In 1992, Landis Ignacio wrote to the Department of Land and Natural Resources, asking if it would give his company, Sunkiss Shrimp Co., Ltd., a long-term lease on a five-acre parcel that his company occupied under a short-term revocable permit.
“Sunkiss has been awarded two grants, one by the DBEDT and the other by the state Legislature,” Ignacio wrote. The facilities it was planning to build would make “the first commercial round pond farm in the state.” (The two grants were for $15,000 each — one the result of a legislative proviso, the other a grant from the state Community Based Economic Development Program.)
The Land Board approved the lease in 1994. At the time, Ignacio again indicated that he intended the operation to be commercial, telling a reporter for the Honolulu Advertiser that the technology he would employ could produce 40,000 pounds of shrimp per acre each year, in contrast to the 6,000 to 10,000 pounds a year produced on an acre by conventional means. The lease issued by the Land Board also indicates that the Land Board expected shrimp raised at the site to be sold; the state is to receive $800 annual base rent or a 3 percent share of the profits, whichever amount is greater.
For the first two years of the lease, Sunkiss reported no sales at all, so the state received just $1,600 total rent for that period. For the third year of operation (August 1, 1996 through July 31, 1997), Sunkiss reported sales of $33,423,which translated to rent of $1,002. (This was only paid after the state wrote Sunkiss in February 1998, reminding the company of the need to submit a statement of gross receipts.)
Assignment
The lease provides that in the event that 20 percent or more of the company is transferred, the Department of Land and Natural Resources is to be notified and is to participate in any “sandwich” profit deriving from the assignment of lease.
In February 1997, CEATECH USA paid off the balance of two loans, totaling $130,000, that Sunkiss had obtained from the state Department of Agriculture. At that time or shortly thereafter, Sunkiss was absorbed into CEATECH. Since that time, however, the state has received no formal notice of the sale of Sunkiss or its assets.
When questioned on this, neither Ernie Diaz, CEATECH’s senior vice president and general manager for operations, nor Paul Bienfang, senior vice president for environmental compliance and technology, was aware of the lease requirement for notification of the DLNR.
Change of Use?
According to Diaz of CEATECH, the four Sunkiss ponds are to produce broodstock for CEATECH’s operations and will not produce shrimp for the market. With CEATECH owning Sunkiss, it is unlikely that Sunkiss will receive as much for the shrimp as if it sold them in an arms-length transaction. That means that the state will probably not be receiving as much rent as it anticipated when the lease rent was established.
But Diaz laughed at the idea that the Sunkiss farm was large enough to produce shrimp for the retail or wholesale market. “Four quarter-acre ponds are not commercially viable,” he told Environment Hawai`i in a telephone interview.
Diaz’ statement that the Sunkiss farm could never have been commercially viable surprised John Corbin, administrator of the state Aquaculture Development Program. According to Corbin, the technology employed by Sunkiss should allow for enough production to make the enterprise profitable. If the ponds were to produce larger broodstock shrimp, the residence time for the animals might be longer, resulting in fewer sales over a year’s time. However, Corbin noted, broodstock values are higher than those for shrimp sold for food use.
— Teresa Dawson
Volume 8, Number 12 June 1998
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