"That space had been planned as a fuel distribution storage location for years now," said Chester Koga, Tesoro's consultant for the project. "They have never exercised their option to fully develop it."

Koga said the company leases another fuel storage and transfer facility near Nimitz Highway in Iwilei but must vacate the property by Aug. 31, 2006. The state lease for the Sand Island sites expires on Oct. 31, 2019.

The new tanks will be built in two phases starting in January, according to the company's draft environmental assessment filed with the state last week. The seven tanks would each be 56 feet tall and range in diameter from 50 feet to 80 feet and hold a variety of fuels including gasoline, diesel, ethanol and jet fuel, with a capacity of 261,000 barrels.

The company also plans to build a replacement truck fuel loading rack, vapor combustion unit, a 3,000 square foot office building and make entrance driveway and spill containment berm modifications.

Tesoro spokeswoman Jeanette Mukai said the project would not be an increase in overall fuel storage capacity, but just a replacement for its tanks in Iwilei.

Mukai said the company is also looking into other unspecified options for fuel storage and the project may not happen at all.

"This is not a done deal as far as we are concerned," Mukai said. "We are looking at other options as well."

Hawai'i has two oil refineries — one run by Tesoro and the other by ChevronTexaco. Tesoro imports crude oil and after refining, sends products by pipeline to its storage facilities. From there it is distributed by truck to retailers.

According to a 1999 Coast Guard report, six companies stored approximately 2.5 million barrels of oil and fuel at Honolulu Harbor. Another 10 million barrels were stored in tanks near Campbell Industrial Park, and 7 million barrels are at Pearl Harbor.

The Coast Guard no longer publishes the amounts or locations of fuel stored on the island citing security concerns after the terrorist attacks of Sept. 11, 2001.

Rodney Kim, executive director of the Sand Island Business Association, said he is concerned about safety and traffic issues with more fuel being stored in the area, but acknowledges that the zoning allows for that use.

"I think anybody would not want to be adjacent to it," Kim said. "Obviously, Tesoro's proposal would make the area a substantial fuel storage area, but I don't see any real grounds for us to object to it because it is within the use of zoning codes."

According to the assessment, trucks will load fuel 24 hours a day with about 90 truck trips a day to and from the site. Tesoro will do a traffic study to determine if a light should be installed at the intersection of Sand Island Access Road and Ke'ehi Lagoon Access Road to provide safe access for harbor users and tanker trucks.

Jeff Mikulina, director of the Sierra Club's Hawai'i chapter, is concerned about so much fuel being stored near two heavily used recreational areas. The lagoon is used by canoe paddlers, and the state park is used by campers and sports teams.

"From an environmental perspective, do we want to have this area as industrialized in exchange for protecting other areas?" Mikulina said. "Looking at the big picture, seven new tanks is a pretty potent reminder of our addiction to imported petroleum."

Tesoro's Mukai said there is a berm around the property to prevent any spills, and the storage tanks make use of an overfill protection systems to prevent overload and spillage.

Mukai said the facility will ensure a safe and efficient supply of petroleum to meet demands and prevent hauling fuel directory from the refinery in Kalaeloa.