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.