supposed to be paying the taxes. I thank you for the opportunity. Mahalo.

Thank you. Moving on to our next testifier, Tax Foundation of Hawaii with comments in Zoom, we have the Nature Conservancy in person. Thank you and support. We also have the Hawaii Climate Advisory Team in support.

Good morning, Chair, Vice Chair and Members of the Committee. I'm Gwen Yamomoro Lau representing the CAT. We stand on our written testimony and support. But I just wanted to underscore that it's not a matter of if another disaster will happen, but when another disaster will happen. The CAT did some polling and 72% of our residents support environmental resiliency.

73% support infrastructure resiliency. And 71% of our Hawaii residents believe that what happened in Lahaina will happen in their communities. However, only they. We only believe 39% of the communities are ready for this. And that's why we need this cill to pass and the ongoing reliable funding so that we can make our community safe. Thank you.

Thank you. We have 25 testimony and support 11 in opposition with four comments. Is there any other testifiers in the room with wishing to testify?

Thank you, Chair. My name is Melissa Pavlicek. I'm here today on behalf of the Care for Ina Now Coalition. And you have our testimony. We have some comments, but I also wanted to add that we recently completed a study which indicated a $560 million gap in the resources needed to do natural resource protection and restoration.

This bill is very important and I ask that you please advance it. Thank you.

Thank you. Is there any others?

Aloha. Daniel Nahoopii, interim CEO at the Hawaii Tourism Authority. We submitted late testimony in support with comments. Our comments are to ensure that the funding mechanism has a clear nexus with tourism resiliency. Mahalo.

Thank you. Is there any other testifiers?

Aloha. Chairs. Vice chairs. Hannah Leziak here on behalf of the Ocean Legislative Task Force. Our task force is comprised of over 120 individuals who deeply support the protection of our Ina and our oceans. Now more than ever is the time to build a safety net for our environment. So I urge you to please support this bill.

Thank you. Is there any others? Any in zoom Committee Members, any questions? We are going to chair Tourism, Adrian Tam. Would you like to ask your Committee.

Thank you.

Members, Tourism Committee Members, any questions? Actually, I do have a question for the governor's office. So in the bill it authorized the Department of Defense, is that really the appropriate agency? Can you just go into a little bit of why that's the.

Sure, absolutely. So, yeah, I think that question has come up quite a bit. Sorry, I'm Will Kane, officer of the Governor. That question has come up quite a bit.

And I think from the governor's perspective, what we've been looking at is how do we best align all the resources that we have when we're talking about mitigation, resiliency, response and all those things. And there's absolutely DLNR and other dod, dot, all these folks play a key role.

But we thought that if we're looking at resiliency, mitigation, all those things, that the DoD makes sense because it all aligns in what we're trying to do. And I'd say the Department of Defense of any Department has. This is all going to be requirements to work with the counties, to work with a lot of different stakeholders.

And I think DOD reaches across all those areas. So I know there's concerns about the environmental side are do they have the expertise and knowledge? But the point of this is that, you know, we're pulling in the expertise and knowledge from folks around the state.

So all these affected departments, all these affected stakeholders and trying to move this forward. So that's why we propose the Department of Defense.

Thank you. Any other questions? Tourism Member community Members.

Thank you. Gonna take a brief recess.

Recess.

We are back from recess. And now it's time to make some decisions with HB. 1077. The Chair's recommendation is to amend this bill so that the proposed 1.75% increase in TAT is not allocated to the two special funds.

Say that again is not allocated to the two special funds, but instead eliminates these special funds and directs the revenue generated from the increase into the General Fund. The funding generated from this increase will be earmarked for two areas. One, the 7.3% of the total revenue collected for climate mitigation and resiliency.

This funding will be used to advance projects addressing climate change impacts, including projects that mitigate, adapt to or increase resiliency against climate change. Funds may also be used for consultants, personnel and administrative costs required to develop and implement these projects. Second, 7.3% of total revenue collected for economic development and revitalization.

This will include infrastructure improvements within tourism districts or resort areas and funding for tourism marketing. There will be technical amendments needed for clarity, consistency and style. And the Bill contains a defect effective date. That's the Chair's recommendation. Committee Members, any questions? Comments at this time? Vice Chair, please take the vote.

Okay. HB 1077 HD1 recommendations to pass with amendments. [Roll Call]The measure is adopted. The recommendation is adopted.

Thank you. Tourism Committee. Same recommendation. Any comments, questions or concerns Seeing none. Vice Chair for the vote.

Voting on House Bill 1077. Recommendation is to pass with amendments. [Roll Call] Your recommendation is adopted. Thank you.

Thank you everyone. This committees are now adjourned.

Welcome to the Committee on Economic Development and Technology. Today is Wednesday, February 12, 2025. The time is 10:01 AM. We are at Conference Room 423. Welcome everybody and glad to have you here. Bear with me as I read out some of the guidelines.

