Agribusiness Development Corporation Grapples With Conflicts Over Diverted Water in Kekaha

posted in: May 2011, Water | 0

Last September, the ADC’s Kekaha Committee gave preliminary approval to PLP’s proposals, in large part, because they included upgrades to the area’s electricity and irrigation infrastructure. The hydropower projects alone would generate 11 megawatts of power, which would be sold first to tenants of the Kekaha Agriculture Association (KAA) — a tenant group that manages the infrastructure — then to the island’s utility.

But a month later, before the details of a license could be fleshed out and approved by the ADC board, Clean River Power 16, LLC, a.k.a. Free Flow Power, submitted an application for a Kitano Water Power Project that would use Pu`u Lua and Kitano reservoirs, both of which feed the ADC-controlled Koke`e Ditch. Then in March, Free Flow affiliate Kahawai Power 4, LLC ,filed an application for a hydro on the Kekaha Ditch.

If approved, Free Flow, an agent for the Kaua`i Island Utility Cooperative (KIUC), would have three years to conduct feasibility studies and would be first in line to develop hydroelectric power on the ditches.

Although the license to PLP was for the land only, it was clear from the board’s discussion that its future decisions regarding PLP’s use of ditch water may affect all of its Kekaha tenants, as well as the Department of Hawaiian Home Lands (DHHL), Pacific West Energy, LLC, and the KIUC, not to mention kuleana landowners and native ecosystems.

Uncharted Territory

“We are looking at three competing entities: PLP, Pac West, and Free Flow Power,” ADC executive director Alfredo Lee told the board at its meeting last month in Honolulu.

Pac West wants to make ethanol and generate electricity at the former Kekaha Sugar Mill using locally grown crops and has sought feedstock land from both the ADC and the Department of Hawaiian Home Lands. 

After being given the brush-off by the Kekaha Committee last September, representatives from the Kaua`i County Council, the ILWU Local 142, and the KIUC all urged the committee to reconsider giving Pac West some land.

So on April 7, Lee proposed issuing a license to PLP for only 877 acres, roughly half of its available land in Kekaha. He suggested the remaining 750 acres could be offered to Pac West.

When ADC board member William Tam asked how KIUC’s hydropower plants related to the discussion, PLP chief development officer Palo Luckett said that KIUC’s project would divert water away from ADC lands, something KIUC representative Mike Yamane disputed. Yamane explained that the final plant design has not been completed.

Apparently concerned about how the water would be allocated, James Nakatani, deputy director of the state Department of Agriculture, asked Lee whether the ADC would be leasing just the land and whether PLP would get its water via a permit from the ADC. (An ADC staff report states that because Kaua`i has no designated water management areas and no new stream diversions are proposed, it’s unlikely that PLP would need a permit from the state Commission on Water Resource Management.)

Currently, under a license with the ADC, the KAA controls the flow of water through the irrigation system at Kekaha. Tam, deputy director of the Water Commission, noted that the system is fed from diversions on the Waimea River and that the DHHL has first claim on that water.

“If there were a petition to amend the interim instream flow standard of Waimea River, it could diminish the available water,” he said, adding, “You need to have a conversation with DHHL.”

Lee said that he had begun talking with the agency and agreed the ADC and DHHL needed to reach some kind of agreement on water allocation. Luckett said he was aware that “there is no project without discussion with DHHL.”

Nakatani asked again whether the ADC needed to issue a water permit to PLP. 

“That’s a very good question. It’s a big one,” said Myra Kaichi, the deputy attorney general advising the board. Although she said the matter was too complex to discuss right then, she had talked with the state Department of Land and Natural Resources’ Land Division and concluded that the ADC would probably issue a water lease.

ADC board chair Christine Daleiden said she wasn’t comfortable approving the license, given the quagmire over water issues.

“If we go forward, what are we going forward with?” she asked.

Board member David Reitow countered that the ADC would not have answers to its water questions for a “very, very, very long time.” In the meantime, time was slipping away for PLP to control the land surrounding its hydro facilities and be eligible for an exemption from the Federal Energy Regulatory Commission.

“We can stand in the quicksand or move forward,” he said. “If we dilly dally, we could have a hydro that diverts water [away from our tenants.]”

