House Standing Committee on Economic Development & Technology

Hey. Good morning, everyone. We're here for the Economic Development Committee hearing. It's March 25, 2026. It's 10:00 in the morning. We're in Room 423. I'm Ikaika Hussey. We're joined here with Chair Ilagan, Representative Templo, and Representative Gedeon. And we are gonna start... Oh, I'm sorry. We have, we need to read.

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Okay. We're gonna start with SB 3169, HD 1. And we have a a kind of a habit or a custom of standing up and saying that you stand in your testimony. We'll assume that everyone is standing on their testimony. So I'm simply gonna ask if there's anyone who would like to testify this morning. Please come to the, to the podium. Any volunteers? No.

Does that include if we've done written?

Sure, please.

Sorry. First time in front of this committee. I'm Michael Cain on behalf of DLNR. We stand on our written testimony. And in essence, we're just asking that one word be struck. And there's been so many drafts. I wonder if this is just a shadow from previous drafts. And that would correct the fact that Office of Planning is not a regulatory agency and doesn't actually have rules to permit programs. Thank you.

Thank you very much. Any other testifiers? Anyone on Zoom? Okay. For the record, for this measure we have eight testimonies in support, two in opposition, and two with comments. Okay. And if there's no further testimony on 3169, we'll move to SB 3320. Oh, I'm sorry. Any questions from the committee?

I have one. Could we... Thank you. Could you come up, please? I did have... I was considering what to do here because DBEDT is supportive of having this pilot program. I just wanted to ask if you could really expand and clarify what sort of work and services and enforcement that needs to be addressed with this pilot project that DBEDT may not be able to support and implement.

That DBEDT?

Are you talking about SB 3169?

Right. Right. I'm trying to understand the question. Office of Planning is a planning body, obviously. They can take a coordinated role in bringing the different parties together. They're learning how to implement projects currently in Waikiki, although that hasn't been a historical feature. It's the actual, it's the permitting part that a lot of us had concerns with.

And a lot of the written testimony, I think it might refer to previous drafts. There was a draft of this bill that would automatically exempt the project from all environmental regulations, which ourselves, OHA, many agencies have concerns with. This draft changes it to could be or maybe, which is consistent with the law. Does that answer your question?

It does. It sounds like Planning was in the design or planning stage of this effort, but you're talking about implementing the permitting. And also you had concerns about some of the exemptions that's in the pilot project.

Correct. Like the original bill would automatically exempt everything. Now it's an option that remains on the table, but it's not a carte blanche exemption from environmental regulations.

Okay. Thank you. Is there anyone here that's working on this project? Can you come up?

Chair and Vice Chair, Members of the Committee. Ken Cheung from Oceanit. We are the Mantokuji missions engineering consultants.

Thank you, Ken. The last time we spoke about this, I asked you to reach out to SHPD and ensure that there is some work in collaboration with this pilot project. Can you give us an update regarding that?

Chair, I don't have exact details. I know that we have had people who talked to SHPD, and there was some back and forth and agreement on the changes to the language that they accepted.

And that's one of the reasons why we made it an option is to figure out what we worked out with SHPD as well. So just for the record, I wanna say that Oceanit is working with SHPD and wanna make sure that SHPD is on board with this project and we're not just exempting any sort of historic or environmental concerns.

Yes. And we are also, we will also comply with federal regulations, including Corps of Engineering permits, Fish and Wildlife, National Historic, as well as State Historic, as well as State Ka Pa'akai, which is a cultural reform.

I see. Thank you. Okay. DLNR, can you come back one more time? You've heard from Oceanit regarding the permitting situation. Do you have any concerns there?

If you look at page three of our testimony. So we've been working with the mission and with Oceanit for about the past five years. And the same you see are emergency permits that we've been issued. I have pictures. The bottom of the second page below the cemetery.

You see really a huge collection of big fat turtles resting there. And whenever I ask what are you gonna do about the turtles, I get a nervous laugh in response and nobody really knows. So my question is federal permits will require you to address the issue that there are honu there, and I don't know what the plan is.

And I, and I don't have any ideas myself, honestly, beyond pick up the turtles and move them, which isn't legal. So in terms of permitting, there is a pathway. I just don't know how the mission gets past federal regulations. So to be bluntly honest.

I see. So there's concerns about the honus and federal regulations and process on policy.

You would need an Army Corps of Engineer permit. And that would trigger further review based on from Fish and Wildlife Service.

I wanna say I kinda went through the similar situation with Pohoiki Boat Ramp, and there was concerns with Fish and Wildlife regarding that sea turtle habitat. So I wanna... I'm considering some amendments on DLNR handling the permitting aspect of the pilot project. But it sounds like from what you're telling me is that the collaboration between the federal permits and the state permits is going to be one of the things that we need to keep in mind.

