[House Report 115-1049]
[From the U.S. Government Publishing Office]


115th Congress     }                                 {        Report
                        HOUSE OF REPRESENTATIVES
 2d Session        }                                 {       115-1049

======================================================================



 
  TO EXTEND THE RETAINED USE ESTATE FOR THE CANEEL BAY RESORT IN ST. 
       JOHN, UNITED STATES VIRGIN ISLANDS, AND FOR OTHER PURPOSES

                                _______
                                

 November 27, 2018.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

Mr. Bishop of Utah, from the Committee on Natural Resources, submitted 
                             the following

                              R E P O R T

                             together with

                            ADDITIONAL VIEWS

                        [To accompany H.R. 4731]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Natural Resources, to whom was referred 
the bill (H.R. 4731) to extend the retained use estate for the 
Caneel Bay resort in St. John, United States Virgin Islands, 
and for other purposes, having considered the same, reports 
favorably thereon with an amendment and recommends that the 
bill as amended do pass.
    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. EXTENSION OF RETAINED USE ESTATE.

  (a) Extension Required.--Not later than 90 days after a request by 
the grantor, the Secretary of the Interior shall extend the retained 
use estate in accordance with this section.
  (b) Requirements.--The extension under subsection (a) shall--
          (1) except as provided in paragraph (2), be effective for the 
        60-year period beginning on the date the retained use estate 
        would, but for the extension under this section, expire;
          (2) be subject to the terms of the retained use estate, 
        including the right of the grantor to terminate the retained 
        use estate in accordance with the terms thereof; and
          (3) require the grantor to pay to the United States, in 
        quarterly installments for the period of the extension, fair 
        market value rental for use of the premises for operation and 
        management of resort facilities and services in an amount equal 
        to--
                  (A) for each of the first 15 years of the extension, 
                a percentage of the gross revenues of the resort in 
                accordance with subsections (c) and (d) to be 
                determined no later than 90 days after the date on 
                which the extension is granted under subsection (a) 
                by--
                          (i) a written agreement between the Secretary 
                        and the grantor; or
                          (ii) if the Secretary and the grantor are 
                        unable to agree on such a percentage by the 
                        date that the extension is granted under 
                        subsection (a), through binding arbitration 
                        using procedures specified in section 51.51 of 
                        title 36, Code of Federal Regulations; and
                  (B) for each year of the extension thereafter, the 
                amount determined under subparagraph (A), except that--
                          (i) such amount shall be adjusted if 
                        requested by the Secretary or the grantor;
                          (ii) any such adjustment shall be 
                        determined--
                                  (I) through a written agreement 
                                between the Secretary and the grantor; 
                                or
                                  (II) if the Secretary and the grantor 
                                are unable to agree on such an 
                                adjustment after a 60-day period for 
                                negotiation (or a longer period for 
                                negotiation agreed upon by the 
                                Secretary and the grantor), through 
                                binding arbitration between the 
                                Secretary and the grantor using the 
                                arbitration procedures specified in 
                                section 51.51 of title 36, Code of 
                                Federal Regulations; and
                          (iii) no more than one adjustment may be made 
                        under this subparagraph in any 15-year period.
  (c) Calculation of Fair Market Value Rental.--The initial payment 
required under subsection (b)(3)(A) and any adjustment under subsection 
(b)(3)(B) shall reflect the fair market value of a land lease for hotel 
use, as determined by an appraisal by an independent qualified 
appraiser who is selected jointly by the Secretary and the grantor and 
shall reflect--
          (1) any restrictions on the use of the property or terms of 
        the retained use estate that limit the value or highest and 
        best use of the property;
          (2) any amounts expended or to be expended by the grantor for 
        preservation, maintenance, restoration (including site 
        restoration), improvement (including construction), or repair 
        and related expenses to the extent that such amounts are for 
        the resort; and
          (3) the remaining term of the extended retained use estate.
  (d) Payments.--Payments under subsection (b)(3) shall--
          (1) be due--
                  (A) except as provided in subparagraph (B), 60 days 
                after the end of the applicable quarter; and
                  (B) in the case of the last quarter of each calendar 
                year (or the last quarter before the retained use 
                estate expires), 90 days after the end of the calendar 
                year (or the end of the retained use estate in the year 
                that the retained use estate expires);
          (2) be based on actual gross revenues for the preceding 
        quarter;
          (3) in the case of a payment due under paragraph (1)(B), 
        include any adjustment that may be required after an audit of 
        the gross annual revenues for the preceding year; and
          (4) be deposited into the General Treasury.
  (e) Definitions.--In this section--
          (1) each of the terms ``retained use estate'' and ``resort'' 
        has the meaning given such term in section 1 of Public Law 111-
        261 (16 U.S.C. 398d note); and
          (2) the term ``grantor'' means the holder of the retained use 
        estate.