For those in Zoom, if you are disconnected unexpectedly, you may attempt to rejoin the meeting. If disconnected while presenting testimony, you may be allowed to continue if time permits. Please note, the House is not responsible for any bad internet connections on the testifier's end.

In the event of a network failure, it may be necessary to reschedule the hearing or schedule a meeting for decision making. In that case, an appropriate notice will be posted. Please avoid using any trademark or copyrighted images and also please keep your testimony civil, respectful, and focus on the issue. Let's begin.

Moving on to the top of the agenda, we have HB 976. At this moment we have Department of Taxation in person making comments.

On behalf of the Department of Taxation. Stands on our written testimony.

Department of Taxation stands on it's written tesimony. Moving on to Hawaii State Energy Office with comments.

Aloha chair, vice chair. My name is [inaudible] on behalf of the Hawaii State Energy Office. We stand on our written testimony.

Thank you. Standing on your testimony. Moving on to Office of Planning and Sustainable Development with comments. Moving on to Zoom. Department of Transportation, in support. Next is Pono Pacific in support.

Good morning.

Alright. Aloha Chair Ilagan, Vice Chair Hussey and members of the committee. My name is Ramsey Brown. I'm the Vice President of Diversified Agriculture with Pono Pacific Land Management and I'm here testifying in support of HB 976

Good morning.

this morning. Par Hawaii will be producing renewable fuels, including renewable diesel and sustainable aviation fuel, following a $90 million investment they made to a portion of their refinery so that they can receive biofuels, these types of fuels and refine them for us.

This is aligned with the state's clean energy goals and will supply local businesses including Hico, Hawaii Gas and even the Hawaii Department of Transportation with fuels with 40-80% lower greenhouse gas emissions. And Pono Pacific is working to develop a local source of feedstock for this fuel.

We have been working with a crop called Camelina Sativa for about the past two years and over the past year and a half, Pono Pacific has partnered with two of Hawaii's largest food producers, Alune Farms and Mahipono, as well as Meadow Gold Dairies to grow Camelina.

I myself oversee an operation on Kuilima Farm on the North Shore of Oahu and we have a half acre growing right now. I was just out there yesterday taking pictures of it and showing it to some folks. The results of these trials have been very encouraging. Growing feedstocks locally have a positive impact on our economy.

For example, providing farmers with an additional economically viable crop. What that means is right now we're doing a trial with the University of Hawaii where we grow camelina and then we grow tatsoi or a leafy green afterward and see how the camelina benefits the soil.

And the farmer will be able to have an economic revenue stream from the camelina and the tatsoi and that leafy green that they're able to grow.

Expanded production will lead to currently fallow lands being put back into active agriculture, creating new jobs not only in the agriculture section, but also in related industries, because the seeds will need to be crushed into that oil and then the oil transported to the refinery. So we're helping to create jobs along the supply chain.

And then the byproduct of this is a seed cake. So after the oil is squeezed, the seed actually becomes this cake kind of flaky substance. And it's a great animal feed and it can be sold locally at much lower cost.

And we're actually providing it to some ranchers here already as an example and a sample to see what it would do for the animals and provide that- that fatty acid that- that's good for them. So we stand on our written testimony in support of House Bill 976. Thank you.

Thank you. Our next testifier is Hawaii Renewable Fuels Coalition in support.

Aloha Chair Ilagan, Vice Chair Hussey and members of the committee. My name is Nahilani Parsons. I'm here as the Executive Director for the Hawaii Renewable Fuels Coalition testifying in strong support of this measure. You have our written testimony. I just want to provide some explanation behind our proposed amendments.

The first one being that in DO Tax's testimony there raised concerns about the challenges of implementing a new tax credit program. Our amendments actually propose to remove the import tax credit section from the bill as it goes forward. So hopefully that would address that concern. The second item is pertaining to state's fiscal concern.

Our proposed amendments remove the aggregate cap increase so that we would not be asking for any additional funding in the measure as it moves forward. We would only be supporting what is currently in statute, what exists today. Third item is the last year we had language in the bill pertaining to local production.

The AG raised concerns about this in the dor- potential concern for the dormant commerce clause. We worked in the interim to revise this language.

So it's based now off of a carbon threshold for transportation of the fuel and that means that, you know, if the fuel is transported from far away, for example, the mainland, it would have higher carbon level. If it was produced locally, it would have a lower carbon level.

So in that language, we hope that this bill will still incentivize the local industry and our local economy, but address the concerns raised by the AG last year. And then finally, we have received a few other amendments after we submitted our testimony from some of our stakeholders.

So we really appreciate working with them and we plan to continue the discussion and involve those amendments as the bill crosses over to the senate. Thank you. We're available if you have questions.

Of course. Moving on to our next testifier, we have Energy Justice Network in opposition and Zoom.

Aloha, committee members, thank you for having me.

