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2nd firm holds key to Glades' sweet deal

Miami Herald – July 4, 2008

After striking a monumental deal with the U.S. Sugar Corp., Florida officials hoping to construct a watery pathway between Lake Okeechobee and the Everglades may have an even tougher challenge ahead.

Now they must come to Pepe.

That would be Jose ‘’Pepe’’ Fanjul, who shares control of the Florida Crystals Corp. — the other sugar titan — with his brother Alfonso. After years of being cast by environmentalists as the polluting villains of the Glades, the Fanjuls could hold the key to the future of restoration if and when the state inks its $1.75 billion buyout of rival U.S. Sugar.

Though plans for the U.S. Sugar land are vague, state water managers envision a series of reservoirs and pollution-filtering marshes stretching south from U.S. Sugar’s land near Clewiston — a vision that includes thousands of acres now owned by Florida Crystals.

To reconnect the lake and the Glades, South Florida water managers hope to swap some of the nearly 300 square miles of U.S. Sugar’s tracts with Florida Crystals and other smaller landowners. That puts the Fanjuls in a sweet bargaining position.

‘’We’re approaching it in a very open manner,’’ said Gaston Cantens, a Florida Crystals vice president. ``We want to be involved and be part of the solution, and we want to make a deal that makes sense for our business.’‘

On Monday, the board of the South Florida Water Management District agreed to begin negotiating with Florida Crystals while also finalizing the $1.75 billion U.S. Sugar buyout announced by Gov. Charlie Crist last month. They hope to complete negotiations by September and close by the end of November — a tight timeline for the largest and most complex conservation land buy in state history.

Cantens said state officials called Florida Crystals for the first time on Wednesday, but they did not discuss anything in detail.

Under a tentative agreement with Crist, U.S. Sugar would be allowed to operate for another six years — if not longer — before the state closes the company and takes over its 187,000 acres around Lake Okeechobee.

Politically influential Florida Crystals would be the biggest player in the Everglades fields if U.S. Sugar closed. And with a trump card to play — the acreage they own in a swath deemed vital to any future Everglades restoration — the Fanjuls could end up gaining far more land than they give up.

That in turn could eat into money the state hopes to eventually recoup from the deal.

Along with swapping land, state officials plan to sell off some of U.S. Sugar’s assets — including a recently built refinery, a mill, a railroad, citrus groves and an orange juice processing plant.

Water managers have said they hope to make as much as $500 million reselling U.S. Sugar assets — though the water district’s executive director, Carol Ann Wehle, called that more of an aspiration than a realistic target. That money would pay for more Everglades projects or reduce the debt used to finance the buyout.

‘’We’re not looking at getting into the sugar business, the citrus business or the railroad business,’’ said Ken Ammon, the water district’s deputy executive director for Everglades restoration.

But growers say the value of U.S. Sugar’s plants depends on how much sugar land is left once the state takes over the company. If Everglades projects plow under too many fields — estimates range from 40,000 to 100,000 acres — there may not be enough cane to go around.

‘’The question becomes is there enough excess U.S. Sugar land to make everybody whole, to make the deal workable,’’ said Barbara Miedema, vice president of the Sugar Cane Growers Cooperative of Florida, which represents 48 smaller growers in Palm Beach County. ``The cane supply is tied to the acres. And you can’t look at the assets separate and apart from the acres.’‘

WORTH BILLIONS

Florida Crystals has its own state-of-the-art refinery, sitting amid 35,000 acres in the middle of the state’s projected Everglades path. Cantens said this site includes a distribution center with robotic machinery, and an electrical plant that uses sugar cane byproduct for fuel.

Cantens said these facilities are worth ‘’billions’’ to the company, and they wouldn’t be an even swap for U.S. Sugar’s plant.

At that sort of price, the state wouldn’t be interested in buying the Florida Crystals refinery, and engineers are drafting plans to ship water around the Fanjuls’ production facilities, Wehle said.

‘’There’s not enough money for us ever to engage in acquiring that refinery,’’ she said. ``We have a tremendous amount of flexibility to engineer around just about anything.’‘

But they can’t entirely get around the Fanjuls, who own a broad belt of land separating Lake Okeechobee from Everglades marshes to the south, an area considered the ‘’missing link’’ of the ecosystem.

Without the Florida Crystals tracts, the environmental benefits of the U.S. Sugar deal could be underwhelming, board member Mike Collins warned last week.

‘’If we buy the land and then try to negotiate for the other pieces of it, I don’t think we’re in a very good position,’’ Collins said.

District officials say they have not discussed condemning the Florida Crystals land through eminent domain; they said the agency has only limited authority to take land through the courts, and such a tactic would probably be even more expensive.

But it’s still not clear how much Florida Crystals land the state will seek — or how much the Fanjuls would demand in return.

Florida Crystals intends to argue that it can afford to part with only so much land near its plant. If the company were forced to truck cane from faraway fields, it would ratchet up costs — and drive down the refinery’s value, Cantens said.

‘’In order to maintain a mill open and efficiently, you need to have a certain number of acres,’’ he said. ``If that mill is not receiving sugar cane, then that mill becomes worthless. That number of acres is crucial.’‘

FERTILE LAND

The state hopes to entice Florida Crystals with more U.S. Sugar acreage on the east end of Lake Okeechobee — land considered more fertile for farming — and make similar pitches to smaller growers who own about 8,200 acres in the projected path of the Everglades project.

Given the importance of the land for the Everglades project and the urgency of the state and environmentalists to get the deal done, the land trades may not be as simple as acre-for-acre swaps.

Growers with key tracts could well wind up with a lot more land than they give up.

Cantens said the U.S. Sugar fields are attractive to Florida Crystals, and he said the company is willing to bargain with the state.

‘’I don’t think anything is a deal-breaker,’’ he said.

For Florida Crystals and other Everglades growers, there’s another potential incentive: Reservoirs and pollution treatment marshes envisioned for the area could resolve or at least sharply reduce growers’ long-running water supply and quality concerns.

And for the first time, environmental groups promoting the U.S. Sugar buyout also are embracing the idea of co-existing with a permanent, if down-sized, sugar industry in the Everglades.

‘’We are fully cognizant of the fact that Florida Crystals needs to be a robust and profitable operation,’’ said Kirk Fordham, CEO of the Everglades Foundation. ``We just hope they also will seize the opportunity to become real champions of the Everglades. They have an opportunity to enhance their corporate image.’‘

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