Planned Maui Wind Farm Changes Hands In Face of Litigation, Rising Costs

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Burden some utility hookup requirements coupled with a federal lawsuit have caused Maui’s premier wind energy project to once again change hands – for the fourth time in as many years. Earlier this year, Hawi Renewable Development sold its interest in the planned 20-megawatt wind farm at Ukumehame to UPC Wind Partners, LLC, a Massachusetts subsidiary of Europe’s UPC Group.

Maui’s Smith Development, owned by Kent Smith, and engineering firm ECM, Inc., run by Hilton Unemori, are UPC’s local partners, says UPC vice president of development Keith Avery, who has been involved in the project since the 1980s, when Zond Pacific, Inc., first proposed a wind farm on state-owned land at Ukumehame.

Last year, the state Board of Land and Natural Resources granted HRD a Conservation District Use Permit and approved award of a lease for the wind farm, in part, because of the company’s depth of experience in wind farm projects. Avery says UPC Wind Partners is also an experienced wind development company, which now owns HRD’s Conservation District permit.

But before construction can begin, UPC needs a lease.

As of mid-August, Department of Land and Natural Resources Land Division administrator Dierdre Mamiya said she was awaiting proof of a sale of between UPC and HRD, which must be provided before her office can recommend to the Land Board that it award the necessary lease to UPC . In addition, the DLNR’s Office of Conservation and Coastal Lands, which administers CDUPs, has asked UPC to prepare an environmental assessment addressing possible effects of UPC ‘s proposed use of wind turbines taller than those proposed for use by HRD. The EA, says OCCL administrator Sam Lemmo, would need to be completed before UPC submits construction plans.

If the Land Board grants UPC a lease, control over the wind farm will have gone from Zond, to Enron Wind, to GE Wind, to HRD, to UPC in the span of five years. Despite the fact that no one has been able to get the farm built, Avery believes times have changed enough to make it viable.

“It was much more difficult in the last century than this one to get things going,” he says. Rising oil prices are making alternative energy sources more attractive to the local utilities, and, he says, “the utility sees that the [wind] technology is advanced enough and more reliable… I see them welcoming this project.”

The Winding Road

In 1996, Zond, with a Conservation District Use Permit from the Land Board, placed six monitoring stations atop the ridge of state-owned Conservation District land at Ukumehame to collect wind data and determine whether the site was suitable for a wind farm. Zond had been looking for a site since the 1980s and had chosen the state lands at Ukumehame known as Kaheawa Pastures because of its tradewinds, proximity to the Maui utility’s transmission system, and its remoteness, according to DLNR reports.

On April 14, 2000, the Land Board approved a CDUP for the wind farm. Zond planned to erect of row of 27 wind turbines along the ridge, which were expected to generate 20 megawatts of electricity. The permit gave Zond a year to begin construction, but Zond was unable to do so. The company was in the midst of being acquired by Enron Wind and was reportedly having problems finalizing its lease. The construction deadline came and went, and with no extension request, the CDUP expired. Then in May 2002, General Electric Power Systems acquired some of Enron’s assets and hired several of its staff, including Avery. By the time the Land Board granted a new CDUP and approved issuance of a lease for the farm in early 2003, HRD had partnered with GE, which indicated it would eventually turn the entire project over to HRD.

In February 2003, the Land Board approved award of a 30-year lease of state land at Ukumehame to Hawi Renewable Development/General Electric. In doing so, the board ended a tense competition between HRD/General Electric and a newly incorporated company called Hawai’i Wind Energy, headed by Brian Hayashida.

The Land Board had granted both applicants CDUPs a month earlier, but by the Land Board’s February meeting, DLNR staff had determined that HRD/GE would “complete the project much more successfully and timely than Hawai’i Wind Energy,” a Land Division staff report stated.

This time, the permit gave HRD up to two years to start construction, but once again, problems arose with regard to actual issuance of the lease itself. By the end of 2003, the project still had not moved forward.

Selling Influence?

With the project at a standstill, Kent Smith and Hilton Unemori filed a complaint in U.S. District Court on December 10, 2003. In it, Smith and Unemori claimed that they had helped HRD win Land Board approval of the project and alleged that HRD had agreed to reward their efforts with interest in various HRD wind farm projects, as well as any tax credits HRD might receive. Claiming that HRD had breached that agreement, Smith and Unemori sued the company and HRD principals Robert Treiberg and Richard Horn, among others.

Smith and Unemori’s complaint alleged that Horn and Treiberg had sought their assistance in securing Land Board approval of a Conservation District Use Permit.

On January 10, 2003, the complaint states, Smith and Unemori signed a Letter of Understanding with HRD. That letter, the complaint says, stipulated that in exchange for their help in winning approval of the Conservation District permit, Smith and Unemori would get 10 percent ownership interest in HRD’s Kaheawa Pastures project, a 90 percent ownership interest in a Kahua Ranch project on the Big Island, and an allocation of state tax credits and refunds or other incentives.

The letter allegedly stated that the parties were to enter into a formal agreement by February 9, 2003. That apparently never happened. Following the Land Board’s approvals, the complaint states, HRD, Horn and Treiberg “have refused to cooperate with plaintiffs in executing a formal partnership as required by the LOU…”

The complaint alleges that Smith and Unemori “spent a considerable amount of time and effort in assisting defendants and GE in securing the permit to operate the Maui wind project.” It goes on to say that Hawi “needed plaintiffs’ local knowledge, contact and lobbying to secure the CDUP.”

