I started a thread in JBoss Seam forum and then I was directed here: http://www.jboss.com/index.html?module=bb&op=viewtopic&t=121137.
To summarize, we have Maven managed projects and one project called "entity" only has entity classes in it with JPA annotations. A JAR generated from this project is then used/shared in couple of other projects. The problem here is that "entity".jar contains "persistence.xml" with declarations like these:
<properties> <property name="hibernate.hbm2ddl.auto" value="validate" /> <property name="hibernate.show_sql" value="true" /> <property name="hibernate.cache.provider_class" value="org.hibernate.cache.HashtableCacheProvider" /> </properties>