Hawaiian Commercial and Sugar Co. is at the center of an important water decision on Maui. Civil Beat covered the issue in an article at the end of May. The company was represented in the article, but HC&S Manager Chris Benjamin wasn’t available for an interview. The following is the complete transcript of an interview with him after the story was published.
MICHAEL LEVINE: From reading the article, you can see the angle I’m coming at it from is trying to understand not only the needs of HC&S today but what the future needs will be in that area and looking at the precedent of Wailuku Water and that kind of transition from sugar to another operation. Are there assurances or investments that can make the community feel like you guys were looking for water for sugar purposes and not water just to have the water? Is the idea that you’re getting it for sugar purposes? Is that the goal?
CHRIS BENJAMIN: Absolutely. That I can’t state emphatically enough. I think that the whole notion of using water for other purposes — and I’m not going to get into the Wailuku Water situation because that’s not us and I can’t speak for them — but the notion of using water for other purposes is a red herring. First there is a basic issue of permits. Regardless of what happens with the interim in-stream flow standard setting, there is a permit process that you have to go through to utilize the water for any purpose. And if that purpose is no longer a valid purpose, you’ve got to go back and get permits. So I think, again, it’s a bit of a red herring to say that we’re trying to get this water for something else because the IIFS is only one step in the process and then you have to go through the separate permit process, and those permits are very specific about what you can use the water for. I said back in October, I said in December and I said again on Tuesday (May 25) in the hearing, we want this water for agricultural purposes, most likely sugar but if we go into biofuels it could be a different crop. But if we ever shut down our sugar operation or we’re not using it for agricultural purposes, we fully understand that our access to that water is subject to another permit process.
That’s sort of the legal answer, but we’ve also been extremely clear about our intent to keep agriculture alive on the island. We’ve invested tens of millions of dollars over the last several years in improving our operation. We have tolerated significant losses. We could have cut our losses a couple years ago when the drought hit and said we’re ready to get out of the business, and we could have at that point used the water for something else. If we really have the ability to do it in the future, we could have done it a couple of years ago, but we didn’t do it. We kept investing in the business, we kept tolerating the losses. We’re not going to tolerate them forever, but I think that shows our commitment to trying to keep this agricultural operation going.
ML: There were a couple of things I wanted to address when you were talking about the permits. Now I’m not a lawyer either and this is not my area of expertise, but would you say that the permit process is less burdensome than the in-stream flow standard establishment process?
CB: I honestly don’t know, and that’s not an evasive answer. I am no more knowledgeable, maybe less knowledgeable than you are about the permits. All I know is that what I hear is that one of the biggest obstacles to any sort of development on Maui is getting water permits. If it were that easy, I don’t understand why there would be so many projects that are essentially dead because of this show-me-the-water provision, and the difficulty of getting permits. But I’m afraid I’m not the right person to answer the question related to the relative ease or difficulty of getting water permits. But separate from the water permit issue, I indicated on Tuesday that we would absolutely commit to reporting any changes in our use of the water, and if there were changes, we fully understand that the commission has the ability to come back and modify its decisions. So even if you forget about the permit process, we have not balked for a second at the notion of having these IIFS settings contingent on our continued use of the land for agriculture.
ML: Let me delve into the agriculture question a little more. I know biofuels is big on the horizon. I’ve seen a few different written statements where you talk about transitioning the business in that direction. In terms of water use, I’ve heard, and this speaks to my lack of knowledge about agriculture, that sugar is a particularly thirsty crop. And right now the model that you’re working on is that after the sugar is extracted, the bagasse is burned and that is used for the energy. That is what we’re talking about?
CB: Well, that’s the current model. That’s how we produce energy from sugar today. But in the future we could be growing crops specifically for energy and not producing any sugar out of the process. Turning the whole plant, whether it’s sugar or a different plant, into energy.
ML: Some of the other alternative plants, would you say that they are less thirsty, they require less water to produce an equal amount of energy on the same amount of acreage?