I myself do not see a clear pathway forward for the mission beyond retreat. So I just need to be bluntly honest. But there are other people looking at it. So the fact that I don't see a path forward beyond retreat doesn't mean one doesn't exist. That also probably means you don't want to put the permitting in my office.

I see. That's a good point. Okay. Thank you for your concern. Oceanit, could you come up? So you heard DLNR. Do you have any thoughts there?

The honu are a concern. And I think the only way, assuming we get a permit, the federal permit, is to only work when the turtles are not there. I think that's the only way through it.

Educate me. The federal regulations are gonna trump over whatever state exemptions we have?

No, they're in addition to.

They're in addition to? Okay. So we must comply with them?

Yes.

No matter what we put in this measure, we still must comply with the federal regulation?

Correct.

Okay. So we're not exempting anything with this measure when it comes to federal regulations? I just want that to be clear.

And could I add one thing? The reason why I mean, we're trying to protect historical and cultural landmark, the temple. But and that's where the emergency structures are. But that picture illustrates why it's urgent because that eight foot escarpment of just red clay is coming down.

We're losing several feet each year on that little patch of sand that the turtles are. And then there's tombstones, burials above that. So we're watching an environmental crisis happening. So we're trying to help the turtles. We're trying to restore the beach. So that's... That's why we're here.

Okay. Thank you.

Any other questions? I had a question. Maybe it's for OHA. OHA. I was wondering, first of all, if you could summarize your organization, your agency's perspective on this, and also if you could provide some guidance on where the, I guess, the differences between federal statute and state statute with regard to this question.

Yeah. And I apologize for coming in late. Came from another hearing. So our primary concern is with allowing some of these exemptions, like environmental review, the conservation district permits, and chapter 205, which is shoreline protections. These typically were they were established for these broad types of considerations.

And we're concerned with this narrowing to this one specific project. We understand all the cultural significance of this place, and it's obviously heartbreaking to see. But at the same time, we have to acknowledge that there's little we can do with mother nature. We saw what happened in the past couple of weeks.

It's kind of a hard battle to fight, and we're just, you know, here living in her world. So we have to kind of go within these bounds that we have. So our concern is that this type of legislation that's narrowed to this type of project, will be replicated and more exemptions occur.

And then and then we're looking at just stepping outside of the bounds already of what we have in place that is meant to help protect our resources. The other issue that OHA had was just we do appreciate a lot of the work that they've done with SHPD and that type of work.

We just had an amendment to incorporate back the SD 1 amendments to that section because it also included a little bit more like with an archaeological monitoring plan that got removed I think unintentionally probably, and then asking for the Office of Hawaiian Affairs to be consulted a little bit earlier.

And then as to your question about federal and state, federal jurisdiction, the state just cannot, the state doesn't have authority to exempt from federal authority. So anything that the state does, you know, we can never really exempt from federal authorities. If they wanted federal type of exemptions, they would have to seek those at a federal level. The difference in those reviews is, one, under the current administration there's been a lot of changes under how NEPA is applied.

Which is the national version of our environmental laws. And so there's less guidance there, so it's less rigid. Hawaii has a, has a more rigid structure, which we should because of our unique island landscape. And I think we have these separate types of protections in place because of our unique island structure, which is different than a continental one.

So to summarize, NEPA in this case is an additional hurdle, but it's sort of a lower hurdle. It's a less rigid hurdle.

In a sense.

The state law is actually more, it provides more protections.

Yeah. And it, and it's not clear whether that would be triggered. I know with the US Fish and Wildlife, because of the turtles and the Army Corps, there are some triggers there for some federal reviews. Whether NEPA would be included is, you know, yet to... I couldn't say on that. But, yeah, it's typically, that's less of a hurdle.

Okay. Thank you very much. Any other questions from the committee?

I just wanted to ask one more. Oceanit, can you come up? I think we need to just emphasize the purpose of why we're even doing this. This is a... This is preventing a coastal erosion that's happening at this bay. And I think you got into it with the burial grounds that are already falling due to the erosion.

And also, there's a highway that's a main thoroughfare for economic development in this region. So the need is there to address the concern of this coastal erosion. If you could emphasize the main purpose of what we're trying to do, I would like to hear more of that.

Understood, Chair. I can sum it up in 2 elements. One is we're trying to preserve a cultural and historic landmark. And secondly, we're trying to save the shoreline. If we retreat and I think there are many cases where retreat is very appropriate. But when if we retreat from here, there's nothing but red dirt that's gonna fall into the ocean.

There's no beach to save. In fact, the last eight years or so, there's been chronic brown water that's pretty much smothering the sea life. So we think that we can save the beach, stabilize the shoreline, and have a sandy beach for the turtles and for visitors and residents.

So doing nothing to me is not an option. We need to, we need to do something. And I appreciate this pilot project moving forward. Let's do our best to move forward while preserving our environment and our cultural resource.

