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HomeMy WebLinkAboutCOM 0825.025 2010-2012 Law Offices of Yeh & Moore THOMAS L.H.YEII tlyO;lava.net A Limited Liability Law Company MICHAEL w MOORE nimoore@lav a.net 85 W. Lanikaula Street,Hilo,Hawaii 96720-4199 Of Counsel: Telephone (808)961-0055 Fax (808)969-1531 JILL D.RAZNOV jdraznov cgmail coin September 28, 2012 Chairman Dominic Yagong Hawaii County Council 25 Aupuni Street, Ste. 1402 Hilo, Hawaii 96720 Re: Bill 292, Draft 1 Dear Chairman Yagong and Committee Members: This letter is submitted on behalf of Puna Geothermal Venture in opposition to Bill 292, Draft 1. The purpose of the bill, as stated by the Council, is to achieve reductions of noise in the evening due to drilling operations. However, the bill does not specifically address noise, but prohibits all drilling operations within an arbitrary radius of one mile of the nearest residence. PGV's opposition to the bill is based upon several grounds: 1. The bill is overly broad, ambiguous, and arbitrarily attempts to prohibit all "drilling operations" within a radius of one mile of"the nearest residence". The bill is not reasonably designed to accomplish the stated purpose, and will effectively prohibit all nighttime drilling operations, a result which we understand the Council is not proposing to accomplish. The bill can also result in the compromise of well integrity and plant safety. 2. The Council needs to take the time to understand that by prohibiting drilling operations in the evening, this can implicate concerns related to mechanical integrity of the well, substantially increase drilling completion time and costs, and result in negligible benefits in noise reduction, given the need to have pumps and mechanical equipment running even when drilling ceases. This will ultimately increase rates to consumers due to increased costs of drilling operations. 3. Notwithstanding the Council's stated desire to adopt a policy of restricting hours for drilling operations, the Council lacks authority or jurisdiction to legislate restrictions upon hours of operation, given the permits which have been issued by the Planning Commission, and the authority of DLNR and DOH to permit PGV to operate during evening hours. An ordinance which retroactively has the effect of amending permits issued by the agencies having the authority to issue drilling permits and interfere with PGV's vested rights will not be enforceable. Our reasons follow. Comm. ; • 2-.C. Zs Ref.To: Ar. Ref. Date, Law Offices of Yeh & Moore ATTORNEYS AT LAW A Limited Liability Law Company Chairman Dominic Yagong Hawaii County Council September 28, 2012 Page 2 Bill 292 Has Unwarranted and Unintended Consequences The bill is written so broadly that it will have the result of prohibiting any further drilling, and reflects a lack of understanding of drilling operations. While one might think that machinery and equipment can simply be shut down, this is not the case, and can increase risks to well integrity and plant safety. While increased costs is a valid concern which ultimately affects rate payers, this is not the source of PGV's primary concerns. Why Would "Drilling Operations"Need to Continue Even If Drilling Does Not? Mud has to be circulated in the well hole even when not drilling to keep the downhole drilling equipment cool and to prevent high temperature and pressure from building up in the wellbore. The Puna Rig mud pumps are direct drive from the drawworks so the rig motors would have to run all night. This is a generator of noise, and constitutes a necessary part of "drilling operations" which must absolutely continue during evening hours. The pumps are also powered by a rig generator at the well site, another source of noise. How Might the Prohibition on Drilling Operations Compromise Well Integrity, and Increase Risks? The well integrity could be comprised by drilling to casing point; having to stop and wait for the next day to run well casing; and then waiting for the next day to cement the casing. In some instances it takes at least 12 hours to run casing. One cannot run casing and wait for the next day to do the cement, running the risk of a compromised cement job. The wells are located in a high pressure and temperature environment. PGV has the experience of working in this environment and has been able to conduct safe drilling without being compromised in completing its wells safely. The agencies which issued well drilling permits to PGV, including DLNR and DOH, understand this and have not prohibited drilling during evening hours. Why Will the Prohibition on Evening Hour Drilling Operations Extend the Drilling and Noise Production Period? Restricting the drilling operations to day light hours only (assume 12 hours) would nearly triple the time due to the time to re-start the rig, the additional trips required to trip out of the well and trip in the well, etc. The extended drilling schedule means the hole would be open and unsecured that much longer, potentially leading to down hole problems, and more equipment breakdowns from excessive wear. Law Offices of Yeh & Moore ATTORNEYS AT LAW A Limited Liability Law Company Chairman Dominic Yagong Hawaii County Council September 28, 2012 Page 3 How Might Employee Safety Be Compromised? The extended drilling schedule also leads to the potential for more on-the-job accidents related to extended drilling hours. Consider the hours: a 30-day schedule working 24 hours/day is 720 hours; a 90-day schedule working 12 hours/day is 1,080 hours. Any well drilling operation, whether for geothermal power or otherwise, involves risks. PGV has safely conducted drilling in an environment which requires that drilling be allowed to continue during evening hours. It has