My name is Mike Ewall. I'm the founder and Executive Director of Energy Justice Network and working with our member groups throughout Hawaii. There are two senate committee members. Sorry, two senate committees that have deferred this bill,

the Senate Companion Bill, after interviewing Department of Agriculture officials who confirmed that there is not sufficient land or water in the state to develop a meaningful amount of biofuel production in the state.

I think it's important to hear some of that testimony before considering moving this bill forward, considering this largely will end up just subsidizing and being a large subsidy for an oil refinery in the state and perhaps indirectly for imports of fuels from the continent.

I support the Hawaii Renewable Fuels Coalition's amendments that would limit the tax credits to not include imported biofuels and capital funding.

I think it's also important to support the amendments that we advise in our testimony to strike the part of the language that allows municipal solid waste, industrial waste, and construction and demolition wastes as feedstocks for making on this type of fuel.

I would also recommend that for the sake of biosecurity, an amendment to ban the use of genetically modified organisms and feedstocks or enzymes in biofuels production.

There is a reason why the biotech industry lobby continues to testify in favor of these bills, and it's not because they care about anything other than the interests of their own industrial members trying to have GMO feedstocks and enzymes serving the needs of this.

Finally, on the toxic hazards associated with using construction and demolition waste, which is something that is being sought by one of the presenters here to produce aviation fuel with.

The Hawaii Natural Energy Institute testified in the previous committee hearing on this that there are very high levels of arsenic, chromium and lead in this waste, much higher than normal wood, even 200 times higher

in the case of arsenic. And the research showed that there are higher levels of hydrochloric acid, copper and zinc from this as well, yet fell short of pointing out that with the copper and zinc these are ingredients that help enhance dioxin formation.

The most toxic chemicals known to science that will be released in the production of these fuels if you allow them to use these waste based fuels like construction demolition waste.

So I urge you to amend this bill if you pass it at all and and at least take these waste based fuels and the GMO productions out of the bill. Thank you.

Thank you for your testimony. Moving on to Zoom. We also have Tax Foundation with comments.

Good morning. This is Jade McMillen for the tax foundation of Hawaii. We've submitted some comments on the measure.

We have some technical comments noting that, number one, the bill requires the aggregate- requires that when the aggregate cap is exceeded, all tax credits will be prorated so that the aggregate cap is met.

Perhaps this is fair to some participants, but would not be administrable because the certifying agency will have to wait until all credit claims are in to be able to start that process.

Number two, the bill also states that a taxpayer must apply to the HSD HSCO for the credit within 30 days following the close of the calendar year and that means the calendar- the taxpayer must also get the form filled in and a third party must verify or audit within that 30 days.

And so we wonder if that timeframe is actually achievable. Thank you very much for the opportunity to provide the comment.

Thank you. Moving on to the next specifier in Zoom. Simonpietri Enterprises with comments.

Aloha. This is Joelle Simonpietri of Simonpietri Enterprises. A couple of comments. First, starting off with recommended amendments to the bill. We agree with the Renewable Fuels Coalition position to strike the import tax credit in entirety.

We also recommend that the threshold for minimum eligibility for producers be reduced so that more local producers who are developing projects now can qualify. So for example, so that wastewater treatment plant and landfill biogas projects being pursued in each of the counties would be able to qualify for this tax credit.

Currently the threshold is too high for them to be able to qualify. We also definitely request that solid waste be continued as a feedstock eligible for this tax credit and eligible to be considered a renewable fuel and include construction and demolition debris in that list of eligible solid waste feedstocks. We're grateful to Mr.

Ewall and the energy Justice Network for raising the challenges of construction and demolition debris processing in order to make renewable fuel out of it. We're happy to report that we have solved all of those challenges.

In fact, we now have a patent approved by the US Patent and Trademark Office as well as over 300 hours of testing and fully integrated systems to produce actual green fuel from Hawaii construction and demolition debris generated in the County of Honolulu. And the results from those trials were very successful.

There is no dioxin, furan or other toxic heavy metals emissions that rises above EPA action levels for the modified air toxic standards from our process. And if you have any other questions, we'll be happy to answer them, as far as the technical aspects of our particular process.

Getting back to the bill, we also recommend that the limit of 75% to one taxpayer to be to claim the tax credit be reduced again to level the playing field for more small local producers. We recommend it be set at 50% or lower so that more small local producers will be able to qualify.

We do definitely support the change of the tax credit to be proportional rather than first come and first served as that has been one of the aspects of the state's renewable, sorry, research and development tax credits that's actually made it very hard to predict and plan on and use because the first come, first served aspect of that tax credit and the state does have other tax credits which do use a proportionate allocation and has been able to effectively administer them.

And that's all the testimony that we have at this time. Thank you very much for your consideration.

Thank you for your testimony. Moving on to our next testifier, we have Par Hawaii with- in support.

Good morning chair, vice chair, members of the committee. My name is Eric Wright. I serve as President of Par Hawaii. We support HB 976. Basically what this bill would do is make renewable fuels more affordable for consumers in Hawaii. I wanted to tell you a little bit about what this bill can make possible.

