PLDC RIP, SPRBs, and SWACs: A Wrap-Up of the 2013 Legislature

When it comes to environmental issues addressed by the 2013 Legislature, repeal of the Public Land Development Corporation grabbed headlines. That agency, established by the Legislature just two short years ago and signed into law as Act 55 of the 2011 session, never was so loved by the public as it was by its creators (chiefly Senators Donovan DelaCruz and Malama Solomon). Following last year’s elections, with both incumbents and challengers hearing an earful from constituents – outraged over the PLDC’s exemption from so many environmental and zoning regulations and angry over its lack of transparency – the agency was shut down.

The closure was effected by Act 38 (House Bill 1133, Senate Draft 2). So unpopular had the agency become that even its original sponsors voted to give it the axe.

The bill’s preamble is probably about as close to an apology as the Legislature has ever come: The exemptions granted to the PLDC, it says, “coupled with the manner in which Act 55 was passed, have led to distrust and uncertainty of the public land development corporation’s intentions and development plans. Despite efforts to allay concerns, many individuals and organizations, particularly environmental and native Hawaiian organizations, have expressed support for legislation to repeal Act 55…. While the optimization of the use of public lands is a meritorious goal … achieving this goal requires a greater respect for existing laws and procedures….” (For more on the manner in which Act 55 moved through the Legislature and its final provisions, see the cover article in the August 2011 issue of Environment Hawai`i.)

But aside from the PLDC’s repeal, the environmental measures passed by the 2013 Legislature, for better or worse, generally flew under the radar. Here are some of those that perhaps should have received more attention than they did:

Seawater air-conditioning has captured the legislators’ collective imagination. Act 238 of the 2013 session authorizes the state to issue up to $40 million in special purpose revenue bonds for a project that says it will cool the Keahole airport and the nearby Natural Energy Laboratory of Hawai`i Authority. Act 129 authorizes up to $200 million in SPRBs for a similar Waikiki project.

SPRBs are not direct grants or loans from the state. Rather, when a company receives permission to issue the bonds – after approval from the state Department of Budget and Finance – buyers are attracted by the fact that they pay no federal income tax on the interest those bonds yield. The bondholders benefit in this manner, so, as a general rule, the companies issuing the bonds get a break on the interest that they have to pay. The full faith and credit of the state is not at risk, but the state is limited in the total amount of SPRBs it may issue. Consequently, approval of SPRBs is one way the Legislature has of providing indirect support to companies that lawmakers think will benefit the state economically, environmentally, or socially.

Testimony in support of the two measures was not plentiful, but it was generally enthusiastic. Jeff Mikulina of the Blue Planet Foundation (formerly director of the Sierra Club, Hawai`i Chapter) praised seawater air-conditioning as a means of achieving substantial reductions in fossil fuel consumption.

Cord Anderson, a partner in Kona SWAC, LLC (the entity proposing to build the Keahole facility) claimed his project would replace 23,000 barrels of oil a year, reduce potable water use by 35 million gallons a year, reduce sewage discharge by 15.4 million gallons a year, and reduce “harmful gas emissions of approximately 11,100 tons/year.”

Anderson, a grandson of politician D.G. “Andy” Anderson, has been involved in several business ventures, including a foreclosed-upon effort to renovate the iconic Ilikai hotel in Waikiki. He has also run afoul of the Board of Land and Natural Resources for the way he has managed state-owned land in the village of Kailua-Kona. Anderson, by the way, is a member of the Honolulu Planning Commission.

In his testimony, Anderson said his plans included “leveraging” unused capacity in an existing 55-inch pipeline at NELHA. There was no testimony from NELHA to indicate whether such capacity exists.

Anderson’s company, he said, is a subsidiary of Kaiuli Energy, whose management team, he said, “is comprised of Hawai`i business leaders with the necessary experience critical to the project’s success.” Among them are Ray Soon, former head of the Department of Hawaiian Homelands, and Darryl Nakamoto, former chief financial officer of the bankrupt alternative-energy company Hoku Corporation. (Hoku, by the way, was also a SPRB beneficiary. As of mid-July, its stock was selling at 1.66 cents a share.)

