Tradewinds Partners With Energy Firm,
\nNegotiates New Timber License Terms
\n<\/b><\/p>\n
\u201cMy question for the last year has been: Do we have the right project?\u201d<\/p>\n
With that remark, Tim Johns of the state Board of Land and Natural Resources voiced his concerns over whether the timber com pany Tradewinds, LLC, will be able to carry out its plans to log state land on the Big Island and process the timber at a veneer mill\/energy generation plant that is also a part of the Tradewinds project.<\/p>\n
Johns made the remarks at the August 12 meeting of the Land Board, when Tradewinds was seeking board approval of yet another extension of the deadline to raise start-up capital for Phase I of its business plan.<\/p>\n
On Tradewinds\u2019 inability to secure $1 million in Phase I funding, Johns, an at-large Land Board member, said, \u201cThe market has been voting with its feet. We either have the wrong project or the wrong people.\u201d Al though $1 million is a lot of money, it\u2019s no more than a house costs in many parts of Hawai\u2018i, \u201ctwo on the Big Island,\u201d he said.<\/p>\n
Tradewinds, based in Washington state, has struggled to meet the many deadlines that have been set and reset since the Land Board granted it a timber land license in 2001. Most recently, it was to have secured legally bind ing commitments of at least $1 million in Phase I financing by July 1 of this year.<\/p>\n
Instead, some time past the deadline, Tradewinds submitted to the Department of Land and Natural Resources\u2019 Division of Forestry and Wildlife a non-binding letter of intent from Rockland Capital Energy Invest ments, LLC (RCEI), a young Delaware-based company, to contribute $700,000 to $1.3 million in start-up capital.<\/p>\n
That contribution, however, was subject to several conditions, including Land Board approval of several license amendments, RCEI investor and board approval, and the comple tion of RCEI\u2019s due diligence and equity agree ments with Tradewinds\u2019 other investors.<\/p>\n
On August 12, DOFAW recommended that the Land Board find Tradewinds in default of its license to harvest eucalyptus and other planted trees from about 9,000 acres of land in Waiakea, south of Hilo. DOFAW administrator Paul Conry wrote in a report to the board, \u201cThe LOI [letter of intent] does not represent a binding commitment for Phase 1 funding. Furthermore, the proposed criteria for closing of the Phase 1 equity agreements\u2026is contingent upon too many factors other than mere [Land] Board ap proval.\u201d<\/p>\n
Conry took issue with the license amend ments Tradewinds needed to get Rockland\u2019s money. Tradewinds proposed that the Land Board: 1) extend the deadline to raise con struction funding from October 31, 2005 to October 31, 2006 or April 30, 2007, depend ing on how Tradewinds fared in its permit ting process; 2) cancel all other deadlines in the license; 3) change the home base of Tradewinds from Washington to Delaware; and 4) approve an extension of the fixed pricing under the license from 2011 to 2016.<\/p>\n
Conry noted that Tradewinds has already received numerous deadline extensions, and that deadlines were necessary for his division to monitor the project\u2019s progress. He ex pressed concern that under the letter of intent between Rockland and Tradewinds, the Dela ware company, which has no experience in forestry, would control Tradewinds in roughly one year. Finally, with regard to the pricing extension, Conry said that approving this would not be in the state\u2019s best interest, since the state had set a low pricing schedule in 2001 to get Tradewinds to commit to replanting harvested areas.<\/p>\n
\u201cThe stumpage value of timber resources locally and internationally has risen during the last four years while the state has waited for TWto perform,\u201d Conry wrote. \u201cAccording to the original TLL [timber land license] terms, the TW mill was to have been completed no later than calendar year 2005. Through recent correspondence, TW has indicated that the earliest their mill can now be completed is November 2008 \u2013 a minimum delay of three years. Despite the low stumpage values stipu lated in the TLL, the department expects to obtain more than $550,000 in revenue annu ally. The department should not be penalized for the inability of TW to perform by subsidiz ing their start-up efforts further.\u201d<\/p>\n
Despite its false starts, Tradewinds gar nered letters of support from the Hawai\u2018i Forest Industry Association, Hawai\u2018i County Council member (and former Land Board member) Fred Holschuh, agribusiness com pany Agro Resources, Inc., and state Sen. Lorraine Inouye. HELCO\u2019s president Warren Lee also submitted testimony indicating his company\u2019s willingness to work with biomass power developers.<\/p>\n
Kamehameha Schools\u2019 Peter Simmons also supported Tradewinds. He said that the es tate had spent $100,000 rebuilding the company\u2019s financial plan and was planning to contribute to Phase II\/construction funding, which is estimated to require about $15 mil lion. (In addition to logging state land, Tradewinds also plans to harvest timber from land owned by Kamehameha Schools.)<\/p>\n
