Opinion ID: 6319856
Heading Depth: 2
Heading Rank: 1

Heading: 2000 Issuance of Revocable Water Permits

Text: In 1985, the BLNR approved the public-auction sale of a thirty-year water license that would have consolidated four license areas—the Honomanū license area, the Huelo license area, the Keʻanae license area, and the Nāhiku license area (collectively, the “license areas”)—spanning approximately 33,000 acres of ceded lands in the Koʻolau Forest Reserve and Hanawi Natural Area Reserve under a single license.2 However, issuance of the thirty-year license was suspended at the request of the Department of the Attorney General pending the settlement of a separate water case. Water rights for the license areas came to be governed thereafter by annual revocable water permits issued for each fiscal year. 2 The four license areas are “affected and partly governed by” the East Maui Water Agreement made in 1939 between the then—Territory of Hawaiʻi and EMI. That Agreement provided for “the joint use by the Territory and EMI of the aqueduct system” and “enabled the State to dispose of the water licenses at a public auction instead of restricting the sale only to EMI.” The aqueduct system runs through lands belonging to the government and to EMI. 3  FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER  On May 26, 2000, the BLNR approved the issuance of four annual revocable water permits to A&B and EMI,3 effective July 1, 2000 and expiring on June 30, 2001. Each of the permits—S-7263 (Honomanū), S-7264 (Huelo), S-7265 (Keʻanae), and S-7266 (Nāhiku) (collectively, the “revocable permits”)—gave the permittee4 the “[r]ight, privilege, and authority for the development, diversion, and use of water” from the relevant license area, “pursuant to the terms and conditions” in the relevant expired general leases. These permits authorized EMI to divert more than 100 million gallons of water per day from east Maui streams for sugar-cane irrigation by Hawaiian Commercial and Sugar Co. (“HC&S”), another subsidiary of A&B, in central Maui. The permits also authorized the delivery of approximately 8.6 million gallons of water per day from east Maui streams to Maui County water treatment facilities that provided the majority of water to a population of approximately 35,000 people in upcountry Maui. Each of the revocable permits 3 A&B is a for-profit corporation that was engaged at all relevant times primarily in real estate development in Hawaiʻi and sugar cultivation in central Maui, and EMI is a subsidiary of A&B. 4 For the 2000-01 fiscal year permits, A&B was the permittee for the Honomanū, Huelo, and Keʻanae license areas and EMI was the permittee for the Nāhiku license area. 4  FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER  stated that they were issued pursuant to HRS § 171-58 (1993).5 The BLNR added, as a condition to the issuance of the revocable permits, that the Department of the Attorney General issue an opinion regarding compliance with HEPA as it related to these leases.6 B. 2001 Long-Term Lease Application and Continuance of Revocable Permits On May 14, 2001, A&B and EMI filed an application requesting that the BLNR (1) consolidate the four license areas 5 HRS 171-58(c) (2011) provides: Disposition of water rights may be made by lease at public auction as provided in this chapter or by permit for temporary use on a month-to-month basis under those conditions which will best serve the interests of the State and subject to a maximum term of one year and other restrictions under the law; provided that any disposition by lease shall be subject to disapproval by the legislature by two-thirds vote of either the senate or the house of representatives or by majority vote of both in any regular or special session next following the date of disposition; provided further that after a certain land or water use has been authorized by the board subsequent to public hearings and conservation district use application and environmental impact statement approvals, water used in nonpolluting ways, for nonconsumptive purposes because it is returned to the same stream or other body of water from which it was drawn, essentially not affecting the volume and quality of water or biota in the stream or other body of water, may also be leased by the board with the prior approval of the governor and the prior authorization of the legislature by concurrent resolution. The text of the statute has remained unchanged since the BLNR first issued the revocable permits in 2000. 6 Petitioners allege this fact in their first amended complaint, and the State and A&B Defendants admit so in their answers. A May 25, 2001 report from the Department of Land and Natural Resources (“DLNR”) stated that, as of the BLNR’s May 26, 2000 meeting, “[t]he Attorney General ha[d] been reviewing the issues and w[ould] report on that review to the [BLNR].” There is no evidence in the record that such an opinion was ever issued by the Department of the Attorney General. 5  FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER  under one thirty-year lease and sell the lease at public auction and (2) authorize “temporary continuation” of the four revocable permits pending issuance of the long-term lease (“proposed longterm lease”). On May 23, 2001, Petitioner/PlaintiffAppellee/Cross-Appellee/Cross-Appellant Nā Moku Aupuni O Koʻolau Hui (“Nā Moku”), a Native Hawaiian non-profit organization, along with three Native Hawaiian individuals, petitioned the BLNR, pursuant to HRS chapter 91, for a contested case hearing on the proposed long-term lease for the license areas. The contested case proceedings—which concerned the same activity as, but do not form the basis for, this appeal—continued for nearly six years. Those proceedings included an appeal to and remand from the circuit court, as well as the publication of several orders containing findings of fact and conclusions of law by the BLNR.
