In re Surface Water Use Permit Applications

154 Haw. 309

550 P.3d 1167

SURFACE WATER USE PERMIT APPLICATIONS, INTEGRATION OF APPURTENANT RIGHTS AND AMENDMENTS TO the INTERIM INSTREAM FLOW STANDARDS, Na Wai ‘Eha Surface Water Management Areas of Waihe‘e River, Waiehu Stream, Wailuku River (Previously Known as ‘Iao Stream) and Waikapu Stream, Maui

SCOT-21-0000581

Supreme Court of Hawai‘i.

June 20, 2024

APPEAL FROM THE COMMISSION ON WATER RESOURCES MANAGEMENT (CASE NO. CCH-MA 15-01 (Agency Appeal))

Wil K. Yamamoto (Jodi S. Yamamoto, Honolulu, with him on the briefs) for MMK Maui, LP

Trisha H.S.T. Akagi (David Schulmeister and Michi Momose, with her on the briefs), Honolulu, for Mahi Pono, LLC

Isaac H. Moriwake for Hui O Na Wai ‘Eha and Maui Tomorrow Foundation Paul R. Mancini (James W. Geiger, Kahului, with him on the briefs) for Wailuku Water Co.

Miranda C. Steed (Julie China and Linda L.W. Chow, Honolulu, with her on the briefs) for Commission on Water Resource Management

Pamela W. Bunn, Honolulu (Judy A. Tanaka, with her on the briefs) for Office of Hawaiian Affairs

RECKTENWALD, C.J., McKENNA, AND EDDINS, JJ., CIRCUIT JUDGE NAKAMOTO AND CIRCUIT JUDGE HAMMAN, ASSIGNED BY REASON OF VACANCIES

OPINION OF THE COURT BY McKENNA, J.

I. Introduction

This is a direct agency appeal from the Commission on Water Resource Management ("the Commission") concerning Na Wai ‘Eha, or "the four great Waters of Maui." Na Wai ‘Eha encompasses Waihe‘e River, Waiehu Stream (North and South), Wailuku River (formerly Tao Stream), and Waikapu Stream, and their surrounding ahupua‘a, or watersheds. MMK Maui, LP ("MMK"), Hui o Na Wai ‘Eha and the Maui Tomorrow Foundation ("the Hui/MTF"), the Office of Hawaiian Affairs ("OHA"), Mahi Pono, LLC ("Mahi Pono"), and Wailuku Water Company, LLC ("WWC"), appeal from the Commission’s Findings of Fact, Conclusions of Law, and Decision and Order issued June 28, 2021 ("D&O II"), as amended by Errata issued June 30, 2021 ("errata") (together "final decision").

MMK owns and operates two golf courses in the Na Wai ‘Eha area. The Hui/MTF are community groups with Native Hawaiian members who reside on or have property interests in the area. Mahi Pono engages in diversified agricultural operations on former sugar plantation lands it owns in the area. WWC operates the Na Wai ‘Eha ditch system built during the plantation era; it diverts water from the streams to points of delivery for other users based largely on commercial contracts.

In 2008, the Commission designated Na Wai ‘Eha as a Surface Water Management Area ("SWMA"). The designation triggered statutory provisions in the state Water Code requiring existing and new water users to file surface water use permit applications ("SWUPAs"). Over 140 applicants filed SWUPAs, including MMK, Hawaiian Commercial & Sugar Co. ("HC&S") (Mahi Pono’s predecessor), and WWC.

Then, in 2016, HC&S, the last remaining sugar plantation on Maui, announced closure of operations. The Hui/MTF filed a petition with the Commission to amend Na Wai ‘Eha’s Interim Instream Flow Standards ("IIFS") in light of that closure. The Commission consolidated the SWUPA and IIFS proceedings. After a contested case hearing, HC&S sold its land to Mahi Pono and Mahi Pono was substituted as the applicant in HC&S’s SWUPA.

On June 28, 2021, the Commission issued its D&O II, in which it amended the IIFS for Na Wai ‘Eha and granted various applicants surface water use permits ("SWUPs"). Two days later, the Commission issued an errata to the D&O II, in which it made corrections to its findings and conclusions regarding Mahi Pono’s SWUP and reduced Mahi Pono’s water allocation accordingly.