complied with specific noise standards established by the agencies with expertise, and with Ormat's safeguards and experience, has a proven track record for conducting the drilling safely. The Council needs to help, not hurt in this process. PGV has listened to the concerns and will make continued efforts to improve upon sound control measures. Jurisdiction As the Council may recall, when discussion took place as to the ability to use Geothermal Asset Fund money to fund community benefits projects, the Council was advised by Corporation Counsel that the use of the asset fund was restricted by the Geothermal Resource Permit ("GRP")to geothermal impact mitigation purposes. Your Energy Sustainability Committee received similar advice from Corporation Counsel during the September 18, 2012 hearing on Bill 292. When the Planning Commission issued the GRP to PGV, it did so under the authority provided to it under Chapter 205, HRS. The Commission was granted authority under statute to issue geothermal resource permits and to set conditions of drilling and operations. No restrictions on hours of drilling operations were included in the current GRP, let alone restrictions on such operations within a designated radius of residences, as Bill 292 also proposes to do. PGV was required to obtain the GRP through a process which included public hearings and testimony. The purpose of Bill 292 is clearly designed to restrict the operations of PGV which have already permitted under the GRP, which was vested with the authority to issue the GRP and conditions of operation. The GRP established specific noise standards for day and night time hours which PGV must comply with, and PGV continues to undertake steps to reduce noise during all hours of drilling. See Conditions 19, 20 and 22 of the GRP. PGV has invested substantial time, cost and effort in reliance upon the terms of the GRP, and continues to comply with the GRP conditions. • Law Offices of Yeh & Moore ATTORNEYS AT LAW A Limited Liability Law Company Chairman Dominic Yagong Hawaii County Council September 28, 2012 Page 4 Pursuant to HRS Section 342F-3(a), the Director of the Department of Health ("DOH") has the statutory authority to prevent, control or abate noise pollution in the State of Hawaii. As such, prior to drilling the last well, PGV received from DOH express authority to conduct the most recent drilling operations (including drilling during night time hours) for KS-15 under Permit No. V-677, subject to conditions and restrictions which DOH established. The County's attempt to restrict noise by limiting hours of operation is further pre-empted by the authority of the State to regulate noise and to issue permits for operations. DOH has adopted night time and day time noise standards which regulates noise based upon its use classification. Imposing a blanket condition which prohibits drilling activity also interferes with DOH jurisdiction in this regard. Related to the issue of jurisdiction, it is also within the purview of the Department of Land and Natural Resources ("DLNR")to issue drilling permits under the provisions of HRS Chapter 182. As an example, DLNR issued a drilling permit for Well KS-15, the most recent well, and PGV was authorized to drill during evening hours. PGV's drilling permits from DLNR similarly do not purport to restrict drilling hours within any specified radius of residences. The County's authority to enact Bill 292 is clearly pre-empted under State law, which grants these agencies the authority to regulate PGV's operations. Thus, HRS Section 46-1.5 (13) provides an express limitation upon the County's powers, as follows: "[e]ach county shall have the power to enact ordinances deemed necessary to protect health, life, and property, and to preserve the order and security of the county and its inhabitants,on any subject matter not inconsistent with or tending to defeat, the intent of any state statute, where the statute does not disclose an express or implied intent that the statute shall be exclusive or uniform throughout the State." Under State law, the Planning Commission and not the Council had the authority to issue the GRP to PGV and to set conditions of operation. DOH and DLNR have the authority under state law, to issue drilling and noise permits, and to regulate hours of these activities as well as to set noise standards. Bill 292 is preempted by the statutes authorizing DLNR and DOH to issue drilling permits and allow operations during night time hours. These agencies also have the right to enforce permit conditions, but PGV has been operating in compliance with such conditions, which are based on long established and accepted health standards. Law Offices of Yeh & Moore ATTORNEYS AT LAW A Limited Liability Law Company Chairman Dominic Yagong Hawaii County Council September 28, 2012 Page 5 Vested Rights and Zoning Estoppel Adopting subsequent legislation which attempts to change PGV's GRP permit conditions and entitlements after the fact also implicates judicially acknowledged doctrines of vested rights, and substantive and procedural due process issues. These doctrines preclude government from rendering ineffective previous governmental approvals upon which an owner of property has vested rights and upon which the owner has relied upon to his detriment. In order to balance the uncertainty of an owner undertaking the development of private property in a complex land regulation and development process, against the government's desire to exercise its police powers, the courts have responded by creating the doctrines of vested rights and zoning estoppel. As in this case, both vested rights and zoning estoppel arise where government attempts to create new regulations, or to amend existing