The board ultimately approved the license, although Tam abstained because the Water Commission, which sets stream flow standards, might become involved at some point. The board voted with the understanding that when it decides on the water issue, whatever the board approves will have to go before the state Board of Agriculture. (Under the statute establishing the ADC, all “projects” approved by the ADC board must also get BOA approval. PLP’s land license by itself, the ADC board decided, was not a project.)

Pac West’s William Maloney says that after the ADC board’s decision, his company re-affirmed with staff its interest in the 750 acres and will provide whatever updates or renewed application the ADC requires.

  “Our position, and I believe what any objective observer’s position would be, is that ADC’s decision to provide both projects lands and therefore to facilitate more development, and potentially more employment and sustainable energy production, is a laudable decision. We are hopeful that ADC will subsequently make a positive decision to make the 750 acres available to our project, and we look forward to working with ADC, KAA and its members, including PL&P, in a cooperative manner should ADC decide to lease the remaining 750 acres to us,” he wrote in an email to Environment Hawai`i.

Turf War

At the April meeting, Tam at one point asked why KIUC chose to file its applications with the Federal Energy Regulatory Commission, since the allocation of stream water in Hawai`i normally falls under the jurisdiction of the Water Commission or the Board of Land and Natural Resources.

He said that decades ago, in response to proposals to develop hydropower on Kaua`i, the state opposed FERC jurisdiction over Hawai`i streams and prevailed, although efforts in the mid-1990s to get federal legislation passed that would once and for all exempt Hawai`i streams from FERC jurisdiction failed.

Even so, Tam said, “CWRM does not look favorably on FERC preemption of the state’s interim instream flow standards.”

Henry Curtis, executive director of the non-profit Life of the Land, disagrees with Tam on this point. Although FERC jurisdiction is tied to interstate commerce, which doesn’t seem to apply in Hawai`i, Curtis says under federal law, any hydro can be under the jurisdiction of FERC.

Gerald Sumida, the attorney representing PLP before FERC, believes that the issue of interstate commerce could arise in hydropower cases in Hawai`i, but it depends on the nature of the project and whether navigable waters are involved. 

“All of these things are really quite site-specific,” he said.

As of late April, the Water Commission had not chosen to intervene in any of KIUC’s hydropower dockets with FERC. But according to Kaua`i resident Don Heacock, the DHHL and taro farmers who get their water from the Waimea River are looking to the Water Commission to make sure their needs are met by setting new flow standards.

“At a recent public meeting held by PLP, taro farmers made it abundantly clear they don’t have adequate water right now. … [The river
] is seriously dewatered and it’s affecting native o`opu (gobies) and `opae (shrimp),” says Heacock, a biologist with the state Division of Aquatic Resources and one of some 250 people who have signed a petition asking KIUC to rescind its FERC applications.

“This is going to be precedent-setting at the state level,” he continues. “The only two groups that have priority rights are kuleana landowners and [DHHL] beneficiaries. … The broad question we need to address right away is: How can these public trust resources be managed and allocated to benefit Hawaiian beneficiaries and instream values of Waimea River?”

The DHHL did not respond by press time to inquiries about their future water needs. An agency representative at the ADC meeting did say he was glad discussions among the agencies were taking place.

With regard to water needed for agriculture in Kekaha, the ADC states in its motion to intervene in KIUC’s docket for a hydro plant on the Kekaha ditch, “The priority status afforded to the holder of a preliminary permit could bind the hands of the ADC and interfere with its decisions on further development and improvement in Kekaha for no other reason than the fact that [KIUC] holds such a permit. This project proposes to take water ‘not needed for irrigation’ which flows through ADC’s Kekaha Ditch, generate hydroelectric energy, then direct the used water away from the Kekaha Ditch to the Waimea River.”

The question of how much of the water being diverted from the Waimea River is wasted by KAA tenants is a crucial one, Heacock says. “The vast majority of what’s being diverted is not used. It flows right into the ditches and out to the ocean,” he says.

According to one government official, only about a quarter of what’s diverted is used for agriculture.

Environmental Concerns

KIUC’s decision to use FERC has a lot to do with protecting the company’s investment, president and CEO David Bissell told the Hawai`i Economic Development Task Force last month.

“People can’t step in front of you and do the same project,” he said. 