Thank you. I agree.

Okay. Thanks. Any further questions? Alright. Let's move then to SB 3320.

For this measure, we have nine in support, none in opposition, one with comments. Would anyone like to testify in this measure? Please. And please allow me to introduce yourself.

Aloha, chair, vice chair, members of the committee. My name is Anela Akana of ADC, and I'm the new food and product innovation network manager, and I stand we stand in support of our measure.

Thank you.

Thank you very much. Anyone else? Please.

Aloha, chair, vice chair, members of the committee. I'm Esther Reichert on behalf of Department of Agriculture and Biosecurity. We stand on our written testimony in support of this bill.

Thanks. Any other testifiers? Anyone on Zoom? Okay. Any questions?

I have one.

Sure. ADC, could you come on? We have language in this bill regarding the FPINs, and we also added language in another bill that's a enterprise zone bill to have FPINs be eligible for that program. This language right now explores that idea. Is there anything else that needed to be considered that's within that enterprise zone?

Well, part of the FPIN is definitely from the education to export. And so foreign the foreign trade zone and the it's all part of that the pathway for the FPIN.

Okay. So I guess more exploration would be good. Yes. Sounds good. Thank you.

Thank you.

Thanks. Any other questions? Okay. Move to SB 2376 HD1. This measure, we have eight in support, two in opposition, five with comments.

Would anyone like to testify in person? Anyone on Zoom? Oh, please, go.

Aloha chair, vice chair, members of the committee. Nahelani Parsons on behalf of Hawaii Renewable Fuels Coalition in strong support of this measure. We just wanna highlight that, you know, right now, renewable fuels require incentives in order to grow, and we really don't have anything. And the part of it the conversation we've been having a lot lately is, like, we have goals for 2045 or in the future, but we really need to these things take time.

So we really need the tax credit today because some of this build out and expansion will take five to ten years, and that's why we really see the significance of it.

And we appreciate the committee for hearing this measure. Our testimony does include two proposed amendments. One for consideration is to expand not just to the renewable feedstocks that we grow here locally, but also those ones that we bring in and we use for local production. The reason being is that some of our farming communities need to see that sort of market in operation in order to then dedicate their land to expanding out to grow renewable fuels.

So it's kinda seeing that system in place and the concept at work that then helps them, you know, build it into their long term goals and plans.

And the other addition is the additional SAF credit. The reason for that is really that when you look at producing renewable fuel, renewable diesel, that's what the producer will make. And then it takes one more step on top of that, as you know, to get to sustainable aviation fuel. You have to then blend the renewable diesel with the conventional jet fuel. Right now, it's approved at 50% blends.

That additional step costs more, and that's why we're asking for the additional credit to be considered because the process takes that one additional step, and we want to be able to incentivize producers to produce SAF. Because it'll make the most me meaningful impact on our greenhouse gas emissions that'll make a difference for us today. Thank you for the opportunity to testify.

Thanks very much. Please introduce yourself.

Aloha, chair, vice chair, members of the committee. Nasha Chanda for the Hawaii State Energy Office, and we stand on our written testimony providing comments. I'll be here if you have any questions. Thank you.

Thank you.

Good morning, chair, vice chair, members of the committee. Noni Toledo representing Hawaii Gas. Hawaii Gas is in support and has testimony, to that effect. Just a little bit of, history and clarification. So the production tax credit was created probably about fifteen years ago.

It had a grandfather clause, so at sunset. And then about five years ago, it was reintroduced in order to promote renewable biofuels for firm renewable electricity. Since then, there have been very little firm renewable electricity generation projects procured by Hawaiian Electric. And so therefore there has been very little use for renewable fuel. Also since then, there's this new technology for sustainable aviation fuel for transportation.

So now you have uses of biofuels for electricity, for aviation, as well as now there's renewable biofuels that can be used to substitute gas in the gas pipeline. So there's actually three different uses, all with varying feedstocks. This bill is a a good very good bill because it does encourage, local feedstock. It encourages local sales. It encourages local distribution.

One of the amendments that was put into HD1, however, even though the bill contemplates a ten year credit for a single project or a single taxpayer, if that is fully subscribed because of the cap for the state, which is, proposed to be $20,000,000, the, tax applicant can only roll over into one year.

So they basically lose the other eight years, which is possibly a a disincentive because when a developer or a biofuel producer proposes and costs out what it will cost to produce that biofuel, if there's no clarity, there's a lot of risk involved and therefore they may not proceed with the project. Another possibly oversight in the bill is that there are various types of projects that can be produced. It's not just, you know, one all project. And so there's for instance hydrogen that can be produced.

