Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Energy and Environment, to which was referred H.B. No. 196, H.D. 1, entitled:

begs leave to report as follows:

The purpose of this measure is to provide a twenty per cent tax credit for hydrogen production systems that utilize geothermal energy.

Hawaiian Electric Company, Inc. (HECO), and Hawaii Renewable Energy Alliance submitted testimony supporting this measure. The Department of Taxation submitted testimony opposing this measure. The Department of Business, Economic Development, and Tourism and the Tax Foundation of Hawaii submitted comments on this measure.

Your Committee finds that approximately thirty per cent of the oil imported to Hawaii is used for electrical energy generation and the rest mostly for transportation purposes. The vast majority of fuel that HECO uses to generate electricity is the residual oil from the refining process to produce the jet fuel and gasoline for the transportation sector. Hawaii will not make any significant reductions in petroleum importation unless it addresses the transportation sector. Your Committee finds that the Electric Power Research Institute, the research arm of the electric utility industry, recognizes hydrogen as the favored energy carrier for fuel cell automobiles and the long-term electricity storage solution. Your Committee believes that this measure is a step in the right direction.

As affirmed by the record of votes of the members of your Committee on Energy and Environment that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 196, H.D. 1, and recommends that it pass Second Reading and be referred to the Committee on Ways and Means.