Tradewinds president \u201cDon Bryan is hon est and has an amazing amount of grit,\u201d Simmons told the Land Board. \u201cHe\u2019s also very, very smart about this industry\u2026 He\u2019s really an asset to us.\u201d<\/p>\n
Bryan added that the birth of Hawai\u2018i\u2019s forestry industry \u201cis upon us,\u201d and his com pany was \u201cready to go.\u201d Bryan said Tradewinds has already spent $1.8 million in time and money on the Waiakea project, and stressed that \u201cit is not a light matter\u201d for the state to abandon Tradewinds just to see if other entities are interested in logging the state\u2019s timber management areas.<\/p>\n
Kona resident Jim Quinn, a former presi dent and CEO of a mainland veneer company, expressed doubts that Hawai\u2018i was on the verge of developing a new industry. Quinn explained to the Land Board that eucalyptus, which makes up most of the growth in the Waiakea Timber Management Area, is good mainly for things like flooring, fixtures, fuels, and furnishings \u2013 not veneer, which is what Tradewinds is focused on making.<\/p>\n
\u201c[Eucalyptus] is a narrow resource and a narrow market. We\u2019re not a commodity mar ket and veneer is a commodity product,\u201d Quinn said.<\/p>\n
Maui board member Ted Yamamura also noted that Tradewinds won\u2019t complete con struction until April 2009, if the company is required to do an environmental impact state ment for the co-generation plant, something that both Bryan and the board say will likely be required.<\/p>\n
Instead of approving DOFAW\u2019s recom mendation to find Tradewinds in default, the Land Board voted to give the company an other six weeks or so \u2013 until the board\u2019s September 23 meeting in Kona \u2013 to negotiate deadlines, possible penalties, and pricing with DOFAW. (Under the current deadlines, Tradewinds was to have submitted all of its 17 permit applications by September 1, some thing Scott Harlan, chief operating officer of Rockland, told the board was not going to happen.)<\/p>\n
\u201cThink pretty hard about renegotiating pricing,\u201d Johns told Conry, referring to con cerns that Tradewinds has been able to lock up the resource \u2013 for free \u2013 for four years. \u201cIf that\u2019s something the financing guys can\u2019t live with, then we need to know that.\u201d<\/p>\n
\u201cI\u2019d like somebody to go to the ocean. Mud doesn\u2019t stay in the ocean. Local guys fish there. If the reef were damaged, the fish would not be there. The limu would be dead\u2026 Go for a swim. Look how clear the water is,\u201d says James Pflueger of allegations \u2013 and a recent finding by the Land Board \u2013 that a 2001 mudslide that originated from property in Pila\u2018a, Kaua\u2018i, owned by a company he man ages, damaged a portion of the reef at Pila\u2018a Bay.<\/p>\n
Pflueger, who manages Pila\u2018a 400, LLC and whose family once owned a great deal of land in Pila\u2018a, says his reef expert Ricky Grigg, emeritus professor of oceanography at the University of Hawai\u2018i, and others who know the area say the mudslide was insignificant compared to the runoff during the sugar plan tation days.<\/p>\n
Like Pflueger, Pila\u2018a 400\u2019s attorneys dispute recent Land Board findings regarding the area and scope of damage to Pila\u2018a Bay resulting from the 2001 mudslide, and have filed an appeal of the Board\u2019s June 30 decision to fine the company $4 million for damages to state land. The appeal was filed in Fifth Circuit Court on July 27.<\/p>\n
In a nutshell, the appeal claims that the Land Board\u2019s decision violates the company\u2019s constitutional and due process rights; exceeds the Land Board\u2019s authority and jurisdiction; was based on unlawful procedure; was arbi trary, capricious, or an abuse of discretion; and was simply wrong in view of the evidence presented during the contested case hearing. The DLNR is also named as an appellee.<\/p>\n
The appeal grows out of a Land Board contested case that began in 2003, revolving around damages to marine resources at Pila\u2018a Bay caused by the November 2001 mudslide, which had been linked to illegal grading on Pila\u2018a 400\u2019s property. These marine resources, which belong to the state, are in the strictly regulated Conservation District.<\/p>\n
Last December, Michael Gibson, hearing officer in the contested case, recommended a $2.8 million fine, which he proposed to be held in trust to remediate property belonging to Pila\u2018a 400, and not that belonging to the state. On June 30, the Land Board raised the fine to more than $4 million and ordered that it be deposited into a state special fund, which is where all other DLNR fines and lease rents are placed.<\/p>\n
By July 21, Pila\u2018a 400 had still not paid the fine, and the state of Hawai\u2018i filed a complaint in Fifth Circuit Court against Pila\u2018a 400 seeking payment of the $4,023,997 fine, as well as any pre-judgment interest.<\/p>\n
