Board Talk

posted in: Board Talk, September 2012 | 0

Land Board to Decide Future Of Proposed O`ahu Energy Park

Later this month, the state Board of Land and Natural Resources is expected to either terminate or amend a development agreement for a 20 megawatt (MW) renewable energy park in `Ewa, O`ahu.

The park, as proposed by West Wind Works, LLC (3W), would generate electricity using a combination of solar, wind, and biomass energy technologies. 3W was selected by former Land Board chair Laura Thielen following a failed November 2009 request for proposals and qualifications for the development of a 110-acre former feedlot at Campbell Industrial Park.

Thielen and 3W president Keith Avery signed a development agreement that would give the company a 65-year lease (effective November 24, 2011) for the property, provided it met several benchmarks and paid development fees of $345,000 a year, payable in quarterly installments. The deputy attorney general’s office approved the form of the agreement in November 2010.

In the development agreement, 3W promised to complete an environmental assessment for the project and obtain a non-utility generator (NUG) determination and power purchase agreements (PPA) from the Hawaiian Electric Company (HECO), as well as various county, state, and federal approvals.

January 13, 2013, is the deadline for 3W to receive approval from the state Public Utilities Commission, as well to obtain 5MW power-purchase agreements for the proposed wind-to-hydrogen energy component, the bioenergy component, the concentrated solar farm, and the solar panel farm.

Almost immediately, 3W fell behind on its quarterly payments due under the development agreement and received notices of default from the Department of Land and Natural Resources Land Division in March and October of 2011 and in March of this year. As of May, 3W had paid $260,360.25 in fees and was $385,000 in arrears.

The company also failed to meet development benchmarks, including having a notice of a draft EA published in the Office of Environmental Quality Control’s Environmental Notice by October 31, 2011, obtaining a NUG determination by June 30, 2011, having a Special Management Area permit accepted by the City and County of Honolulu by December 31, 2011, and having a conditional use permit application accepted by the city by January 5, 2012.

In January, Avery proposed that the DLNR convert the development agreement into a “conditional lease” and promised to pay all rents past due, as well as future rent through November 2013. But in the months that followed, Avery failed to satisfy the Land Division’s repeated requests for information on proposed terms of the conditional lease and how such a lease would help 3W attract renewable technologies and more financing, among other things. So on May 25, Land Division staff recommended that the Land Board terminate the agreement.

In letters to Avery, Land Division administrator Russell Tsuji warned that should the Land Board terminate the development agreement, it would jeopardize 3W’s ability to secure a lease for a wind energy project it had proposed for the North Shore of O`ahu.

In August 2008, the Land Board approved, in principle, a 20-year lease to 3W for 232 acres in Kahuku, with an option to extend for another 20 years. 3W had proposed erecting up to 10 wind turbines, which could generate up to 25 MW of electricity. The board also approved a right-of-entry permit to allow 3W to conduct due diligence activities on the property, which was once part of the state Department of Agriculture’s Kahuku Agricultural Park.

At the time of the Land Board’s approval, 3W had not had a lease, permit, or other state land disposition terminated within the last five years as a result of non-compliance. If it had, it would not be eligible for a lease.

“As a result of the termination of this Development Agreement, the Land Board may be subsequently be requested to rescind its prior approval in principle to issue 3W a direct lease,” a May 25 Land Division report stated.


At the Land Board’s May 25 meeting, Avery and Enzo Zoratto of International Electric Power, which plans to help fund the project, asked the board not to terminate the agreement.

Avery said that after the DLNR’s RFP for the feedlot had yielded no qualified applicants, 3W approached Thielen and convinced her that its project was a benefit to the state and could pay a high rent.

“Ms. Thielen said, ‘Okay, I’ll give you the opportunity. You have three years to complete the Development Agreement and three years to complete the project,’” he said. But because the energy farm proposes to combine photovoltaics, concentrated solar power, wind and biomass, “it became very apparent … this was a very difficult product to produce,” he said.

HECO’s recent efforts to solicit proposals for at least 200 MW of renewable energy for O`ahu’s electricity grid complicates things, according to Avery. HECO doesn’t expect to even have a short list of projects selected until October. Final selection would occur next year, “leading to power purchase and transmission agreements,” an October 2011 HECO press release states.

“We are guided by who we can sell this power to,” Avery told the Land Board. If it’s 5 MW or less, selling to HECO is not much of a problem. If it’s more than that, it has to go out to bid, he said. As a result, the energy farm is largely tied to HECO’s RFP time frame, which doesn’t coincide with benchmarks in the development agreement.

