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Mar 02, 2010

Use a new "barrel fee" on imported oil to fund future energy and food security


   By Fawn Jade Koopman | Comments: 22

Bill Status Updates


Hawaii's is deeply dependent on imported oil for electricity, gasoline, and jet fuel. As the price of oil continues to rise, these items get more expensive for all of us. Importing oil also means we send billions of dollars out of state, and that we add to the global warming crisis. This measure would place a fee on every barrel of oil, with fees used to fund alternative energy and food security projects. The current bill would add a $1.00 fee on each oil barrel, generating $22 million per year to be split among funds for renewable energy and efficiency projects, local agriculture and food, and other programs. Critics argue that the barrel fee increases the cost of living during an already hard time, especially for the poor who spend more of their paycheck on essential items. The estimated impact of a $1.00/barrel fee is about $0.03 per gallon of gas, and about $2 per monthly electricity bill. If the fees are invested properly in local energy and food, it could protect families from the rising price of oil in the future. On balance, we think we should support of this measure. Current bill: HB2421.

You can directly view the latest version of this bill, track bill status, and read the testimony of others on the Hawaii State Legislature's website for Bill Status and Documents.

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Comments


Fawn Jade
May 24, 2010
reply
Final outcome: HB2421 was vetoed on by governor Lingle on Apr 25, 2010. Legislators quickly gathered enough votes for an effective override of that veto which was approved and carried by a two-third vote by the members of the House. HB 2421 will now become law in Hawaii.

The purpose of this measure is to establish initiatives and appropriate funds to increase Hawai’i's environmental security and food and energy self-sufficiency. This “barrel tax” bill increases the tax on petroleum products, to $1.05 from 5 cents. The aviation fuel tax remains at 5 cents. However, the increase is scheduled to expire in 2015. Opponents still criticize this measure because gasoline prices should go up by about 2.5 cents a gallon and might be felt by community members who cannot afford the extra costs.

The measure will allocate money collected by the environmental response, energy, and food security tax to the energy security special fund, energy systems development special fund, and the agricultural development and food security special fund. Although, lawmakers are apportioning 60 percent of the money into the general fund to help balance the budget the remainder of the funds will go to toward assisting Hawai’i’s energy independence.


Fawn Jade
Apr 09, 2010
reply
Just an update, but I believe no public testimony will be heard tomorrow.


Mr.
Apr 13, 2010
Let's contact our Legislators now for a final push in favor of the $1 tax- per oil barrel. Regardless of how the money is spent, it will at least provide an incentive for us to get off our addiction to Oil. Hawaii's current addiction to Oil (80-90% of our energy/fuel source) will really hurt when oil prices increase over time.

HB2124 will spur local renewable projects and contribute to the local economy. The pay-off on this investment will be greater over time since Hawaii would be insulated from future oil shocks.

Note: it's important to have an exemption for Aviation Fuels (jet fuel) since there is really very little, if anything, that they can do to use renewables or conserve. Let's give them an exemption so we don't end up punishing Hawaii's tourism and local econ.


Fawn Jade
Mar 31, 2010
reply
A little late, but I just read this article on the barrel tax in the Honolulu Advertiser, visit:
http://www.honoluluadvertiser.com/apps/pbcs.dll/article?AID=20103290357


Fawn Jade
Mar 31, 2010
reply
This link will direct you to a letter you can "sign" your name to in support of this bill and its amendments. In order to "sign", just comment!
I'm working on adding a direct link, and it should be up and running shortly.
For now, please visit:
http://www.kanuhawaii.org/campaigns/details/blog/entry/?id=8&bid=1269998600530334


Brent
Mar 24, 2010
reply
Mahalo for speaking out on the issue, Jason, and also for the response, Cathy.

If you're asking whether there is comprehensive, Hawaii-specific research on the impact of a $5.00 barrel tax locally, including the effect of a) increased transportation costs of goods which must be trucked or transported via ground transport, and b) the increased electricity costs for businesses that may be passed along to consumers, the short answer is no.

There are a few studies which look at the economic impact of a $5.00/barrel tax at a national level. Here are two examples:
http://www.rff.org/Publications/Resources/Pages/Pay-By-the-Barrel-Oil-Tax.aspx
http://www.cbo.gov/ftpdocs/59xx/doc5966/doc12b-Entire.pdf

However, as an update, the most recent version of the bill was passed with amendments out of the Ways and Means Committee and includes a $2.00/barrel fee, which would result in an impact on gas and electricity prices double that of a $1.00/barrel fee. So as Fawn mentioned, if $1.00/barrel tax = $0.025/gallon of gas the a $2.00/barrel tax = .05/gallon of gas.

The division of the fee goes as follows:
$1.05 to environmental and food security funds including:
- $.05 to environmental defense revolving fund
(for response actions and disaster preparedness)
- $.55 to energy security special fund
(support clean energy initiative)
- $.10 to energy systems development special fund
(for renewable energy and reduce oil dependence)
- $.35 to agricultural development and food security special fund

The remainder will go the general fund to help shore up our budget shortfall.