The lone discouraging word came from Henry Curtis, executive director of Life of the Land. He pointed out that the request by Kona SWAC for as much as $40 million in SPRBs (Senate Bill 1280) “was filed before the company registered” with the Department of Commerce and Consumer Affairs. (It finally registered on February 5 of this year; the DCCA website shows that its sole member is Kaiuli Energy, LLC.)

“Neither company has a working website,” Curtis said in his testimony. “Neither company has any public information about their skill sets, knowledge of SWAC or ability to deliver. In the interest of open government, sunshine, and community participation, we believe their requests for SPRBs are not ripe and should be deferred until the public has had adequate time to evaluate their proposals and to offer meaningful comments to this committee.”

The Waikiki project will save 106,000 barrels of oil a year, according to Nakamoto, identified in his testimony as a partner in Kaiuli Energy. Nakamoto also claimed it would reduce potable water use by 157 million gallons a year and reduce sewage discharge by 69 million gallons a year.

Since 2005, the Legislature has authorized up to $145 million in SPRBs for yet a third seawater air-conditioning project intended to cool downtown Honolulu buildings. Although Honolulu Seawater Air Conditioning, LLC, prepared a state environmental impact statement for the project in 2009, the necessary federal EIS has not been completed. In 2011, a draft federal EIS was panned by the Environmental Protection Agency.

A source at HSWAC told Environment Hawai`i that the company had submitted a revised environmental impact statement to the Army Corps of Engineers “recently… within the last three months.” Earlier this year, a spokeswoman for the company told Pacific Business News that the final EIS would probably be available for public comment in May with a record of decision in July. At that time, start of construction on the $250 million project was anticipated by the year’s end.

Climate change and sea-level rise did not get a lot of legislative attention this year. Two bills, both introduced by Rep. Cynthia Thielen, would have set up a Climate Change Roundtable (HB 460 and HB 1058) but they failed to get so much as a single hearing.

Still, whether they knew it or not, lawmakers did come face-to-face with the issue in House Bill 1388. Its formal title was “relating to the issuance of special purpose revenue bonds to assist a processing enterprise,” but a more appropriate description might be, “helping a company adapt to rising sea levels.”

The bill, which became Act 128 upon the governor’s signature, authorizes the Department of Budget and Finance to issue up to $1.3 million in Special Purpose Revenue Bonds to help Sunrise Capital, Inc., move its shrimp farm operations on Kaua`i to higher ground.

According to testimony from James Sweeney, president of the company, the “slow but relentless” erosion of the coast poses a serious challenge to its operations.

“Over the last year,” Sweeney said in written testimony, “the entire west side shoreline of Kekaha, Kaua`i, has experienced heavy erosion due to unusually high waves. The increased wave erosion has created a potential public safety hazard next to the Kaumuali`i Highway, which has required emergency action by Kaua`i County to shore up the highway to keep the highway from collapsing. The heavy wave erosion, which is threatening the Kaumuali`i Highway embankment, is occurring approximately 100 feet further inland than the oceanside boundary of our hatchery property. The erosion we are experiencing has completely undermined over 150 feet of chain-link security fencing and has completely taken down five, 50-foot tall ironwood trees. The erosion … is currently less than 20 feet from the edge of our packing facility and salt-water well.”

The bonds, he continued, will allow the company to “immediately protect our facility and in the long term, plan for the relocation of the vital infrastructure which will keep our company solvent.”

Usually, if the Chamber of Commerce and the Building Industry Association-Hawai`i support a bill, you’ll find the Sierra Club and the Office of Hawaiian Affairs on the other side of the fence.

