STAND. COM. REP. NO. 2061

Honolulu, Hawaii

RE:    S.B. No. 3215

       S.D. 1

Honorable Colleen Hanabusa

President of the Senate

Twenty-Fourth State Legislature

Regular Session of 2008

State of Hawaii

Madam:

     Your Committees on Energy and Environment and Agriculture and Hawaiian Affairs, to which was referred S.B. No. 3215 entitled:

"A BILL FOR AN ACT RELATING TO BIODIESEL,"

beg leave to report as follows:

     The purpose of this measure is to provide various market stimulation incentives for the development of biodiesel.

     Specifically, this measure makes:

     (1)  State agricultural lands, with soil classified by the Land Study Bureau's detailed land classification as having a productivity rating of class A or B, available for biodiesel fuel crops at nominal rent;

     (2)  Establishes a state biodiesel feedstock crop and biodiesel fuel purchasing program; and

     (3)  Creates tax exemptions for biomass crushing facilities and lands used for biodiesel feedstock crops.

     Testimony in support of this measure was submitted by the Department of Land and Natural Resources; Hawaiian Electric Company, Inc.; the Sierra Club, Oahu Group, Imperium Renewables Hawaii LLC; and Enterprise Honolulu.  Comments were submitted by the Department of Taxation; Department of Agriculture; and the Tax Foundation of Hawaii.

     Your Committees find that this measure will stimulate the development of locally produced biofuels.  Your Committees further find that the use of biofuels can reduce the State's dependence on imported oil and increase the amount of renewable energy from sustainable resources.

     The Department of Land and Natural Resources has suggested to your Committees that:

     (1)  Due to the Department's public trust obligation to maximize returns on the disposition of public land, leases are usually subject to fair market value, as nominal rent is reserved for nonprofit organizations and special circumstances that warrant favorable treatment pursuant to the State's public trust responsibilities; and

     (2)  Most A or B rated agricultural lands are the best overall agricultural lands and most state lands with that designation are already encumbered by long term leases or permits, while other state lands remain fallow and unencumbered.

     Accordingly, your Committees have amended this measure by:

     (1)  Omitting the requirement that that Board of Land and Natural Resources lease the public agricultural lands at nominal consideration;

     (2)  Omitting the restriction mandating that the state agricultural lands made available for biodiesel fuel crops be soil classified by the Land Study Bureau's detailed land classification as productivity rating class A or B, making all public agricultural lands available for biodiesel fuel crops;

     (3)  Adding language to ensure that the amendments made by this measure to §235-7(a), Hawaii Revised Statutes, are retained when that section is repealed and reenacted on January 1, 2013, pursuant to Act 166, Session Laws of Hawaii 2007; and

     (4)  Making technical, nonsubstantive revisions for the purposes of clarity and style.

     As affirmed by the records of votes of the members of your Committees on Energy and Environment and Agriculture and Hawaiian Affairs that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 3215, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 3215, S.D. 1, and be referred to the Committee on Economic Development and Taxation.

Respectfully submitted on behalf of the members of the Committees on Energy and Environment and Agriculture and Hawaiian Affairs,

____________________________ JILL TOKUDA, Chair

____________________________ RON MENOR, Chair