The FERC process, which provides a “known” timeline and an independent perspective, is perhaps “the only avenue to actually getting a hydro project done,” he added. The company’s agent, Free Flow Power, also “knows FERC inside and out.”

Once FERC issues a permit, Heacock says, “FERC law trumps all state and all county law. … They [KIUC] can actually condemn land.”

Currently, Kaua`i spends $80 million a year on oil and KIUC is aggressively trying to develop more renewable energy. Bissell told the task force that in two years Kaua`i will have the highest concentration of solar panels in the world, but because of endangered species concerns, “wind is effectively off the table,” Bissell said. 

The company’s goal to use 50 percent renewable energy in as few as five to seven years relies heavily on hydropower, which could generate as much as 25 megawatts of electricity. Even though the FERC process seems to place KIUC in a good position among competitors, Bissell is aware of the difficulties ahead.

“It’s gonna be a real challenge to get them done. There’s a lot of push-back on Kaua`i, people thinking we’re going to build dams,” he said. 

The U.S. Fish and Wildlife Service also sees the potential for harmful environmental impacts. Paula Levin of the FWS’s Ecological Services Division says her agency has provided FERC recently with some “pretty lengthy and explicit comments” regarding the protection of native species.

Levin, who likens the recent flurry of hydropower proposals to a feeding frenzy, says, “We want to make sure these [projects] avoid impacts as much as possible or mitigate them if impacts are unavoidable.” The FWS has asked FERC to require all hydropower applicants to asses cumulative impacts not only in the affected watershed, but island-wide, including impacts of transmission lines on native seabirds.

“The workload is phenomenal that’s produced by these applications. We’re trying to make sure we don’t miss anything, that threatened and endangered species are not harmed,” she says.

Heacock also worries about the effects on native habitats. “Anything that is cement, crosses the river side-to-side and takes surface water has a negative impact on animals,” he says.

In its comments to FERC on the Kitano project, the FWS states that the project “could cause significant alteration of substrate and increased stream sediment that could disrupt or deter fish spawning and other aquatic fauna reproduction, and impair aquatic habitat diversity.”

Several candidate, threatened, and endangered species, including several waterbird and seabird species, the Hawaiian hoary bat, and the Hawaiian goose, have been seen in or are likely to occur in the project area, the FWS states. 

Levin adds in an email to Environment Hawai`i, “What we did not point out very strongly in the Kitano letter but will point out in the Kekaha letter (as in the proposal that will use the existing Koke`e ditch system) we are concerned that these projects where water is not being used for production of hydroelectric or being used for irrigation should be considered to be put back in the streams for survival of native species. Although this concern might be perceived as an overall water allocation issue that the state licensing should address, we are also concerned for the conservation of habitat needed for native stream species.”

* * *

Green Energy Secures 

Kalepa Land License

After the vote, Green Energy Team, LLC president Eric Knutzen wanted to take a picture of the board members to commemorate the culmination of five years of sometimes difficult negotiations to get his biomass project off the ground.

On April 7, the ADC board approved a 22-year land license to Green Energy for 1,000 acres in Kalepa, Kaua`i. Under the terms of the license, Green Energy may negotiate a 10-year extension.

Ron Agor, the Kaua`i member of the Board of Land and Natural Resources who had shepherded the collaboration between the land’s existing tenants and Green Energy, sat by his side in support.

Green Energy, which plans to chip and burn albizia and eucalyptus to make electricity, signed a power purchase agreement with the Kaua`i Island Utility Cooperative in January to provide 7 megawatts of firm power. German boiler and power system manufacturer Standardkessel Baumgarte is a major equity partner in Green Energy.

The company had first sought a permit for its project from the state Board of Land and Natural Resources in 2007, but was initially rejected because of its plans to use invasive albizia trees as its feedstock. After consulting with the state Division of Forestry and Wildlife, the company agreed to harvest the albizia already on the property and use a non-invasive species of eucalyptus as its biomass source.

In 2008, The Land Board voted to transfer its agricultural lands at Kalepa to the ADC.

For Further Reading

The following related articles are available at our website,

“Board Defers on Plan to Grow Albizia for Fuel,” BOARD TALK, January 2008;

“Farmers Make Room for Green Energy,” BOARD TALK, August 2008;

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

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

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

— Teresa Dawson

Volume 21, Number 11 May 2011

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