Thursday, September 11, 2008

Musings: Surprise, Surprise, Surprise

Sometimes I’m amazed by the workings of my own internal clock, which seems to get Koko and me up and out at the most opportune times, like the brief few minutes this morning when the sky was such an exquisite shade of lavender-pink that I exclaimed aloud.

The air had a distinct chill, and was heavily scented with the fragrance of mock orange in the front yard and white ginger in the back, and the moisture left by last night’s rain had resulted in thick mists forming in every pasture, drifting across the road and enveloping us as we walked.

It helps me get up in the morning, this desire to see what nature has in store, the little surprises she’s got up her sleeve.

In the human world, The Garden Island brought two big surprises. The first was that Jan Ten Bruggencate, the longtime Kauai bureau chief for the Advertiser, is now a spokesman for Safeway. Wow. Whoda thunk it?

Jan was announcing plans for a new 22-acre shopping center near the middle school in Puhi, anchored by one of Safeway’s whopping big 56,000-square-foot “lifestyle stores.” In case you’re wondering what the heck that is:

The “lifestyle” branding implies more prepared foods so customers can bring home a meal, not just the ingredients, as well as more public spaces for gathering.

Interesting, how as a society we're no longer gathering in the kitchen to make a meal, or around the table to eat it, but at the grocery store, where we buy it already made. Maybe it’s just me, but I never think of the grocery store as a place where I want to hang out. It’s more get in and get out.

The other big surprise is that Gay & Robinson is quitting. But don’t bemoan the loss of sugar on Kauai quite yet. According to the paper, they want to lease the sugar mill, land and other assets to Pacific West Energy LLC, “which intends to grow even more sugar than Gay & Robinson for the production of ethanol and electricity, as well as hire all of the existing 227 workers.”

Wow! What a deal! Oh, wait, there’s a catch. The company needs 15,000 acres to make the ethanol project go. But it will only get 3,750 acres from G&R, which plans to use the other half its land for a hydro-electric project. (Although why they get to keep using that water, which is a public resource, for purposes other than ag is beyond me.)

Anyway, that means Pacific West needs about 11,000 acres. The paper cites company president Bill Maloney as saying that without land agreements upfront, the banks and lenders won’t sign on. “We’re rounding up all the cats and dogs that we can,” Maloney said.

So get ready for the big land grab and steamroller action, with 227 plantation workers being held for ransom. Ominously, Gov. Linda Lingle is already promising state aid by “expediting the permits and approvals necessary to transform this kama‘aina company.”

The shibai about G&R being a kama`aina company aside — come on, that’s like claiming the Wilcox family still controls Grove Farm — [Correx: my apologies, G&R still is 100% Robinson-owned] where do you suppose Pacific West is going to get all that land? Kalepa Ridge, which G&R was already eying and where Green Energy Kauai got 1,000 acres for its albezia-to-biofuels project, is a likely start, meaning there goes the last public ag land on the eastside.

As farmer Jerry observed: “It’s the industrialization of our ag land.”

And then there's the question of whether this project makes economic sense, even with all kinds of state hand-holding. According to the paper:

On Tuesday [G&R President E. Alan] Kennett told Kaua‘i Renewable Energy Conference attendees that the ethanol market is flooded, the debt market is dismal and workers are scarce, particularly truck drivers.”

Kennett previously said ethanol prices need to be $3.50 per gallon to make the project go. They’re at about $2.65 now. One has to wonder why G&R isn't going ahead with the project themselves if it's so great. Instead, it looks more like they're selling a liability. Or is it all just a ploy to get leeway for the ethanol project by raising the specter of the company otherwise going down altogether?

This project sounded questionable to me back in 2006 when I interviewed Maloney for an article in the Honolulu Weekly on the failure of the state’s ethanol program. At the time, Maloney was talking about burning molasses and coal to generate 12 million gallons of ethanol, and estimating a 2008 start date and a $50 million capital investment. G&R recently has been using a figure closer to $80 million.

Of course, there are those tasty tax credits to consider, which could explain Pacific West’s real interest. As I wrote in the Weekly:

The project will also take advantage of state and federal tax credits, Maloney acknowledges. Under Hawai’i law, manufacturers that produce between 500,000 and 1 million gallons of ethanol will receive a non-refundable 30 percent investment tax credit, or $150,000, whichever is less. The credit increases for bigger manufacturers, capping at 30 percent, or $4.5 million dollars, for companies that produce more than 15 million gallons per year. The state credits run for a maximum of eight years.

The federal small producer tax credit kicks in when the plant actually begins making ethanol, providing a credit of 10 cents per gallon of ethanol produced. Combined, they total about $4.8 million annually for Maloney’s project, if it’s producing at full capacity.


Another question to consider is whether KIUC really wants that ethanol. [Correx: The plan calls for selling KIUC not ethanol, but electricity derived from burning bagasse.] When you figure the old and new power plants together can generate 160 megawatts, and peak demand is currently 76 megawatts, where’s the incentive to encourage conservation or adopt alternatives? They’ve got to pay the debt service on those plants, so that means we — the lucky owners of this boondoggle co-op — get to keep paying the highest rates in the nation indefinitely because they aren’t in any position to stop burning oil.

And finally, there’s the question of Pakala camp. The paper reports:

As for the 300 company homes, 105 of which are occupied by employees and pensioners, Kennett said Gay & Robinson will maintain them into the foreseeable future and no one is being asked to vacate.