There's renewable diesel, there's renewable gas, all with different technologies, and they all may have different projects. So the bill as written in in this amended only gives a taxpayer one single credit that they're able to, to utilize. Whereas they may have different projects. So for instance, if you look at, renewable solar developments, a single corporation might develop different solar farms with different partners. In that case, the state and the federal, would provide tax credits for each of those projects.

So on a project basis, this only provides a tax credit on the taxpayer hierarchy basis. So in effect that may lead to a consequence where there won't be more innovation by a single entity, so they'll it'll be a one and done. So we would respectfully request consideration perhaps in the committee report to for the next committee to look at, amending that so that it's on a project basis versus on a taxpayer basis. Okay. Thank you.

Thank you. Any other testifiers, please?

Hello, chairs, vice chairs, vice chair, members of the committee. Marc Inouye from Par Hawaii. Thank you for hearing this measure. We support the intent of SB 2,376 and appreciate the updates to HD1 as it would help support the renewable fuels production tax credit and give it that update. And it would hurt really help further adoption about for renewable fuels for our state.

As kind of heard from other testifiers, you know, it it would really impact other different sectors and hard some of those are hard to decarbonize sectors, including utilities, aviation, ground transportation. So as committed to this, Par Hawaii, you know, put a $100,000,000 in

our facility to really help provide these fuels for our customers and eventually really helping the state meet its goals, the organization goals as well.

We are collaborating with the Hawaii Renewable Fuels Coalition, so we really support their amendments in there. And if you have any questions, I'll be here

for any questions. Thank you. Thank you.

Chair, vice chair, members of the committee, Chris Bennett with Pono Pacific. We did submit written testimony and support, and just point out there are a couple amendments in there we asked for as well, and I'm available for questions. Thank you.

Thank you.

Hello. I'm Ted Metros. I used to work for Par Hawaii before being terminated on testifying on a renewable fuel tax credit, back in 2024, and what it's supposed to be a $100,000,000. There have been a lot of misrepresentations in this bill. PAR continues to make them regarding production within the state.

The state has very little capacity to produce the feedstock for non renewable fuels here. Pono Pacific has completed their testing, and they've only produced about 63 gallons per acre of fuel. They can produce no more than 3% of Par's desired fuel amount. It's gonna be way less than 1% of the total. As a consequence, it's gonna have to be imported.

All the renewable feedstocks are gonna be imported. And to clarify that this is, you know, the truth, Par Hawaii has partnered formed a partnership with two Japanese company. In the press release, they they're excited about importing and providing feedstocks to Hawaii. And with this bill, in fact, it's still included, you can produce it. It's still in page, three.

Allowed production facilities within and outside of the state. They would be able to import not only feedstocks, but also, renewable fuels. They're already producing renewable fuels in Japan, so this tax credit will go in part to Japanese companies, which is precisely what the senate wanted to avoid with their initial amendments to this rule. The there will be a few exceptions, but it really doesn't make a lot of sense.

I mean, Pacific Biodiesel, they are producing crops, they're producing sunflower oil to produce oil, but they don't need an extra $7,000,000, which is a basically a government giveaway.

They're already embedded. And contrary to the other representations, Pacific Biodiesel sold out all 6,000,000 gallons of their material, representing only 1% of HECO's needs, and and they sold it all to HECO. And they're already obligated under the renewable portfolio standard to do it. Is Pacific Biodiesel or Par Hawaii gonna give those tax credits to HECO, to the airlines? And they wanna convey that there's no other alternatives.

There is another great alternative, and it's being widely embraced, and that is the clean fuel standard. The clean fuel standard is expected to cost 30 to 40% 30¢per gallon. This is gonna cost $1.40 per gallon, And there's no means whatsoever of scaling. This is 20,000,000. The state needs about a 100 times more, so it's gonna cost the state $2,000,000,000 if you wanna go down the tax credit path.

Something the state of Hawaii simply can't afford. So I would encourage you to veto this bill, kick it back. There's a lot of measures that can suffice it, particularly the clean fuel stamp.

Thank you very much. Any further testimonies?

Yes, Tom. If I can testify, please?

Yes, go ahead.

Great. Thank you. Good morning, chair, vice chair, members the committee. I'm Mike Ewall, executive director of Energy Justice Network, speaking out for our members and member groups and committee. As it turns out, many of the burnable fuels are actually worse for the climate than the fossil fuels that they would replace.

This bill uses the GREET model, which makes biofuels look better for the climate than fossil fuels. However, leading climate scientists have exposed this model as flawed due to its incorrect evaluation of indirect land use change. Even where these fuels may be less harmful, it is still a bad idea because these so called clean fuels are worse in terms of land and water use, toxicity, competition of food production, risks from genetic modification, and more.

These not actually clean fuels are extra expensive because state law requires zero emissions from transportation by 2045. Burnable fuels are not zero emissions, so the plan is to do two major transitions another under twenty years.

