ADC Gives Ho`opili Farmers First Shot at Large Chunk of Former Galbraith Land

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Nearly half of former Galbraith Estate land now owned by the state Agribusiness Development Corporation may wind up being leased to agriculture operations displaced by the 1,500-acre Ho`opili development of D.R. Horton-Schuler Homes, LLC, in East Kapolei, O`ahu.

Last month, the Trust for Public Land purchased 1,732 acres in North O`ahu from the estate for $25 million. The TPL then transferred roughly 1,200 acres to the ADC, which had contributed $13 million to the sale. The remaining 500 acres went to the Office of Hawaiian Affairs, which paid $3 million. (The City and County of Honolulu and the U.S. Army Garrison together contributed more than $8 million but received no land.)

The ADC board has agreed to give D.R. Horton “designees” first crack at 500 of its 1,200 acres, in consideration of a total of $1 million that the company is putting in. At its November 28 meeting, the ADC board unanimously approved a memorandum of understanding with D.R. Horton outlining the deal.

Under the MOU, the developer promised to contribute up to $500,000 in “gap funding” to TPL for the Galbraith land purchase. Horton will pay the remainder ($1 million minus the initial contribution) to the ADC once the City and County of Honolulu approves a small-lot residential subdivision for the Ho`opili project area.

The ADC agreed to give Horton — “for the benefit of its designee” — a first right of refusal and right of first offer for the 500 acres, the MOU states. What’s more, the rent and lease term for those 500 acres will be “mutually agreed upon by the ADC board and the lessee(s).” (Because the ADC’s lands are not considered public lands under Hawai`i Revised Statutes, leases may be directly negotiated and are not subject to market rent or term limits.)

Based on the discussion at the ADC board meeting, members appeared to have had little choice but to agree to the MOU, which had not been discussed at any previous meeting.

“This is one of the pieces of the puzzle to finish to get the money so we can close” the sale, ADC executive director James Nakatani told the ADC board at the November meeting.

“Can we get an explanation?” board member William Tam asked. (Tam is the water deputy for the state Department of Land and Natural Resources and also sits on TPL’s advisory board.)

TPL executive director Lea Hong said that she hoped to close the sale by December 10 and needed to have all of the money in escrow in less than a week.

The MOU is an attempt to accommodate farmers that will be displaced by the Ho`opili development. In June, the state Land Use Commission approved Horton’s boundary amendment petition to remove its 1,500 acres from the Agriculture District and place them in the Urban District. Although the LUC decision and order (D&O) requires Horton to reserve 159 acres in Ho`opili for commercial farming, that’s not nearly enough land for the current agricultural tenants — Aloun Farm, Inc.; Sugarland Farms, Inc. (owned by former ADC board member Larry Jefts); and Syngenta Seeds, Inc. Aloun Farms leases 1,100 acres at Ho`opili, a portion of which is subleased to Fat Law’s Farm, Inc.

During the LUC’s contested case hearing on the boundary amendment, all 1,700 acres of the Galbraith land, the state Department of Agriculture’s proposed 150-acre Kunia Agriculture Park, and a 400-acre Department of Land and Natural Resources parcel, also in Kunia, were identified as possible relocation sites for Ho`opili farmers.

But according to Brian Kau, administrator for the DOA’s Agricultural Resource Management Division, his department has no plans to lease the park to Ho`opili tenants. The park is still in the master-planning phase, he said, adding that anyone wanting a spot in the park would have to apply for one. He added that he doesn’t know yet whether the 400-acre DLNR parcel will be transferred to the DOA.

At the ADC meeting, Horton vice president Cameron Nekota said the MOU is an effort to give `Ewa farmers an opportunity.

ADC board member and Department of Business, Economic Development and Tourism deputy director Mary Alice Evans asked Jesse Souki, director of the state Office of Planning, whether the deal made sense. The Office of Planning represented the state before the LUC in the Ho`opili case.

“This wasn’t in the D&O to make the contribution, but it does help,” Souki said.

Nekota added, “Whoever the farmer is that’s going to go there will have to work out their own lease with ADC. We’re basically giving farmers potentially in Ho`opili a chance to negotiate. They get the opportunity.”