We're going to be producing renewable fuel later this year. We could actually get Kauai and Molokai to 100% renewable power as soon as next year with the fuel that we produce. We could also make a meaningful decrease in GHG emissions on Maui and Hawaii island as well. Hawaii Gas is a customer of ours.

We can decarbonize the natural gas that they produce. We're in talks with the State Department of Transportation to decarbonize the fuel that they use in their fleet and of course the airlines. We're going to make sustainable aviation fuel that can reduce GHD emissions associated with travel to and from Hawaii. You've heard from Pona Pacific,

there's a great opportunity here for the ag sector as well. But these fuels do cost more to produce. It's about $2 to $4 a gallon more to produce. There's federal incentives in place. They're worth about a dollar to $2 a gallon. So it gets you like half of the way there.

But the states that have been successful with these fuels have incentives at the state level. In fact, in California, over half of the diesel now is renewable diesel. So we really need something in Hawaii to kind of level the playing field and move these fuels forward. We've got a really broad coalition supporting this, as you can tell.

And the waste issue, in terms of what we're doing at our site, we're processing fats, oils and greases, really has nothing to do with solid waste. So I just want to make sure that that's clear. And I'm happy to answer any questions you have. Thank you.

Thank you. Moving on to our next testifier, we have Aloha Carbon in support.

Aloha. Good morning, everyone. My name is Naomi Kukac. I'm here representing Aloha Carbon. And so just a little background on who or what Aloha Carbon is and why we're here to testify.

Aloha Carbon is a waste recycling and conversion project that's actually being developed in Campbell Industrial Park in Kapolei to not only address the high cost of fossil fuel imports and physical waste, but also some of the impacts of landfilling and waste hauling activities, particularly to our West Oahu communities, where we've actually performed extensive community engagement over the last four years to garner feedback from them on what feedstocks to use and just inform the overall design of this project.

So our intention with this project is to sort and recycle construction and demolition waste, intake the wood waste components along with green waste that contains invasive species, plants and pests, and to use them to produce renewable fuels through our gasification conversion process, which is different from incineration and combustion, by the way.

And so as an intended producer of renewable fuels, we do, of course, support this bill. We have also submitted written testimony with some of our recommendations as well as additional comments. And with that, I thank you for the opportunity to testify this morning. Mahalo.

Thank you. Moving on to our next testifier, Pacific Biodiesel Technologies in support.

Good morning and thanks for having me up. My- My name is Bob King, President of Pacific Biodiesel.

We've been 30 years now, believe it or not, making biodiesel here in Hawaii, the oldest biodiesel company in the US. We want to reach- reach further now in the next 20 years between here and 2045 to bring more biodiesel, more locally produced biodiesel into the state. And it's not easy. This is, it's a tough business.

And these- these types of incentives really give us the- the clarity to keep investing and new projects and new territories. We're expanding our AG operation right now. We've got a crushing mill that we're setting up on Kauai. We should harvest a thousand acres this year, mostly sunflower.

You know, sorry for the traffic on the road, but when people stop but, but a rotation of regenerative crops that include food and fuel. And we're- we're excited to do that. Our- Our sunflower field on- on Kauai actually stopped a fire from reaching Kalmakani town a few months ago.

So part of- part of getting ag going in the state is really wildfire mitigation. We can't just let our- our lands go fallow while we ask other people to send us food and fuel. I think so. Lots of good things, hundred- hundred jobs that we- we- we have in the state, about half of them on the Big Island.

And so I, a lot of families that count on us staying in business and we'd appreciate the continued support of the state to- to- to. to join us in making this, this path forward viable. Thank you.

Thank you. We also have testifier in zoom. Department of Transportation.

Aloha chair and committee members, Laura Kaakua for Hawaii Department of Transportation. Apologies that our written testimony was submitted after the deadline. We'll make sure to follow up and get you that. The Department of Transportation supports the intent of House Bill 976 to increase the use of renewable fuel statewide.

Sustainable aviation fuel is an important solution for Hawaii to reach our greenhouse gas emission reduction, especially within the aviation industry. DOT is currently working on our greenhouse gas reduction plan to provide DOT and the public with immediate actions we can take to reduce greenhouse gas emissions.

A roadmap for Hawaii to meet the state's net zero emissions clean energy target no later than 2045 and a long term plan to reach zero emissions in the transportation sector. Although we're still working on our specific strategies and benchmarks, we expect that increased sustainable aviation fuel will be an important strategy of our plan.

And from our initial calculations, it does not appear possible to reach the state's ambitious greenhouse gas reduction goals without the significant increase in sustainable aviation fuel. Thank you for the opportunity to provide testimony.

Thank you. Moving on to her next testifier, we have Hawaiian Electric in support.