Days later, Pila\u2018a 400\u2019s attorneys Wesley Ching, Kathleen Douglas, and Colleen Hanabusa (who also is a state senator representing the Wai\u2018anae, O\u2018ahu area) filed their appeal, which disputes the state\u2019s assessment of damage as well as the state\u2019s ability to calculate fines for damages without rules. Both arguments were made and rejected during the contested case.<\/p>\n
Some of their other arguments:<\/p>\n
The appeal also states, \u201cany external political pressure, either from the Legislature or the executive branch, on the BLNR in its perfor mance of its judicial function is a violation of Appellant Pila\u2018a 400\u2019s right to procedural due process and invalidates the BLNR\u2019s Decision and Order.\u201d<\/p>\n
Although the state had not responded to the appeal by press time, deputy attorneys general representing the DLNR, Sonia Faust and Bill Wyhoff, did address most, if not all, of the arguments in their contested case filings.<\/p>\n
In one filing, they state that Pila\u2018a 400\u2019s argument that the DLNR and Land Board lacked jurisdiction over land use violations outside the Conservation District \u201creflects a fundamental misunderstanding of these proceedings\u2026The undisputed facts are that on November 26, 2001, thousands of cubic yards of mud poured down from Pila\u2018a 400\u2019s illegally and improperly graded property and altered land into and onto State-owned conservation district land.\u201d<\/p>\n
With regard to Pila\u2018a 400\u2019s accusation that the state slipped a marine construction violation into the contested case proceedings without proper notice, the state\u2019s attorneys argued that the DLNR does not have to quote every chapter or rule possibly related to the case for Pila\u2018a 400 to have proper notice. They also noted that hearing officer Gibson did not base his recommendations solely on \u201cmarine construction\u201d.<\/p>\n
And responding to Pila\u2018a 400\u2019s claim that it is not responsible for violations that occurred before it owned the property, Faust and Wynhoff noted that during the contested case, Pila\u2018a 400 filed a motion seeking to remove its predecessors Pflueger and Pflueger Properties as liable parties. Its motion stated, \u201cAll actions taken by Mr. Pflueger on the Pila\u2018a property were performed under his authority to act as manager\u2026As a matter of law, Pila\u2018a 400, LLC is the sole responsible party in this action.\u201d And because the DLNR did not op pose the motion, Pflueger and Pflueger Prop erties were dismissed as parties.<\/p>\n
\u201cIt is grossly unfair and improper for Pila\u2018a 400 to now claim it is not responsible after its motion was granted based on exactly the opposite claim,\u201d Faust and Wynhoff wrote.<\/p>\n
When sugar plantations across the state began shutting down one by one more than a decade ago, windward farmers, native Hawaiians and environmentalists began calling for the return of waters, diverted by the plantations for more than a century, to their watersheds and streams of origin.<\/p>\n
(Windward interests have won back some of the water diverted by O\u2018ahu\u2019s Waiahole ditch, and on Maui, with its extensive East Maui Irrigation diversion system, efforts to do the same are ongoing.)<\/p>\n
So when the DLNR\u2019s Land Division rec ommended on July 22 that the Land Board simply hand off management of thousands of acres and most of the East Kaua\u2018i Irrigation System to the Agribusiness Development Corporation, several members of the environ mental and native Hawaiian communities were taken aback.<\/p>\n
The Land Board ultimately voted to defer the proposed set-aside, but not before a num ber of people indicated that they would re quest a contested case hearing if the transfer were approved without significant amend ments.<\/p>\n
The ADC currently operates the Waiahole ditch system on O\u2018ahu, and manages thou sands of acres in Kekaha on the west side of Kaua\u2018i, including an old sugarcane irrigation system there. The ADC is a state entity, but by statute its lands are not considered public lands. As such, what it does with those lands is generally not scrutinized as closely as what the Land Board does with lands under its jurisdic tion. Also, unlike the Land Board, which is tasked with protecting the state\u2019s natural re sources, the ADC\u2019s main objective is to pro mote agribusiness.<\/p>\n
At the July meeting, Kaua\u2018i resident Carol Wilcox expressed her concern that transfer ring the Kealia, Anahola and Hanalei por tions of the ditch system, which are not currently being used for agriculture, would be a \u201cmisuse of the intent of the ADC.\u201d She added that any allocation of water needed to be coordinated with the state Commission on Water Resource Management.<\/p>\n
Like Wilcox, House Rep. Mina Morita, representing the North Shore of Kaua\u2018i, ex pressed concerns about how the transfer to ADC would affect water allocations, which are the jurisdiction of the Water Commission and the Land Board.<\/p>\n