At a May 25, 2001 meeting, the BLNR considered an agenda item titled “Discussion on Long-term Dispositions of Water Licenses and Issuance of Interim Revocable Permits to [A&B] and [EMI] for the [License Areas.]” The administrator of the Land Division of the DLNR recommended that the BLNR authorize the issuance of interim revocable permits to EMI and A&B, and “explained that the long-term disposition process [was] subject to discussion, that there [was] going to be a [HEPA] 6  FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER  requirement, and that the applicant [would] be required to prepare the necessary environmental documents.” An A&B representative requested that the BLNR also approve the proposed long-term lease it had requested in its May 14 letter to the BLNR. However, a Deputy Attorney General “clarified that the only matter before the [BLNR] for action [was] the issuance of the 4 interim revocable permits” and that the proposed long-term lease was “listed on the agenda for discussion only and [could not] be acted on by the Board at [that] time.” A Nā Moku representative testified that they would be petitioning for a contested case hearing. The BLNR voted to defer action and instead “grant a holdover permit on a month-to-month basis [to EMI and A&B], pending the results of the contested case hearing” (“2001 holdover decision”). 2. 2002 “Holdover” of Revocable Permits and Subsequent “Continuation” or “Renewal” Nearly a year later, at the BLNR’s February 22, 2002 meeting, the BLNR indicated that it would review the rental rates for the revocable permits. At the BLNR’s May 24, 2002 meeting, upon consideration of an agenda item titled “Re-issuance of Interim Revocable Permits to [A&B] and [EMI] for the [License Areas]” BLNR staff recommended that the BLNR “authorize the re-issuance of permits for the subject waters in the interim and pending the outcome of the contested case.” The BLNR Chair stated that the BLNR’s intention was “to keep the 7  FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER  status quo and that [the revocable permits] w[ere] brought back to the Board because of questions raised about authority to holdover permits beyond a year.” The BLNR again voted to “defer and grant a holdover of the existing revocable permit on a month-to-month basis pending the results of the contest [sic] case hearing” (“2002 holdover decision”).7 After the BLNR’s 2002 holdover decision, the revocable permits were annually “continued” by a process in which the BLNR reviewed and voted to approve for continuation a “master listing” of hundreds of revocable permits submitted by the DLNR.8 This process continued the revocable permits included on the master listing on a month-to-month basis for a one-year period. The DLNR’s submissions to the BLNR from 2002 to 2004 cite HRS § 171-55 (1993) as its authority for this annual review process.9 7 Documentation from the BLNR indicates that because the revocable permits were continued on a “holdover” basis, they did not appear on the December 2002 master listing. 8 The revocable permits were not subject to this annual review and continuation process in 2003 or 2004 and first appeared on the master listing submitted to the BLNR on November 18, 2005. In a declaration, the administrator of the Land Division of the DLNR stated that he put the revocable permits on the 2005 master listing “to be consistent with how all of the other revocable permits were being addressed by DLNR.” 9 HRS § 171-55 (2011) provides: Notwithstanding any other law to the contrary, the board of land and natural resources may issue permits for the temporary occupancy of state lands or an interest therein on a month-to-month basis by direct negotiation without public auction, under conditions and rent which will serve the best interests of the State, subject, however, to those restrictions as may from time to time be expressly imposed by the board. A permit on a month-to-month basis may (continued . . . ) 8  FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER  The revocable permits issued to A&B and EMI appeared on the master listings dated November 18, 2005; October 27, 2006; November 16, 2007; October 24, 2008; October 23, 2009; November 12, 2010; January 13, 2012; December 14, 2012; January 10, 2014; and December 12, 2014.10 C. Circuit Court Proceedings11 In response to the BLNR’s December 12, 2014 decision approving the continuation of the revocable permits (“2014 continuation decision”), on April 10, 2015, Petitioners/ Plaintiffs-Appellees/Cross-Appellees/Cross-Appellants Healoha Carmichael, Lezley Jacintho, and Nā Moku (collectively, “Petitioners”) filed a complaint for declaratory and injunctive relief against the BLNR, its interim chair, Carty Chang,12 and the DLNR (collectively, “the State Defendants”); A&B, EMI, and (. . . continued) continue for a period not to exceed one year from the date of its issuance; provided that the board may allow the permit to continue on a month-to-month basis for additional one year periods. The text of the statute has remained unchanged since the DLNR first invoked it in 2002. 