Two of the state's leading paving and construction companies expect to begin building a $10 million asphalt storage facility on 4 acres of state land in Kalaeloa early next January to prevent a repeat of the materials shortage that paralyzed the paving industry in Hawai'i last year.

Grace Pacific Corporation and Jas. W. Glover Holding Co. have formed GLP Asphalt LLC to build a facility that will hold well more than half the paving material used in Hawai'i annually.

"The state needs to have a terminal to import asphalt because there's enough business to warrant it," said Bob Creps, senior vice president of administration for Grace Pacific. "There is just no alternative."

The state has already spent about $100 million on repaving jobs over the past three years, and more such projects are scheduled or under way for this year, said state Department of Transportation spokesman Scott Ishikawa. Likewise, the City and County of Honolulu has millions in paving projects in progress this summer and through the end of the year.

The state uses more than 70,000 tons of asphalt a year for everything from paving highways to building parking lots to filling potholes. But on May 12, 2006, Hawai'i's supply of asphalt ran out — halting road projects and causing worker layoffs.

Hawai'i had already experienced shortages in the supply for two years before that. But in December 2005, Chevron Hawaii — which previously had produced about half the state's paving material — pulled the plug on its asphalt operation. That left Tesoro as the state's only producer.

Then, the asphalt supply was drained by repairs to road damage caused by torrential rains in February and March 2006. Tesoro spent upward of $1 million to upgrade its liquid asphalt storage capacity, only to have a storage tank fire on June 13 halt operations four days after the company had resumed production.

Still, the company managed to complete the storage upgrade by the end of June and begin production again in July.

Creps credits Tesoro with doing a good job to restore the supply since last year's shortage.

"But we can't get a 25-year supply agreement with them," he said. "It's not reasonable for them to entertain that, either. But that's what we need as an asphalt paver."

Having the storage facility will allow the company to buy asphalt from Tesoro as well as import it from other suppliers around the world, Creps said.

"Whether as a backup or an alternate facility, or as the primary way that we do (business), it needs to be within our control," he said.

Creps said the company had completed an environmental assessment, and a finding of no significant impact was accepted. He said the company still needs to get building and grading permits, negotiate a lease with the state, and obtain a special management area permit with the City Council.

Dick Levins, project manager for the facility, said the 4.4-acre site will house two 25,000-ton storage tanks, two smaller 5,000-gallon pumping tanks, as well as an office building.

If all goes according to plans the facility could be in operation by October 2008.

Levins said it's doubtful that Hawai'i will ever have more than one asphalt refiner again. The paving material is made from heavy crude oil that, when heated and mixed with crushed rock, known as aggregate, can be used to build roads.

"But fewer and fewer refineries are making asphalt because the crudes needed to make it are very heavy, high-sulfur crudes," he said. "So, the American refineries don't like to mess with that stuff because they can get better yield on gas and diesel using lighter crudes."

While there won't be as many refineries making asphalt, those that do will specialize in producing a higher quality product, he said.

Reach Will Hoover at whoover@honoluluadvertiser.com.