The ADC’s Ivan Kawamoto says the Galbraith lands will likely serve both large and small farmers, with small lots ranging from five to ten acres. The larger lots would be 50 acres or greater.

Whether the Ho`opili farmers will be able to grow the same types of crops they’ve been growing remains to be seen. Aloun Farms grows a wide range of common fruits and vegetables, as well as several Asian specialties in the dry, hot Central O`ahu plain. Aloun’s sublessee is one of the state’s largest basil growers.

The climatic conditions are quite different in Wahiawa.

“In the winter, the Galbraith land is wetter and cooler,” Kawamoto says, adding that the former Ho`opili farmers will have to test which crops grow best there.

For now, the Galbraith lands will be irrigated using well water, but the ADC has expressed interest in using wastewater from a nearby treatment plant that has been treated to R-1 levels. (R-1 recycled wastewater can be used to irrigate any food crops, according to the state Department of Health guidelines.)

The Wahiawa Wastewater Treatment Plant currently discharges about 1.6 million gallons a day of R-1 quality treated wastewater into the Wahiawa Reservoir (also known as Lake Wilson). Although the water is treated to R-1 levels, the DOH has not certified the Wahiawa facility as an R-1 wastewater treatment plant because it lacks alternative disposal options or emergency storage to prevent accidental discharges of untreated wastewater into Lake Wilson.

The City and County of Honolulu has indicated it would like to redirect its effluent from the lake to a distribution system serving various users, but is a long way from developing the necessary infrastructure and partnerships. In the meantime, the Legislature last year appropriated $750,000 for the planning and design of an irrigation system, including a reservoir, to pump water from the north fork of Kaukonahua Stream — which feeds Lake Wilson — to irrigate the Galbraith lands.

***

Solar Greenhouses Proposed

For Galbraith Lands

A company that builds greenhouses topped with solar panels wants the ADC to chip in nearly $400,000 for a “study” of what it would take to develop a viable project on the ADC’s newly purchased Galbraith Estate lands in Wahiawa, O`ahu.

But it’s much more than a simple study, according to representatives from France’s Akuo Energy, which specializes in renewable energy development. At the ADC board’s November meeting, they said that by the end of the study, the company would have the finances and plans in place to fully implement a project.

“They’re willing to help us with Galbraith,” ADC executive director James Nakatani told the board, adding that the partnership idea originated with the state Department of Business, Economic Development and Tourism.

“The energy infrastructure helps finance the ag infrastructure,” said Akuo project development manager Hans Royal of his company’s solar greenhouses. The company, which has an office in Chicago, has already built greenhouse projects on several French islands.

On Reunion Island, in the Indian Ocean, Akuo developed five acres of greenhouses that generate 1 megawatt of power. The greenhouses produce lilies and anthuriums, which generate sales of about $500,000 a year.

“Pretty much everything can be grown in [the greenhouses],” said Akuo COO Jean Lemaire.

For the Galbraith land, Akuo needs to study the most viable and marketable crops, determine water requirements and what to do with the electricity generated, and design a greenhouse that will meet the area’s needs.

“You all understand the cost of water. At Galbraith or Kunia, if you’re pumping [water], some things are just not feasible because of the cost of energy,” Akuo engineering manager Doug Krause told the board. “We know the history of the water rights pretty well. We think we can find water to Galbraith by leveraging these different parts so ADC benefits.”

DBEDT deputy director and ADC board member Mary Alice Evans called the project promising, but recommended that the study examine the state’s important agricultural lands (IAL) law, which limits the amount of land in the Agriculture District that can be covered by a solar array to 10 percent. She added that the company should also explore the cost of a power purchase agreement with Hawaiian Electric Company, should it wish to sell power.

Royal said he was aware of the IAL law and that because of the limitation, the company was proposing an initial project of five to 15 acres. He added that Akuo will study utility interconnection needs, but that selling electricity to HECO “is not the only possibility.” He later suggested that the project could supply electricity to a proposed processing facility on 24 acres of land the state plans to purchase in nearby Whitmore Village.

