Three years ago, Molokai Ranch announced a broad shutdown that brought Molokai’s already struggling economy to its knees. But the ranch may have found a way to recover, thanks to an innovative agricultural land use law. The state Land Use Commission should approve the ranch’s plans for a refurbished cattle ranch tailored for profitability, and, it is hoped, a shot in the arm for the financially strapped island.

The ranch’s request is one of several recent efforts by large landowners to make use of the state’s "important agricultural lands" (IAL) program, enacted in 2008 to help preserve and promote Hawaii’s farming industry. While it’s too soon to render a final verdict, the first steps are promising.

Molokai Properties Ltd. is asking the commission to preserve 4,919 acres on Molokai, expanding the 3,000 acres that longtime rancher Jimmy Duvauchelle has been renting. That would total about 5,000 acres to manage about 500 cattle, with goals of doubling the herd.

Last week, Castle & Cooke Homes Hawaii Inc. requested Land Use Commission approval to designate as IAL some 902 acres on Oahu being leased to 60 small farmers. In 2009, Alexander & Baldwin Inc. won commission approval to claim tax credits for 31,000 acres on Maui and Kauai harvested by subsidiaries Hawaiian Commercial & Sugar Co. and Kauai Coffee Co.

In exchange for preserving land in agriculture in perpetuity, companies investing in agricultural facilities can qualify for financial incentives that include $7.5 million in annual tax credits and a $2.5 million loan guarantee program. The law also allows the companies to urbanize land equivalent to 15 percent of the acreage protected; all three companies have waived that right.

If the law can crack one of Hawaii’s toughest land-use problems — making local farming a stable, profitable enterprise on land most suited for it — then the tax credits will be well worth the cost.

Proposed land development mixed with ag land has been most controversial in Molokai because of critical water issues. Cheryl Corbiell, a director of the nonprofit Molokai Land Trust, said she has not seen the plan’s particulars. Nonetheless, "I think any kind of conservation in the state is good news," she said.

The Molokai company, a subsidiary of Singapore-based GuocoLeisure Ltd., owns about 64,000 acres, which covers about 35 percent of Molokai. In 2008, it failed to win the Land Use Commission’s approval of a controversial master plan to develop 200 lots for oceanfront luxury homes at Laau Point that would have helped finance other ranch business investments on the island.

Molokai Properties responded to the commission by announcing a layoff of 120 employees and closure of several facilities, including a luxury hotel. Cattle operations were turned over by lease to Duvauchelle, a fourth-generation Molokai cowboy.

Duvauchelle told the Star-Advertiser that making a profit since then has been difficult.

"I’m doing the best I can now, but I’m too small. In the cattle business, volume helps."

To make a profit, he said he will need more land for grazing and need to make other improvements so he can double the herd and ship only half his animals to the mainland for fattening and slaughtering.

The plan includes granting a 99-year easement of 5,000 acres to Molokai Land Trust to ensure the land is restricted for agricultural use. The company asserts that the land could be used for large-scale crop production, perhaps for biofuels or seed corn — if more water sources can be developed.

That’s a big if. Molokai is the most arid of the populated islands, and the water supply is adequate for grazing but not for crops.

Nonetheless, on an island where urbanization has been fiercely opposed, a thriving cattle ranch — a traditional Molokai industry since the days of Kamehameha III — would fulfill the ambitions of IAL, and justify the state’s investment.