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The Honolulu Advertiser
Posted on: Wednesday, March 1, 2006

Ethanol gasoline at pumps this month

By Sean Hao and Dan Nakaso
Advertiser Staff Writers

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For more information about Hawai'i's ethanol law: www.new-fuel.com

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Ethanol gasoline is coming to Hawai'i sooner than expected.

Drivers could be pumping ethanol-blended gasoline by the middle of this month as the state's oil industry gears up to meet an April 2 deadline. That's when a state law takes effect that requires at least 85 percent of gasoline sold in Hawai'i to contain 10 percent ethanol.

Officials are pushing the alcohol-based fuel as a way to reduce the state's dependence on outside oil, give new life to the ailing sugar industry, create jobs and cut pollution.

Chevron Corp. announced yesterday it will begin blending ethanol into gasoline within two weeks, first on the Big Island, then on Maui, Kaua'i and O'ahu. Chevron's refinery supplies gasoline to Chevron dealers and other oil companies on O'ahu.

"We're going to begin blending in early March," said Chevron spokesman Al Chee. "We can't convert to ethanol on a moment's notice. It has to be done over time."

For consumers the change to ethanol should be seamless. Practically all gasoline including regular, midgrade and premium will be blended with ethanol after April 2. Vehicles manufactured after 1960 should run on ethanol without problems, according to state officials. Ethanol is slightly less fuel efficient than gasoline, but the difference shouldn't be noticeable.

Ethanol shouldn't result in higher prices, and could result in lower prices. That's because sales of ethanol-blended gasoline are exempt from the state's 4.166 percent general excise tax until the end of this year. That equates to a potential savings of about 8 cents a gallon. However, consumers won't see such savings if gasoline dealers maintain their price at the pump, which has all taxes already built in.

At least one local dealer said that some and possibly all of that potential savings would be used to offset other costs including those associated with distributing ethanol-blended gasoline.

"I don't think we'll be able to pass it all on," said Barney Robinson, who operates Chevron stations near Honolulu International Airport and in Kahala. "Most stations are not going to pass along the excise tax reduction. We're going to incur additional costs handling ethanol."

Those costs include cleaning gasoline storage tanks and keeping them free of water, Robinson said. Unlike gasoline, ethanol can mix with water. If water collects in the storage tanks, a portion of that water could mix with the ethanol and end up in a consumer's car.

The Department of Business, Economic Development and Tourism said stations face a one-time cost of about $1,000 associated with the conversion to gasoline blended with ethanol, including adding equipment to filter out water.

Maurice Kaya, DBEDT's chief technology officer, said the purpose of the excise tax break was to spur the conversion to ethanol-blended gasoline.

"We would hope ... some of those savings will be passed on (to consumers) but there's no mechanism to force that," Kaya said.

Chevron's Chee said the oil refinery will not benefit from the tax break. Hawai'i's wholesale price cap law will prevent the company from raising the price it charges dealers by 8 cents a gallon.

Hawai'i's other major refiner, Tesoro Petroleum Corp., did not return messages left yesterday.

At least for the first year the ethanol pumped into Hawai'i cars will be imported from foreign or Mainland sources.

The ethanol mandate was supposed to reduce Hawai'i's dependence on imported oil and create an alternate market for struggling sugar cane growers. Several companies that plan to produce ethanol in Hawai'i, including those using sugar cane, have run into technical problems and had difficulty acquiring land. Local ethanol production isn't expected to begin until mid-2007.

As a result, Hawai'i's oil industry will be forced to import about 3 million gallons a month of ethanol to meet the state mandated 10 percent blend as of April 2.

Aloha Petroleum Ltd. said yesterday it is ready to begin selling ethanol-blended gasoline April 1.

Some consumers welcome the addition of ethanol as long as it doesn't adversely affect their cars.

Larry Thornley, 66, drives 40 miles every day from his home in Hawai'i Kai to his job on Ford Island as a manager at a systems engineering firm. Like other drivers yesterday, Thornley said he supports the idea of ethanol blends but wants to learn more about its price and effects on the environment and on vehicles like his 1997 Cadillac Seville, which gets 18 to 19 miles per gallon.

"I think it's a prudent move and a necessary move," Thornley said. "We need independence from oil-producing companies and the oil habit that we have. But I'd like to know more information about what it would do to a car and how various engines would perform, and whether we're doing harm to the exhaust control system. If it's harmless, then we ought to go with it."

Once ethanol is introduced it could take several weeks before consumers actually fill up with gasoline that includes 10 percent ethanol because stations will be mixing the new ethanol/gasoline blend with regular gasoline that's already in their storage tanks. Once the gasoline that's pumped meets the full 10 percent ethanol content requirement the gasoline will be exempt from Hawai'i general excise tax.

Bob Cabral, 59, of Kalihi said he was open to using ethanol. He uses his 1993 Ford Crown Victoria for his job of repairing computers and teaching computing classes. He pumps about $30 worth of gas into the car about every three days and wouldn't mind paying a similar amount for ethanol blends if everything stays about the same as it does for regular gasoline.

"I'm not against it," Cabral said, "but I'd like to have more information. I'm against it if the price is going to skyrocket. And I'd be concerned about my car and the environment. I think they go together."

Reach Sean Hao at shao@honoluluadvertiser.com and Dan Nakaso at dnakaso@honoluluadvertiser.com.