The state Board of Land and Natural Resources last month unanimously approved a 65-year pipeline easement to Summit Biofuel, LLC. The company plans to use the pipeline to move biofuels from cargo ships at the port of Hilo to a renovated tank farm nearby. The one-time rental payment recommend by the Department of Land and Natural Resources\u2019s Land Division has yet to be determined.<\/p>\n
The pipeline and fuel tanks were used for years by Shell Oil, which completed work on the 10-inch-diameter asphalt cement pipeline and associated heating oil lines in 1963. In 1980, the company assigned its lease to Pauley Petroleum, which stopped paying lease rent to the state for the pipeline easement in 1993. (The asphalt tank site, meanwhile, was leased to Big Island Asphalt, and although it did not pay lease rent to the state, some reports suggest it may have continued to use the pipeline well into the 2000s.)<\/p>\n
In 1998, the Land Board wrote off the unpaid balance of lease rent owed by Pauley Petroleum, now known as Hondo Oil & Gas. A few years later, the extension of the pipeline that ran from Pier 2 to Pier 3 was removed.<\/p>\n
New Beginnings<\/i><\/b><\/p>\n
Two years ago, Summit Biofuel owner Charles Barker III began investigating the possibility of refurbishing the tanks and pipeline to bring biofuels into Hilo. He set up two limited liability companies with the Department of Commerce and Consumer Affairs \u2013 Summit Biofuel, in March 2013, and Hoku Kai Biofuels, in May of that same year. Within a few months, he had begun talking with the state Department of Health about what might be required to bring the facility back into usable condition and in October 2013, Makawao Sugar Limited Partnership gave Hoku Kai Biofuels a deed to the property. Not until the end of December was financing in hand, apparently allowing Hoku Kai to give a mortgage in the amount of $2.3 million to the former owners, representing most of the $2.9 million sales price. Both deed and mortgage were recorded with the state Bureau of Conveyances on January 3, 2014.<\/p>\n
Barker signed the documents on behalf of Hoku Kai, but by April, he was out of the picture. According to a filing made on April 1 with the state Department of Commerce and Consumer Affairs, the three new principals of Hoku Kai Biofuels were Michael Petras, Kevin Gorman, and Hank Correa. The first two are affiliated with NextFuels, a mainland company that, according to its website, \u201chas specialized in the logistics and marketing of biodiesel for over nine years.\u201d Before founding NextFuels, the website states, Petras was with Falck Bioenergy Singapore and developed palm plantations in Southeast Asia. Before that, he was president of Texas-based National Biofuels. Gorman\u2019s career followed a similar trajectory, with a stint at National Biofuels followed by a period at Falck Bioenergy Singapore.<\/p>\n
Correa is a Big Island real estate broker based in Hilo, and, says Barker, his partner in Summit Biofuel. \u201cThere are two parts to Hoku Kai,\u201d he said. \u201cOne is NextFuels, the other is Summit. Hank is a member of Summit with me. He is my part of the company\u2019s voice. NextFuels is more the funding.\u201d<\/p>\n
Who\u2019s On First?<\/i><\/b><\/p>\n
The involvement of NextFuels in the project is mentioned on the company\u2019s website, where it states it has a \u201csphere of influence\u201d in Hawai`i and that it has purchased the fuel tank facility. However, in documents submitted to the state, including the final environmental assessment and the filings of all the Hoku Kai-related companies, NextFuels is not mentioned.<\/p>\n
Yet Barker readily acknowledges that NextFuels is providing much, if not all, the financing for the project, which, he told Environment Hawai`i<\/i>, \u201ctranscended to a higher level of funding than I have the capacity for.\u201d And mention of NextFuels does appear, albeit almost cryptically, in a Phase I Environmental Site Assessment prepared in December 2013 by Environmental Science International. ESI interviewed several parties associated with the project, including Ricardo \u201cRick\u201d Barbati. Barbati is the owner of the building in Hilo that Hoku Biofuels and a host of associated companies use as their headquarters. He described his involvement with the project as \u201cfuture owner \u2013 Summit\/NextFuels merger to acquire property.\u201d<\/p>\n
Still, Barker insisted in a phone interview, \u201cNextFuels is only our funding partner. They\u2019re not Hoku Kai.\u201d<\/p>\n
NextFuels\u2019 deep pockets may have been needed to purchase the tank farm, but the transfer of the property later last year could have have been covered by a charge card. In June, Hoku Kai conveyed the property to yet another entity, Lea Ha Ana `Ole, LLC, for $1,001 (although the mortgage Hoku Kai had given to Makawao Sugar Plantation Limited Partnership still had not been released). Lea Ha Ana `Ole is another limited liability company that Barker established in September 2013.<\/p>\n
Interviewed by Environment Hawai`i<\/i>, Barker insisted that Hoku Kai continued to remain the owner. The tank farm \u201cwasn\u2019t sold in June,\u201d he said. Lea Ha Ana `Ole \u201cis just a holding company, for financial purposes. It [the tank site] is still owned by Hoku Kai.\u201d<\/p>\n
Why was the land transferred at all? he was asked.<\/p>\n
\u201cIt\u2019s just being held in trust until all the formal funding is completed, much like a trustee holds something,\u201d he answered. \u201cIt will revert to Hoku Kai once the funding is in place.\u201d<\/p>\n
Palm Oil?<\/i><\/b><\/p>\n
Given the apparently extensive backgrounds of the NextFuels principals in the establishment and trade in palm oil from Southeast Asia, Barker was asked if palm oil will be the eventual source of biofuel brought into the Hilo harbor.<\/p>\n