One from fossil fuels to biofuels and waste based fuels, and then another to electric fuels that have the potential to be truly free of greenhouse gases. And you just heard from an earlier testifier that it would take five to ten years just to ramp this up. That's the time frame in which this industry would have to be shut down to replace with electric fuels to comply with state law. So I'd like to highlight two recommendations if you are to move this bill forward.

We hope you defer it though.

First is to remove the eligibility of fuels produced from trash and construction and demolition waste unless it can be demonstrated that the feedstocks have no greater concentrations of halogens or toxic metals like arsenic than the conventional fossil fuels or biofuels that they would replace. This bill references construction and demolition waste as a renewable fuel, yet the Hawaii Natural Energy Institute has documented that this waste is 200 times as much arsenic as clean wood.

And second, the senate EIG committee has wisely questioned other clean fuels deals in part because there's not adequate land or water available to grow any meaningful amount of biofuel within the state. It'll be nearly all imported as Ted Metros had also testified. We recommend that you limit this bill to supporting only in state production of biofuels and only after demonstrating that land and water resources are unable to be used for in state food production.

So please defer this bill or at least, consider these amendments, Mahalo.

Thank you. Any further testifiers? Questions?

I have one.

Could I have the state, State Energy Office come up?

Yes. Hi.

Please state your name, title, and department.

Yes. Manasha Chanda, and I'm a renewable energy analyst at the State Energy Office.

I wanted to ask you, with what's going on with the price of gas, how important do we try to figure out regarding policy to look at alternative fuels? I know this does not directly I mean, it kinda does, but because consumers well, anyway, I just wanted to ask you, what's happening throughout the world right now and what we're doing with this tax credit, what's the linkage?

And the other question is, with our current energy goals, with our energy renewable goals, how does this align to incentivize and accomplish those goals?

I will have to take those questions back, but we'll make sure to find the appropriate channels to communicate with your committee.

Okay. Well, then can you answer your testimony? You had some concerns.

Yes. In testimony, the main comments were to address the rollover. So, HSCO is in support of many of the changes that have been made to this bill, but the rollover mechanism, which is page five lines 15 through 21 and page six lines one through 11, sort of creates uncertainty in terms of if there's gonna be that backlog.

And of course HSCO defers to Department of Taxation and other appropriate departments on the ultimate impacts that this would have, but just the concerns of, you know, years going on and there's credits that continue to be owed and there's a backlog on if people continue to claim that credit.

Have you talked to DOTAX yet?

I am not sure. I will see. Yes.

Have you considered, a cap on the rollover?

So I think we do make note of that. So, in our testimony, it says that HSCO defers the respective finance committees on budget constraints and an appropriate cap level.

Okay. Have you I guess my question is, have you considered what that amount would be?

If we have, I have not had eyes on that, but that is something I can follow-up on. So, taking note to follow-up on or to take the questions back on, an appropriate cap level. And then there were two others. I might have to watch the recording again to see what those two others were.

Okay. Yeah. Thank you. And could you follow-up on those questions that I asked earlier? Just send it over to my office.

For sure.

Thank you. Thank you. Renewable fuels?

Chair. Did you say your name?

Nahaalani Parsons. I'm Executive Director for the Hawaii Renewable Fuels Coalition.

Thank you. Regarding my question earlier Yes. With what's happening with prices going up, how does this tie into some of those concerns?

I think any increased local production increases our resiliency, and that is really, really key. Again, a lot of people get fixated on whether it's point 5% or 1%. It doesn't really matter. Any percentage of local production increases our resiliency and makes us, you know, more stable in terms of not completely dependent on the global markets. So I appreciate that question.

Second question

I, I, I totally agree. I the second question, I think, is for the state of state of energy department to answer because they're the ones who's supposed to be keeping an eye on those goals and making sure that they have a a wider aspect on all sorts of energy, not just renewable. My other question is the cap for the rollover. I wanted to get an understanding, the justification to have a rollover because not every tax credit has a rollover.

What makes what makes this the exempt exemption?

I believe it's just to maximize the usage of what we have available. And so the our goal is to, you know, show progress according to the Navigating settlement on what we're doing to reduce greenhouse gas emissions, so that would be as much renewables as we can get a hold of. So the rollover just helps us address that if they're that's why it's sort of in this particular bill versus others.

It's just so that we can continue expanding on the use of it if we're not meeting if we're maxing out on the 7,000,000 right now as the current cap, but we actually are producing a lot more. That rollover would help us keep continuing to use it in the future years.

But how the budget works, it's a little bit different. Like, that money, the carryover is used for something else once it's not used. So how how would we try to. How would you calculate what you know is available each year?

Yeah. I think you could you'd see if you had two producers that were they have to file a form in advance to show notice that they're going to apply for this tax credit. So you kinda had that forewarning. So you see what applications are going in, and then you know there might be capped at 7,000,000, and you have two applications.