“If the state comes in and says we will buy that power … then we could complete the project in two years easily,” Avery said.

Zoratto promised to start paying down the back rent if the board gave him and Avery time to renegotiate terms of the development agreement. Zoratto said the agreement had become an obstacle to financial institutions and HECO.

“Although Keith, with really good intent, negotiated a timeline, I don’t think he appreciated … [the details in the agreement needed] to get the financing,” he said.

(Avery has been involved in several wind energy projects in Hawai`i over the years, including the one at Kaheawa pastures on Maui.)

Tsuji told the board he did not want to do any negotiating until 3W cured its defaults. “I’m concerned about taking a partial payment under the guise that something’s going to be worked out,” he said.

In the end, the Land Board chose to defer the matter for two months to allow all of the parties to continue negotiations.

In the meantime, on July 13, the Land Board amended its August 2008 decision so that any termination of 3W’s development agreement would not kill the Kahuku wind project. The board changed the assignee of the direct lease in principle from 3W to Na Pua Makani Power Partners, Ltd.

3W had recently entered into an agreement with Na Pua Makani’s parent company, Delaware wind power developer Champlin Hawai`i Wind Holdings, LLC. Under that agreement, the Kahuku facility would be the first phase of a three-phase wind farm that would ultimately generate up to 90 MW. 3W holds a minority interest in Champlain Hawai`i.

On August 10, Tsuji provided the board with an update on negotiations regarding the development agreement for the energy farm in `Ewa. In short, 3W and IEP needed more time. The companies had proposed new rental terms, including paying half of the delinquent amount upon execution of a PPA, which is scheduled to be signed in 2014. The other half would be paid upon execution of a financing agreement to be signed some time afterward. They would not pay anything until then and if a PPA is not approved, the state would get nothing, Tsuji said.

“This is all subject to further negotiation,” he added.

“I think we have a ways to go,” Avery said. “Any deferred payments, we plan on paying interest on them and paying them whole.” The company has also proposed to pay an additional million dollars.

The board unanimously voted to defer termination for another 60 days.


Board Grants Permit

For Shark Movement Study

A handful of ulua and sharks in the Northwestern Hawaiian Islands may soon be fitted with go-pro-like little cameras, the size of a D-cell battery, so that Hawai`i Institute of Marine Biology scientist Carl Meyer can better understand their movements.

On August 10, the Land Board approved a Papahanaumokuakea Marine National Monument research permit to Meyer, who has been studying movement patterns of top marine predators in Hawai`i for years.

The cameras, which he will have to physically retrieve, will allow him to get a direct view of feeding activity. In addition to deploying cameras and/or acoustic transmitters to top predators, Meyer also plans to collect tissue samples from them, as well as reef fish species, algae, and phytoplanton, to determine feeding habits.

“You are what you eat,” he said. Unique isotopes in organisms get passed up through the food chain, he said, adding that he will “look at carbon and nitrate ratios and see where they were sequestered.”

Meyer has been putting transmitters in sharks since 2005 and they have provided “a very valuable insight into the ecology of the [various] species,” he told the Land Board.

He’s found that ulua “are like Swiss bankers — very predictable in their movements for the most part.”

Tiger shark movements are much harder to characterize, he said, because they’re more variable in their behavior. After six years of work, a recent transmitter download revealed that adult female tiger sharks in the Papahanaumokuakea monument travel to the Main Hawaiian Islands to pup in late fall.

“It’s something we’ve been trying to figure out for years. We just cracked it,” he said.

Galapagos sharks, on the other hand, don’t travel nearly as far, at least not regularly.

Although one Galapagos shark tagged in the NWHI went to Palmyra atoll, “it surprised us how resident many of the sharks are, aside from tigers. Before we did this work, we thought we’d see Galapagos sharks going to Hawai`i and beyond,” he said.

In this year’s tagging effort, “[p]articular emphasis will be placed on determining the frequency and timing of visits by Galapagos and tiger sharks to monk seal pupping sites at FFS [French Frigate Shoals],” a report by the DLNR’s Division of Aquatic Resources states.

“This information is vital for a better understanding of shark predation on Hawaiian monk seals and for selecting appropriate management strategies for mitigating predation impacts,” Meyer’s permit application states.

–Teresa Dawson

Volume 23, Number 3 September 2012