His concept, he said, \u201cwas to have some capacity to bring non-fossil fuels in that are less expensive than fossil fuels.\u201d Palm oil, however, \u201cis not a good fuel. A much preferred feedstock is canola, though there\u2019s not a lot available from the U.S. market \u2013 the Jones Act makes it cumbersome to bring in.\u201d<\/p>\n
Canada is the \u201cpreferred source\u201d of canola oil, he said, adding, \u201cWe will make sure any fuel we would supply would be properly sourced \u2013 no rain forest or inappropriate labor practices. We have a world purpose that transcends individual agendas.\u201d<\/p>\n
When asked whether NextFuels would be bringing in palm oil, Barker acknowledged the NextFuels people \u201chave a deciding vote. Yes, it\u2019s one of those things that happens. When you\u2019re faced with having to procure capital, the reality I suppose, of capital structure [is] those that have the money have the loudest voice. I maintain as substantial a presence as I can.\u201d<\/p>\n
A Bio-mess<\/i><\/b><\/p>\n
Barker has been involved in at least one other biofuel project in Hawai`i that, to date, has borne little fruit outside of the courtroom.<\/p>\n
According to a complaint that Barker filed in the U.S. District Court in Honolulu, beginning around 2007, Barker applied to Hawai`i County for permits allowing construction and operation of a wood products facility at the Haina mill, once a part of Hamakua Sugar, near the town of Honoka`a. He states in his complaint that he arranged financing for this in 2008 with a loan of almost $5 million from a Pennsylvania company, Ambit Funding, LLC.<\/p>\n
Less than a year later, Haina Properties, LLC, the company Barker had formed with Big Island logger Robert Barr, was in default, and Ambit foreclosed. Barker evidently believed he had a contract to buy back the mill from Ambit and devised a number of different scenarios, including a biomass energy plant, a company to market and sell stockpiled topsoil left over from plantation days (Kama`aina Earth Products), and, most ambitious of all, a plan to acquire the Hamakua Energy Partners power plant \u2013 if he could arrange nearly a quarter of a billion dollars for that scheme.<\/p>\n
Barker moved forward with the project, getting the county to extend the deadline for performance on the permit and also getting the permit extended to cover the production of \u201cbiomass synthesis gas.\u201d<\/p>\n
In late 2011, the joint venture that Barker had put together with a number of different mainland companies began showing signs of strain, with his partners making payments for various goods and services that Barker felt were unnecessary. What\u2019s more, they did not come up with the financing for the ambitious biomass energy projects that Barker had expected. In February 2012, Barker accused his backers of breach of contract, but a year later, he signed, \u201calbeit with grave reservations,\u201d an agreement that gave his partners 87.5 percent ownership over the projects \u2013 on the condition that within two months, a new agreement would be produced more satisfactory to him.<\/p>\n
Although that new agreement never materialized, Barker says, he moved forward and was able to obtain an Israeli source of funds in the amount of more than $9 million, which would allow the group to repurchase the Haina mill, among other things.<\/p>\n
The partners did not act on the offer and instead informed Barker they were pursuing other avenues of financing, he states in the complaint. Further, Barker says, he found out that they were working behind his back to move forward on the topsoil marketing plan and other ventures that Barker had come up with.<\/p>\n
In May 2013, Barker, acting as his own attorney, sued his former associates. The initial complaint accused them of unprofessional contact, breach of fiduciary duty, violations of securities laws, fraud, misrepresentation, malfeasance, breach of conduct, theft, tortuous interference, violation of interstate commerce laws, and several other charges as well. He asked the court to award damages in excess of $29 million.<\/p>\n
Judge Leslie E. Kobayashi dismissed the complaint but without prejudice, allowing Barker to file a second amended complaint. That, too, was dismissed without prejudice in May, with Barker being allowed to file yet another amended complaint by June 30.<\/p>\n
Barker\u2019s third amended complaint, filed June 27, with 48 exhibits, was dismissed on October 24. Less than two weeks later, Barker filed a motion for reconsideration \u2013 and to disqualify Judge Kobayashi. \u201cThis Court cannot separate itself from it\u2019s [sic] earlier acquiescence to the Defendants [sic] tactic of trying to hide the essential evidentiary documents such as will resolve not only the above described individual defendant responsibility identification, but the specificity, dates, times, locations, method of communications, and documentation of each of the relevant events which have been, up to this date, described by Plaintiff to the greatest extent presently possible in the void of such documents,\u201d he claims.<\/p>\n
Andrew Odell, the Cades Schutte attorney representing the defendants, filed an objection to Barker\u2019s requests in late November. \u201cApparently,\u201d he wrote, \u201c\u2026 Plaintiff\u2019s sole basis for seeking recusal of the Court in this matter is his perception that the Court is biased because it is ruling against him. \u2026 [T]hat is not a sufficient or proper basis to seek the Court\u2019s recusal.\u201d<\/p>\n
Asked about this case, Barker said it would almost certainly end up before the 9th Circuit Court of Appeals. He indicated he was confident he would, in the end, prevail.<\/p>\n
\u2014 Patricia Tummons and Teresa Dawson<\/i><\/p>\n","protected":false},"excerpt":{"rendered":"
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