It now moves on for debate in Conference Committee and the amounts are subject to change.


Olin
Mar 25, 2010
Thanks for posting those links...checking them out.


Jason
Mar 21, 2010
reply
Be careful what you wish for...the Senate is now pushing a $5 per barrel hike. And again, the proponents soften the blow with a promise of only a 12 cent fuel rise.

http://hawaiireporter.com/story.aspx?b84fc173-3f0b-433f-9cd2-2856eacecb93

Can anyone say how much our overall costs will rise because of a tax like this? A punitive, far reaching tax like this will prolong the recession and hurt the economy.


Cathy
Mar 21, 2010
Thanks for the link, Jason, to the Hawaii Reporter article. Although I cringe to say this in this eco-conscious crowd, I am the driver of a nearly 10 year old Forerunner with 170,000+ miles on it. It still gets relatively good miles per gallon, but when gas prices hit $4+ a summer or two ago, we really felt it, both at the gas station and in our electricity bill. My college-aged son, who drives a Honda Civic, began to consolidate his trips into town (we live in Kahalu'u) and even arranged carpools with friends--at least those who, like him, were paying for gas on their own. We all cut down on electricity use at home in order to try to make up for the increase in energy costs.

I would like to be able to say the primary motivation for our efforts was a concern for the environment, but the truth is our pocketbooks were hurting. Perhaps not the best kind of motivation, but for the short term, it raised awareness and made us make some adjustments in our habits--some of them stuck with us when gas prices dropped and have become new, better habits we're happy to have adopted.

Another example of this principle in action: I recently heard someone say in a discussion on how to encourage students to make healthier choices in the lunch line that some schools are experimenting with making healthy choices reasonably priced and unhealthy ones more expensive--think $2 for a fruit salad and $2.50 for a spam musubi. They said that preliminary results indicate better choices are being made by kids, initially because of cost, but they're hoping some of the habits will stick, especially with support of other education/motivation measures.

I don't want to see gas prices skyrocket and hurt those who can't afford to cut back anymore. It would certainly be an unfair ask of people who are eco-conscious, are making those good choices, and already finding it hard to make ends meet. But there are a lot of us out there for whom price increases may lead to permanent changes in habits and a desire to seek and promote new solutions to our energy needs.


Fawn Jade
Mar 19, 2010
reply
That's a good point, Cathy, we should be clearer on where the tax money goes. Jason brought up that point as well.

It is my understanding that the Committee on Finance reported that: Five cents of the tax on each barrel, shall be deposited into the environmental response revolving fund; 55 cents of the tax on each barrel shall be deposited into the energy security special fund; 10 cents of the tax on each barrel shall be deposited into the energy systems development special fund; and 35 cents of the tax on each barrel shall be deposited into the agricultural development and food security special fund.


Also, just an update: yesterday after the hearing, the committee passed the measure with amendments.


Cathy
Mar 20, 2010
Thanks, Fawn, for the additional info, and for the offer to respond to other questions our students might have about the issues. They're enjoying and learning a lot from following these discussions on this Kanu page. Since they're 12 and 13 year olds, I'll "channel" any questions or responses that come my way.

But we just started Spring Break today, so my guess is they've got other things going on right now!


Cathy
Mar 18, 2010
reply
(Student comments...) The group generally agreed that the basic idea behind this position is good, but they felt there wasn’t enough detail to be able to vote confidently to support it. For example, they wondered where the money from the tax would go, and if it went to a special fund, would this fund then be another one that could be "borrowed from" if the State runs into fiscal trouble again. Agree 3 Disagree 9 Abstain 1


Fawn Jade
Mar 17, 2010
reply
http://www.rff.org/Publications/Resources/Pages/Pay-By-the-Barrel-Oil-Tax.a
spx
sorry! here's the link


Fawn Jade
Mar 17, 2010
reply
Jason asked some important questions about this bill. I hope these answers are helpful.
The revenue estimates $22 million for a $1.00/barrel tax and these figures are from the StateTax Department's own testimony on the bill, which can be found online at the bill status page.
The electric bill estimates are from the Blue Planet Foundation's testimony, also accessible on the bill status page.
The estimates for increase per gallon of gas are derived from studies which cite U.S. Energy Information Administration (EIA) estimates of a $5.00/barrel tax as equivalent to an increase of $0.12/gallon of gasoline (hence a $1.00/barrel tax = $0.025/gallong of gas).

I posted a link to studies which cite this figure. One study was conducted by the think-tank Resources for the Future. When you get to this website, you can do a search to find it.
The study is called the Case for a Pay-by-the-Barrel Oil Tax, by Ian Parry.
During my search, I also found links to other studies which might be both helpful and informative!




Claire
Mar 16, 2010
reply
A tax to help our state in the future seems like a great idea and one that I would vote for. One dollar at a time seems like a small price to pay for something so necessary on the islands.

Although some people have said that the money may not go to the right place, it's probably best to believe that the government will choose the right thing and see what happens. As citizens of a democracy, sometimes it's our job to trust that the people we voted for can see our point too.


