Pacific Biodiesel Occupies ADC Land In Keaʻau; No Lease, No Rent
by Patricia Tummons, Environment Hawaii, March, 2025
Less than 1 percent of the land nominally managed by the state Agribusiness Development Corporation is found on the island of Hawaiʻi, according to a pie chart in the agency’s most recent report to the Legislature.
That fraction is all in one small, 1.5-acre parcel near the mauka end of the Shipman Industrial Park in Keaʻau, just south of Hilo. The ADC purchased it in 2015 for $500,000.
Whether this land has, in fact, been managed at all in the nine-plus years since that acquisition is open to question. In the entire time the ADC has owned the land, it doesn’t seem to have collected any rent on it or leased it out to any party. County property tax records show the property is unencumbered.
Yet for years – at least seven, possibly more – the parcel has been used by Pacific Biodiesel Technologies, LLC, as a parking lot for its tanks.
Environment Hawaiʻi attempted to find out whether the private company pays rent for use of the state land and, if so, how much and to whom. Inquiries to Pacific Biodiesel and ADC were unanswered.
Just as Environment Hawaiʻi was going to press, the ADC produced a copy of a right-of-entry agreement, signed in August 2020, giving Pacific Biodiesel use of the property for parking and storage purposes. For this, Pacific Biodiesel pays no rent but is supposed to insure the state. ADC was asked if proof of insurance was ever obtained; no response was received before we went to press.
Why did ADC acquire the land in the first place? Questions to ADC about the rationale behind the purchase were referred to Becker Communications. According to Scott Ishikawa, a senior account director with the company, Becker Communications had “just been awarded a state contract to assist ADC with media relations.”
“The property had been purchased to house a proposed food waste treatment facility to handle items such as table scraps, outdated and off-spec produce, to create organic fertilizer,” Ishikawa replied. “However, project funding lapsed several years ago and has not been reappropriated.”
An Ambitious Project
More than a decade ago, the state, under the leadership of Governor Neil Abercrombie, was championing the idea of using crops and waste produce for biofuels. In April 2013, the governor’s office issued a press release announcing the award of $200,000 from the state Department of Agriculture to the Pacific Basin Agricultural Research Center, an agency of the U.S. Department of Agriculture. The award was to support PBARC’s “zero waste biofuel and high protein feed program,” the press release stated. (The award was actually made by the ADC.)
“Aside from the benefit of producing biofuel,” the press release said, “this technology has the ability to create another revenue stream for papaya and other tropical agricultural farmers… At full scale, more than 1,000 jobs are projected.
“While papaya was chosen as the initial feedstock, this technology can be applied to any plant material as a carbon source. In Hawaiʻi, other identifiable feedstock are unmarketable sweet potato, sugar cane, mango, albizia, and glycerol.”
Jimmy Nakatani, then head of the Agribusiness Development Corporation, is quoted as describing the project as “a major breakthrough that focuses on key components hampering the sustainability efforts of other micro-organism based fuel projects. … Using unmarketable plant and other waste materials drastically reduces this cost driver.”
A year later, in August 2014, Abercrombie’s office issues another press release, this time announcing the award of $1.6 million from ADC to PBARC.
On April 22, 2015, the ADC board heard a presentation urging approval of the Keaʻau parcel. Staffer Ken Nakamoto described this as an acquisition “needed in conjunction with our zero waste project.” According to ADC minutes, he told the board that the Legislature last session had allocated funds “to establish a zero waste demonstration facility on Hawaiʻi island for the purposes of scaling up the mini pilot project to determine if the heterotrophis algae/fungi can be produced on a commercial scale.
“ADC entered into a [memorandum of agreement] with Pacific Biodiesel to establish a temporary demonstration on PB’s property to work on the specialized equipment which may take months to assemble. ADC identified land in the W.H. Shipman Business Park to construct the permanent zero waste demonstration facility. The property is an ideal location to construct the facility because of its industrial zoning and its proximity to the PB facility.”