Yeah. Hi, Good morning, chair, vice chair and members of the committee. Thanks for allowing me to testify on this bill. My name is Nicholas Paisley. I'm the Director of Fuels at Hawaiian Electric. So Hawaiian Electric has been supporting renewable fuels for a while now.

We've been using them for about 15 years and as mentioned, you know, they cost more to make them. So we do have to pay a premium for that fuel. So a bill like this would create incentives and help level the playing field between renewable diesel and petroleum diesel. So, you know, as a result, we support this bill.

It'll help us move towards our 100% renewable energy goal and allow us to buy more volumes of renewable diesel. Thanks for the opportunity to testify.

Thank you. Our next testifier is Theodore Metrose in opposition.

Hello, I'm Ted Metrose. I'm independently here. I used to work for Par Hawaii as the environmental manager heavily involved in greenhouse gases. I am here because this is a special interest bill.

And I was shocked and appalled that the legislature would think about moving forward in providing a robust tax credit for a company that's been under investigation by the Department of Taxation in the AG's office since 2021 when I first levied a whistleblower's complaint for their operation in the foreign trade zone.

And so now to go ahead and reward that company with at least a 20 million and more likely a $110 million ongoing tax credit seems very at odds with the rest of the government's actions.

I should note as well that the- that the IRS offers a federal tax program and that tax program includes a provision that you have a good standing with the Department of Tax and a solid tax history before you can make such a large claim on tax credits.

Unbelievably, the tax credits that are being proposed under this bill are actually higher than the federal government, 2.56 per gallon versus $1.75 per gallon. So what people aren't appreciating is just how much money that is translates into being and how much of an exposure it is because it's a refundable tax credit.

The Department of Tax provided testimony before to avoid risks and abuses to make the tax non refundable. And that is a important move as well. I do want to talk about the viability of doing this on a large scale because we have lots of hopes and promises of doing this in Hawaii.

But you know, the assessment has already been conducted and the legislator funded the studies to do it. The Hawaii National Institute had been working on this for 10 years and they put out a report in November and their November report looked at 17 different crops over all sorts of acreage under different scenarios, four different scenarios.

And they came to the conclusion at the very best, only 10% of the necessary aviation fuel could be produced in Hawaii. And that's putting every bit of available land into service that is not already into crop service. That same study on the waste side said that only about half of that again, so even less than the 10%.

Now, let me just give that example a little bit further because this dials it in really well. The state has 120,000 acres in agricultural production right now for food. We barely have enough space for food or enough of that.

If we put 120,000 acres into service for oil, and even using robust numbers like 300 gallons per acre, which is a very high number reported from NEI, that would lead to 36 million gallons. 36 million gallons out of the 740 million gallons that were in the study. That's less than 5%. That's a very big number.

And to think that we're going to go ahead. It's not good enough to simply say, oh, yes, we can- we can produce these crops. You have to do it at economies of scale that it makes sense. It's got to be commercially viable, which is what AA is saying. We're not going to displace the foreign imports coming in.

The Paraguay has already been authorized. They were authorized back in April of 2023 to import huge shipments from Brazil and Argentina for soybean oil. So the- the whole thing of locally grown is largely facade to sell the bill.

I do want to speak additionally about the interest of the air carriers who express interest in a willingness to buy all available SAF if it's competitive with existing fuels. Well, that's wonderful. What does that mean?

Well, they want the public subsidy and that might make in some sense in some areas, but it doesn't make a whole lot of sense for Hawaii or Hawaii's interest. Hey, what are we, 1.3 million, maybe 600,000 people paying taxes? But we have 10 million visitors coming here. Why aren't we putting the burden for SAF onto those visitors?

The state has long talked about a carbon tax. Why aren't we proceeding down that pathway instead of giving rich rewards to a singular company? And I will tell you, the modifications for reducing this bill down to its original scope of 20 million is that's a bit of a red herring as well, because as Pacific Bio Diesel.

Now please summarize.

That's pretty much it. But I would say that I would encourage you to veto this bill or hold it because there are better options available and we don't have to give away the state's money because I think you've got a lot of other better uses for it.

Thank you for your testimony. We have currently 13 testimony in support, 18 testimony in opposition with seven comments. Is there any other testifiers wishing to testify? Any. Proceed.

Hi, Good morning, chair, vice chair and members of the committee. My name is Alanna James. I'm the managing director of sustainability initiatives at Hawaiian Airlines here on behalf of Alaska Airlines and Hawaiian Airlines. This morning Alaska and Hawaiian are in support of this bill.

This bill establishes critical incentives to promote the production of sustainable aviation fuel and other renewable fuels here in Hawaii. Sustainable aviation fuel, or SAF, is the most promising technology to address aviation carbon emissions. It's a proven drop in fuel. It works with existing engines and with existing fuel infrastructure.

As long as it's blended up to 50% with conventional jet fuel. And SAF can bring really meaningful reductions in aviation carbon emissions. Just by switching to SAF, you can get 50 to 80% lower life cycle carbon emissions. So that's really meaningful for our industry.

