Board Talk

[b]Tradewinds Hangs Onto Timber License,
Faces New Deadlines for Capital, Construction[/b]

When the Land Board voted in June 2001 to grant Tradewinds Forest Products, LLC, a license to log 8,875 acres in the state’s Waiakea Timber Management Area in South Hilo, no one voiced concerns over the timetable. The license called for construction of a veneer and plywood mill to be “substan tially completed” by December 31, 2003, and for harvesting of the state’s timber plantation to begin within 60 days of completion of the mill.

For various reasons (including, according to the company’s major shareholder, a depressed market following the September 11 terrorist attacks), that never happened.

Unwilling to launch the search for a new licensee, the Land Board adopted new dead lines last January offered up by Don Bryan, Tradewinds’ main shareholder, manager and board chairman. The new timetable called for Bryan to secure $1 million in startup funding by March 31, apply for state and federal permits by September 1, secure $14 million in construction funding by October 31, and begin mill con struction before July 2006, to be substantially completed by January 2007, and fully com pleted by January 2008.

By the time the first of the new deadlines rolled around, according to a Division of For estry and Wildlife report, Tradewinds had obtained a letter of intent to commit $650,000, $60,000 in cash, an unwritten promise of $350,000, and another letter of intent for $400,000 that was subject to the Land Board approving changes in the company’s owner ship structure and amending the license by adding an approval process for future owner ship changes.

While Bryan argued that these actions ful filled the Land Board’s requirements, Land Board member Ted Yamamura was expecting more.

“Letters of intent are just words,” he said, adding that he was concerned that Tradewinds wouldn’t be able to raise the $14 million needed for construction “if they can’t even meet startup funding goals.”

Bryan said that once the Land Board ap proved the proposed changes regarding the company’s ownership, his investors would sign subscription agreements, which he said were more legally binding than letters of intent.

The agreements don’t call for the money to be transferred immediately, Bryan said, ex plaining that his company hasn’t already banked the promised money because it doesn’t have a reason to spend all of it right now.

“It’s not prudent to take that money before we’re ready for it,” he said.

But Land Board member Tim Johns ques tioned whether the subscription agreements were enough, and also voiced concerns about proposed changes in ownership.

In November 2004, Bryan bought out his original partners, acquiring a 93 percent inter est in the company. At the Land Board’s May meeting, DOFAW recommended approving the assignment of 34 percent ownership inter est to startup investors Al Jubitz, Michael Clark, Michael Haglund, Gayle Veber, Bob Hansen and Jack Shifferdecker. DOFAW’s report notes that Tradewinds is anticipating that once construction funds are acquired, Bryan will own 13 percent of the company, with 70 percent being held by five to ten investors.

“We’re going to turn control over develop ing this state asset without knowing these people,” Johns told Bryan, who acknowl edged it was a legitimate concern.

But despite the concerns about ownership and financing, the Land Board unanimously approved DOFAW ’s recommendation to con tinue working with Tradewinds and made changes in the license regarding the company’s ownership.

Before the final vote, however, Yamamura told Bryan, “From now on, when we speak of money, it should not be letters of intent or verbal commitments.” Johns added that the subscription agreements must be submitted to the DLNR by June 1.

Bryan told Environment Hawai‘i that since the Land Board’s vote, everything is moving along as planned. Although Tradewinds has not yet selected a mill site (three sites are under consideration), the company anticipates that 17 permits will be required to get its operation up and running. Bryan told the Land Board in May that it would take a full year to obtain all of the necessary approvals, maybe more.

Because the mill will also be a co-generation plant, where wood will be burned to generate electricity, an environmental assessment or environmental impact statement will be re quired.

“To meet your deadlines, we need to do an EA, not an EIS,” Bryan told the board. Big Island board member Gerald DeMello ex pressed skepticism that Bryan could get by with an EA.

***
Hawi Man Faces Fine
For Coastal Bulldozing

Ahmad Mohammadi of E Commerce Enterprise Corporation, owner of approximately 21.5 acres of coastal land in Hawi on the Big Island, was recently slapped with the largest fine ever levied by the County of Hawai‘i — $400,000 — for violating the county grading and Special Management Area rules.

Mohammadi bulldozed a 1,500-ft. road near the shoreline, two parking areas, and another shorter road on the property with out grading or SMA permits. Most of the work occurred in the Agricultural District, but grading also extended onto about a half acre of Conservation District land near the coast.

