Hawai'i's first planned ethanol production facility has run into more delays and now won't open until mid-2009 or later.

That would be at least two years after the state began requiring most gasoline sold statewide to contain 10 percent ethanol.

Kauai Ethanol had planned to break ground on a planned 12 million-gallon-capacity facility early this year, but permitting delays and cost concerns have pushed the start of construction back until at least the first quarter of next year. The plant, now estimated to cost $50 million, could open 14 to 18 months after groundbreaking, said William Maloney, president of project developer Pacific Quest Energy LLC.

Part of the delay results from cost-cutting engineering changes necessitated by falling ethanol prices.

"We've had to face the reality that ethanol prices are very low, but we don't think that's going to impede our ability to go forward at this point," Maloney said yesterday.

The facility's planned cost has risen from $35 million to $50 million.

Meanwhile, ethanol prices have plunged from a peak of $4 a gallon in June 2006 to $1.70 a gallon yesterday, according to Bloomberg News Service.

Ethanol is an alternative fuel that can be produced locally from sugar cane or one of its byproducts.

The planned plant at Kaumakani, which is about four miles west of Hanapepe, would produce about 30 percent of what is needed to satisfy demand for ethanol created by a state mandate that took effect in April 2006.

That mandate, which oil companies contend makes gasoline more expensive, is supposed to reduce Hawai'i's dependence on imported oil, expand local sugar cane production, generate more than $100 million of new investment in manufacturing plants, and create nearly 700 direct and indirect jobs, according to state estimates.

However, no local ethanol plants have broken ground yet, and questions also remain over whether Hawai'i can even grow the massive amount of crops needed to satisfy demands for the alternative fuel.

Lacking a local ethanol source, oil companies have been importing the grain-based fuel from countries such as El Salvador. Through May, the state imported 1.4 million barrels, or 58.8 million gallons, of ethanol, according to the U.S. Energy Information Administration.

Reach Sean Hao at shao@honoluluadvertiser.com.