But not in the case of Senate Bill 1207, one of the measures in the governor’s package. It may rank as one of the tersest bills heard this year – except for the blank, so-called “short form” bills – but in terms of its potential impact, it could be one of the big contenders. It consists of just one sentence: “Notwithstanding any law to the contrary all work involving submerged lands used for state commercial harbor purposes shall be exempt from any permitting and site plan approval requirements established for lands in a conservation district.”

Now that it has become law, as Act 86 of the 2013 Legislature, the state Department of Transportation is free to ignore any and all Conservation District rules that otherwise would apply to submerged lands. Testifying in favor of the measure was the Department of Transportation and one member of the public (in an email that indicated his support, but gave no reason). Opposed were not just OHA, the Sierra Club, the Chamber, and the BIA-H, but also the Maui Nui Marine Resource Council and other members of the public including one employee of the Department of Land and Natural Resources’ Office of Conservation and Coastal Lands, which administers Conservation District rules. (She was testifying as a private citizen.)

The BIA-H was not against the idea of exempting improvements to existing commercial harbors from Conservation District requirements, since this “will enable the Harbors Division to more efficiently implement needed projects to meet the growing needs of the maritime industry.”

“However,” the BIA-H testimony continued, “the language in the bill does not appear to limit the exemption to ‘existing commercial harbor system,’” but instead applies to “all work involving submerged lands used for state commercial harbor purposes.”

The Chamber of Commerce noted that even with the exemption, the DOT would still be subject to the requirements of the U.S. Army Corps of Engineers, the Environmental Protection Agency, and the Department of Health. “As such,” the Chamber said in its written testimony, “it is unclear … why the Conservation District Use Application process has been singled out by the Department for an exemption.”

Kimberly Tiger Mills, the DLNR employee, testified that the Conservation District Use Application process was already streamlined, requiring a decision be made within 180 days of the application being accepted. “Harbor improvements,” she noted, “are exempt from County SMA requirements, therefore the Conservation District Use Application process may be the only local opportunity in which traditional, cultural, and customary uses may be vetted.”

“For newly designated areas or harbor expansion within the Conservation District, DOT Harbors should not be exempt from the CDUA process,” she continued. “Submerged, unencumbered public trust lands are used for fishing, gathering, canoe paddling, ocean recreation and other activities. I believe there needs to be oversight for sustainable use of the natural resources.”

Passage of the measure was not a slam-dunk. Four senators opposed it on the final vote: Josh Green, Les Ihara, Laura Thielen, and Russell Ruderman. In the House, 13 “no” votes were recorded. Casting them were Mele Carroll, Lauren Cheape, Beth Fukumoto, Kaniela Ing, Aaron Ling Johanson, Chris Lee, Nicole Lowen, Dee Morikawa, Marcus Oshiro, Karl Rhoads, Cynthia Thielen, Gene Ward, and Jessica Wooley.

The third time (at least) is the charm for this bill, which increases the amount of compensation that the state may pay to ranchers on state land when part of the land they lease is removed before the lease term ends. The origin of the measure, which was incarnated this year as Senate Bill 5 and became Act 234, goes back more than a decade to construction of the realigned Saddle Road on the Big Island. To mitigate for the loss of palila habitat, the state withdrew land high on Mauna Kea from several large pasture leases. Under terms of the leases, the land can be withdrawn for any purpose, with the rent being reduced proportionately.

The affected ranchers, however, claimed that they were owed more than a simple reduction in rent. They say they still had to pay taxes and insurance on the withdrawn land, and that they also suffered by having to sell off part of their herds at fire-sale prices. Also, per the “Findings” section of SB 5, “lessees cannot mitigate the long-term, fixed costs associated with operating a ranch in the way they anticipated when the lease was negotiated. Thus, the lessees have experienced financial hardship for an extended period of time that is not sufficiently mitigated by a reduction in their lease rent.”

The new law sets up a system for determining the losses that a lessee experiences (whether they involve crops, trees, or livestock). In the case of livestock, “the [Board of Land and Natural Resources] shall pay to the lessee the difference between the appraised breeding value and the salvage value, including the cost of transportation to a market.” Also, the lessee “shall be entitled to compensation for costs attributable to the diminished use of the leased land.”

