Interior Department officials on Wednesday announced they have reached a non-binding "understanding" with the operators of the Caneel Bay Resort at Virgin Islands National Park that possibly could lead to a rebuilding of the resort and a long-term concessions-type lease.

The agreement itself was not released, and it was not considered to be a memorandum of understanding. Rather, it essentially creates a framework for the two sides to move forward on getting the resort that was severely damaged by Hurricanes Irma and Maria in September 2017 back on its feet.

“Through our shared understanding, we can in good faith continue our work to rebuild  Caneel  Bay and re-enter negotiations toward a long-term lease of this treasured resort,”  said Assistant Secretary for Fish and Wildlife and Parks Rob Wallace in a prepared statement.  “I am hopeful our recent discussions will provide a path  to successfully negotiate a lease and support the rejuvenation of the island  in a way that benefits the community and future visitors to Virgin Islands National Park.”   

At a minimum, the agreement will allow Park Service contractors to return to the property to determine the extent of any environmental contamination there and construct a cleanup plan. What that analysis discovers, and how expensive it might turn out to be to address the contamination, will determine whether CBIA, LLC, which has operated Caneel Bay since 2004, is able to work out a concessions lease once the existing Retained Use Estate expires in September 2023.

That RUE has allowed the exclusive resort, which is surrounded by the national park, to be operated by CBIA without any payments to the Park Service.

“We are gratified by this significant step and the positive progress toward rebuilding  Caneel  Bay, helping return St. John to a world-class destination, and the important economic engine this will provide to St. John,”  said  Gary  Engle, president of EHI Acquisitions, LLC, under which CBIA operates.  “We share the National Park Service’s commitment to rebuilding  Caneel  Bay in a manner that protects and preserves the island’s natural and cultural resources.”    

From RUE To Lease

Back in 2010 Congress passed a law pertaining to the long-term operational fate of Caneel Bay. It instructed the Park Service to recommend whether the RUE should be renewed or if a more typical concessions lease for the resort should be assigned, which was the option supported by the agency. That law also specified that once the RUE expired, CBIA "shall transfer, without consideration, ownership of improvements on the retained use estate to the National Park Service" unless a lease agreement is finalized.

While talks aimed at agreeing on terms of such a lease supposedly started several years after that law passed, Engle testified to a House subcommittee in March 2018 that the negotiations never turned substantive. Park Service officials repeatedly have refused to describe the talks, though a former concessions chief for the agency has maintained that the talks were substantive.

In his appearance before the subcommittee, which was considering legislation to provide a six-decade extension to the RUE, Engle said such a lengthy term was needed to justify an investment of roughly $100 million to rebuild the tattered resort.

"If Caneel Bay is to be rebuilt, a sufficiently long-term and commercially reasonable agreement is necessary," Engle testified. "In the amount of required capital and time required to redesign and rebuild, and the time required to reestablish a resort in a highly competitive marketplace, a minimum 60-year term is necessary."

The legislative approach to securing the extension was just one option Engle was pushing to land such an unusual term. He actually had been working before and after the 2017 hurricanes to see the RUE extended for 60 years.

Months before the legislative effort arose in the fall of 2017, and while lease negotiations with the Park Service supposedly were ongoing, Engle reached out to Interior Department officials with hopes they somehow could extend the RUE even though the late Laurance S. Rockefeller personally had crafted the RUE with language specific that the resort grounds be transferred to the Park Service in September 2023.

On July 14, 2017, in response to an Engle letter from June 5, Virginia H. Johnson, the acting assistant secretary for Fish and Wildlife and Parks, told him that the "NPS does not have any legal authority to amend or extend the Retained Use Estate as requested in your proposal."

However, she pointed out, the agency had the authority and was "willing to negotiate a forty-year lease with you." Evidently unsatisfied with that response, Engle then wrote Todd D. Willens, Interior's acting assistant secretary for Fish and Wildlife and Parks at the time, on July 31 with the same request.

Willens, who had succeeded Johnson, reiterated what Johnson had told him.

"The NPS would like to work on a lease with your company that contains terms that are satisfactory to both parties, and that allows your company the sort of autonomy to operate Caneel Bay Resort that lessees typically enjoy," wrote Willens. "The NPS looks forward to working with you to address concerns that you raised while negotiating the lease with the NPS in 2014, such as concerns relating to reporting and planning requirements that would be applicable to your company under the lease."

Three weeks later, Hurricane Irma, and a week later Hurricane Maria, trampled St. John and substantially knocked down the resort.

Environmental Contamination

As part of the Park Service's approach to working on a concessions lease, outside contractors did an initial investigation of the Caneel Bay grounds to determine whether there was environmental contamination that needed to be addressed.

That 2014 environmental assessment raised questions of contamination from SVOCs -- semivolatile organic compounds -- often related to pesticides, and arsenic, according to some of the documents National Parks Traveler obtained through its FOIA.

"In addition, there are concerns for leachability of SVOCs, arsenic and mercury to groundwater," the consultant's report noted. The surveys also found concentrations of total petroleum hydrocarbons and diesel range organics above acceptable levels set by the Virgin Islands Department of Planning and Natural Resources.

While the assessment called for more extensive testing to determine the extent of these contaminants -- both across the ground surface and to determine depth of contamination -- additional records Traveler obtained indicated Engle refused to allow further testing.

That issue apparently has been resolved, as Wednesday's press release stated that "addressing environmental stewardship remains a top priority. The parties will work cooperatively and in good faith to define and develop any necessary actions concerning environmental matters at  Caneel  Bay. Following  Interior  and EHI reaching this agreement, the NPS will now resume environmental site assessments at the property to evaluate appropriate next steps, including whether and to what extent cleanup and remediation may be necessary."

What the assessment concludes "is necessary to inform details of a future lease."

Engle in the past has tried to be absolved of any responsibility for environmental contamination at Caneel Bay. In April 2019 he offered to walk away from the resort if the federal government would pay him $70 million and hold him harmless for any contamination. If that offer was rejected, Engle said he would claim "all rights of ownership" over the 170 acres the resort sets on.

The offer was rejected by Interior.

The lack of progress to resolving the matter has had potentially significant impacts for the resort's near-term future. Park Service staff in 2017 predicted it would require litigation to resolve the matter.

"If the RUE is allowed to expire without executing a lease, title to the 'Improvements' will need to be resolved and is likely to result in litigation with the NPS potentially having to purchase the 'Improvements' from CBIA," Gordy Kito, the Park Service's leasing program manager, wrote in a briefing document obtained by Traveler.

In that document, Kito pointed out that lease negotiations would need to begin in 2020 to have a concessionaire in place by the RUE's expiration in September 2023. 

Now, with the resort facilities still reflecting the wrath of those 2017 hurricanes, and the extent of environmental contamination unknown, it would appear that it will be long after September 2023 before resort lodging is back in place and operational.