A lease snafu could cause Aloha Petroleum’s Waiakea fuel depot property to revert back to the state.
The Board of Land and Natural Resources on Friday was scheduled to discuss an application by Aloha Petroleum for a new 35-year lease for a 2.6-acre property in Waiakea, on which various oil companies have kept petroleum storage tanks and other equipment since 1989.
Aloha was assigned its lease for the facility in 1996, and that lease was slated to expire in 2014. That year, the BLNR approved a 10-year extension of the lease — putting the new expiration date in May 2024 — with some conditions requiring the company to make about $300,000 of improvements to the site, consisting of new storage tanks or tank repairs.
However, Russell Tsuji, Land Division administrator for the Department of Land and Natural Resources, told the BLNR Friday that, while reviewing Aloha’s lease extension application, staff could not determine if those improvements had ever been made.
Because of this, Tsuji recommended that Aloha’s request for a 35-year lease extension be put on hold until the DLNR can inspect the site and determine its condition. The future of the lease, he said, will depend on the results of that extension.
“My guess is, it’s going to be a modified recommendation with quite a bit of conditions in there if we go forward with the direct lease,” Tsuji told the board. “The other option is the board could just say go to auction.”
Big Island BLNR member Riley Smith raised some concerns about the quality of the fuel storage tanks on the site, noting that the aging equipment could be susceptible to leaks and does not appear to have any system to contain any leaks that do occur.
Jennifer Metrose, Aloha’s general manager of terminals, said no fuel has actually been stored at the site since 2014. Currently, the terminal provides offices for Aloha’s transportation department and parking for commercial fuel trucks, which Metrose said are also not carrying fuel when they park at the end of the day.
Although the lease extension application calls the Hilo terminal “a critical part of the company’s operations” and claims that the company has long-term plans to get the fuel tanks operational again, Metrose said leadership changes at the the company have left its plans for the site unclear.
“Whenever there’s a new president, there’s a new … whatever,” Metrose said. “But we are always talking about what we would like to do for the future.”
But Smith said that in order to keep the state from potentially inheriting a derelict facility, any future lease extension likely will require the company to remove the fuel tanks and other infrastructure once the lease expires.
While the lease extension matter was placed on pause until the condition of the terminal is determined, the BLNR also had to address the fact that Aloha’s lease of the property expired almost a year ago.
When the lease expired in May, neither Aloha Petroleum nor DLNR seem to have noticed right away. According to Aloha’s application, leadership changes at parent company Sunoco caused the matter to fall through the cracks, while at the DLNR “nobody was looking” at the matter, Tsuji said.
Until a long-term decision about the lease is determined, Tsuji recommended the BLNR approve a revocable permit retroactively allowing Aloha to operate at the site beyond May 2024, with conditions including the posting of a $173,800 bond, conducting an environmental site assessment, and paying of about eight months of back rent of more than $7,200 per month.
The board ultimately approved the revocable permit, while the lease extension will be postponed until an unspecified future date.
Email Michael Brestovansky at mbrestovansky@hawaiitribune-herald.com.