                          PURPOSE OF THE BILL

    The purpose of H.R. 4731 is to extend the retained use 
estate for the Caneel Bay resort in St. John, United States 
Virgin Islands.

                  BACKGROUND AND NEED FOR LEGISLATION

    Caneel Bay Resort, on St. John, U.S. Virgin Islands (USVI), 
is located on a 150-acre peninsula on the northwest side of the 
island and was originally developed by Laurance Rockefeller 
beginning in 1956. Initially, Rockefeller donated over 5,000 
acres of land to the National Park Service (NPS) and reserved 
the 150 acres that is now Caneel Bay Resort for the Jackson 
Hole Preserve, a Rockefeller family land trust. In 1983, the 
Jackson Hole Preserve donated the 150 acres of land to the U.S. 
government for inclusion in the Virgin Islands National Park. 
The preserved land was transferred to NPS with a 40-year 
retained use estate (RUE).\1\
---------------------------------------------------------------------------
    \1\``Caneel Bay Resort Lease.'' PEPC Planning, Environment & Public 
Comment. Accessed February 21, 2018. https://parkplanning.nps.gov/
projectHome.cfm?projectID=43598.
---------------------------------------------------------------------------
    Since 1983, the Resort under the RUE has been owned and/or 
managed by different companies. In 2004, Jackson Hole Preserve 
sold the RUE to CBI Acquisition LLC, which currently operates 
the Caneel Bay Resort. The RUE is scheduled to expire on 
September 30, 2023.\2\
---------------------------------------------------------------------------
    \2\Ibid.
---------------------------------------------------------------------------
    As the largest employer on St. John, with approximately 450 
employees, the Resort plays a significant role in the economy 
of the USVI. It brings 15,000 guests and over $65 million in 
spending to the island of St. John every year.\3\ The Resort 
supports jobs and the local tourism industry, and accounts for 
7% of the USVI total employment in the hotel and restaurant 
sector.
---------------------------------------------------------------------------
    \3\Shimel, Judi. ``Caneel Restoration Awaits Congressional 
Action.'' St. John Source. January 30, 2018. Accessed February 23, 
2018. https://stjohnsource.com/2018/01/30/caneel-restoration-awaits-
congressional-action/.
---------------------------------------------------------------------------
    In 2006, NPS commenced consideration of the future 
management of the Caneel Bay Resort property. In 2010, Congress 
enacted Public Law 111-261, which authorized NPS, subject to 
several limiting conditions, to enter into a long-term lease 
with the holder of the RUE for continued resort operations upon 
relinquishment of the remaining term of the RUE.
    Following the passage of Public Law 111-261, NPS analyzed 
the conversion of the RUE to a long-term lease. In addition to 
the 150-acre Caneel Bay Resort, three additional parcels of 
land totaling 3.01 acres outside of the RUE (but owned by the 
holder of the RUE) were considered as part of the lease 
negotiations. These parcels include a 1.01-acre area utilized 
for three executive homes, a 1.69-acre area utilized for a 24-
unit apartment building for employee housing, and a 0.31-acre 
marina used for ferry docking, maintenance, and fuel sales.
    NPS finished an Environmental Assessment in 2013 that 
analyzed the environmental and human impacts of entering a 
long-term lease under the terms of Public Law 111-261. The 
preferred alternative included the relinquishment of the 
remaining term of the RUE and the award of a long-term lease to 
the holder of the relinquished RUE under the terms of Public 
Law 111-261. Despite nearly eight years of studies and 
negotiations on the conversion of the RUE to a long-term lease, 
NPS and the current holder of the RUE have not come to an 
agreement on lease terms.
    On September 6 and September 19, 2017, Hurricanes Irma and 
Maria destroyed much of St. John and the Caneel Bay Resort. The 
Resort was forced to cancel its entire November-to-August 
season and lay off some 300 employees.\4\
---------------------------------------------------------------------------
    \4\Perez-Pena, Richard. ``After Irma and Maria: How 3 Spots on the 
U.S. Virgin Islands Are Faring.'' The New York Times. November 10, 
2017. Accessed February 23, 2018. https://www.nytimes.com/2017/11/10/
us/virgin-islands-hurricanes.html.
---------------------------------------------------------------------------
    H.R. 4731 requires the Secretary of the Interior to extend 
the RUE by 60 years and requires the holder of the RUE to pay a 
rental fee for use of the property. Extending the RUE provides 
long-term certainty to the current holder of the RUE, thus 
allowing the holder to realize a return on the significant 
capital investments necessary to reopen the Resort and thereby 
contribute to the economy and recovery of USVI. It will also, 
for the first time, generate funds to the United States for the 
use of the land.