CB: I was about to say ‘yes’ to the part about other crops being less thirsty, but then when you added in the part about producing the same amount of energy, that’s where it gets tricky because it is definitely true that sugar is a relatively thirsty crop, and I’ve said that to the commission, but it isn’t known whether less thirsty crops can produce enough biomass in this climate. I’ve acknowledged to the commission that we are looking at the viability of less thirsty crops. In fact, it was either in my October oral argument or in my testimony in December that I said my hope is that someday, we may be able to grow a less thirsty crop, produce energy, and reduce our use of water. So that is absolutely a long-term possibility. The challenge that we have is in preserving the plantation in the meantime. If I could step back for a minute, one of your questions that you emailed (Alexander and Baldwin spokeswoman) Linda (Howe) is ‘what is this case about?’ And in my mind, from a legal standpoint, the case is about maximizing the public interest from the allocation of this water. That gets into various on-stream uses versus off-stream uses that we can talk about it a minute.
I think that the case in a broader sense is really maybe a key determinant of long-term sustainability in Hawaii. Let’s put aside for a second the issue of taro farming, because we have no squabble or no disagreement on taro farming. In fact on Tuesday’s hearing, we supported the release of the water to the taro farmers. Where the debate really gets very difficult, and we feel very strongly on one side and I can understand why the environmentalists feel strong on the other side is with respect to putting water back in the streams where there already are healthy fish populations, and taking that away from agricultural and other off-stream uses. And where it’s going to get very challenging is when the state right now is looking at how to reinvigorate agriculture. Everything from small upcountry farmers to larger-scale organic and other farms to large-scale agriculture for biofuels, and the state has this 70 percent renewable mandate by 2030, and they’re talking about bringing hundreds of thousands of acres of land back into cultivation to grow crops for biofuels, etc. etc., all of that is going to be significantly in jeopardy if we choose to put large amounts of water back into streams, and again, I’m not talking about where there’s taro farming, we can get back to that in a minute, but where the water is just going to flow, whether it ever gets to the ocean or not, the only potential benefit of that water is going to be increase of populations of fish that are not endangered in the first place. That’s the challenge that we face, and that’s really what this is about.
Now, the attorneys get clients who are taro farmers and they come out and they talk about taro, but that’s another red herring because if you look at these 19 streams that were just ruled on in East Maui, of the streams that we divert there is only one stream that has any either current or potential taro farming, and that was the stream that we fully supported the release. On the West Maui side, in the Na Wai Eha case, if you go back and look at the testimony, there were 50 taro farmers that testified that they did not have enough water. 47 out of 50 are either getting their water off of the same diversions that we get our water off of or they are above the diversions and therefore will not in any way be impacted by this decision. And so, yes they say the taro farmers in West Maui don’t have enough water, but what they don’t tell you is that 47 out of 50 don’t get their water from the stream below the diversions. They either get it above the diversions or they get it from the diversions. So there’s a lot of misinformation out there and a lot of people try to make it into farmer versus farmer, little guy versus big guy, but the reality is that this is about stream restoration versus off-stream uses, and I would submit to you that if we continue down a path of releasing significant amounts of water back into the stream to flow to the ocean, the sustainability of Hawaii, both from a food and an energy standpoint, is going to be significantly challenged.
I sat through a five-hour meeting of the Hawaii Clean Energy Initiative steering committee on Thursday where the primary discussion was about how we get land back into agriculture to grow crops to help our energy independence. And this came two days after the hearing in East Maui, and these leaders, and they’re leaders from all walks of Hawaii life, not just business but agricultural leaders and community leaders, are extremely concerned about this trend that seems to be emerging. So that’s my response to ‘well, what is the case about and what are the implications of it.’
ML: If we’re talking about maximizing the public good that comes from the water, then if the goal eventually is to have HC&S be a biofuel company, are there more efficient ways of using the water than burning sugar plant?
CB: Yes, there are, but we don’t know what is going to be the most viable. What we have to is we have to figure out what crop is right, what conversion technology is right. Let me first say that one thing we know we don’t want to do is we don’t want to take sugar and ferment it to make ethanol. That is not going to create enough energy value, it’s not a financially viable thing, and it’s just not really the right end-game for Hawaii. What we need to do is we need to find new technologies for converting biomass, whether it’s the sugar part of the plant or the fiber part of the plant, into energy at much higher yields. So instead of burning bagasse and producing electricity, which is a very primitive and much less efficient way to produce electricity, if one of these cellulosic conversion technologies would be proven viable, I believe we could create much greater amounts of energy than we do now with the same plantation. And it is possible that we could do it by growing a different crop. So yes it is absolutely possible to transition to an alternative means of converting biomass to electricity, and it may be possible to convert to less thirsty crops, but the reality is that any of these things are probably at least five years off. And they’re five years off because there is a two- to three-year development process once you’ve chosen the technology and chosen the right crop. And we’re still two or three years away probably, some people think maybe five or more years away, from knowing which of these technologies is going to work. There are a hundred different competing technologies right now. It’s a huge focus for people. A lot of people locally — there are a number of companies Hawaii Bioenergy, Ulupono Initiative, Clear Fuels, Aina Koa Pono — they’re all looking at various technologies for producing energy from biomass, and it’s still, I won’t say it’s in its infancy because there’s stuff making good progress, but there’s a still process that we have to go through to figure out which one is right and then develop the plant.