A review of project files maintained by the Department of Land and Natural Resources disclosed no evidence of any assistance by Smith or Unemori. In its response to the complaint, HRD stated that no binding contract existed between the parties. Even so, according to minutes of a meeting with U.S. District Judge Barry M. Kurren on March 18, 2004, HRD agreed to settle the case.

Transfer

About a week after notice that the federal case had been settled, Horn notified Maui County, the state, several U.S. agencies, Maui Electric Company (MECO) and Hawaiian Electric Company (HECO) that HRD was no longer pursuing the Maui wind project.

“Recently, HRD was approached by Wind Partners, LLC (UPC) regarding the possibility of UPC acquiring the Kaheawa Pastures project. These discussions have led to an understanding between UPC and HRD with respect to UPC’s possible acquisition of the Kaheawa Pastures project,” Horn wrote on March 26, adding that UPC intended to use Unemori’s firm ECM, Inc. and one of Smith’s companies, Smith Development, in the “due diligence process.”

Avery says UPC and its partners bought HRD’s “rights to the project,” meaning the company’s interest in the Conservation District Use Permit granted by the Land Board in early 2003.

DLNR staff , however, say that CDUPs cannot be bought, since they run with the land. In any case, without legal tenancy, the project cannot be built. While it appears the DLNR is working to process Smith Development’s request to have HRD’s lease transferred to UPC, the department wrote Smith Development’s Michele McLean in April noting that the board and department have “a longstanding practice to discourage speculation over conservation lands.”

When asked whether the lawsuit precipitated the sale between HRD and UPC, Avery replied: “Let’s just say us buying the project alleviated any problems.”

Avery said that Unemori has been involved with the project since the days when Zond was involved. According to a biography authorized by UPC, Avery began developing wind projects in Hawai’i in 1982 and joined Zond Systems in 1984. After Enron Wind acquired Zond, Avery was charged with overseeing projects in the Pacific Northwest, Western Canada, Hawai’i and Alaska, as well as special projects for the Department of Defense and native American tribes. Avery joined UPC as vice president of development after leaving Enron/GE Wind.

“He was one of the first people I worked with,” Avery says of Unemori. It was Unemori, Avery continued, who “brought in Kent [Smith] for his development capabilities. It’s important for us to have people locally to help us complete the project. Construction and engineering abilities out of Smith and ECM added to our ability to build a wind farm and make the project that much more successful.”

MECO

Earlier this year, before the sale, HRD’s Richard Horn spoke to Environment Hawai’i of his company’s problems with MECO.

“We have a contract with MECO, but there’s still a problem with the fault ride-through,” he said. (A fault ride-through shuts down the wind farm in the event that the utility loses power. If the wind farm doesn’t shut down and continues to emit power onto a powerless grid, it can hurt the wind farm’s equipment.)

Horn added that it had also been difficult dealing with so many government agencies and obtaining rights to highway entry and egress.

Life of the Land’s Henry Curtis, who closely follows and participates in Hawai’i energy issues, confirmed Horn’s complaints. Curtis said MECO wanted HRD to build a substation, erect a higher-powered line, a fault ride-through and a triple breaker.

What’s more, Curtis said, the fault-ride through that MECO insisted HRD use cost “more than what you could design yourself. The Kaheawa Pastures people thought it would add $13 million to the cost of the project… They can’t make money with MECO’s requirements.”

Avery disagrees.

“MECO has some pretty stringent requirements that haven’t been requested on the mainland,” he told Environment Hawai’i, noting that only one other country has requested requirements as stringent. Even so, he said, “It’s doable, at a cost.”

Avery also indicated he’s sympathetic to MECO’s rationale. The local utility has sole responsibility for maintaining electric power on each island. Unlike the mainland, if something breaks down, power can’t be transferred from another system in another state. Because of Hawai’i’s isolation, Avery says, “They need to be more diligent in their responsibilities.”

‘More Pleasing’

Since the wind farm was first proposed, it’s undergone a number of changes. The initial design proposed in Zond’s environmental impact statement included 27 turbines mounted on 50-meter high towers. HRD planned to use 30 Vestas turbines on 40-meter towers. Now, UPC is proposing to use 20 GE turbines on 55-meter towers, taller than both of the earlier designs.

The new proposal, Avery says, “is different in a more pleasing way. Instead of 27 turbines, we’ll have 20, and they’ll move slower. The rotors are bigger, but the towers are only 15 feet taller, and they put out twice the amount of power.”

UPC has until January 24, 2005 to begin construction. While his company doesn’t have a lease for the land and is still working on an environmental assessment (which requires a month-long comment period) and a Habitat Conservation Plan for the endangered nene in the area, Avery believes he can make the deadline. If things don’t go as planned, the CDUP deadline can be extended administratively by the DLNR.

“So far, everything is moving fine,” Avery says. “We’re working towards a lease and a power purchase agreement by the end of the year, [will] start construction in January and be done by June.”

— Teresa Dawson

Volume 15, Number 3 September 2004

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