21/08/2007 (Maui News),HONOLULU – A Hawaiian Electric Co. plan to include construction of a $61 million biodiesel fuel refinery on Maui in Waena could be delayed if the company is required to do an environmental impact statement for the project.

But it’s disputed whether an EIS is necessary.

The environmental group Life of the Land says an EIS is required by a 2004 state law, and on Monday state Sen. J. Kalani English, who wrote the amendment, said that’s correct.

Peter Rosegg, a spokesman for HECO, said the company’s lawyers concluded there is no trigger for an EIS. He noted that MECO did an environmental impact statement for the Waena generating plant site, and the zoning not only allows for but requires half the output to come from renewable sources.

When the Waena permitting process was under way in the early 1990s, nobody was talking about refining plant oils for fuel, but now MECO’s plan is to convert to all biodiesel at its Maalaea generating station. (Some biodiesel, produced across the street from Waena by Pacific Biodiesel, already is being used there.)

MECO President Ed Reinhardt has said that turning Maalaea into a renewable energy plant is within the concept of the Waena permits, which allow MECO to install 240 megawatts of new generators.

Hawaiian Electric Co. and the Natural Resources Defense Council published their final biosustainability policy today. It is designed to ensure that HECO and subsidiaries Maui Electric Co. and Hawaii Electric Light Co. use only sustainable feedstocks for biodiesel fuel, whether local or imported.

That includes the BlueEarth refinery to be built on Maui at Waena. In February, HECO, MECO and BlueEarth Biodiesel said they expected the refinery to be in operation by 2009, but that schedule could be hard to meet if the Waena plant is required to produce an environmental impact statement.

Because of an outcry against imported palm oil, BlueEarth and HECO asked the NRDC to study a series of voluntary rules that would guarantee that only ecologically benign sources would be used when buying biodiesel.

This would include crops grown in Hawaii or plant oils imported from elsewhere or refined biodiesel made elsewhere.

It also would apply to all HECO operations that use biodiesel. MECO uses about 73 million gallons a year of diesel, but HELCO also uses diesel, and HECO is preparing to use biodiesel at a new plant on Oahu.

The BlueEarth refinery would initially produce 40 million gallons a year, but it would be able to expand to 120 million gallons within two years.

Since no local source of large amounts of plant oils is yet available, BlueEarth would import its raw materials. (These include not just the oil but also alcohol. Eventually, if ethanol plants using local raw materials are built, local alcohol could be used.)

The HECO-NRDC policy says the company will purchase only biodiesel fuel produced from locally grown sustainable feedstocks or palm oil that complies with international standards established by the Roundtable on Sustainable Palm Oil.

At a public meeting in Kahului in July, NRDC experts said they were not paid by HECO to craft the sustainability policies, which will be the first not only for palm oil but for any plant oil tabbed for conversion to fuel.

HECO and NRDC both repeated in a statement today that the policy represents a shift away from fossil fuels and toward creation of an environmentally friendly biofuels sector in Hawaii.

HECO’s shift to biodiesel policy is significant because the three Hawaii utilities are the country’s largest utility user of petroleum diesel. When their transition is complete, they will become the largest user of biodiesel in the United States. By creating a market for the raw materials, HECO says, the BlueEarth plant will jump start a new sector for the state’s farmers.

Whether African oil palms or some other plant, like jatropha, will be most suitable for biofuel crops in the islands is still being researched. HECO is pledging its half of the refinery profits to an agricultural foundation to help farmers answer that question.

"Hawaiian Electric’s switch to biodiesel and adoption of this sustainable procurement policy could help lead the global transition to more sustainable fuels," said Ralph Cavanagh, senior attorney and co-director of NRDC’s energy program. "It’s part of a strategy to continue to transform these companies into a model of diverse, sustainable

supply and efficient electricity use."

NRDC and HECO both agree that the utility needs to continue its acquisitions of energy-efficiency and renewable generation resources, and they view the policy, which will be formally presented today in Honolulu, as a complement, not a substitute, for them.

Karl Stahlkopf, HECO’s senior vice president for energy solutions and its chief technology officer, made presentations at public meetings on Maui, Oahu and the Big Island in June and July.

"We heard spirited commentary at the public meetings and heard directly from a range of individuals and organizations representing a variety of views," he says. "We listened to everyone and made significant adjustments based on what we heard."

At the Maui meeting, Stahlkopf said HECO would do an EIS "if required." Since then, the refinery partners have concluded an EIS is not required.

Last week, Henry Curtis, the executive director of Life of Land, who had pressed the point with Stahlkopf in July, wrote the Department of Business, Economic Development & Tourism, claiming that BlueEarth has begun using the word "transesterification" instead of "refining," because of a law that requires strict environmental review for waste-to-energy generating plants, large wastewater treatment plants, power-generating facilities and "oil refineries."

Landis Maez, the co-managing partner of BlueEarth, said Monday that "oil refinery" is a "term of art," and as defined in federal laws means "petroleum refinery."

Rosegg said although "refinery" is used in everyday speech, the processes in the two kinds of refinery are different.

He described a biodiesel refinery as akin to "making soap."

An ester is the product of a reaction of an acid (contained in the plant oil) and alcohol. Its primary byproduct is glycerine.

A petroleum refinery, by contrast, uses heat to break down hydrocarbons, and other processes to remove contaminants, such as sulfur.

HECO contends that a biodiesel refinery is inherently less polluting – producing less effluent that is less harmful and less net carbon dioxide when the fuel is burned.

Curtis said last week that the intent of the 2004 changes in state law was to "close a loophole" in the Coastal Zone Management Act, by which large projects were escaping review, while small ones were subjected to rigorous oversight. (Waena is not in the special management area.)

He said the BlueEarth refinery will be the largest biodiesel plant in the country. It would be a hundred times bigger than Pacific Biodiesel’s Maui plant, which uses a variety of feedstocks but primarily reclaimed restaurant grease.

State Rep. Bob Nakasone introduced the bill proposing changes in the environmental law in 2003, but he said Monday that he cannot recall whether it was directed only at petroleum, or all oils.

English says the changes were added in the Senate Energy, Environment and International Affairs Committee, which he chairs, when the bill was completed in the 2004 session. He says, "Henry Curtis is correct" – any kind of oil refinery is covered.

HECO’s switch from petroleum diesel to biodiesel was meant to accomplish three goals: to make the islands more independent of imported fuels, to reduce the net output of the greenhouse gas carbon dioxide and to give a boost to local agriculture.

At the time the refinery was announced, Bob Wellington, a co-managing partner of BlueEarth, said: "BlueEarth will work diligently with other local biodiesel and ethanol producers to encourage increased local biofuels production, greater efficiency and lower pricing.

"Potentially, shared raw materials purchasing, joint land use, and using locally produced ethanol and methanol in our own process are a few of the ways we can further stimulate the local biofuels industry. We intend this to be a win-win for Maui, Hawaii and our company."

Besides concerns about cutting down rain forests to plant oil palms, at the July meeting the program was challenged on the grounds that importing either palm oil or finished biodiesel would not reduce Hawaii’s dependence on imported energy.

Maurice Kaya, the chief technology officer at DBEDT, said his agency will review Curtis’ request before determining whether an environmental review is required.

’’We have to resolve two questions. One, is a state environmental impact statement required for this BlueEarth plant, and secondly, would DBEDT be the appropriate agency,’’ Kaya said.

Maez said Monday that although he is not a lawyer, the first question had been discussed with lawyers. He said biodiesel refineries could not support the financial and administrative costs involved in an EIS of the kind required for petroleum refineries.