Tax coal like other fossil fuels

There’s a coal-black spot marring the clean-energy record of the state Legislature in its 2015 session.

In the midst of passing a bill strengthening Hawaii’s push away from fossil fuels — the goal now is to produce all the state’s energy from renewable sources by 2045 — lawmakers also approved a carve-out for coal, the most polluting energy source of them all.

With the passage of Senate Bill 359, the "barrel tax" on petroleum products is being extended to include fossil fuels in general, including liquefied natural gas (LNG) as well as synthetic gas and propane. However, the original version of the bill also included coal, which prompted protests from AES Hawaii Inc. The company produces about 20 percent of Oahu’s energy by burning coal at its Campbell Industrial Park plant.

The producer’s agreement to sell energy to Hawaiian Electric Co., a contract extending over seven years, precludes AES from recovering this cost. So the company pressed for, and received, an exemption from the tax, which generates revenue for various environmental, energy and agricultural special funds.

Gov. David Ige should sign SB 359 in order to expand the tax more broadly: The advent of LNG as a short-term fuel source makes it essential that the tax be in place when it becomes a more substantial part of the state’s energy portfolio.

However, the exemption for coal would be a flaw in the statute that must be fixed when lawmakers return to the state Capitol in 2016.

Most of the other legislative actions this year signaled a heightened resolve to advance the state further in its Hawaii Clean Energy Initiative policies — and exceed them.

Those policies currently require the state to have 70 percent of the state’s energy come from renewable sources by 2040, both by increasing the use of renewables and reducing reliance on fossil fuels.

House Bill 623 Increases renewable portfolio standards to 30 percent by the end of 2020, 70 percent 10 years after that, and 100 percent by Dec. 31, 2045. It passed 50-1 in the House and 24-1 in the Senate. There are few clearer expressions of commitment to a goal. Ige should sign this one as well.

Additionally, the governor already has enacted HB 1286, which amends the state’s objectives and policies relating to energy facility systems. Among other statements is the assertion that state energy plans "ensure that liquefied natural gas is used only as a cost-effective transitional, limited-term replacement of petroleum for electricity generation and does not impede the development and use of other cost-effective renewable energy sources."

It’s just a statement, of course, but it’s an important one. And it wouldn’t have made sense to adopt this language but in the same year fail to include LNG and other fossil fuels in a tax that is designed to disincentivize their use. Advocates of SB 359 reasonably believe that should Ige veto this bill, getting a tax expansion of any kind during the election year of 2016 would be an excessively heavy lift.

However, the Legislature should be on notice that the carve-out for coal is unfair on its face, and counterproductive to the state’s overall energy development mission. Lawmakers should have expanded the tax to fossil fuels across the board, period. The fact that AES has a problem recovering the cost is a matter for the company and its partner, Hawaiian Electric, to resolve without the state stepping in to lend a hand.

Renewable-energy advocacy groups such as Blue Planet Foundation assert that the existing barrel tax isn’t hefty enough to pay for the environmental costs of fossil fuels, or to deter their use sufficiently. But SB 359 at least represents the start of a mechanism to accomplish that aim. After this year, coal should not get a pass from lawmakers claiming to support Hawaii’s clean-energy agenda.