So if we just say it’s going to be five years before we can make that conversion, we’ve still got to stay in the sugar business for the next five years. And the only way you can remain viable in the sugar business as a bridge strategy, if it’s a bridge to an energy model, is to grow enough sugar cane so that you can stay profitable because if this plantation shuts down, within a year or two, all of the infrastructure that we’ve invested in and maintained over the years will be virtually useless. We spend millions of dollars every year maintaining this infrastructure. If we shut down this operation, these lands went fallow, guinea grass took over, and irrigation systems rusted and fell apart, to ever get that back would be cost prohibitive. That’s one of the reasons that we feel very strongly about trying to stay viable in the sugar business in the near-term so that we can transition to that model that you’re talking about where maybe we’re growing a less thirsty crop and maybe we’re using a technology to get a lot more energy out of the biomass than we are today. We’re using hundred-year-old conversion techniques — we’ve put a lot of innovation into our power plant, it’s as efficient as it possibly could be, but it still is burning bagasse as opposed to some of these newer-generation conversion technologies. We’re combusting the bagasse, which is a very old approach, but we’re doing it with state-of-the-art equipment. It’s just a question of whether there is a better way to convert the biomass to energy. And I hope that there will be.
ML: One thing I try to address in my story and maybe you can speak to is the idea that establishing the in-stream flow standard now when sugar is still the business model and it still has a chance of surviving, and there are hundreds of jobs hanging in the balance, and all these future impacts of keeping this land productive. I’m not pointing the finger and saying it’s intentional, but somebody could argue that now is a good time for HC&S to have that in-stream flow standard established. You have a lot of factors on your side that may not be on your side in five years or 10 years. What would you say to that?
CB: I would say two things. One thing is it’s an interim in-stream flow standard. So if at some point in the future, we needed less water, the commission has the ability to come back and review. I’m not a lawyer, but my understanding is that the reason it’s called an interim in-stream flow standard is that it is not a permanent decision. I think that (Hawaii Department of Land and Natural Resources Chair) Laura (Thielen)said that in your article. I think you quoted her as saying that. So that’s number one.
Number two is that we didn’t choose the timing for this. We didn’t file these petitions and seek these contested case hearings. If someone is suggesting that we’re trying to set these now when we’re thirsty as opposed to later when we’re not so thirsty, this is in no way of our choosing, this timing. We would very much like to have our current uses protected until such time as it could be revisited if and when at some point we don’t need as much water.
ML: Let’s say in five years from now or 10 years from now, some time in the not-too-distant future, let’s say HC&S is a successful energy production company and you’re growing a crop that requires much less water than sugar does today. You would not be opposed if somebody brought another petition and said they wanted to re-establish the IIFS?