So then you know the cap is gonna go up to 14 max, if it if if it even hits that. And then you would be able to calculate that for that year, knowing that you have the remainder 6,000,000. And then the next year, depending on the rollover, you would just have to start again with knowing that the state liability was 20,000,000, and then working back from the applications to see what the producer is.

So it's not I'm not an expert on the finance committee's sort of tax credit approach, but that is kind of a policy decision for you guys to address.

That's like having all the applicants in our GIA request having their GIA approved and not actually making a decision of what's important and what's to fund.

Totally. I think it's it's a lot about, like, what is our capacity of our fuel producers here? And some of them have capacity to produce 60,000,000 gallons, and some can produce 6,000,000. So if the state's goal is to maximize that greenhouse gas reduction, then you wanna just provide the support for as much fuel that we can produce locally as possible. So that would be why you would do it.

But So I see your point.

You hit it in the nail when you said what the state energy office, goal on reducing greenhouse gas. We need to understand what we're trying to aim for, and I think we can supply the credits that we need to meet that goal. That's why it was very important for the State Energy Office to answer that question because if we're not subsidizing to help meet that goal, then we're not putting the the action that we need to do to meet that goal.

We have goals for a reason. It's to accomplish them.

So until that is factored out by the state energy office and figured out and shared to us and, point out that plan, then it's hard for us to, give you this latitude of these rollovers. I think we need to make decisions and allocate the funding that we can support, to help the initiative that we believe in. Yeah. So I I do want to allow the finance committee to consider this rollover and consider a cap.

But, ultimately, they understand the finances better than we do, but we do support what we're trying to do.

The other thing that was brought up was the possibility of importing the finished product from another country or even another state and then applying the tax credit. I could see a scenario where, initially, we want to get out of go into renewable. So we start off with sub supplementing. But is there well, one, how accurate is that statement? And the second is if that statement is accurate, is there a phase out to where it must all be 100% locally produced here in the state?

What's what's the plan there?

I think to to go go back to the first part of I know it's hard to import any you know, we we import a lot of our food, and we wish we grew a lot more locally. And the reality is we just have to import a portion of it. And when you're trying to build out the local feedstock growth, farmers really need to see the security of the market. And so without having the support I I like your idea about the phase out.

So if you it yes. It's an imported feedstock, but it's imported renewable feedstock, which is, like, leaps and bounds better than what we have now. So it would be increasing our renewable feedstock access to increase our renewable fuel production locally. Tax credit would only go to local production. It goes to local customers.

It does not benefit anyone out of the state. It goes to our utilities that are purchasing the renewable fuel. It goes to our truck drivers. It goes to anyone that wants to use that renewable gas as well would benefit. So the benefit would stay within the state even if the feedstock was imported.

And then it just shows that market security to the farmers. They've gotta see that the the system is in play because they're making big decisions. And, again, it's not a competition with food. It's it's meant to be an additional economic driver for farmers who can now make money off of a cash crop or now can have a rotational fuel crop in between growing their watermelons and onions that helps them provide another source of revenue.

So that's the goal there, but to really build that out to get to the scale, I do like the suggestion of a phase out there.

There's nothing written in the bill right now, but that concept is definitely within reason of looking at at ways to do that.

So this clears up a couple of things. I assume that it was the finished product that was being imported. But what you mentioned, it's actually the feedstock. You're talking about the inputs. Yes.

And that does make sense to have it some sort of rollout or phase. Because right now, I I think there's definitely potential here. Do you know what the profitability looks like for, like, a single company? Because what I'm hearing is that there is a market for this renewable fuels. However, on the actual production of them locally, there needs to be some sort of security from these farmers or local producers to actually ensure that they grow the feedstock and then produce the renewable fuels.

So I guess what I'm trying to say is, do we need one company, two, three, four to like, what does the market looks like to be able to sustain a company? Is it only we can't we we know that we can't just have unlimited amount of producers. I I would like to understand what the potential market could be and maybe as the state help supplement and subsidize the initial producers until they can do it on their own.

So that way, we create an industry, support them in the early phase, and then at the end, they mature and produce this. So has that research been figured out?

Because I think that's crucial.

Yep. I appreciate that that comment, chair. And, although I don't have the research necessarily, but the the bill welcomes multiple producers and incentivizes the market to grow, it's definitely the intent because the bill has a ten year time limits, ten year sentence. So that is the intention is that the market would grow and the cost would come down. And part of that is we're really at the cusp of it.

Like, par is one of the fuel producers. I think we'll be one in five in the nation right now that's gonna be producing staff. And that's we're we're right at the exciting starting point. The goal is grow the market, grow the producers, and, you know, have more options here available to us. And over time, that will reduce the cost.

