HB380.DOC

SECTION 1. Chapter 182, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§182- Geothermal development special fund. (a) There is established in the state treasury the geothermal development special fund, into which shall be deposited:

(1) Moneys collected from geothermal resource mining leases on state lands or reserved lands;

(2) Royalties paid to the State for the utilization of geothermal resources, pursuant to section 182-18;

(3) All accrued interest from moneys in the special fund; and

(4) Appropriations by the legislature.

(b) Moneys in the geothermal development special fund shall be used by the board for the exploration and development of geothermal wells and other geothermal energy sources within the State."

SECTION 2. Section 171-19, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) There is created in the department a special fund to be designated as the "special land and development fund". Subject to the Hawaiian Homes Commission Act of 1920, as amended, and section 5(f) of the Admission Act of 1959, all proceeds of sale of public lands, including interest on deferred payments; all moneys collected under section 171-58 for mineral and water rights[;] except for royalties paid to the State for geothermal production pursuant to section 182-18; all rents from leases, licenses, and permits derived from public lands; all moneys collected from lessees of public lands within industrial parks; all fees, fines, and other administrative charges collected under this chapter and chapter 183C; a portion of the highway fuel tax collected under chapter 243; all moneys collected by the department for the commercial use of public trails and trail accesses under the jurisdiction of the department; transient accommodations tax revenues collected pursuant to section 237D-6.5(b)(2); and private contributions for the management, maintenance, and development of trails and accesses shall be set apart in the fund and shall be used only as authorized by the legislature for the following purposes:

(1) To reimburse the general fund of the State for advances made that are required to be reimbursed from the proceeds derived from sales, leases, licenses, or permits of public lands;

(2) For the planning, development, management, operations, or maintenance of all lands and improvements under the control and management of the board, including but not limited to permanent or temporary staff positions who may be appointed without regard to chapter 76;

(3) To repurchase any land, including improvements, in the exercise by the board of any right of repurchase specifically reserved in any patent, deed, lease, or other documents or as provided by law;

(4) For the payment of all appraisal fees; provided that all fees reimbursed to the board shall be deposited in the fund;

(5) For the payment of publication notices as required under this chapter; provided that all or a portion of the expenditures may be charged to the purchaser or lessee of public lands or any interest therein under rules adopted by the board;

(6) For the management, maintenance, and development of trails and trail accesses under the jurisdiction of the department;

(7) For the payment to private land developers who have contracted with the board for development of public lands under section 171-60;

(8) For the payment of debt service on revenue bonds issued by the department, and the establishment of debt service and other reserves deemed necessary by the board;

(9) To reimburse the general fund for debt service on general obligation bonds issued to finance departmental projects, where the bonds are designated to be reimbursed from the special land and development fund;

(10) For the protection, planning, management, and regulation of water resources under chapter 174C;

(11) For invasive species control and mitigation by the invasive species council under chapter 194;

(12) To promote reforestation and sediment run-off mitigation; and

(13) For other purposes of this chapter."

SECTION 3. Section 182-7, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) The payments to the State as fixed by the board shall be specified; provided that:

(1) In the case of bauxite, bauxitic clay, gibbsite, diaspore, boehmite, and all ores of aluminum, the amount of royalties for each long dry ton of ore as beneficiated shall not be less than twenty-five cents or the equivalent of the price of one pound of virgin pig aluminum, whichever is higher, nor shall it exceed the equivalent of the price of three pounds of virgin pig aluminum;

(2) The rate of royalty for ore processed into aluminous oxide in the State shall be set at eighty per cent of the rate of royalty for ore not processed to aluminous oxide in the State; and

(3) The royalty shall be fixed at a rate which will tend to encourage the establishment and continuation of the mining industry in the State.

The prices of virgin pig aluminum for the purpose of determining the royalties under this section shall be the basic price on the mainland United States market for virgin pig, not refined, f.o.b. factory. The royalties shall be in lieu of any severance or other similar tax on the extracting, producing, winning, beneficiating, handling, storing, treating, or transporting of the mineral or any product into which it may be processed in the State, and shall not be subject to reopening or renegotiating for and during the first twenty years of the lease term.

In the event the lessee desires to mine other minerals, the lessee, before mining the minerals, shall so notify the board in writing, and the board and the lessee shall negotiate and fix the royalties for the minerals.

[Any other law to the contrary notwithstanding, thirty per cent of all royalties received by the State from geothermal resources shall be paid to the county in which mining operations covered under a state geothermal resource mining lease are situated.]"

SECTION 4. Section 182-18, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:

"(a) The board shall fix the payment of royalties to the State for the utilization of geothermal resources at a rate [~~which~~] that will encourage the initial and continued production of [~~such~~] these resources. With respect to all geothermal mining leases previously issued or to be issued, where the board determines that it is necessary to encourage the initial or continued production of geothermal resources, the board shall have the authority to waive royalty payments [~~to the State~~] for any fixed period of time up to but not exceeding eight years.

(b) The board shall adopt, amend, or repeal rules pursuant to chapter 91 to establish procedures for auctioning geothermal resource mining leases to private entities and the basis upon which the amount and duration of royalty payments to the State will be fixed or waived. The board's assessment of each application shall include[,] but not be limited to[,] the examination of such factors as the progress of geothermal development taking place in the State at the time of the application, the technical and financial capabilities of the applicant to undertake the project, and the need for providing a financial incentive in order for the applicant to proceed. The granting of any favorable terms to an applicant for the payment of royalties under this section may be revoked by the board if the applicant fails to satisfy any of the terms and conditions established by the board, or if the applicant wholly ceases operations and for reasons other than events [~~which~~] that are outside the control of the parties and [~~which~~] that could not be avoided by the exercise of due care by the parties."

SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 6. This Act shall take effect on July 1, 2011; provided that amendments made to section 171-9(a), Hawaii Revised Statutes, by section 2 of this Act shall not be repealed when section 171-19(a) is reenacted on June 30, 2013, pursuant to section 5 of Act 209, Session Laws of Hawaii 2010.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	380
TWENTY-SIXTH LEGISLATURE, 2011
STATE OF HAWAII