To proceed with the study, which Royal said would take six to eight months to complete, Akuo has proposed that the ADC shoulder half of the $710,000 cost.

“Why so long?” asked ADC board member Alan Takemoto, noting that the company has already developed similar projects elsewhere. “If we could give you five acres, couldn’t you give us an estimate in three months?”

Lemaire doubted his company could address within three months all of the various issues associated with developing a project in the Galbraith area.

“This is an island-specific project. We’ve built projects in eight countries. No country is the same,” he said. “Generally, where projects fail, [developers] go sometimes quickly and because people forget key, critical things … the financiers are not comfortable to invest. “

ADC board member William Tam thought even eight months was an incredibly ambitious deadline since the ADC does not yet have a plan for the Galbraith lands.

“We haven’t done our planning. We need to ourselves figure out how we’re going forward,” he said, adding, “I’m not sure the ADC has ever engaged in paying for a study for a project that will be privately owned on state land. I like what you’re doing, but there are a lot of details that may need to be worked out on our side.”

Nakatani acknowledged the many moving parts and unknowns surrounding the development of the Galbraith lands, but said he was excited by the idea of using greenhouses to increase production in such a wet area.

“We have time to digest [the proposal]. It’s not too early to start planning conceptually,” he said.

“This is a fantastic opportunity,” Tam said.

The board took no action on the proposal.

***

KIUC, PLP at Impasse Over

Hydropower Development

Can Pacific Light and Power’s plan to upgrade irrigation infrastructure and develop hydropower in Kekaha succeed without a power purchase agreement from the Kaua`i Island Utility Cooperative?

At an ADC board meeting nearly a year ago, KIUC made it clear it had no interest in purchasing electricity generated by PLP because it wants to develop its own hydropower facilities using the ADC’s Kekaha and Koke`e ditches.

According to PLP president Palo Luckett, his company has been unable to persuade the utility to change its position.

On November 28, Luckett briefed the ADC board on the status of PLP’s plans to develop more than 11 megawatts of electricity along the two irrigation ditches. PLP plans to sell its power to the Kekaha Agriculture Association, which operates and maintains the irrigation infrastructure on the ADC’s Kekaha lands under a memorandum of agreement. Any excess power would be sold to KIUC.

The ADC board voted in April 2011 to approve a 25-year license to PLP to build a biodigester, grow biofuels (guinea grass) to feed it, and build three hydropower plants in Kekaha. But a competing proposal by KIUC has since stalled PLP’s hydropower project.

PLP has revised its Natural Resources Conservation Service soil conservation plan and has had consultants prepare environmental reports that will eventually be used as the basis for an environmental assessment for the hydropower project.

The company also has a letter of commitment indicating that Canada’s Kruger Energy has agreed to fund and construct the hydro project.

ADC board member Mary Alice Evans, however, noted that the letter did not state how much money Kruger was promising.

“We weren’t asked to provide an amount. It is approximately $10 million in equity financing,” Luckett responded. (Luckett has said previously that the hydropower project will cost about $40 million.)

Ultimately, the company needs to resolve the impasse with KIUC. When asked by ADC board member William Tam what the next milestone for the company was, Luckett said it was “coming to an agreement with KIUC for uptake of power from KAA.”

Several KIUC employees and board members attended the ADC meeting. None of them testified.

For Further Reading

Environment Hawai`i has published the following articles on the subject of ADC lands at Kekaha:

“Biofuels Company Courts State Agribusiness Agency,” July 2012;

“Kaua`i Utility Bursts Pipe Dream of Independent Hydropower Firm,” April 2012;

“Kaua`i Hydropower Company Seeks Accord with Agribusiness Development Corporation,” November 2011;

“Agribusiness Development Corporation Grapples with Conflicts Over Diverted Water in Kekaha,” May 2011;

“Energy Projects Dominate Discussion Before State Agribusiness Board,” March 2011;

“Agribusiness Committee May Reconsider Biofuels Project at Kekaha,” January 2011;

“Agribusiness Subcommittee Approves Renewable Energy Project at Kekaha,” October 2010.

— Teresa Dawson

Volume 23, Number 7 January 2013

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