But just how long is the foreseeable future? It’s a crucial question, when you consider that plantation retirement pay is about $300 to $400 a month, which means the old folks living there couldn’t rent anyplace else. And all those homes are on cesspools, so G&R is facing a requirement to install a septic system. Now why would they invest millions in such a project unless there’s hotel component attached to make it all worthwhile? Or are they planning to bail down the road a piece, and let the government kick out the kupuna?

Sounds like a few surprises are still in store as the deal-making behind this transaction continues to unfold.

12 comments:

Anonymous said...

Joan wrote, "They’ve got to pay the debt service on those plants, so that means we — the lucky owners of this boondoggle co-op — get to keep paying the highest rates in the nation indefinitely because they aren’t in any position to stop burning oil."

A boondoggle of epic proportions indeed, and supported by the likes of Chairman Gregg, Hooser, Yukimura, and Jimmy Tokioka who said when asked who would be holding the bag if the resorts and other large coop members jumped ship, Tokioka replied "Oh no I talked to them and they will not do that. They want to be good corporate citizens"

Right!

If the Co-opt was a municipal power authority (the only good idea I can remember Mayor Kusaka having)we would have other revenue streams (like increasing taxes) to subsidize the up-front costs of moving to real renewables and cut the stranglehold of being dependent on oil.

Instead we are sinking in a sea insurmountable debt which can only be paid back by doing what we are doing until we can't to it any more.

Lack of political will then and lack of political will now is the 600 lb gorilla in the room.

Ed Coll said...

Read the title of this post as Gomer Pyle would have to put a smile on such a serious pickle.

The term GOMER is originally an acronym, meaning "Get Out of My Emergency Room". It originally referred to malingerers who were always on sick call, trying to get out of their duties.

People who stand around talking green and wasting time are now known as "Lawn Gomers".

Anonymous said...

"...Kalepa Ridge, which G&R was already eying.."

Where'd you get that, Joan? Or did you mean Pacific West energy?

Joan said...

No, I meant G&R was already looking to lease some of that land, presumably for the ethanol project when it was still a player.

As to where I got that, all I can say is from very reliable sources.

Anonymous said...

Which side of the ridge?
The East side is mostly DHHL. And I thought the west side was Grove Farm.

Anonymous said...

I think your source meant will Maloney and G&R Ag Energy which was a to be a partnership between Pacific West, G&R and a major equity partner. G&R was to be a very minor player in that venture. It was more of the name and ag assets being used than the actual entity. But that's pau now in any case.

But just to help correct a couple of your statements: 1) G&R, Inc. is in fact still owned 100% by the Robinson family. 2) It wasn't anticipated that the ethanol would be sold to KIUC, but rather the electricity generated by burning bagasse. The ethanol would be sold to oil companies that would use it versus importing ethanol from outside Hawaii to meet the State mandate.

Joan said...

Which side of the ridge?

It's on the mauka back side of that ridge, on the right as you drive up to Wailua Falls.

To anon. 3:07, thanks for your corrections, which I have noted in the post. Still, my point about KIUC needing/wanting the energy, even if it's derived from burning bagasse, is the same.

Anonymous said...

Doesn't KIUC have some sort of mandate to be using more poer from renewable sources by a certain date? It may be self imposed. I believe that's why they're currently interested in any power generated by renewable fuels.

Anonymous said...

"Or are they planning to bail down the road a piece, and let the government kick out the kupuna?"

How could you say that when the Robinsons have been taking care of their employees and tenants for over a century? Due to their relationship with their employees, the employees consistently voted down union membership. The company remained non-union umtil they were forced to in buy-out of Olokele Sugar in which C. Brewer and its union demanded that the G&R workers join. Further, at their own expense, they have protected the culture and lifestyle of the 250 Native Hawaiians living on Niihau. Sorry, Joan, but you should do more research before you go disparaging people with your second-guessing of motivation and intention. I'd give G&R and the Robinsons the benefit of the doubt. I think you're anti-business prejudice is showing a bit much.

Anonymous said...

This guy never lived under the Robinsons. Yes they take care of their people, just like the plantations of the Old South did. Talk to some of the older employees and they tell of how they had to get off the road if a Robinson was approaching. Or how about the families who were evicted because a son had some weed growing in the back yard. On Niihau, no tobacco,no liquor and you have to attend a Calvinist church right out of the 19th century. And God help you if you vote for a Democrat.
I'm not down on them, they are responsible for preserving the Hawaiian language and have held off on development of their lands but make no mistake, they rule with an iron hand.

Anonymous said...

I replied to Anon. Sept. 12, 2008 3:28 PM in comment form. It is not showing. Should I have bothered?

I’m disappointed that you now appear to exclude comments simply on whim as opposed to those that one could broadly describe as objectionable in some way. Why should one waste the time of composing a comment if you are going to arbitrarily exclude it? Sure it's your blog; you can do anything you want. But if you are simply preaching to the choir, then say so and I won't bother to read or comment here anymore. But if you're actually trying to promote discussion between opposing viewpoints, then you current exclusions are not favoring that. Why not be up front about what your true policy is as most journalists of integrity do. What you said is the past about not posting certain comments is not what’s happening now.

Joan said...

Relax. The comment moderation function doesn't work perfectly and sometimes I don't get comments, and other times I get so many at once that one occasionally gets overlooked or accidentally deleted. I'm not censuring opposing points of view, as you would know if you're reading comments.

Since you don't use a name, and didn't tell me when or what you posted before, I can't search for your original comment, but if you want to try again, you're welcome to do that.