A lawsuit claims the federal government has lost a legal claim to the Caneel Bay Resort/NPS file

A lawsuit filed against the United States on Thursday claims that the Caneel Bay Resort at Virgin Islands National Park legally belongs to the company that has operated it since 2004 and asks a federal judge to declare the Interior Department has no legal claim to the property.

According to the 26-page filing, the federal government lost its hold on the property in 2019 when it turned down an offer from CBI Acquisitions, Inc., to transfer the property and its title to the government for $70 million. Under that offer, CBI requested indemnity from any environmental liability tied to the property, "other than for contamination caused by Caneel Bay." Along with seeking that payout, CBI claimed it would still control the marina on Caneel Bay that services the resort and so any future operator would have to negotiate a deal to use it.

National Park Service officials, citing the pending litigation, declined comment Friday.

Laurance S. Rockefeller in 1956 donated the land on the island of St. John that today makes up Virgin Islands National Park. At the time, he held back roughly 150 acres for the Caneel Bay Resort. In 1983, the Jackson Hole Preserve, which Rockefeller had established, donated the land to the park; but it came with a Retained Use Estate agreement that gave the Preserve free use of the property and its facilities for 40 years. At the end of that four-decade period, September 2023, the RUE document dictated that the buildings and their improvements be donated to the Park Service.

While the Preserve initially held the RUE, it was passed down to other companies, and finally to CBI in 2004. 

In September 2017 the resort was pummeled by back-to-back hurricanes, storms that essentially put the resort out of business. Gary Engle, CBI's principal, then worked with U.S. Rep. Stacy Plaskett, D-Virgin Islands, to craft legislation that would extend the RUE for 60 years, a time period Engle maintained was needed to attract investors for the estimated $100 million it would cost to restore the resort's glimmer. But that legislation failed to gain traction.

In 2019 Engle offered to essentially terminate the RUE and sell the resort to the federal government for $70 million, a move that raised questions of whether he was properly interpreting the the terms of Rockefeller's RUE. Ani Kame’enui, the legislative director for the National Parks Conservation Association, told the Traveler  at the time that Engle exaggerated his interpretation of that document by putting conditions on how he could walk away from it.

“In the 1983 (RUE) paperwork, there is a reversion clause. But that reversion clause is not conditional," she told the Traveler. "So if he wanted to fully convey and transfer to DOI and just be done, he could. But he can’t do that with conditions."

The termination clause in the RUE does state that, "(S)uch notice of termination shall include an offer by Grantor (at this point, CBI) to convey and transferr to Grantee (Interior Department) as of the Termination Date fee title in and to all improvements located on the Premises ... and shall be accompanied by the form of an instrument to effect (sic) such convenyance and transfer which Grantor will execute and deliver upon acceptance by Granttee of such offer."

Engle gave Interior 180 days, as required under the RUE, to accept or reject his offer. If the requirements to "wire transfer" $70 million and indemnify CBI from any environmental contamination on the grounds were rejected, he claimed in 2019, and the latest lawsuit restates, then the "fee title to the Premises will immediately and automatically revert to EHI [a sister company of CBI] and EHI will have all rights of ownership over the Premises."

Long, Convoluted History

There's a long history in CBI's operation of the Caneel Bay Resort.

In 2010, Congress passed a law directing the Interior Department to weigh whether it was better to keep the facilities under the RUE or create a concessions agreement for the resort. In that law, Congress specified that if the property was turned into a leased concession, then "the owner of the retained use estate shall terminate, extinguish, and relinquish to the Secretary all rights under the retained use estate and shall transfer, without consideration, ownership of improvements on the retained use estate to the National Park Service."

Three years later, the Park Service, after studying which management approach made the most sense for the agency via an environmental assessment, recommended that the operating agreement be redefined as a long-term lease more in line with typical concessions agreements. The environmental assessment said that if the RUE remained in place, there could be impacts to land use, archaeology, cultural and historic resources, and species such as sea turtles and corals.

Indeed, a letter the national park's superintendent wrote in 2010 seeking a solicitor's opinion regarding the Park Service's authority to manage resources at Caneel Bay mentioned that RUE operators "over the years and without park notification destroyed half of a historic plantation’s slave village to install diesel tanks, trenched throughout the property cutting though prehistoric ceremonial sites, installed tennis courts, swimming pools, and sidewalks. In the past few years they have installed a modern floor in the plantation’s factory, and cleared with machinery along the shoreline resulting in the disturbance and erosion of materials from both the prehistoric record and the first European settlements on the island."

But that EA was never finalized, as talks were underway with CBI to reach a long-term lease. Whether any progress was made on negotiating a lease is debatable. While Park Service officials had maintained talks were continuing with Engle, he at the same time was reaching out to Interior Department officials to find a way around the RUE's 2023 sunset.

In December 2020, Interior officials announced they had reached a non-binding "understanding" with the operators of the Caneel Bay Resort 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 created 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 then-Assistant Secretary for Fish and Wildlife and Parks Rob Wallace in a prepared statement at the time.  “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.”   

Then, last July the National Park Service announced that it would seek competitive bids for the resort's lease.

But first the Park Service has to address environmental contamination on the property. Testing has detected a variety of wastes, some hazardous to humans, on nearly eight acres of the grounds of the once-tony resort. That testing found varying levels of arsenic, elevated levels of certain pesticides, and a "mixture of benign organic materials, plastics, metals, and CERCLA (Comprehensive Environmental Response, Compensation, and Liability Act) hazardous substances, including the pesticide DDT and polychlorinated biphenyls."

Cleanup of the wastes was expected to cost at least $6 million. That necessary cleanup put a hold on talks with CBI Acquisitions to reach agreement on an operations lease.