Molokai Ranch's decision yesterday to shut down and lay off its roughly 120 employees apparently aborts a controversial residential development plan for the rural island, but also promises to shock employment and tourism on the Friendly Isle, where the company was the largest private employer and landowner.

The struggling company, an affiliate of Hong Kong-based GuocoLeisure Ltd., said all its major operations will cease at the end of the month, including the 22-room Molokai Lodge, 40-unit Kaupoa Beach Village, the Kaluakoi Golf Course and other recreational activities.

Also to be shuttered are Maunaloa's gas station, the Maunaloa tri-plex movie theater, cattle ranching and related maintenance work.

The company, which owns about 64,000 acres covering about 35 percent of Moloka'i, said access to its property — some of which is used by residents for subsistence hunting — will be cut off indefinitely.

"We deeply regret to have taken this step as the main impact will be on our loyal employees," said Molokai Ranch CEO Peter Nicholas in a written statement. "The decision is purely a business one."

The move is another product of intense clashes in Hawai'i in recent decades between land development and preservation forces that often result in dramatic climaxes such as the nearly three-year shutdown of the Big Island luxury golf community Hokuli'a a few years ago and the present plan by Gov. Linda Lingle to buy O'ahu's Turtle Bay Resort.

But observers said land development on Moloka'i is especially sensitive because of critical water issues and the large population of subsistence hunters and farmers who fear losing their rural way of life.

Molokai Ranch said its decision was a result of its inability to win enough support for a controversial master plan to develop 200 lots for luxury homes at La'au Point that would help finance other ranch business investments on the Island.

Under the proposal, the ranch was to refurbish and reopen the shuttered Kaluakoi Hotel, and convey 50,000 acres to a community land trust for management and protection using income from leases on the land and a cut of La'au lot sales.

The plan won support from some Moloka'i residents including a handful of community leaders who accepted the plan as a reasonable trade-off.

But opponents of the plan feared that developing La'au would harm the ecosystem by using more water than projected, and attract wealthy real estate investors who would diminish Moloka'i's atmosphere, defined by unspoiled coastlines, an absence of traffic signals and a large population of farmers, ranchers and Native Hawaiians living a subsistence lifestyle of fishing and hunting.

LA'AU POINT OPPOSITION

Molokai Ranch and its Honolulu-based parent company, Molokai Properties Ltd., recently saw the intense opposition on display before a state Land Use Commission hearing held in November to assess whether the company's environmental impact statement for the La'au project was thorough enough.

The company withdrew its environmental report from consideration after an LUC commissioner moved to reject the report. The company said it would continue the public review process, but also had warned that it could be forced to reduce or cease operations if its La'au project was unduly delayed or rejected.

"Under this doomsday scenario, (Molokai Ranch) essentially closes down ranch operations and land banks the property for the future," the company wrote in its environmental report. "These reductions, along with lost tourist expenditures, will in turn severely affect local businesses at Maunaloa and elsewhere. These losses in local jobs and probable business failures will in turn increase the need for county and state social services."

Walter Ritte Jr., a Moloka'i hunter and Hawaiian homesteader instrumental in challenging the development plan, said he was shocked but not surprised by the ranch's decision yesterday.

"It was set up to end this way," he said. "They gave us an all-or-nothing, unreasonable ultimatum. I guess (yesterday's decision) was the 'nothing.' "

Ritte said he is sad about the outcome affecting residents, but hopes it brings an opportunity for preservation-minded investors to acquire Molokai Ranch land.

Molokai Ranch said it worked in good faith with residents on the proposal intended to help the company sustain its business and the island's economic future.

"For the past five years, (the company) has been working with Moloka'i community leaders and community members on developing and implementing a master plan for (ranch) property and the future of Moloka'i," Nicholas said in the statement.

Nicholas said the company will "mothball" assets on its land, and that employee layoffs will happen over the next 60 days.

The governor expressed concern for ranch employees and said state labor officials on Thursday will travel to Moloka'i to provide information on available assistance including job training and medical benefits. Meetings are scheduled for 10 a.m. and 1 p.m. at the Maunaloa Tri-Plex theater.

"The loss of this many jobs in such a small community like Moloka'i is equivalent to 23,000 people on O'ahu losing their jobs on the same day," Lingle said in a statement.

Moloka'i has a population of about 7,500, only a third of whom are in the labor pool. In January, there were 200 unemployed on the island, representing an unemployment rate of more than 7 percent, compared with 3 percent statewide, according to state statistics. Adding another 120 to the unemployment roll would boost unemployment to more than 12 percent.

CONCERN FOR CHILDREN

Maunaloa Elementary sits just a couple of blocks from the Molokai Lodge, and principal Joe Yamamoto worried yesterday about his 62 students, many of whom have parents employed by Molokai Ranch.

"For children of any rural community, their access to experiences are already limited," Yamamoto said. "And this is going to adversely affect the economy, that's for sure. It's never good news whenever people lose their jobs."

State Sen. J. Kalani English, D-6th (E. Maui, Moloka'i, Lana'i), said he hoped Molokai Ranch's decision hasn't been presented as a bargaining chip in its development plan effort, and added that the company has a duty to respect land access related to native gathering rights of the island's Hawaiian population.

Moloka'i Councilman Danny A. Mateo suggested the ranch's closure was economic punishment for the community's opposition to the La'au project.

Mateo, who represents Moloka'i on the Maui County Council, said in a statement: "This is so unfortunate and disappointing. With it being final, it seems to be a mean-spirited conclusion to punish a community that isn't ready to deal with the type of project the company wanted. ... Bringing about economic woe to a community that already has next to zero employment opportunities is terrible."

Molokai Ranch officials yesterday declined to comment beyond the company's written statement. The ranch previously has said cumulative operating losses over the past seven years totaled about $40 million, offset by $25 million in Kaluakoi house lot sales that helped keep the company afloat.

"Without the prospect of an economic future for the company that results from the implementation of all facets of the master plan, we are unable to continue to bear large losses from continuing these operations," Nicholas said in his statement.