                            COMMITTEE ACTION

    H.R. 4731 was introduced on December 21, 2017, by 
Congresswoman Stacey E. Plaskett (D-VI). The bill was referred 
to the Committee on Natural Resources, and within the Committee 
to the Subcommittee on Federal Lands. On February 28, 2018, the 
Subcommittee held a hearing on the bill. On March 7, 2018, the 
Natural Resources Committee met to consider the bill. The 
Subcommittee was discharged by unanimous consent. Congressman 
Rob Bishop (R-UT) offered an amendment designated #1; it was 
adopted by voice vote. Congressman Raul M. Grijalva (D-AZ) 
offered an amendment designated .080; it was not adopted by 
voice vote. No additional amendments were offered and the bill, 
as amended, was ordered favorably reported to the House of 
Representatives by voice vote.

            COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

    Regarding clause 2(b)(1) of rule X and clause 3(c)(1) of 
rule XIII of the Rules of the House of Representatives, the 
Committee on Natural Resources' oversight findings and 
recommendations are reflected in the body of this report.

      COMPLIANCE WITH HOUSE RULE XIII AND CONGRESSIONAL BUDGET ACT

    1. Cost of Legislation and the Congressional Budget Act. 
With respect to the requirements of clause 3(c)(2) and (3) of 
rule XIII of the Rules of the House of Representatives and 
sections 308(a) and 402 of the Congressional Budget Act of 
1974, the Committee has received the following estimate for the 
bill from the Director of the Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 18, 2018.
Hon. Rob Bishop,
Chairman, Committee on Natural Resources,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 4731, a bill to 
extend the retained use estate for the Caneel Bay resort in St. 
John, United States Virgin Islands, and for other purposes.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Janani 
Shankaran.
            Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

H.R. 4731--A bill to extend the retained use estate for the Caneel Bay 
        resort in St. John, United States Virgin Islands, and for other 
        purposes

    Summary: Under current law, the Caneel Bay resort in the 
Virgin Islands National Park operates under a retained use 
estate (RUE), an arrangement that grants a private entity that 
is not the landowner managerial control over the resort. When 
the RUE expires in 2023, the National Park Service (NPS) will 
assume managerial control over the resort. H.R. 4731 would, 
upon request by the current RUE holder, extend the RUE for an 
additional 60 years.
    H.R. 4731 would require the RUE holder to make payments 
that would be deposited into the general fund of the Treasury. 
Those payments would be recorded on the budget as offsetting 
receipts, which are recorded in the budget as reductions in 
direct spending. CBO estimates that enacting the bill would 
reduce direct spending by $3 million over the 2019-2028 period. 
Because enacting H.R. 4731 would affect direct spending, pay-
as-you-go procedures apply. Enacting the bill would not affect 
revenues.
    CBO estimates that enacting H.R. 4731 would not increase 
net direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2029.
    H.R. 4731 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA).
    Estimated cost to the Federal Government: The estimated 
budgetary effect of H.R. 4731 is shown in the following table. 
The costs of the legislation fall within budget function 300 
(natural resources and environment).

 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              By fiscal year, in millions of dollars--
                                           -------------------------------------------------------------------------------------------------------------
                                                                                                                                       2019-      2019-
                                              2018    2019    2020    2021    2022    2023    2024    2025    2026    2027    2028     2023       2028
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                               DECREASES IN DIRECT SPENDING
 
 Estimated Budget Authority...............       0       0       0       0       0       0       *       *      -1      -1      -1         0         -3
 Estimated Outlays........................       0       0       0       0       0       0       *       *      -1      -1      -1         0         -3
--------------------------------------------------------------------------------------------------------------------------------------------------------
* = between -$500,000 and zero.
The bill would require an independent appraisal of the fair-market value of payments. CBO estimates that the appraisal would cost less than $500,000,
  subject to the availability of appropriated funds.