So, technically, if we're looking at ten years at 7,000,000 a year, we're looking at 70,000,000 to have this incentive for renewable fuels, technically. So if we're looking at the Max cap or everything else, is 70,000,000 over ten years enough to start out this emerging industry and them leading into maturity?

I did. That's a great question because we wanna see the results. Right? We wanted to see it be successful. And so we are working on whether or not the current calculation at the 0.85 calculates out, and I don't necessarily have the exact information today, but I will get circle back with you on that one.

I think with the we wanna see as much effort go into this as possible. So our goal was originally when we asked was just the 75% of whatever the cap was. If the cap was 20,000,000, it would be 75% of that per producer. That would maximize and make a bigger impact.

There's one interesting fact that I had, which is, like, if we had the whole 20,000,000 and we were using sustainable aviation fuel with the additional credit in the bill, because they do have to have that additional credit to incentivize that.

There was a like, we grow our greenhouse gas emissions by 1.4% a year in just naturally increased volume of air travel. And so that was the exciting part is, like, if we turned on this tax credit and had access to it, we could literally stop the increase. So I know, again, we're talking about small percentages, but we're talking about things we've never done before. We've never stopped our increase in greenhouse gas emissions. This is what's exciting about the policies that we have the option.

It gives us the option to literally stop the increase.

Well, provide us more information.

Sure.

I I think there's work that needs to be done. I saw your amendments, and I'm still I'm still mulling through it. So let's continue the conversation.

Thank you, chair. Appreciate that. Any other questions?

Actually, Mahayelani, could you stay up one second? Okay. The current tax credit, is it refundable?

Current to your the original draft of the bill, it was refundable. Forgive me after double checking this h c one. It's not right. I don't believe it is. I think they took the language out.

It was in a prior version. Okay. I believe on the house side, Yeah. The HB 69.

Oh, it's still Oh, yes. Oh, okay. Great. Thanks. Thanks, Ted.

Yeah. So I need to raise a question. Okay. One second, please. And so, from your coalition's perspective, do you have any, comments, I guess, about the ideas raised in other testimonies around including camelina and also construction debris as allowable feedstocks into qualification for this tax credit?

Yes. Thank you for the question. We have asked forgive my testimony, but it's one of our coalition members. Put on Pacific's earlier testimony did ask for camelina to be added. It's the list is not exclusive of it, but it's not stated clearly in there.

So we that would be a a preferred amendment would be to clearly state it in there. Camelina is a the Brassica family. It's related to canola, so it fits in there. I don't have any comment on the waste construction debris as I do not have any current coalition members that

Okay.

So I'm not not available to comment on that one.

I know that there's projects that are, you know, that are interested in in pursuing that sort of thing. So okay. Thank you very much. Thank you. And they can also please call the car.

Thanks, mister Inouye. My question is about feedstock availability. With your view on the market and obviously don't disclose anything that's confidential can we grow enough to to feed just into your into your production goals? And I guess the related question is to what degree are imports of feedstocks really necessary?

Yeah. I mean, that's a great question. That's like the million dollar question. Can we grow enough feedstock here in Hawaii? And and that's the the work that's being done by Pono Pacific to really expand that research.

Like, well, how much acres do we we need to to grow, like chamelelinum, for example? What is being done by Pacific Biodiesel, because they're expanding as well, their types of crops for, renewables as well. But the answer to your question is probably not. We can't grow all that feedstock here in Hawaii. I mean, it would be nice to grow all of our food here in Hawaii.

That'd be great too. But we there was just not enough, land to grow. However, you know, it's going back to, the chair's point is that, you know, we can create a different economy here, you know, expand on that. And then that's what we're doing with collaborating with with ag, collaborating with the landowners, collaborating with airlines and ground transportation and the state as well. So it's, you know, this kind of collaboration is what we kind of like to see.

Everybody is just kind of working together on that. And then, you know, the import question, you know, that's what we're currently doing now to import a renewable feedstock. Canola is coming from from Canada. And that's gonna be able to start our production locally here, the local production in the next we wanna say fairly fairly soon that we're gonna start producing renewable fuels here.

Yes. I just wanna make sure I understand. So the way that the credit is currently structured, would you be able to claim a renewable fuels tax credit using the imported canola from Canada?

We would be with the the renewable fuels production tax credit. Not the eight not this version here.

Yeah. Yeah. Yeah. Yeah. Problem, though, obviously, with if we're doing the import approach is none of that benefit goes to our local farmers.

Right? It's

And and that's what we're trying to trying to build out with the the incentive here for the feedstock, you know, with the low low low life cycle here.

Yeah. It's really try to help develop that industry, give them that incentive as, as a farm, as a farmer to grow these cover crops or canola or Camelina, you know, there's other things that are in the works and just we give them the incentives for that.

Okay. Thank you. Thank you, guys. Any other questions? Okay.

