To judge by the testimony submitted, Senate Bill 1345, calling for holders of leases of state lands to be compensated if any acreage is withdrawn, was one of the less controversial measures taken up by the 2009 Legislature. Only the Department of Land and Natural Resources voiced opposition to the bill in hearings by several committees of the House and Senate. All the other testimony \u2013 all of it from ranchers and cattlemen\u2019s groups \u2013 was strongly in support.<\/p>\n
\tYet once the bill was sent to Governor Linda Lingle, SB 1345 suddenly generated fierce interest among environmental and conservation groups, who worry it could set a bad precedent and, what\u2019s more, undermine the state\u2019s ability to exercise responsible stewardship over public lands.<\/p>\n
\tThe bill calls for the state to compensate lessees for the \u201closs of reasonably anticipated income associated with the withdrawn leased land,\u201d to reimburse lessees \u201cfor any insurance costs associated with the withdrawn\u201d land, and, at the lessee\u2019s request, to extend the lease for \u201cnot more than the number of years remaining in the original lease.\u201d<\/p>\n
\tWhat prompted the bill was the dissatisfaction of four ranchers with terms under which conservation easements were placed over some 6,500 acres of high-altitude Mauna Kea lands that had been included in their leases. The easements are called for in a 1999 agreement involving state and federal agencies that sets forth mitigation measures to offset the loss of habitat for the endangered palila (Loxioides bailleui) caused by the rerouting of the cross-island Saddle Road.<\/p>\n
\tThe ranchers are called out specifically in the findings section of the bill: \u201cThe purpose of this Act is to prevent similar situations as the Saddle Road withdrawal from occurring in the future.\u201d<\/p>\n
\tExisting law provides that public land under lease \u201cshall be subject to withdrawal by the board of land and natural resources at any time during the term of the lease with reasonable notice \u2026 for public uses or purposes, including \u2026 easements of all kinds.\u201d When land is withdrawn, lease rents are to be reduced in proportion to the value of the land withdrawn, and lessees are to be paid the \u201cproportionate value\u201d if legally permitted, permanent improvements are damaged or destroyed. If crops are taken, the Land Board is to pay the lessee the value of the crops. (See Section 171-37, paragraph 3, of Hawai`i Revised Statutes, for the full text.)<\/p>\n
\tLaura Thielen, DLNR administrator, was alone in her opposition to the bill. \u201cThe department\u2019s standard lease form already contains a provision requiring the state to lower rents in proportion to the reduction in leased area and compensate the lessee for improvements made unusable in the process of taking leased lands,\u201d she noted. \u201cTo require the department to pay the lessees\u2019 insurance costs and speculative income losses on top of the existing remedies could prove costly to the state. The department characterizes the income losses under the bill as speculative because the bill provides no framework for evaluating such claimed losses. The bill merely states that the department compensate a lessee for \u2018loss of reasonably anticipated income associated with the withdrawn leased land.\u2019 \u2026Further, the bill provides compensation for lost income as opposed to lost profits. A lessee should not be compensated for income without deducting the operating expenses required to generate that income. Finally on the compensation aspect of the bill, there is the potential for costly litigation resulting from a dispute between the state and a lessee over the calculation of losses resulting from the taking.\u201d<\/p>\n
\tThielen also noted that existing law already authorizes the Board of Land and Natural Resources \u201cto grant lease extensions \u2026 and make other modifications to the lease where the partial taking of leased land results in significant economic hardship to the lessee\u2026. The bill would allow the taking of even a small portion of land, for example 100 square feet for a utility easement on a 1,000-acre lease, would automatically qualify the lessee for an extension.\u201d<\/p>\n
\tAs the bill progressed through cross-over and into the House of Representatives, Thielen\u2019s testimony grew more impassioned and her arguments lengthier. On April 6, she told the House Committee on Finance, \u201cAn automatic extension in statute would go against all the provisions for fairness in the leasing of state land in Chapter 171, HRS [Hawai`i Revised Statutes]. When seeking public lands for private use, potential lessees are well aware of the benefits and drawbacks of leasing state lands as opposed to conducting their activities on private lands. First and foremost is the knowledge that those lands are public assets that must serve primarily the interests of the general public and the public trust purposes, and secondarily the needs of a private user.\u201d<\/p>\n
Mitigating Circumstances<\/i><\/b><\/p>\n
To understand the bill\u2019s genesis, it is necessary to go back ten years, to 1999, when the heads of the state departments of Transportation and Land and Natural Resources signed a memorandum of understanding with representatives of five federal agencies (the Federal Highways Administration, or FHWA, the Military Traffic Management Command, the U.S. Army Garrison\u2014Hawai`i, the Fish and Wildlife Service, and the U.S. Geological Survey\u2019s Biological Research Division). The MOU set forth the measures that each agency committed to undertake to mitigate the loss of palila habitat as a result of improvements to the Saddle Road. Part of the mitigation measures included setting aside so-called \u201creplacement lands,\u201d areas that were or could be habitat for palila that could replace land lost to the road project.<\/p>\n
\tThe DLNR committed to two tasks with respect to the replacement lands: first, to assist the FHWA and the state DOT \u201cin compensation negotiations with current lessees of the state replacement lands;\u201d second, to \u201cperform all administrative and right-of-way related work to ensure subdivision and transfer of the [palila critical habitat] replacement land parcels.\u201d<\/p>\n