And this bill will help to narrow the cost gap between renewable fuels and conventional fuels and also will provide incremental value for SAF compared to renewable diesel, which is important to level the playing field and ensure some production volume can go to sustainable aviation fuel.

Now, incentivizing sustainable aviation fuel and other renewable fuels here in Hawaii will not only support the state's clean energy goals, but will also support our state's energy security and it will drive economic development for our state. I'm available for questions. Thank you very much.

Thank you. Any other testifiers in person, any in Zoom. With no further testimony, members, do you have any questions? Proceed.

Thank you all very much. This is great testimony. I appreciate the diversity of opinions and thoughts that are expressed. I was wondering if anyone would come to testify today would care to respond to the concern that. I'm sorry, it was Metrose? That Mr.

Metrose raised about the kind of the economics and the ethics of the people of Hawaii bearing a cost that is really about, you know, 10 million or so tourists coming to Hawaii. You know.

And I'm wondering if there's any ideas on ways to export that cost to- to those tourists, either by, you know, some kind of fee assessed by the airlines or some other mechanism. I'm curious if there's any thoughts.

The second thing I want to add, and we can do this, you can all come up in your time, is the issue raised by some of the other possible producers, you know, besides Par. And you know, I'm really glad that Par is planning to, is- is- is on track to do

this is actually I think a really important thing for us to do in order to hit our climate goals, which the United States is really far behind on, but we thankfully can- can make some progress. Is a question of lowering the caps so that other participants in the marketplace, such as, you know, anyone else in the room, so that other folks can take advantage of this tax credit.

So, you know, whoever wants to speak, I'd love to hear your thoughts. Thank you.

Actually, before we move forward, would you like to start us off?

Sure, yeah.

Thank you, chair. I think the first question regarding who should be liable for the cost or if the- if the tourism industry could, you know,

Just please state your name.

Oh, sorry.

My name is Nahilani Parsons, Executive Director for the Hawaii Renewable Fuels Coalition. And I do know we've had this conversation a little bit with our stakeholders.

And the important impact is that, you know, whether or not people fly or they don't fly, but everyone is impacted by the airline industry and in some way or the other because everything we get here comes on a plane. So even if you don't utilize the air travel yourself. And the other impact was the cost of living.

You know, if the fee was passed down to the customer directly, then that would increase our cost of living overall. And we have a challenge with affordable cost of living in Hawaii as it is. So we don't want to increase our, the price of our tickets.

And then the main goal is to support our clean energy goals for 2045. Our unique geography means that the bulk of our energy is aviation because we're so far from everything. So as a state, that is a really meaningful impact on reducing our energy emissions to reduce that. And then I'll defer to Jacob to answer the airline.

Yes.

Thank you, chair. Jacob Aki, on behalf of- on behalf of Alaska Airlines. To your question regarding the ability for us to, I guess it was pass the fee on to- to the visitor. I think we're open to different mechanisms in which, you know, we can spur the production of staff.

But I think what's important to note is that this, what we're trying to do here is already being done in other states. This is part of a national strategy to really spur the production of SAF. The airline industry has a goal to produce or to get our hands on 3 billion gallons of cost competitive SAF by 2030.

Currently about 15 million is being produced now. So there is a big gap in which we are trying to feel, sure we could pass this off on to the customer, but that would be a increase in ticket prices, not just for visitors, but for local residents. Right.

So I think what we're looking at is there has been stuff done at the federal level to really close that gap. And what we're hoping to do is to really follow the leads of what other states are doing in having the state provide some sort of support to really get this production going.

The aviation industry, and particularly our combined company, actually has a goal to achieve zero carbon by 2040, which is five years ahead of what the state's goals are. Right. So both the state and our combined company and the industry are committed to achieving this goal.

You know, but we are looking at support from the state to really start to get this production going. I think the other thing to note is that the aviation industry has invested so much over the past decade in building our sustainability teams to really try to reduce the amount of carbon, the amount of output that we are doing.

Alaska Airlines is proud to have zero plastic on board. So SAF isn't the only way in which we're trying to reduce our carbon footprint. This is just one of the many ways.

But as was noted by many of the people here, this is probably the most feasible way to reduce a large amount of the carbon output that we are doing. So I will defer to Nahi's comments on the other questions, and we are open to answer anything else you may have. Thanks.

Do you have any further questions?

Well, I was wondering if anyone would like to. Okay, Mr. Metrose.

Wait. Hold on, hold on.

I think your question was answered regard- regarding his concerns.

Yeah, that's right.

But do you have further questions for Ted?

Actually, I don't. But I was wondering if- if any of the other possible, you know, users of the tax credit would like to opine on lowering the- the participation rate or the allocation rate so that there's more competition for the use of the credit.

I thought your question was on the--

Wait, hold on. Ted, please. Please sit down until I call you. Thank you. So your question is regarding the user?

Yeah.