CB: I’m not saying that it would need to happen through a petition, nor would I want it to happen through a petition. What the commission said to us is that if our usage changes — and we have to report on our usage every year — as our business model changes, as our usage changes, we will report back to them and the commission will have the ability to determine whether our uses of the water still justify the current diversions. Keep in mind that in the discussion on Tuesday, it was acknowledged by staff that we are water-short, we don’t have enough water. One of the commissioners was pretty adamant that we’re not using enough water while one of the other commissioners was pretty adamant that we’re wasting water, have too much water. So there’s a wide range of opinions on this. It’s not as if we get more water than we need. In fact, the best data point I can give you is that the commission staff indicated we are pumping the brackish water wells to the maximize feasible extent, and we’re doing that at great cost to ourselves. So if we had excess water, why would we be pumping at those levels? So if we go to a less thirsty crop, it doesn’t necessarily mean that we’re going to have extra water. We just might be able to then be more efficient and frankly get back to having enough water. We’ve always been a water short plantation throughout our history. We’ve never had as much water as we need. You might say ‘then well how can you survive?” Sugar cane is like grass, if you water it less, unless you completely starve it for water, if you water it less, it just grows slower; it doesn’t die unless you give it absolutely no water. So you can give grass or sugar cane varying degrees of water. There’s a linear relationship between how much water you apply and how much cane you produce. And so when I say we don’t have enough water, we don’t have enough water to get optimal yields out of cane plants. We can still grow it, it doesn’t die, we can still harvest it, but our yields fall when we don’t have adequate water. And that’s what will happen as a result of these decisions. We will yield less sugar from the sugar cane, we’ll make less money, and depending on what happens with sugar prices and our costs and fuel costs and labor and everything else, that will the determinant of whether we make money or not. So it’s not a situation where you can say we had too much water, and now we have the right amount of water, and if we use a less thirsty crop we’ll have too much water again. That’s not at all the case. We’ve always been water short, it’s just a question of how water short can we afford to be.
ML: One thing I wanted to ask you, point blank. Have there been discussions at HC&S or at Alexander and Baldwin for potential other uses for this land like real estate or urbanizing development or turning it into a water company like Wailuku? Have there been discussions like that?
CB: Absolutely not. Land development is obviously one of our business strategies We have 180 acres (near Maui Business Park) that A&B has recently received entitlements for. That took over 15 years to get 180 acres entitled. We have 35,000 acres of sugar cane land. The dent that could be made in your lifetime or my lifetime in that land for entitlement purposes and development is really very modest. So I think that again the notion of going and someday converting all this land into homes or whatever, I don’t think people that make those comments understand the magnitude of this farm. It’s actually 43,000 acres of land in total and 35,000 of crop acres.
ML: I understand the 35,000 acres. I hope I wasn’t saying converting ALL of it to urban development, but even if it was a tiny fraction, even if it was 500 acres or 1,000 acres like some of the proposed developments in Central Oahu. Koa Ridge is in the range of 800 acres. And that’s not small, but even if it were a number of acres like that, you could put thousands of homes and essentially build a new town in central Maui if it were urbanized. I guess what I’m saying is: Has there been discussion of ANY urbanization in what is currently sugar land?
CB: First of all we declared most of our cane land Important Ag Land, so we cannot do anything with that land. There is some land adjacent to around Wailuku and Kahului where there is a development that we’ve been looking at doing called Waiale, and that is a potential future development, but that is actually part of the county’s master plan. When we declared the IAL designation, the county actually came to us and said don’t you want to develop more in the Kahului area? Don’t you want to create more of a buffer so there’s more potential for development? It was actually the county that came to us and said why are you declaring all of these lands IAL? Shouldn’t they be developed? Yes, there are projects down the road in our development plans. The vast majority of them are not on cane land that we’re farming now. A couple of them are, but very small scale. I don’t remember the number of acres, but probably in the 500-acre range or something like that. So when you talk about 35,000 acre farm, a very very small fraction of it is on the drawing board or in the long-term plans for development.
ML: Let me take that one step further. Even that small number of acres, whatever it may be, would you say that whatever interim in-stream flow standard is determined for Na Wai Eha will have an impact on the viability of developments in that area? Obviously you’ll need a permit so I’m not saying it’s the final decision, but whatever that in-stream flow standard is established at, will that impact the possibility of developing even a few hundred acres into urban development in that area?
CB: Did you read my oral argument from last October [pdf], because I think we addressed the fact that the county could be impacted and the county’s needs for water for development, not just any development that we’d be doing. We’re not the only developer on the island. There are a number of other developers that would like to have water, and the county wants to support that because the county wants growth, so we indicated the potential impact on ourselves, on the county and on even the taro farmers, many of whom could run the risk of losing water. So we did identify that as a risk, but we are the last taker of water. The primary impact from this is going to be on HC&S because the county gets its water before we get it, and the taro farmers get it before the county gets it, so we’re kind of low man on the totem pole from a farming standpoint. The fact is that there could be days though where even the county’s existing water treatment plant could be water short, let alone new water for new development and then us. So that was what we tried to communicate to the commission, so I wouldn’t characterize it as just being our development activity, if any. It’s really about the sustainability of existing county needs as well as emerging county needs.