regulations, which render prior approvals ineffective. As a general rule, government may enact prospective regulations (subject the preemption doctrine discussed above), including those that may impact property uses, and change the rules regulating those uses. However, no law may have retrospective application unless expressly stated or obviously intended. HRS §1-3. The constitutional and equitable principles limit the power of government to change the ground rules without due process and without compensation, or when to do so would be fundamentally unfair to the property owner. Vested rights turn on whether a property owner has acquired property rights which cannot be taken away by government regulation. County of Kauai v. Pacific Standard Life Insurance, Co., 65 Hawaii 318, 325; 653 P.2d 766 (1982). Interference with vested rights violates the due process clauses of the US Constitution and Hawaii Constitution. Waikiki Marketplace v. Zoning Board of Appeals, 86 Haw. 343, 354, 949 P. 2d 183 (1997). Equitable estoppel's focus, on the other hand, is on whether it would be unfair to permit the government to exercise its regulatory power to change regulation after its acts or omissions have induced a property owner to alter his position in reliance on"official assurance"that a particular use can proceed. Life of the Land, Inc. v. City Council of the City& County of Honolulu, 61 Hawaii 390, 453, 606 P.2d 866, 902 (1980). The Hawaii Supreme Court provided the following formulation of zoning estoppel: The doctrine of equitable estoppel is based on a change of position on the part of a land developer by substantial expenditure of money in connection with his project in reliance, not solely on existing zoning laws or on good faith expectancy that his Law Offices of Yeh & Moore ATTORNEYS AT LAW A Limited Liability Law Company Chairman Dominic Yagong Hawaii County Council September 28, 2012 Page 6 development will be permitted, but on official assurance on which he has a right to rely that his project has met zoning requirements, that necessary approvals will be forthcoming in due course, and he may safely proceed with the project. Id., citing Allen v. City & County of Honolulu, 58 Hawaii 432, 571 P.2d 328 (1977). The Hawaii Supreme Court in applying these doctrines has effectively merged the two into one approach, noting that the two analyses rarely produce a different result. Id. As noted by the court in Nukolii, citing Callies,Land Use: Herein Vested Rights, Plans, and the Relationship of Planning and Controls, 2 U. Hawaii L. Rev. 167, 174 (1979): The critical questions become: (1) What reliance is `good faith'; (2) what sums are `substantial'; (3) what constitutes `assurance' by officials; and (4) when does a developer have a right to rely on such assurances? In answering the third question, the court in Nukolii noted that: Life of the Land therefore teaches that final discretionary action constitutes official assurance for zoning estoppel purposes. This rule acknowledges the incremental nature of the modern development process and strikes the appropriate balance between competing private and public interests. It preserves government control over development until the government's own process for making land use decisions leaves nothing to discretion. A proper understanding of the last discretionary action in a governmental process will lead to predictable results consistent with the important public policy considerations that underlie Hawaii's estoppel rule. Nukolii, 63 Hawaii at 328-329, 653 P.2d at 774. In this matter, the final discretionary action was the issuance of GRP2 by the Commission. PGV had a right to rely upon the conditions of approval in the GRP which set forth the conditions for its drilling of wells. In this instance, GRP 2, the subject discretionary permit, was issued on February 6, 2001, and provided PGV with the authority to increase production from 30 MW to 60 MW. Since Law Offices of Yeh & Moore ATTORNEYS AT LAW A Limited Liability Law Company Chairman Dominic Yagong Hawaii County Council September 28, 2012 Page 7 then, PGV has entered into power purchase agreements, the most recent of which require it to produce an additional 8 MW under a rate structure and cost analysis which is predicated on the conditions of GRP 2. PGV has invested substantial sums in the production facility in reliance on these entitlements. In good faith reliance on these conditions, PGV proceeded further with binding itself to the recent power purchase agreement and to conduct drilling. PGV has expended substantial sums and incurred contractual obligations with a set rate structure in reliance upon its ability to drill both in daylight and night hours. Hence PGV's rights to conduct drilling operations in accordance with the conditions set forth in the GRP have vested, and the Council is estopped from now limiting PGV's rights granted thereunder. Enforcement of the bill would also result in"taking" issues and a deprivation of PGV's rights under the GRP. Conclusion For the reasons stated above, PGV strenuously objects to the Council's current attempts to change the conditions under which PGV must operate. Restricting drilling operations to certain hours is unwarranted, will not accomplish the perceived benefits of Bill 292, and the County does not have jurisdiction to prohibit PGV's drilling operations during night time hours. Notwithstanding the above, PGV has heard the public's and the Council's concerns about noise, and will continue to endeavor to implement noise reduction techniques in future drilling operations should they occur. Very truly yours, LAW OFFICES OF YEH & MOORE By THOMAS L.H. YEH cc: Planning Director Office of the Corporation Counsel Puna Geothermal Venture TLHY\db