Okay, so we have two users. Let's- Let's go with Parga. Come up and then you can go after Bob.

Okay, thank you, chair. Yeah, this is an issue we're very sensitive to. We- We did some math, and we felt like carving out at least 25% for others was going to be sufficient. But I'd point out the bill actually has two protections. One is the fact that if you go over 20, it goes proportionally to the claimants.

I apologize. Just please state your name and--

I'm sorry. Eric Wright, Par Hawaii.

Thank you.

So two protections. One is if you go over 20 million in our amendment, it would be allocated proportionally to the parties claiming the credit. And on top of that, there's a second cap of 75% to us. So that- So that.

Thank you, Eric.

Thank you.

Bob King, Pacific Biodiesel. And Kelly said hi. I- I feel the same is that I got to say, this group has really gone deep to protect companies like us, the small producers in this bill. And they heard what we said last year and, and they've really taken efforts to make sure that we're going to be okay.

Could still be a little bit more, but I think- I think the 25%, the 75% to 1 is fair. Ms. Simonpietri is. You know, we can run those numbers again, but I feel like this group is willing to really work this so that we- we- we get the- get this right with everybody help.

Otherwise, you know, this is Hawaii. We're gonna- We got to do this right. We will. I- I really feel like there's some very good points for- for us and the other small producers in this bill.

Thank you. All right, any other Members with comments, questions? With no further comments and questions, we're going to move on to our next item. We have HB 1498. Starting to the top of our testifiers, we have the Department of Taxation with comments. Thank you. Stand on its written testimony. Moving on to Honolulu Film Office in support. Proceed.

Aloha, Chair and Members of the Committee. My name is Walea Constantinau. I run the Honolulu Film Office. I'm in strong support of this measure, in particular where it speaks to the GET and the definitions of manufacturing. I did want to offer a couple of other suggestions. We're faced with a situation right now where the industry itself is at a crossroads and we need to adjust our credit to be more competitive. And how do we do that to align it with the goals that we have here?

So I humbly suggest some strategic growth paths with targeted uplifts within the credit so that we drive workforce development hires, specifically local residents in positions of greater authority, above the line department head and keys. That way we're building our workforce while we're addressing the needs.

In addition, to make it more competitive, it's very public that we lost a large part of filming for Chief of War because of some restrictions in the cap. And so another humble recommendation is to provide meaningful exemptions to the per production cap as long as certain minimums are met.

And the specific recommendation is that we take a look at those projects that want to be here longer. Those projects tend to hire more local people for longer and put more money in our economy. So one of the thoughts is exempting from the per production cap those entities that work into a qualified soundstage facility.

I know there's a soundstage component within the bill currently, but that will not affect us immediately, and I think we need to take some immediate steps to address what's happening in the marketplace and to maintain our competitiveness. And then finally, if we're able to increase the overall industry cap to 75 million, which was recommended by UHERO a couple of years ago, that would give us the room for the growth that these other things would spur. And I'll share with the Committee a couple of documents that might also help in your decision making.

I just realized how much time we're taking, and we also have a 10:15 that we were supposed to open, but we're running a bit long on our first item. I want to remind everybody that we will need to make all the decision making before our floor session. And at this time, I want to share with everyone that we have a lot of testifiers for the next items.

And if I can encourage everyone to stand on their testimony as we go through this. Rest assured that these bills all look very positive, and we do want to make sure that they all have their decision making. So if we have read your testimony and if I can encourage everyone to stand on this testimony from here on out. Thank you.

Thank you, Chair. My apologies. I'll leave you with this additional information.

Thank you. We have the Department, we have DBEDT in support. Thank you. We have SAG in support.

Good morning. Mericia Palma Elmore, SAG-AFTRA. We're standing on our written testimony and also noting that we're supporting the MPA amendments.

Thank you. We have IATSE 665.

Aloha, Chair, Vice Chair, Members of the Committee. Tuia’ana Scanlan, President of IATSE Local 665, IATSE International Trustee. We represent the workers behind the scenes. We're in strong support of this, and also note that we support the amendments suggested by MPA.

Thank you. We have Motion MPA in support. We have Island Film Group in support. Oh, actually they're in Zoom. I apologize.

So, aloha, Chair Ilagan and Vice Chair Hussey. I'm happy to stand on our written testimony and can be available if there's any questions about the bill or any of the amendments. But I don't want to, want to be mindful of your time.

Thank you. Moving on to Island Film Group in support.

[Unintelligible Testimony]

Thank you. Moving on to Zoom, the Kapolei Chamber of Commerce in support.

Good morning, Chair, Vice Chair, Members of the Committee. Kiran Polk, Executive Director and CEO of the Kapolei Chamber of Commerce and I also like to stand in strong support of this measure. And thank you so much for the consideration.

Thank you. Moving on to the Tax Foundation of Hawaii with comments, in Zoom.

