by Andrew Walden

Natural gas and coal don't come in barrels, and they don't cause oil spills, but that's not stopping competing energy producers in the solar and wind industry from pushing legislators to impose the barrel tax on natural gas and coal imported into Hawaii.  SB358 is a bald-faced move to raise the price of energy for Hawaii consumers.

Under SB358, gas and coal will be taxed more heavily than oil.  Testimony from Hawaiian Electric points out: "a $0.21 per 1,000 cubic foot tax on natural gas is approximately 19.2% higher than the British thermal unit (BTU) equivalent tax rate for low sulfur fuel oil (LSFO). Similarly, the tax rate on coal is approximately 15% higher than the BTU equivalent tax rate for LSFO."

Just in case you haven't figured out that this tax is designed to save over-priced 'green' electricity producers from cheaper competitors, HEI also points out: "SB 358 does not propose to change any portion of the definition of 'Distributor' except to add a provision that selectively targets persons who use fossil fuels for the purpose of generating electricity to sell to an electric utility. As a result, others who may acquire, import or cause to import fossil fuels can avoid paying this tax in a number of ways, including if such persons use the fossil fuel to generate electricity for their own use, or if they sell or use the fossil fuel for any purpose other than to generate electricity to sell to an electric utility.... Hawaiian Electric proposes to have SB 358 make clear that any tax imposed on a unit of fuel under Chapter 243 only be charged once, and not on each person in the chain of custody."

And who will be paying?  Testimony from Hawaii Gas urges: "Hawaii Gas...be allowed to recover the tax from its utility gas customers in its Fuel Adjustment Charge (FAC) effective on the same date this bill becomes law."  A&B wheedles: "...the purchase power agreement between HC&S and MECO does not provide for the pass through of any new taxes imposed upon our renewable energy.... We respectfully request your consideration to incorporate provisions into this bill to exclude from the State environmental response, energy, and food security tax, solid fossil fuels used by renewable energy production facilities in providing to a public utility, firm power renewable energy that primarily utilizes non-fossil fuels to generate its firm power renewable energy."

SB358 would also loot General Fund Barrel Tax revenues and divert them to special funds designed to 'create positions.'  The Hawaii Department of Health complains: "the Department's Environmental Response Revolving Fund Barrel Tax allocation is insufficient to sustain the 41 positions (31 filled positions) that depend on the ERRF for funding."

The Tax Foundation explains: "Initially, the 5 cents per barrel environmental response tax was established to address oil spills in state waters. It was temporarily increased to $1.05, much of which was earmarked to numerous special funds, and was scheduled to sunset on 6/30/30. This measure redistributes the tax collections among the special funds. It also subjects gaseous and solid fossil fuels to the tax, which is a tax increase. The tax has taken on a life of its own and lacks transparency, and the special funds it feeds do not come under close scrutiny by either lawmakers or the public. The barrel tax should be repealed and all programs funded out of the environmental response tax should be funded through the general fund."

Support for SB358 comes from the usual suspects behind the push to keep Hawaii energy costs high, including: Ulupono Initiative, Nature Conservancy and Blue Planet Foundation. 

SB3581 has passed the Senate ENE and AGL Committees amended as SD1, passed Second Reading and now awaits a hearing before the Senate Ways and Means Committee.

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SB358SD1 (Text, Status)