Big Island resident Paul Crawford isn't looking forward to the start of July, knowing he'll probably see red the first time he drives by a gas station.

That's because on Wednesday, gasoline prices likely will spike about 12 cents as a general excise tax exemption expires. The coming tax restoration, along with a 30-cent-plus surge in gasoline prices over the past month, is disturbing to Crawford.

"I'm very upset about the gas thing," said Crawford, a Mountain View resident who sometimes drives his 2002 Ford Focus 100 miles a day commuting to Hilo and other places.

"I'm getting 30 miles a gallon and this is killing me."

Barring a dramatic fall in gasoline prices, Hawai'i drivers on Wednes-day will be paying the highest taxes on gasoline of any state. Currently, motorists pay 52 cents a gallon, made up of 33.6 cents in state and county taxes and 18.4 cents in federal taxes, according to the American Petroleum Institute.

The overall tax burden likely will jump to 64 or more cents this week, surpassing the 60.9 cents paid by New York drivers and the 45.6-cent average for the entire U.S., according to petroleum institute data from April.

The higher taxes will drain an estimated $38 million to $39 million from drivers' pocketbooks while filling up state tax coffers with a like amount, according to Lowell Kalapa, head of the Tax Foundation of Hawaii.

He said the tax increase is tied to the expiration of a moratorium on general excise taxes that was enacted to shield consumers from higher prices when ethanol started being blended with gasoline three years ago. In April 2006, the state mandated that at least 85 percent of the gasoline sold here needed to include 10 percent ethanol, or ethyl alcohol.

During the past session, lawmakers didn't want to extend the exemption as they eyed a gaping state budget shortfall and scrounged for revenue sources.

"Now that we're in this fiscal crisis with a shortfall of the general fund, that money looks pretty good," Kalapa said.

The shift to E10, or 10 percent ethanol-laced gasoline, came as the state cozied up to the idea of establishing an ethyl alcohol/renewable fuel source industry here. Besides being blended into gasoline, ethanol also can be used to replace diesel fuel used by some electrical generators in the state.

On the surface, the idea presents potential synergies for the state, since ethanol can be made from sugarcane byproducts. Policy makers thought Hawai'i could reduce its economically unhealthy addiction to imported fuel sources while resurrecting a sugar industry trampled by foreign competition. At the same time, pollution would be lowered.

One state study projected local ethanol production would result in $104 million of new investments in manufacturing plants, 84 direct jobs and 601 indirect jobs.

Besides dangling a ready ethanol market of more than 40 million gallons annually in front of would-be producers here, the state enacted a tax credit for 100 percent of plant construction costs.

But three years after the state mandated E10 at the pump, not one ethanol facility has broken ground.

Instead of millions of gallons of ethanol being produced here for the local market, refiners are spending millions to bring in ethanol produced elsewhere, including foreign countries.

That's given ammunition to critics.

"It continues our reliance on foreign fuels," said Henry Curtis, executive director of Life of the Land (Hawai'i), an environmental and community action group. Curtis also questions the amount of water that will be needed to produce ethanol and said the nation's move toward E10 has raised grocery prices as corn and other grains are used to produce ethanol.

"We were never enthusiastic fans of ethanol to start with," he said.

Moreover, the switch to E10 also raised costs for producing gasoline here, since refiners have had to add storage and other equipment for ethanol.

It now appears it will be at least a year, probably longer, before ethanol starts flowing from any Hawai'i-based plants.

At one time, at least half a dozen different proposals were being floated to build plants here. But the implosion of ethanol prices, along with closures of plants on the Mainland and a worldwide credit crunch, seemingly have thinned the ranks.

Hawaiian Commercial and Sugar Co. on Maui is now sitting on the sidelines after reviewing ethanol potential, though it is keeping a watch on ethanol and other emerging renewable energy options. Another player, Pacific Biofuels, which changed its name from Aloha Ethanol Corp., couldn't be reached for comment and isn't listed in the telephone book.

"The situation has been challenging to everyone in the space," said William Maloney, chief executive officer of Pacific West Energy LLC, which is among the ethanol plant frontrunners with a plan for a $134 million facility on Kaua'i.

Maloney had a setback last year when Kaua'i sugar producer Gay & Robinson Inc. withdrew from a partnership with Pacific West. But Maloney said he is back in talks with the plantation about using Gay & Robinson's sugar mill in Kaumakani. Pacific West also is bringing in ClearFuels Technology Inc., an 'Aiea company with processes to turn sugarcane waste and other cellulosic biomass materials into ethanol and electricity.

But beyond those steps, there is reason to be optimistic, said Maloney, whose experience includes building and operating a 25-million-gallon ethanol facility in Jamaica and helping establish the Jamaican bobsled team commemorated in the movie "Cool Runnings."

Maloney said financing of the projects may be easier now since biorefiners are eligible for part of the federal stimulus package and have incentives from a 2008 farm bill.

"What we really have at this point is a series of state and federal incentives that really have enhanced the viability of what we've worked on," Maloney said.

The same incentives have brightened the outlook for Oahu Ethanol Corp., which wants to build a 15-million-gallon facility at Campbell Industrial Park.

"I hope within the next couple of months we will be making a serious announcement," said Daniel KenKnight, Oahu Ethanol president. "We're back in the saddle as far as moving forward with interested parties that want to do the financing."

KenKnight said it is possible that his venture will produce ethanol in the next 18 to 24 months.

Besides volatility in ethanol market pricing, financiers also want to know where the facilities are getting their feed stock. KenKnight said his operation will initially import molasses until local sugarcane growers start producing crops; Maloney has identified lands that could be used to grow biomass.

One firm that might not have as many worries is Hawai'i BioEnergy LLC, which is backed by three of the state's largest landowners: Kamehameha Schools, Grove Farm Company Inc. and Maui Land & Pineapple Co.

Its other partners include successful venture capitalist Vinod Khosla. Joel Matsunaga, Hawai'i BioEnergy president, said it was too early to disclose the company's plans, which include producing ethanol and projects to develop jet fuel from algae.

In Hilo, motorist Paul Crawford said he's all for the ethanol ventures, having read articles about Brazil's energy independence and the widespread availability of the sugarcane-based fuel at low prices throughout the country.

"Their economy is a lot stronger because they're energy-independent," Crawford said.

"If that gets us there, I don't care if they put molasses in my car."