Good morning, Chair, Members of the Committee. This is Jade McMillen on behalf of Tom Yamachika for the Tax Foundation of Hawaii. We've submitted some comments on the measures. They are fairly lengthy, so we'll stand on those written comments. Thank you.

Thank you. We have 35 testimony in support with zero opposition and with two comments. Any other testifiers wishing to testify in person? Any in Zoom? Committee Members, any questions, comments? With no questions, comments, we're moving on to our next item. We have HB 450. At this moment, we have Creative Industries with DBED, in support.

Good morning, Chair and Vice Chair Hussey and Members of the Committee. We stand on our testimony in support of House Bill 450.

Thank you for standing on your testimony. We also have DBEDT again, with SOH, in support. We have State Foundation: Culture and Arts in support.

I'm Karen Ewald, the Executive Director for the State Foundation on Culture and the Arts. We stand in support of this Bill. We just have one recommendation to amend—to add one position in the State Foundation as well.

Thank you. We have five testimony in support, zero opposition, with zero comments. Any other testifiers in Zoom? Committee Members, any questions? Comments? Moving on to the next item. We have HB 774. First to testify, Hawaii Department of Agriculture, in support. Moving on to the next, in Zoom, we have Hawaii Food Industry Association in support.

We have the University of Hawaii in support, in Zoom. Proceed.

Did I?

Okay. Go ahead.

Okay. I hope you can hear me. Aloha, Chair, Vice Chair. Carlos Penaloza on behalf of the community colleges. We submitted our written testimony and stand on our written testimony for HB 774 in support of this Bill.

Thank you. We have the Local Food Coalition in support.

Good morning, Chair, Vice Chair. On behalf of Local Food Coalition, we stand on our written testimony in support.

Thank you. ADC in support.

Good morning, Chair Vice Chair, Members of the Committee. Frankie Empeno with ADC. We stand on our written testimony.

Thank you. Any other testifiers wishing to speak in person? Any in Zoom? Committee Members, any questions, comments? With all the testifiers have testified, we are going to take a recess.

Recess.

Welcome back. We are now back from recess, and we are going to make some decisions on these measures. Moving to the top of the agenda, HB 976. The Chair's recommendation is going to adopt the suggested amendments from Hawaii Renewable Fuels Coalition to remove the Import Tax Credit Section.

Also, going to remove the increases to the aggregated cap for the production credit. So, the fiscal ask remains at what is already in statute of $20 million. Updated renewable feedstock, renewable fuel, and SAF definition for clarity. Update the preamble section to reflect changes.

We're also going to adopt DOE tax suggested amendment to change the taxable years to be effective beginning after December 31st, 2025, to accommodate the changes for new forms, instructions, and system changes. It's also going to be some technical amendments needed for clarity, consistency, and style, and the Bill already contains a defect the effective date.

Members, those are the Chair's recommended amendments. Any questions or comments?

Do want to share—I do have just one comment I want to make. And that is we have a testimony from—we have the testimony from the Office of Planning and Sustainable Development and I'm just going to read this testimony because it really shows our reason of moving this out.

The proposed Bill introduces tax credits for sustainable aviation fuel, aligning with the State of Hawaii's clean energy and decarbonization laws by addressing aviation emissions, one of the largest contributors to greenhouse gases. Sustainable aviation fuel supports Hawaii's carbon neutrality goals, diversifies the economy, and strengthens local energy independence. And just wanted to make that comment.

Vice Chair, could you please take the vote?

[Roll Call]

Thank you. Moving on to our next Bill, we have HB 1498. With HB 1498, the Chair's recommendation is going to adopt DOE tax suggested amendments on day changes to allow an efficient, effective transition of implementing this Bill.

Also, we're going to adopt amendments from the Motion Picture Association to address the loan-out companies. Going to restore the classification of motion picture and television production as manufacturing. We're also going to repeal the part of the definition of qualified production costs requiring get to be paid at the highest rate.

We also have some technical amendments needed for clarity and consistency and style. Those are the Chair's recommendation of amendments. Any questions or comments, Committee Members? With none, Vice Chair, please take the vote.

[Roll Call]

Moving on to our next bill, HB 450. The Chair's recommendation is going to be to adopt the suggested amendments from the State Foundation on Culture and Arts to add an administrative statistic staff to SFCA to ensure support, both the transition and the state future. Change the effective date to July 1st, 2026, and add to the Committee Notes that there will be no loss of funding in this transition. That's the Chair's recommendation. Any comments, questions, Committee Members? With no questions and comments, Vice Chair could you please take the vote?

[Roll Call]

Thank you. Moving on to our last item, we have HB 774. The Chair's recommendation is going to adopt DBEDT suggested testimony to align the Food and Product Innovation Network with Hawaii's Strategic Agricultural goals. Also, the Bill contains a defect the effective date as the Chair's recommendation. Any Committee—any questions or comments, Committee Members? With none, Vice Chair, please take the vote.

[Roll Call]

Thank you everyone. Committee's now adjourned.