\tIn 2001, the Legislature passed Act 236, instructing the DLNR to \u201cexpedite discussions\u201d with representatives of the four ranches affected by the designation of the replacement lands: Parker Ranch, K.K. Ranch, S.C. Ranch, and Boteilho Hawai`i Enterprises. The department was to \u201cidentify and investigate all alternatives that will: (1) Fairly compensate the ranchers for losses suffered as a result of the withdrawal of any leased lands; and (2) Avoid providing exceptions to public land leasing policies.\u201d Act 236 also authorized the DLNR to allow lessees to use up to 10 percent of the land remaining in their lease for \u201calternative agricultural use\u201d without increasing lease rent.<\/p>\n
\tWhen it reported on the negotiations in January 2002, the DLNR told the Legislature that the ranchers would be eligible for reimbursement of \u2018actual reasonable expenses for vacation of the property\u201d as provided for in federal law, \u201cas well as any required payment for improvements to the property.\u201d<\/p>\n
\tSome of the ranchers \u201cfelt that compensation by DOT would not sufficiently address the actual damages,\u201d the report stated. Federal law \u201cprimarily views compensation for cattle on a salvage value basis and does not address the loss of future revenue from additional calves,\u201d it noted.<\/p>\n
\tAccording to Dave Gedeon of the Federal Highways Administration, the ranchers could have received compensation for relocation and for improvements under federal law, but their expenses had to be documented. None of the ranchers could satisfy this requirement, he said.<\/p>\n
\tIn an effort to address the ranchers\u2019 concerns, the Land Board approved \u201cin principle\u201d lease extensions if ranchers needed longer lease terms as a condition of financing. \u201cWith these extensions,\u201d the DLNR report stated, \u201cthe lessees will have another 20 years to recoup those revenues lost due to the removal of the palila mitigation areas from grazing.\u201d<\/p>\n
\tAt the time of the report, all four leases were to expire within 10 years. \u201cWith the anticipation that the [Land] Board will grant lease extensions\u2026 the ranchers feel that the impact of the loss of the grazing areas to the palila mitigation requirement has been reasonably mitigated,\u201d the DLNR wrote. \u201cAlthough not what they would consider ideal, they are accepting of the Board\u2019s actions.\u201d<\/p>\n
A Slow Start<\/i><\/b><\/p>\n
In November 2002, a 10-year easement over 6,542 acres of the land under lease to the ranchers on the north and west slopes of Mauna Kea was granted to the state Department of Transportation, for which the DOT paid the DLNR $221,900. Under the original MOU, the state was to pay for installing an ungulate-proof perimeter fence around the replacement lands, but by 2003, it was clear that the state would not have the funds. In January 2004, the MOU was amended, so that now funds for fencing would be covered by the Federal Highways Administration. The USGS would take over responsibility for controlling predators and alien species on the replacement lands. The DLNR would be responsible only for mowing for a period of five years.<\/p>\n
\tIt took years \u2013 and some $2.6 million in federal highway funds \u2013 for the replacement lands to be fenced, however. And in the meantime, the ranchers were free to graze their cattle in the easement areas, rent-free.<\/p>\n
\tSC Ranch, where the easement took 791 acres out of the 7,780 acres originally under lease, was notified in September 2005 that fencing was completed except for final gate installation. Still, the DLNR did not give the ranch \u201cofficial notice\u201d to remove all cattle until July 2006, with a deadline to get the cattle out by August 15, 2006. The annual lease rent for SC Ranch had been reduced by $3,597 to adjust for the easement. Thus, to SC Ranch, the value of the use of state pasture lands for three years and eight months came to roughly $13,200.<\/p>\n
\tBoteilho Hawai`i Enterprises, whose lease covered 7,932.36 acres, saw its pre-easement annual rent of $32,640 drop to $23,470.77, to adjust for the 2,228 acres removed in the easement. It, too, was given an August 15, 2006 deadline for cattle removal from the easement area. The value of 3.67 years of free grazing on the easement lands in the Boteilho lease comes to $33,650.<\/p>\n
\tK.K. Ranch lost 2,123 acres to palila critical habitat, out of the 7,267 acres originally under lease. For that, it saw its annual lease rent reduced from $30,000 to $21,233, giving the easement lands a rental value of $8,767 a year. K.K. Ranch also enjoyed the free use of the easement lands for 3.67 years, for a total value of $32,175.<\/p>\n
\tUnlike the three previous leases, that held by Parker Ranch was on the western slope of Mauna Kea, adjoining existing palila critical habitat. Of the 1,739 acres under lease, 1,399 were placed in the conservation easement. For this lease, Parker Ranch saw its annual rent cut from $9,125 to $1,782. Again, the ranch was given an August 2006 deadline to have all cattle removed from the easement area. The use of 3.67 years of the easement area, rent-free, had a value of $26,949 to Parker Ranch.<\/p>\n
\tBut the freeloading did not come to an end when the last fence was completed. According to DOFAW wildlife biologist David Leonard, \u201cOn Jason Moniz\u2019s ranch [K.K. Ranch], there have been cows on that easement persistently. Some of that was because the fence was damaged by very large storms, fences through the gullies washed out. But there also have been cases where the gates have been left open and cows come in on a pretty consistent basis.\u201d<\/p>\n
The easements are to expire in 2012, when the Saddle Road mitigation agreement ends. What happens then?<\/p>\n
\tAccording to DOFAW biologist Scott Fretz, \u201cit\u2019s always been our intention to set those aside as forest reserves\u2026. We testified against [SB 1345] and also recommended that the governor veto it\u2026 And we\u2019re hoping that she does. \u2026 [SB 1345] would really complicate setting aside the lands, since it would require us to pay an unknown sum to those lessees, which would completely change the cost-benefit scenario for those lands.\u201d<\/p>\n
— Patricia Tummons<\/p>\n
Volume 20, Number 1 July 2009<\/p>\n","protected":false},"excerpt":{"rendered":"
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