ML: I understand that obviously that you guys aren’t the only ones impacted. What I’m trying to understand is the in-stream flow standards that are being discussed now, the major argument of HC&S is the viability of the sugar business. That’s what we’re talking about. But I’m wondering if that in-stream flow standard is established at a higher standard, if more water is allowed to be diverted, so less needs to be left in the stream, does that increase the viability of a future development plans or future ideas that are on the table right now that aren’t part of the conversation? Could those benefit if the in-stream flow standard is established at a certain level?
CB: I don’t think so. I think, again, HC&S is the last taker of the water, which means that the county is going to get the water that it needs. First of all, no water flows directly from these streams to a development. It flows to the county. The county then decides who gets that water for residential or commercial uses. So the county could be impacted if the hearing officer’s recommendation was adopted, that could impact the county, and then that could have an impact on both existing and future users. So I guess that if you’re looking for a way to say that this is self-serving from a development standpoint, you could sort of say that “this could impact the county which could impact future development which could impact A&B so that’s why they’re in it.” Yeah, I guess you could draw that conclusion (laughing), but I think the point is that it’s the county’s use and the county even testified, and the county, believe me, is not beholden to A&B. They weren’t there to protect A&B. They were there to protect the residents of the island and they testified that they felt there should be a very measured and gradual approach to looking at these IFS because they’re in the full understanding of what the impact on the county might be.
ML: That gets to a lot of the questions I was asking. What I’m trying to get at, and I hope the story started to get toward it, was the idea that state law basically says, and I believe the Waiahole decision [pdf] tries to make clear that the burden is on the off-stream users to explain and justify why they need the water, and why it’s in the public interest that it be diverted from the streams and not the other way around.
CB: Your legal assessment is based on what?
ML: That’s based on my very limited understanding of the Waiahole decision from skimming it and from reading things about it. Am I reading it incorrectly? Is that not what someone should take away from that decision?
CB: The Waiahole decision is completely different than this situation. Waiahole was a situation where an off-stream user went out of business, shut down, and that water was no longer needed for those off-stream uses. And then it was up to the commission to decide what new off-stream uses had merit. We are an existing user. We’re the user that was granted the rights to the water 150 years ago, so it’s a very different situation in Na Wai Eha. Waiahole was about where an off-stream user went out of business, didn’t need the water anymore, and then the question was, “well what do we do with this unused water?” This is a very different situation where there is an existing user and so, again I’m not a constitutional lawyer either, but I think there are statements in the Waiahole decision from the Supreme Court that talk about the fact that there is no categorical imperative that establishes a priority of users [pdf provided by Benjamin]. In fact, it says that they’ve got to balance the various users to determine the best use of the water in the public interest.
I think that’s the first thing to understand, just at a basic level, is how different from Waiahole, because Waiahole was all about an off-stream user that went out of business. And then it was sort of a grab for the water and they had to balance the various in-stream and off-stream uses in making a ruling. This is where an existing user that absolutely is using all of the water, all of the water it can get, and now it’s a question of if we should take some of that away to put in the streams.
ML: That’s an important distinction to draw. The ultimate question I’m asking is, if HC&S at some point either shuts down or transitions to another business model, whether it be biofuel or some sort of urban development or whatever may come for this section of Central Maui, what’s going to happen to the water that is currently being used for sugar cultivation?
CB: The Water Commission then has every right to come back and take another look at how the water should be allocated at that point.
ML: I think that answers all the questions that I had. Is there anything that I should have asked that I missed? Is there something that the story fails to address that you think is important that people understand? Is there anything else that you’d like to add that you think is important that it be included?
CB: My hope is that people will recognize the far broader implications of this decision. It goes way beyond HC&S and in some ways it probably is more precedent-setting, and I’m talking really about both cases, Na Wai Eha and East Maui. What the Water Commission is doing now in some ways sets an even more important precedent than Waiahole, because again it is about taking water away from long-time existing users, in fact the company that built these systems for collecting this water in the first place, and puts it back into the stream for biological purposes. And where we come out as a society on that trade-off is going to help determine the long-term sustainability of our islands. Again, from both a food and energy standpoint.
ML: I think that sums it up very nicely. Thank you very much for making time for me on a weekend. I really appreciate it.
CB: No problem. Thanks Mike.