    Basis of estimate: For this estimate, CBO assumes H.R. 4731 
will be enacted near the end of 2018 and that the current RUE 
holder would request an extension of the agreement as provided 
in the bill.

Direct spending

    In 2017, the Caneel Bay resort sustained extensive damage 
from Hurricanes Irma and Maria. CBO expects that rehabilitation 
of the resort by the current RUE holder would be contingent on 
a long-term operating agreement between the NPS and the RUE 
holder. The two parties could enter into such an agreement 
under current law or under H.R. 4731.\1\
---------------------------------------------------------------------------
    \1\For this estimate, CBO assumes that the NPS will not seek 
appropriations to rebuild the resort or enter into a concession 
contract after 2023.
---------------------------------------------------------------------------
    Options under Current Law. Under current law, the NPS is 
authorized to enter into a long-term lease with the current RUE 
holder upon expiration of the RUE in 2023. If the two parties 
enter into a lease, the current RUE holder will be required to 
make fair-market rental payments to the NPS that are equal to a 
percentage of the gross revenues of the resort; those payments 
would be recorded in the federal budget as offsetting receipts. 
(Currently, the RUE holder does not make any payments to the 
NPS.) Based on an appraisal of the property, CBO estimates that 
under this scenario the NPS would collect, on average, $750,000 
annually over the 2024-2028 period.
    If the NPS decides not to enter into a long-term lease with 
the current RUE holder, it will assume management of the resort 
on October 1, 2023. CBO has no information about whether the 
agency plans to rebuild and operate the resort if 
reconstruction and operations are not initiated prior to that 
date. Because we do not know whether the NPS and the current 
RUE holder will enter into a lease, CBO assumes that the 
probability of the two parties entering into a long-term lease 
under current law is 50 percent.\2\ Adjusting for that 
probability, CBO estimates that lease payments would total 
about $2 million over the 2024-2028 period. Under current law, 
any amounts collected by the NPS are available to be spent 
without further appropriation for visitor services and resource 
protection within the Virgin Islands National Park. Based on 
historical spending patterns, CBO estimates that the agency 
will spend $1 million, or about half of the expected 
collections, at that park over the 2024-2028 period. Therefore, 
CBO estimates that under current law, the expected net 
operating expenses for that park will decline by $1 million 
over the 2024-2028 period.
---------------------------------------------------------------------------
    \2\CBO endeavors to develop estimates that are in the middle of the 
distribution of potential budgetary outcomes. In cases where there is 
no clear precedent for predicting agency behavior under a legislative 
proposal, CBO has adopted a convention of assuming a 50 percent chance 
of an agency using its discretion under the bill. CBO takes this 
approach in uncertain situations for the purpose of informing the 
Congress about the potential costs of legislation.
---------------------------------------------------------------------------
    RUE Extension. Under the bill, CBO expects that the current 
RUE holder would pay amounts similar to those expected under 
current law ($750,000 annually, beginning in 2024) for a total 
of about $4 million over the 2024-2028 period. Those payments 
would be recorded as offsetting receipts, would be deposited 
into the general fund of the Treasury, and would not be 
available for spending unless appropriated. Thus, on net, CBO 
estimates that enacting H.R. 4731 would reduce direct spending 
by $3 million over the 2024-2028 period (the $4 million in 
savings under the bill minus the $1 million that will be saved 
under current law).

