Rules on adding ethanol to gas finally in works

By Jan TenBruggencate
Advertiser Science Writer

A decade after the Legislature mandated the addition of ethanol to Hawai'i's gasoline, the state is finally preparing regulations that could spawn a new industry.

Several companies are waiting to start production of cleaner-burning ethanol, using molasses and other byproducts from the state's sugar plantations.

"This should have happened in Hawai'i 10 years ago, and this may be the last opportunity to get this industry off the ground," said Bill Maloney, managing director of Maui Ethanol LLC, a firm that hopes to build an ethanol plant next to Hawaiian Commercial & Sugar Co.'s Pu'unene Mill.

The new rules are being fine-tuned by the Ethanol Working Group made up of members from the oil industry, sugar companies, potential ethanol producers, government officials and alternate-energy advocates.

ChevronTexaco and Tesoro Hawai'i, the companies that run Hawai'i's two oil refineries, say they are concerned about the technical and price issues surrounding the switch. But a consultant for the Department of Business, Economic Development and Tourism found that tax credits and increased octane from the use of ethanol shouldn't increase the cost to the consumer.

"It might even save a penny or two a gallon," said Maria Tome, alternate-energy engineer with the State Energy Office.

For motorists, there would be no noticeable change in performance. Ethanol-gasoline mixtures — often called gasohol — are sold in most states, and gas-powered cars and trucks can run on it without modification. The standard mix is 10 percent ethanol, 90 percent gasoline.

When added to gasoline, ethanol increases the octane and also provides a source of oxygen that reduces pollutants when the fuel is burned. In many congested cities, ethanol is required as an additive for pollution-control purposes. In Hawai'i, the driving forces for the change are the development of new industry and the reduction of the state's demand for imported fuel.

On the Mainland, much ethanol is made from corn, but the product can be manufactured from the sugars in Hawai'i's low-value molasses. It can even be made out of biomass such as bagasse — the fibrous material left after sugary juice is crushed out of cane stalks — as well as wood chips, green waste, and materials such as paper and cardboard.

Several companies are poised to start business as soon as the rules are in place. Once drafted, the rules still have to go through various government agencies, the attorney general's office and the governor's office before public hearings are held.

Tome said the review process could be done in six months or so, putting the issue to public hearings by the end of the year.

It would be another year or two after that before drivers could expect gasohol at the pump.

Maloney's company proposes a fermentation system, making ethanol out of molasses the same way rum is made.

Daniel Kenknight's O'ahu Ethanol Corp. would use a system similar to that of Maui Ethanol.

Another firm, Waimanalo resident Bob Shleser's Worldwide Energy Group, is working with the Gay & Robinson sugar plantation on Kaua'i on a pilot plant with a different process that uses bagasse or other biomass as fuel.

"The biomass is gasified — heated in a low-oxygen environment to make syngas, which is put through catalytic conversion to make ethanol," Shleser said.

It is not clear whether these firms could meet the entire state's potential demand. The state consumed about 410 million gallons of gasoline in 1991, a figure estimated to rise to 500 million gallons in 2005.

That means between 40 million and 50 million gallons of ethanol would be needed — more than the three firms are likely to be able to produce, at least at first.

"If there is not sufficient ethanol available, all the oil companies would need to do is seek a partial waiver," Maloney said.

The oil companies doubt assertions that the ethanol requirement won't raise prices at the gas pump.

Tesoro said it would need financial help to cover the cost of setting up an ethanol program. "Without assistance ... the ethanol implementation measures may cause an upward pressure on gasoline prices in the state," Tesoro Vice President David H. Leonard said in a December letter to Tome.

ChevronTexaco Public and Government Affairs Manager Al Chee said his firm has a lot of experience with using ethanol in other states, and he predicts a price rise as well.

There are costs for new tanks, pipelines, adding new blends of gasoline and transporting the product to different islands in the state, the oil firms said.

But Maloney said the oil companies benefit from significant tax advantages in using ethanol that would actually reduce their cost per gallon of delivered fuel. He said he doesn't understand their opposition.

"There is like a mental block within the Chevron company. They will generate more money with ethanol," Maloney said.

Shleser said his review of the financial picture suggests the price of gasohol should end up cheaper than pure gasoline.

For the sugar companies, it would provide a revenue source from molasses. Also it may protect the business in case of a fall in sugar prices.

"We're very much concerned about what's happening to sugar prices, but we have the potential to convert all of our sugar into ethanol. I think it's got tremendous potential," said Alan Kennett, president of Gay & Robinson.

Reach Jan TenBruggencate at jant@honoluluadvertiser.com or (808) 245-3074.