Scott Enright, chair of the Department of Agriculture, “commented that the land adjacent to Pacific Biodiesel in Keaʻau allows ADC to move forward. The original work was done by PBARC so now that we are taking it to commercialization but still in the demonstration phase this allows us to tie it in. The thought is that Pacific Biodiesel has the best track record to allow us to move forward just short of commercialization.”
The board approved of the purchase. The sale was recorded December 4, 2015.
Petering Out
The big plans to turn unsellable papayas, other produce, albizia, and who knows what else into fuel or feed seems to have fizzled.
In 2016, the Legislature appropriated $1.5 million for “plans, design, construction, and equipment for the Keaʻau facility to develop biofuel and animal feed in Keaʻau, Hawaiʻi.”
ADC’s reports to the Legislature for 2018 and 2019 report its expenditures on the zero waste project.
In fiscal year 2018 it had a budget of $25,000 for zero waste but spent $42,924. In 2019, the budget was again $25,000, but it spent $64,173.
Both reports contain an identical description of the accomplishments toward zero waste:
Reducing food waste, the reports state, is a strategy championed by UDSA PBARC. The ADC, PBARC, and Pacific Biodiesel Technologies “currently are engaged in a project regarding the development of algae grown on papaya waste as a biofuel and livestock feed.”
The sole achievement noted is the completion of plans and design for project-build out “in the adjacent lot to Pacific Biodiesel. The construction phase was put out to bid and did not receive any offers. As a result, the funds received for construction ($1.5 million) lapsed on June 30, 2018.”
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Editorial: In the Case of Keaʻau Lot, ADC Owes Taxpayers an Explanation
by Patricia Tummons, Environment Hawaii, March, 2025
The failure of the Agribusiness Development Corporation to collect rent on its Keaʻau parcel represents the loss to the state of a significant income stream over the years. If the state were to receive a modest 6 percent return on its investment of $500,000, that would pencil out to a rental rate of $2,500 per month, or $210,000 over the minimum seven years that Pacific Biodiesel, LLC, seems to have occupied the lot. If interest were to accrue on unpaid rent over time, the total owed by Pacific Biodiesel would be far higher.
The existence of a right-of-entry dating back five years is the only document the ADC has provided that gives some cover to the company’s occupation of the ADC lot in Keaʻau. But even that seems to have been made two years, or more, from the commencement of use of the property by Pacific Biodiesel. And it fails to explain why the ADC is giving a pass to a privately held company for all these years.
Another loss is to Hawaiʻi County. No property tax is collected on unencumbered state lands. But if the acre-and-a-half were under lease or permit, the county would have received tens of thousands of dollars in tax payments over the last 10 years. A neighboring parcel that is an identical size and also vacant has a 2024 tax bill of $7,921. Since 2016, taxes on that parcel add up to $55,193. Before the ADC purchased the adjoining lot, it was privately owned and the county would have been collecting property taxes on it of around $5,000 a year.
The January 2021 report of the Office of the Auditor on the Agribusiness Development Corporation pointed out the laxity in the ADC’s record-keeping. “For instance, when we requested documents we believed would be essential to the day-to-day operations of a corporation that manages land and properties … we were informed that the requested materials did not exist… In addition, we found that ADC’s recordkeeping is inconsistent, incomplete, and in many cases, non-existent.”
In the case of the Keaʻau property, Environment Hawaiʻi asked ADC asset manager Lyle Roe whether the ADC was receiving any rent from the Keaʻau property. Instead of a straightforward reply, Roe turned the question into a formal Uniform Information Practices Act request, to which he then replied.
According to that reply, “Agency requires additional time to respond to the request in order to avoid an unreasonable interference with its other statutory duties and functions.”
Not until we were hours away from going to press did the ADC provide the right-of-entry.
Pacific Biodiesel has enjoyed an excellent reputation over the years as a leader in waste-oil recycling and a champion of developing alternative fuels. That it has not paid rent to the state for nearly a decade is a black stain on that reputation.
The ADC should immediately explain how this rent-free occupation of state-owned land came about and why it should not cease at once. If it does not, then the Department of Business, Economic Development, and Tourism, to which the ADC is administratively attached, should demand an explanation.