Mike
Mar 16, 2010
reply
Jason,

You are not alone...although we are undoubtedly the minority in this forum.

Adding another tax at this point is counter-productive to the nascent economic recovery that is in progress. This is the wrong time.

Beyond that, I prefer that people and companies make these decisions rather than relying on a government agency. I do not trust our elected and appointed representatives to "properly invest" these funds. I much prefer that you and I make, and then fulfill, our Kanu commitments to build a more sustainable Hawaii. Making investment and consumption choices based on our convictions.

I support the rest of the bills and issues that Kanu has added to their agenda, but I believe that the goals of this particular initiative can be better achieved through other means.


Mike
Apr 09, 2010
OK...it looks like we are now likely to get the barrel tax but very little of the proceeds will go towards investments in energy and food security. We need to be careful what you ask for...because we just might get it, but in a way that does little to advance the cause.

See below from Blue Planet Foundation's own assessment:

"The clean energy investment bill, or barrel tax (HB 2421) passed out of the Senate on Tuesday as a dramatically different measure from the House version. The latest version increases the tax to $1.50 per barrel, but sends most of the revenue to the state general fund--not clean energy. Only about 13% of the tax goes toward clean energy (20% to food security)."

Again, I support the objectives of the proposal but suggest to you that adding a new tax at this time was the wrong way to go about achieving them.


Olin
Mar 12, 2010
reply
Jason, mahalo for sharing your thoughts. We'll never get anywhere without having honest and constructive conversations.


Jason
Mar 11, 2010
reply
Last thing I want others to consider...

The irony of the situation is that the question posed to fellow Kanu members is "Use a new "barrel fee" on imported oil to fund future energy and food security", when two issues down another reads "Use a portion of the Hurricane Relief Fund to restore school days this year" (something I disagree to).

With another tax supported fund sitting around, legislators will be tempted to tap it for whatever reason they see fit for any other purpose. No one can guarantee that this new fund will be used as intended, or used well.

Case in point: In 2004 legislature raised a 66 cent tax for each cell phone user in order to build infrastructure to support the Enhanced 911 System (now's a good time to check your cell phone bill and see all the taxes and fees that the govt stuffs in there!). As much as I hate new taxes, it seems to be a legitimate way to quickly fund a system that will enhance rescue and emergencies. I don't mind that.

(http://www.hawaiireporter.com/story.aspx?6b469e0a-f1d5-4d16-8fb6-84d4c0e0dc86 and in full disclosure if you didn't know Hawaii Reporter leans right)

However, in 2009, legislature voted to raid $25 million from that fund, leaving it only at $9 million. E911 looks like it's almost complete, but I'm pretty sure they're still collecting it, and who knows when the tax will be phased out.

I feel that the legislature in it's current form is a poor steward of the taxpayer's money, so I'm hesitant to embrace a new tax even though it's wrapped up with good intentions.


Fawn Jade
Mar 11, 2010
reply
Jason, I will definitely look into your questions regarding who will receive the money and how it will be distributed. Also, the details on the .03 cents/gallon and $2 increase in electricity/month statistic...are numbers that I didn't personally compute, but which arose from a breakdown and analysis of the bill. I'll look over it as soon as possible and get back to you.
Also, thank you for posting the link to more information!


Wendi
Mar 11, 2010
reply
In taking a systems look at our energy consumption, I believe that the availability of 'cheap' (I use this term relatively) energy reinforces our continued level of energy consumption. Although not the only factor, cost does come into play in deciding our energy use - do I buy the car with better or worse fuel efficiency; do I put my laundry in the dryer or hang dry; and so on...

Our dependency on energy, and currently, imported energy, is a complex state, and shouldn't we make the changes that can be made, take the steps that can be taken to create the conditions for a more sustainable reality?

Thanks Jason, for your perspective, which I welcome and appreciate.


Jason
Mar 10, 2010
reply
I know my opinion will be in the minority in this forum. In theory, the bill seems logical and straightforward, but I'm afraid of the subtle nuances that may be incorporated into the language of the bill that will undo any good intentions.

Who exactly will receive the money? How will the money be distributed and who decides on that?

Where did the .03 cents/gallon and $2 increase in electricity/month statistic come from?

One thing to remember is that the $1/barrel tax will exponentially increase expenses beyond .03 cents a gallon... fuel prices will be more, so Matson will charge more to transport the goods to Hawaii, in return the delivery companies will charge more for goods to be delivered to the store, stores will be paying more for electricity... Since prices of goods largely revolves around the cost of energy, the cost of goods and services will rise... So a new tax AND increase in the cost of living is the LAST thing that we need right now.

As Lowell Kalapa of the Tax Foundation Hawaii puts it, why should the taxpayers pay for another government initiative?

http://www.hawaiireporter.com/story.aspx?4e5da688-eff9-40d8-a654-ef4009db4941

A better solution would be a joint public/private partnership. The state could give a tax break or cheap lease on land to alternate energy start up companies, and let these entrepreneurs take on the financial risk and rewards. That way, the state has provided private enterprise to develop, provide jobs and lower our energy dependency.

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