In Waipiele Gulch, Mohammadi had graded, grubbed, and excavated a drainage channel that led to the sea. In letters to the DLNR, Mohammadi stated he did not do any grading, but only removed “rubbish deposited by the unusually severe storms.” As for the channel, a DLNR Office of Con servation and Coastal Lands report states Mohammadi claimed it drained wastewater from a nearby crawfish farm for years and that he periodically cleaned it.

Last September, the OCCL tried to get Mohammadi to submit a Best Management Practices Plan for the area. He did not sub mit one until last February.

For his delay, the OCCL recommended on May 13 that the Land Board fine Mohammadi $2,000. OCCL also recom mended $2,000 fines for grubbing and grad ing, culvert construction, and failure to re move a prior violation (a fence and gate), as well as $2,500 in administrative costs.

OCCL asked that Mohammadi submit an after-the-fact Conservation District Use Application for the fence and gate within 180 days, and that he implement the BMP plan and remediate the property within 45 days of the Land Board’s action. If the Land Board chair is not satisfied with the remediation, Mohammadi will be fined $2,000 a day until the chair is satisfied.

The Land Board approved OCCL’s rec ommendations. Mohammadi’s attorney Steve Lim told the board remediation would be completed this month.

***
Board Approves Refuge
For Northwest Islands

Frankly, I never believed the state had the guts to do this,” Earthjustice attorney Paul Achitoff told the Land Board on May 13. At its May meeting, the Land Board voted unanimously to approve rules establishing the “Northwestern Hawaiian Islands Marine Ref uge, which covers waters from shore out to three miles. Under the new rules, except for things like “innocent passage” and “interstate commerce and activities related to national defense or enforcement,” no one may enter state waters surrounding the NWHI without a permit from the Land Board.

Permits will only be granted for “scientific or education purposes, non-extractive pur poses undertaken to further the knowledge of resources or which provides for enhanced resources protection or resource manage ment,” and Native Hawaiian subsistence, tra ditional and customary practices “consistent with the long-term preservation of the refuge resources,” according to a DLNR Division of Aquatic Resources report.

While the Western Pacific Fishery Man agement Council and a few fishermen deliv ered opposing testimony, the board’s vote was met with applause from the majority of testifiers crammed into the Kalanimoku Building’s conference room.

Achitoff said that existing laws have not been adequate to protect the islands’ marine life, noting that under the Fishery Manage ment Council’s stewardship of the federal waters surrounding the islands, the NWHI lobster fishery was destroyed in one decade.

The council’s chairman, Roy Morioka, testified that there are already layers of federal protection in the NWHI and expressed his concern that the state’s new rules will harm the NWHI bottomfish fishery, “a proven sustain able fishery.”

While the majority of people testifying supported the rules, a few suggested that they be amended to:

• Require permittees to report back to the DLNR on what they saw and did;
• Add a bonding or insurance requirement to address potential boat groundings;
• Require that a committee of ecologists, marine sanctuary managers, and the state re view all permits before they were issued;
• Extend the review period for permits to one month;
• Eliminate all references to the current maps because they are wrong and are in the process of being changed.

In the end, the Land Board approved the rules with a few amendments. At-large member Tim Johns, who is also a member of the North western Hawaiian Islands’ Coral Reef Ecosys tem Reserve Advisory Council, asked that be fore any permits are brought to the Board, that the Division of Aquatic Resources brief the Land Board on the permitting process and address concerns expressed by some testifiers about anchoring on live rock.

***
Board Seats May Remain
Vacant Until 2006

Only one of Governor Linda Lingle’s three nominees for the Land Board made it through the Legislative proce ss. Accountant Taryn Schuman will replace O‘ahu Land Board member Kathryn Inouye in July.

The positions left vacant by Ted Yamamura of Maui and Toby Martyn, member at-large, may remain vacant until the next Legislative session, according to a representative of the governor’s office.

Berton Hamamoto and James Lowson, Lingle’s nominees for the posts vacated by Yamamura and Martyn, respectively, were sub jected to harsh questioning by senators during committee hearings on their nominations. Many of the questions probed the nominees’ familiarity, or lack of it, with the issues con fronting the board to which they were being appointed. Following that, Lingle withdrew the nominations.

As of mid-May, Lingle had not announced any interim appointments. Spokesperson Mark Miranda said it is unclear the governor will make any interim appointments for the Land Board or for any other state board. During the last Legislature, interim appointments the gov ernor had made last year were intensely grilled by senators during their confirmation hearings, and this, he said, makes it difficult to enlist people to serve, for free, as interim appointees.

— Teresa Dawson

Volume 15, Number 12 June 2005