Spending subject to appropriation

    The bill would require an independent qualified appraiser 
to determine the fair market value of payments under the 
extended RUE. Based on the costs of similar tasks, CBO 
estimates that the appraisal would cost less than $500,000; 
such spending would be subject to the availability of 
appropriated funds.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. As shown in the table on page 2, the net decrease in 
outlays that are subject to those pay-as-you-go procedures is 
$3 million over the 2024-2028 period. Enacting the bill would 
not affect revenues.
    Increase in long-term direct spending and deficits: CBO 
estimates that enacting H.R. 4731 would not increase net direct 
spending or on-budget deficits in any of the four consecutive 
10-year periods beginning in 2029.
    Mandates: H.R. 4731 contains no intergovernmental or 
private-sector mandates as defined in UMRA.
    Estimate prepared by: Federal costs: Janani Shankaran; 
Mandates: Zachary Byrum.
    Estimate reviewed by: Kim P. Cawley, Chief, Natural and 
Physical Resources Cost Estimates Unit; H. Samuel Papenfuss, 
Deputy Assistant Director for Budget Analysis.
    2. General Performance Goals and Objectives. As required by 
clause 3(c)(4) of rule XIII, the general performance goal or 
objective of this bill is to extend the retained use estate for 
the Caneel Bay resort in St. John, United States Virgin 
Islands.

                           EARMARK STATEMENT

    This bill does not contain any Congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined 
under clause 9(e), 9(f), and 9(g) of rule XXI of the Rules of 
the House of Representatives.

                    COMPLIANCE WITH PUBLIC LAW 104-4

    This bill contains no unfunded mandates.

                       COMPLIANCE WITH H. RES. 5

    Directed Rule Making. This bill does not contain any 
directed rule makings.
    Duplication of Existing Programs. This bill does not 
establish or reauthorize a program of the federal government 
known to be duplicative of another program. Such program was 
not included in any report from the Government Accountability 
Office to Congress pursuant to section 21 of Public Law 111-139 
or identified in the most recent Catalog of Federal Domestic 
Assistance published pursuant to the Federal Program 
Information Act (Public Law 95-220, as amended by Public Law 
98-169) as relating to other programs.

                PREEMPTION OF STATE, LOCAL OR TRIBAL LAW

    This bill is not intended to preempt any State, local or 
tribal law.

                        CHANGES IN EXISTING LAW

    If enacted, this bill would make no changes to existing 
law.

                            ADDITIONAL VIEWS

    H.R. 4731 adds an additional 60 years to the Retained Use 
Estate (RUE) for Caneel Bay Resort, a private hotel that 
operates within the Virgin Islands National Park. The resort is 
a high-end, world-class tourist destination and one of the top 
employers on the island of St. John. Unfortunately, like much 
of the Virgin Islands, the hotel was severely damaged by last 
year's hurricanes.
    The land associated with the Virgin Islands National Park 
was donated to the United States by Laurence Rockefeller in 
1956. Mr. Rockefeller retained a small piece of the island to 
develop the Caneel Bay Resort, which was, ultimately, donated 
to the Federal government to complete the vision for the park. 
However, the donation of the resort initiated the RUE, a unique 
legal arrangement that authorized the hotel to operate for 40 
years before becoming part of the park.
    In 2010, Congress authorized the National Park Service to 
enter into a 40-year sole source lease with the owner of the 
RUE.\1\ To honor the spirit of the original donation, the 
authorized lease is required to include provisions that limit 
expansion of the resort, prohibit the division and subsequent 
sale of the property, and include provisions to protect the 
park and the public interest. The operators of the resort and 
the National Park Service have been negotiating a lease for the 
last eight years and have not been able to agree on the terms.
---------------------------------------------------------------------------
    \1\Public Law 111-261 (16 U.S.C. 398d note).
---------------------------------------------------------------------------
    The hurricanes and the urgent need to rebuild the resort 
led to the introduction of H.R. 4731, which bypasses the lease 
negotiation process and simply extends the RUE. This removes 
the National Park Service from the process and does not provide 
any additional oversight or assurances that new construction 
complements the management goals of the national park.
    Natural Resources Committee Ranking Member Grijalva offered 
an amendment that would have authorized the National Park 
Service to ensure that the hotel's reconstruction and future 
operation comply with all appropriate laws and regulations. In 
the context of providing a 60-year license to continue business 
as usual on property owned by the American taxpayer, this is a 
fair request. Committee Republicans characterized the amendment 
as overly broad and refused to incorporate it into the bill.
    Rebuilding Caneel Bay Resort is a priority for the Virgin 
Islands, and should be a priority for Congress, but this bill 
lacks the necessary safeguards to ensure that the property is 
managed in a way that complements the mission of the Virgin 
Islands National Park. We hope to continue working with our 
colleagues to ensure that the resort is developed in a manner 
that honors its status as a piece of the park.

                                   Raul M. Grijalva,
                                           Ranking Member, Committee on 
                                               Natural Resources.

                                  [all]