In written testimony she noted, \u201cWith the demise of Lihu\u2018e Plantation, much of the system, especially the parts of the system which affect the Hanalei, Anahola and Kealia watersheds, have been abandoned for several decades.\u201d She asked that the set aside include only those parts of the system currently in use by the East Kaua\u2018i Water Users Cooperative and the Kaua\u2018i Island Utility Cooperative. (Co-op president Jerry Ornellas told the Land Board that his members don\u2019t use water from Kealia or Anahola.)<\/p>\n
Currently 15 farmers, ranchers and a church have revocable permits covering roughly 5,484 of the 6,766 acres proposed for the set-aside. All belong to the water users co-op, which has a water permit from the Land Board and manages those por tions of the East Kaua\u2018i Water System that it uses.<\/p>\n
The Kaua\u2018i Island Utility Cooperative has a revocable permit for water as well, but is seeking a 65-year lease from the Land Board for water emanating from the system\u2019s \u201cBlue Hole\u201d diversion to power its two hydroelectric plants.<\/p>\n
While the water users coop supports the set-aside to ADC, seeing it as a means of assuring cheap water and low rent, the utility, which is currently involved in a contested case over its water lease with the Office of Hawaiian Affairs and Life of the Land, would rather have any action on the set-aside postponed until the contested case is resolved.<\/p>\n
\u201cKIUC is concerned that the issuance of the water lease may not be completed prior to the proposed transfer to ADC in March 2006. KIUC does not want to start over with the application process that has already taken several years to get to this stage of processing,\u201d KIUCvice president Gary Peers wrote in a July 7 letter to the Land Division.<\/p>\n
Office of Hawaiian Affairs administrator Clyde Namu\u2018o also wanted the DLNR to postpone the set-aside, at least until the Blue Hole contested case was resolved. Namu\u2018o noted in written testimony that, \u201cTransfer ring management of stream diversions on the main watersheds of Kaua\u2018i \u2013 from Wailua to Hanalei \u2013 from a protective state agency to an \u2018aggressive and dynamic agribusiness devel opment program\u2019 [ADC\u2019s purpose as stated in Hawai\u2018i Revised Statutes] should, and does, raise concerns.\u201d Like Morita, Namu\u2018o said the proposed set aside was too broad, given that only portions of the land and ditch are currently in use.<\/p>\n
At the July 22 Land Board meeting, OHApolicy analyst Jonathan Scheuer added that he did not feel the DLNR had a good understanding of all of the resources on its Kalepa lands and what the diversion\u2019s ef fects were on streams. \u201cThe ADC doesn\u2019t have the Division of Aquatic Resources\u201d to assess stream resources, he said. (The Divi sion of Aquatic Resources, a branch of the Department of Land and Natural Re sources, takes the lead on managing streams within the Land Board\u2019s jurisdiction.) \u201cThere is more involved than agricultural land here.\u201d Scheuer also noted that the DLNR does a better job of providing OHA with its legally mandated 20 percent of ceded land revenue than the ADChas done.<\/p>\n
Maka\u2018ala Ka\u2018aumoana, executive direc tor of the Hanalei Watershed Hui, asked in written testimony that the Land Board exclude from ADC\u2019s application those parts of the ditch system that divert water from the Hanalei River and its tributaries. If the board chose not to do so, she wrote, the Hanalei Watershed Hui would request a contested case hearing. Morita and Wilcox also promised to request a contested case hearing if the board chose to approve its staff recommendations.<\/p>\n
Because ADC director Alfredo Lee could not address any of these concerns (he did not attend the July 22 Land Board meeting as he was reportedly on vacation), the Land Board voted to defer the set aside.<\/p>\n
— Teresa Dawson<\/p>\n
Volume 16, Number 3 September 2005<\/p>\n","protected":false},"excerpt":{"rendered":"
Tradewinds Partners With Energy Firm, Negotiates New Timber License Terms “My question for the last year has been: Do we have the right project?” With that remark, Tim Johns of the state Board of Land and Natural Resources voiced his … Continued<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13,340,17,119,28],"tags":[],"class_list":["post-1546","post","type-post","status-publish","format-standard","hentry","category-board-talk","category-forestry","category-marine","category-september-2005","category-water"],"_links":{"self":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts\/1546","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1546"}],"version-history":[{"count":0,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=\/wp\/v2\/posts\/1546\/revisions"}],"wp:attachment":[{"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1546"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1546"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/environment-hawaii.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1546"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}