10 At its December 12, 2014 meeting, consistent with the DLNR’s recommendation, the BLNR again approved the continuation of the revocable permits included in the master listing. The DLNR notified A&B and EMI in letters dated December 29, 2014 that the revocable permits were continued “on a month-to-month basis for an additional year up to December 31, 2015.” 11 The Honorable Rhonda A. Nishimura presided. 12 Current BLNR Chair Suzanne Case was later substituted as a defendant for Carty Chang. See Hawaiʻi Rules of Civil Procedure Rule 25(d)(1) (2001). 9  FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER  HC&S (collectively, “the A&B Defendants”); and the Maui County Department of Water Supply (“the County”) in the circuit court.13 Petitioners alleged in their amended complaint that, under HRS § 343-5 (Supp. 2012),14 the “renewal of [the A&B Defendants’] 13 Petitioners’ amended complaint stated that the County was “only named as an interested party,” but in its answer, the County denied that it was only an interested party and argued that “[Petitioners]’ prayed [sic] for relief could have serious and widespread consequences on Defendant County and its citizens, and therefore, Defendant County has a heavy interest in the outcome of these proceedings.” 14 HRS § 343-5 provides, in relevant part: (a) Except as otherwise provided, an environmental assessment shall be required for actions that:
use of state or county funds, other than funds to be used for feasibility or planning studies for possible future programs or projects that the agency has not approved, adopted or funded, or funds to be used for the acquisition of unimproved real property; provided that the agency shall consider environmental factors and available alternatives in its feasibility or planning studies; provided further that an environmental assessment for proposed uses under section 205-2(d)(11) or 205-4.5(a)(13) shall only be required pursuant to section 205-5(b); . . . . (c) For environmental assessment for which a finding of no significant impact is anticipated: (1) A draft environmental assessment shall be made available for public review and comment for a period of thirty days;
availability of the draft environmental assessment for public review and comment pursuant to section 343-3; (3) The agency shall respond in writing to comments received during the review and prepare a final environmental assessment to determine whether an environmental impact statement shall be required; (continued . . . ) 10  FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER  revocable permit[s]” constituted applicant action proposing the use of State land and, as such, required the preparation of an EA pursuant to HEPA. Thus, Petitioners contended that HEPA was violated (1) when the BLNR failed to order an EA before its 2014 continuation decision, and (2) when A&B and EMI continued to divert water without preparing an EA.15 Petitioners asked the circuit court to declare that HEPA had been violated, void the revocable permits, order the completion of an EA, and enjoin further diversion of water from the license areas, provided that (. . . continued) (4) A statement shall be required if the agency finds that the proposed action may have a significant effect on the environment; and (5) The agency shall file notice of the determination of the office. When a conflict of interest may exist because the proposing agency and the agency making the determination are the same, the office may review the agency’s determination, consult the agency, and advise the agency of potential conflicts, to comply with this section. The office shall publish the final determination for the public’s information pursuant to section 343-3. The draft and final statements, if required, shall be prepared by the agency and submitted to the office. The draft statement shall be made available for public review and comment through the office for a period of forty-five days. The office shall inform the public of the availability of the draft statement for public review and comment pursuant to section 343-3. The agency shall respond in writing to comments received during the review and prepare a final statement. The office, when requested by the agency, may make a recommendation as to the acceptability of the final statement. 15 Petitioners asserted—and the A&B and State Defendants admitted in their respective answers to Petitioners’ amended complaint—that no EA has ever been completed in connection with the revocable permits. 11  FOR PUBLICATION IN WEST’S HAWAI‘I REPORTS AND PACIFIC REPORTER  up to 8.4 million gallons per day could still be diverted to the County for the public health, safety, and welfare of existing customers served by East Maui surface-water diversions. 1. Petitioners’ Motion for Partial Summary Judgment and the A&B Defendants’ Cross-Motion for Partial Summary