Hawaii-2011-HB335-Introduced

SECTION 1. The legislature finds that Hawaii relies too heavily on imported fuels to meet its energy and transportation needs. In the past, Hawaii has produced more than thirty per cent of its electricity using sugarcane bagasse. The demise of the sugarcane industry, however, took a heavy toll on Hawaii's ability to generate renewable energies. Presently, more than eighty-five per cent of the State's electricity and one hundred per cent of its transportation fuel are imported.

The legislature finds that it is difficult for biofuel production companies to obtain financing through conventional financial institutions because most commercialized technologies are in their infancy. Providing incentives and financing support to encourage the development of biofuel production facilities in the State has the potential to:

(1) Reduce Hawaii's reliance on petroleum by forty per cent by the year 2030;

(2) Attract private sector investments to the biofuel industry; and

(3) Create jobs in the agriculture, construction, and biofuel industries.

The purpose of this Act is to reduce Hawaii's dependence on imported fuel and reinvigorate Hawaii's struggling agriculture industry by creating a biofuel production facility loan guarantee program.

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

HAWAII BIOFUEL Production facility LOAN GUARANTEE PROGRAM

§ -1 Definitions. As used in this chapter:

"Biofuel production facility" means a facility in this State that produces liquid or gaseous fuels, including but not limited to ethanol and biodiesel, from locally produced municipal solid waste and construction and demolition waste, and organic sources such as biomass crops; agricultural residues; and oil crops, including palm, canola, soybean, and waste cooking oils; grease; food wastes; and animal residues and wastes that can be used to generate energy.

"Department" means the department of business, economic development, and tourism.

"Offtake agreement" means a contract between a biofuel producer and a buyer to purchase biofuels refined at a biofuel production facility in the State.

§ -2 Hawaii biofuel production facility guarantee loan program; loan; limitation and terms. (a) There is established the Hawaii biofuel production facility loan guarantee program to be administered by the department of business, economic development, and tourism.

(b) Subject to availability of funds, the department may guarantee loans to assist eligible applicants with the construction and development of biofuel production facilities in the State.

(1) There shall be an unconditional offtake agreement between the applicant and a biofuel purchaser with a Standard & Poor's credit rating of no less than BBB- or a Moody's credit rating of no less than Baa3 for the duration of the loan guarantee;

(2) The applicant's earnings before interest, taxes, depreciation, and amortization shall not be less than the amount equal to the total of the interest and amortization of the loan guarantee multiplied by one and one-half;

(3) The applicant shall be required to pay one per cent of the value of the loan guarantee annually for the duration of the loan guarantee;

(4) The applicant shall purchase insurance coverage in an amount sufficient to protect against revenue losses resulting from unforeseen events beyond the applicant's control;

(5) The default of a loan guaranteed to an applicant under this chapter shall result in the transfer of ownership of the applicant's biofuel production facility to the State; and

(6) The biofuel production facility shall be located within the State and shall use feedstock grown or sourced from within the State for at least seventy-five per cent of its production output.

(d) Interest charged on an insured loan made under the provisions of this chapter shall be determined by the department.

(e) The total amount of loans guaranteed under this chapter shall not exceed $1,000,000,000.

§ -3 Rules. The department shall adopt rules pursuant to chapter 91 to implement and administer this chapter by:

(1) Prescribing the qualifications for eligibility of applicants for loan guarantees;

(2) Prescribing the qualifications for eligible development and construction costs;

(3) Providing for public inspection at reasonable hours of the biofuel production facilities, books, and records of an enterprise that has applied for or has been granted a loan guarantee;

(4) Setting additional terms and conditions on the granting of a loan guarantee to a biofuel production facility; and

(5) Requiring the submission of progress and final reports and prescribing the contents of those reports."

SECTION 3. This Act shall take effect July 1, 2011.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	335
TWENTY-SIXTH LEGISLATURE, 2011
STATE OF HAWAII