Conflicts sink Midway tourism venture
By Jan TenBruggencate
Advertiser Science Writer
Months after contractor Midway Phoenix Corp. and the U.S. Fish and Wildlife Service agreed to walk away from an arrangement that brought 2,000 tourists a year to Midway Atoll, the hard feelings persist.
Midway Phoenix's last employees left Midway at the end of April, more than five years after the firm took over management of the refuge that is rich in wildlife and World War II history.
The remote area 1,300 miles northwest of Hawai'i is a wonderland of fish, coral reefs and seabirds. The atoll is where U.S. forces turned the tide against Japan in the war in the Pacific.
A new contractor is keeping the power on and the water purifiers operating pending a decision by the Fish and Wildlife Service on future management.
The agency insists it plans to reopen the atoll to visitors of all kinds. Midway Phoenix representatives say they doubt anyone but biologists and college students on research trips will be welcome.
Company officials say the Fish and Wildlife Service never wanted the kind of ecotourism it signed up for with Midway Phoenix in 1996.
"I just can't see us sitting back and having the Fish and Wildlife Service carry on with this charade, this smoke and mirrors," said Bob Tracey, executive vice president of Midway Phoenix. "Why weren't they actively engaged as our partner?"
The Fish and Wildlife Service found Midway Phoenix to be a difficult partner that failed to pay bills and "failed to address operational deficiencies," said Hugh Vickery, a spokesman for the U.S. Department of the Interior in Washington.
Despite the rancor between the contractor and the wildlife service, the future will see restored public access to Midway, both for its military history and its wildlife, said Craig Manson, assistant secretary of the Interior for Fish and Wildlife and Parks. He is an Air Force veteran and a colonel in the Air National Guard.
"We are committed to preserving the military heritage of Midway as well as the wildlife values. I don't think those are incompatible," Manson said. "There will be public access to Midway."
The Fish and Wildlife Service proposed a grand experiment when it took over Midway from the Navy. For the first time, it would try to conduct a major commercial tourism enterprise within a wildlife refuge.
It selected Midway Phoenix, a subsidiary of defense contractor Phoenix Air, to run the Midway airport and harbor, to keep the power and water systems operating, and to conduct an ecotourism operation that allowed tourists to stay in restored barracks while visiting the site of the Battle of Midway and a remote coral atoll where millions of seabirds nest.
In exchange for keeping the facilities on Midway functioning at no cost to the government, the company was allowed to keep its profits from its ecotourism business and airport operations.
Tracey said it started out well, but the contractor soon determined that those in charge did not really support the concept of commercial activities at the refuge.
"We tried our hardest to make it work, but we didn't get a fair shake," he said. "They wouldn't allow us to have revenue streams."
Vickery said his review of the documents in the Midway file suggests the service bent over backward to accommodate Midway Phoenix, within the overall mission of protecting the ecosystem.
"They claim that additional restrictions were put on them that made it unprofitable," he said. "The restrictions were clearly spelled out in the (original) agreement. If anything, we eased up on them."
An example: Midway Phoenix arranged to have cruise ships stop at Midway, providing a lot of people who would pay to take tours of the island.
The company said the Fish and Wildlife Service so restricted the visits that they couldn't be made to work. The biggest ships were required to anchor outside the lagoon and bring visitors to shore in small groups. Without being able to dock at the harbor, ship operators decided it wasn't worth the trouble.
Vickery said the service allowed smaller cruise ships in, but concluded the big ones were too much of a risk because of their deep draft.
"Allowing cruise ships was a concession from the original agreement to allow them to make some money," he said. "But the big ones are too deep for the lagoon, and they were not allowed in for safety reasons."
Don Pressnell, the last Midway Phoenix island manager, said he was repeatedly prevented from doing things that were needed to make the island profitable for the company.
"It was not a partnership. It was a partnership they wanted out of," he said.
Midway Phoenix operated the atoll for more than five years, and by the end of that time, both sides wanted out, Vickery said. One major issue was fuel. Honolulu is the closest port, and fuel is needed to run all Midway's systems.
A $2 million congressional appropriation gave the island a one-time fill-up. Midway Phoenix and the Fish and Wildlife Service still disagree on how the fuel was to be handled. The company says it used some of the fuel to run generators and pumps, but that it also sold fuel to passing ships and planes, often at a profit.
"We viewed that as a subsidy," Tracey said. "We paid the government back by running a free airport for the Commerce Department, for the Coast Guard ... Every nickel we ever made on that island we reinvested into salaries, the doctor, maintaining (buildings and equipment), termite protection. We built a million-dollar French restaurant."
Vickery said the fuel supply was a one-time deal and that the Fish and Wildlife Service was expecting to collect money from fuel sales and to use the money to buy more fuel.
"The concern was that Midway Phoenix was draining the tanks and not repaying for it. We, the government, needed fuel out there," Vickery said.
Tracey countered that the Fish and Wildlife Service was not paying the company back for many of the services it provided, including telecommunications. Ultimately, the service and the company sat down and on March 6 of this year signed a "no-cost settlement agreement" in which both sides dropped any financial claims.
"The sides were talking a few million dollars each. Both sides would incur tremendous costs (litigating the issue). We felt the best thing to do was to shake hands and each side goes home," Vickery said.
That might have been the end of it, but Tracey said he became angry when he found out that the agency had hired another company, GeoEngineers of Oregon, to keep the power and water systems running on Midway for six months for a fee of $1.3 million. With that kind of money as a subsidy, Midway Phoenix could have kept running a full-scale ecotourism operation for a year, he said.
Instead, there are just 13 people on the island, and the Fish and Wildlife Service is paying a great deal of money for what is essentially a "base camp," he said.
"This is more than insulting to us and our company and the 150 people who lost their jobs," Tracey said.
The old military airport, which Midway Phoenix kept open as a certified field, has now lost its FAA certification.
"It's closed," FAA Pacific representative Tweet Coleman said. "None of the nav(igational) aids work. They've been depowered. There's no fuel. There's nobody there with GeoEngineers with airport knowledge."
Trans-Pacific twin-engine aircraft are required to have a mid-flight emergency landing base. With Midway gone, they've had to change their flight paths farther to the southwest to keep Wake Island as their emergency site.
"The Japanese airlines are impacted the most," Coleman said.
The Coast Guard is limited by the lack of fuel availability in its ability to conduct long-range search-and-rescue and law enforcement flights in the mid-Pacific.
"I think we could still land there, but it would limit the area that we could cover," said Capt. Jim Angert, chief of the Search and Rescue Branch of the U.S. Coast Guard in Honolulu.
Vickery said the Fish and Wildlife Service is working hard to find a way to get the airport reopened, but there is no timetable for it.
"Everybody lost on this deal," Tracey said.
On that, both sides could agree.
Contact Jan TenBruggencate at (808) 245-3074 or jant@honoluluadvertiser.com.