Thank you all for your patience. Let's move then to the next item, the last item, SB 2925, HD 1. For this measure, we have nine in support, none in with opposition, two with comments. Any testifiers on this measure?

Aloha, Chair, Vice Chair, members of the committee. I'm Esther Recker with Department of Agriculture and Biosecurity. We stand on our testimony offering comments on this bill, and I'm available for questions.

Thank you. Any further testifiers? Anyone on Zoom? Okay. Any...

On Zoom, we have DLNR.

Okay.

Aloha, chair, vice chair, members of the committee. Heather McMillan, DLNR. We stand on our written testimony in support. I'm here to answer any questions that you might have along the lines of the forestry side. Thank you.

Thanks. Any other testifiers on Zoom or in person? Okay. Any questions from our committee? Okay.

We're gonna recess.

Hello, everyone. We are back from recess, and we are gonna go to the top of the agenda starting at sb 3169. And this bill establishes a five year coastal resilience pilot program for the preservation of month, so Kujig Bay. Members, I think we had a very lengthy discussion about this pilot project, and the concerns are valid. And we are gonna ensure that we follow all federal regulations in place.

And so we're gonna move this forward as is. Any questions, concerns, comments? If no questions, concerns, comments, vice chair, please take the vote.

SB 3169 SD one HD one. The recommendation is to pass unamended as is. Chair and vice chair vote aye. Representative Tam? Aye. Representative Tempo? Aye. Representative Yamashita? Aye. Representative Gedien? Aye. Thank you very much. The recommendation is adopted.

Thank you. Moving on to SB3320. This bill establishes policies for the Food and Product Innovation Network. Members, we're gonna move this as is. And any questions, comments, or concerns?

With no questions, comments, concerns, vice chair, please take the vote.

Okay. SB3320 SD 1. Recommendation is to pass unamended as is. Any votes in opposition? Any reservations?

Okay. The recommendation is adopted.

Thank you. Moving on to SB2376. This bill expands the renewable fuels production tax credit. There is a lot of questions regarding this measure, and I want to work with the EEP chair in the future to figure out some logistical and economic development concerns, and maybe we can figure that out. And maybe we could work something out also in conference.

Comment.

But for now, we're gonna leave it as is, members, and continue the discussion. Any questions, concerns?

Just, you know, in general, I, I think, you know, it's no secret that tax credits have, have been an issue for me. But it's it's not from the standpoint that I oppose tax credits. I just believe that, you know, some states today are not calling it tax credits anymore, and they're calling it what it is. And they're calling it tax expenditures because technically, that's what it is. We're we're taking money out of the budget and reducing it to fund this, this purpose.

And when we use the tax code to do these types of things, there's very little oversight to, to meet those goals and things like that. So I that, that's why I've, I've had problems with using the tax code to push forward initiatives. I understand why the proponents of these types of measures do this because it's the easiest to push forward. Just use the tax code to move it forward.

But, but again, I just wanted to make that comment that there are, a number of, tax credits that are moving forward.

And I think at some point, the legislature should be looking at this from that perspective, that it is an expenditure. And there should and because it's an expenditure, there should be oversight over, like, these expenditures.

Thank you for your comment. I also believe we need to make sure that we know exactly how we're gonna spend our taxpayer funds and who we're gonna give it out to, and there is a plan for it all. And that's why I really wanna work with the EEP chair to figure out what that plan looks like and make sure that this program becomes successful and we grow a mature renewable fuels market here in Hawaii, which diversifies our economy.

So there's gonna be a lot of work that's needed, and I am relying on not only the industry but our state agencies to ensure that we are meeting these goals and policies that we set forth, by the state. Otherwise, we shouldn't have these goals and policies if we're not even trying.

Alright, members. Any other further comments?

Vice chair, with no further comments, please take the vote.

SB2376 SD2 HD1. Recommendations to pass unamended as is. Any votes in opposition? Any reservations?

Okay. Chair, the recommendation is adopted.

Thank you. For the last measure, we have SB 2925. This bill establishes a tax credit for natural management of coconut reno renoise. I can't even say it. Re help me out, guys.

Renoiseres. Renoiseres. It's the Filipino in me. Like, English is not my first language. Beetle tax credit.

This the chair recommends to add Department of Ag's recommendation to testimony regarding requesting positions to cover the regulatory aspect of this bill. Also, technical amendments for the purpose of clarity, consistency, and style. After reading the Ag's testimony, we realized they need the manpower to be able to make this bill happen. So we're gonna add that in. Members, any questions, comments, concerns?

No questions, comments, concerned. Vice chair, please take the vote.

SB 2925 SD1 HD1, recommendation to pass with amendments. Any votes in opposition? Any votes with reservation? Chair, the recommendation is adopted.

Well, thank you members. Our hearing is now adjourned.