Land Board chair William Aila noted in his testimony that the bill, introduced by Clayton Hee, “represents a compromise position between the Legislature and the [DLNR] reached last session, and, as such, the Department has no objection to its reintroduction this session.”

He went on, however, to note that “the concept behind these measures had the potential to impede the state’s flexibility to set-aside portions of state lands for state public purposes. Implementation of this measure will potentially result in the department having to pay additional costs to pasture and agricultural lessees when lands are withdrawn … Additional expenses include appraisal costs to determine value of breeding livestock, paying the difference between appraised value and salvage value of such livestock, and reimbursing lessees for insurance and real property tax expenditures on lands made subject to easements.”

Act 120, Lateral Beach Access: This measure (House Bill 17) limits the amount of sand an individual can take from the beach to pretty much what sticks to their feet and their clothes. It also makes permanent a law passed in 2010 that prevents landowners from obstructing public lateral access along the shoreline and requires the Department of Land and Natural Resources to enforce this.

Act 233, Graywater Use: This measure (SB 454) encourages the use of graywater (from showers, laundry, dishwashing – anything except toilets) for landscaping and gardening purposes. It also requires graywater systems to conform to the state plumbing code.

Act 241, Lipoa Point Acquisition: Honolua Bay and Lipoa Point, on the northwestern coast of Maui, have great scenic and natural resource value. A couple of years ago, the Maui County Council considered putting Lipoa Point into protective zoning. That prompted the owner, Maui Land & Pineapple, to begin to talk of selling it off for development into luxury house lots. The land, the company said, had been pledged as security for workers’ pensions; if it were downzoned, it would lose value – and retired workers might well be thrown onto the public dole, the company argued.

House Bill 1424 called on the Department of Land and Natural Resources to work with the private Hawaiian Islands Land Trust to attempt to negotiate the sale of Lipoa Point so that both the land and the pension fund can be protected. Hundreds of individuals testified in support, as did members of the Maui County Council. The Department of Land and Natural Resources gave qualified support to the measure: “The department supports acquisition,” stated Land Board chair William Aila, “provided that the designated management program has the capacity to manage the property for its cultural and recreational values.”

Act 105, Pesticide Reporting: House Bill 673 began life as a pretty gutsy measure. It would have required the state Department of Agriculture to develop a pesticide-use reporting system and to publish annually a report on pesticide use by geographic area. It would also be required to summarize health complaints from pesticide use, report on results of investigations done by the Department of Health on such complaints (the DOH would also be required to do these investigations), analyze trends in pesticide use, assess the accuracy of reported pesticide information; and provide an accounting of the amount and type of pesticides imported and used in the state. All pesticides except those deemed to be of minimal health risk by the federal government would be included in the reporting system.

Several dozen individuals submitted supportive testimony, criticizing the bill only for its exemption of the “minimal risk” pesticides. But testifying in strong opposition were the Hawai`i Pest Control Association, representing about 80 termite control companies, Alexander & Baldwin and its subsidiary, Hawaiian Commercial & Sugar, the Hawai`i Cattlemen’s Council, the Hawai`i Crop Improvement Association, representing most of the biotech companies, and the Hawai`i Farm Bureau Federation.

The director of the Department of Agriculture, Russell Kokubun, said the bill may have been well intended, but was “unworkable, given present staffing and resources.” He noted that the only state in the union that has a pesticide reporting requirement is California, whose reports are some three years in arrears.

By the time the bill made it out of both chambers, it had been watered down significantly. As Act 105, it requires the DOA to publish on its website “the public information contained in all restricted use pesticide records, reports, or forms submitted to the department,” except those relating to pesticides used “for structural pest control” (not just termite tenting, but also other kinds of fumigation) or which are legitimately withheld from disclosure under the state’s public records law. It also calls for the Legislative Reference Bureau to provide the 2014 Legislature with a report on how other states account for pesticide use.