On appeal, the Hui/MTF and OHA together argue the Commission failed to comply with its constitutional and statutory mandates to restore Na Wai ‘Eha stream flows to the extent practicable and to justify its IIFS decisions through findings of fact ("FOFs") and conclusions of law ("COLs"). MMK, Mahi Pono, and WWC each contend the Commission violated their due process rights and challenge their respective SWUPs. MMK and Mahi Pono argue their respective SWUP water allocations are clearly erroneous because they are not based on their actual water needs. MMK also argues the Commission erroneously and/or arbitrarily classified its golf course water use at the same water duty as "diversified agriculture," engaged in unlawful rulemaking and/or policymaking through adjudication in violation of the Hawai‘i Administrative Procedure Act ("HAPA"), and abused its discretion in denying MMK’s request to monitor its water use based on a 12-month moving average ("12-MAV") standard. WWC challenges various directives and/or conditions related to its SWUP for system losses. WWC additionally argues the Commission should have addressed the "overlapping" jurisdiction of the Public Utilities Commission ("PUC").

While thorough in many respects, the Commission’s final decision still does not evince the "level of openness, diligence, and foresight" that is required where vital public trust resources like water are at stake. See In re Water Use Permit Apps. (Waiahole I), 94 Hawai‘i 97, 143, 9 P.3d 409, 455 (2000). In summary, with respect to the IIFS, we hold the Commission failed to justify its decision to not restore water to the streams in light of the closure of the last Maui sugar plantation and newly incorporated downstream uses. The final decision also lacks reasonable clarity with respect to whether all downstream uses were incorporated into the IIFS. Further, the Commission’s final decision lacks findings on the effect of its decision on instream traditional and customary Native Hawaiian rights protected by the Hawai‘i Constitution and the feasibility of protecting those rights, as required by Ka Pa'akai O Ka ‘Aina v. Land Use Commission, 94 Hawai‘i 31, 7 P.3d 1068 (2000).

The Commission’s final decision also unlawfully delegates the agency’s public trust duties to balance between users during times of water shortages to WWC and, to a lesser extent, Mahi Pono. The Commission’s final decision also does not make reasonably clear the process by which it arrived at Mahi Pono’s water allocation.

We therefore vacate the Commission’s Findings of Fact, Conclusions of Law, and Decision and Order issued June 28, 2021, as amended by Errata issued June 30, 2021, with respect to the IIFS and the delegation of the Commission’s public trust duties. Other than for the reasons given in this opinion for vacatur or remand, we affirm. We remand for further proceedings consistent with this opinion.

II. Background

A.Na Wai ‘Eha, "the four great Waters of Maui"

Na Wai ‘Eha, or "the four great Waters of Maui," encompasses Waihe‘e River, Waiehu Stream (North and South), Wailuku River (formerly ‘Iao Stream), and Waikapu Stream and the surrounding ahupua'a (watershed)¹ on the windward side of Mauna Kahalawai, the West Maui Mountains.

1. Significance in Hawaiian history and culture

"Due to the profusion of fresh-flowing water in ancient times," Na Wai ‘Eha is central in Hawaiian history and culture, and historically "supported one of the largest populations and was considered the most abundant area on Maui." According to undisputed FOFs, Kanaka Maoli (Native Hawaiians)² revered Na Wai ‘Eha as the site of heiau (places of worship) and the traditional and customary practice of hiding piko (the naval cord of newborn babies), representing connection to the land. Other traditional and customary practices "thrived in Na Wai ‘Eha, including the gathering of upland resources, such as thatch and ti, and protein sources from streams," including ‘o‘opu (goby), ‘opae (shrimp), and hihiwai (snail).³ The abundance of water also "enabled extensive lo‘i kalo (wetland kalo) complexes"; Na Wai ‘Eha "comprised the largest continuous area of wetland taro cultivation in the islands."

Today, Native Hawaiian practitioners continue to exercise traditional and customary rights in Na Wai ‘Eha. The exercise of these rights, however, is impacted by offstream diversions, which are largely for private commercial use. During the sugarcane plantation era, "big five" companies C. Brewer and Alexander & Baldwin ("A&B") began building ditch systems to divert water from Na Wai ‘Eha streams for irrigation of two sugar plantations, Wailuku Sugar and HC&S (owned by C. Brewer and A&B, respectively). Wailuku Sugar ceased sugar operations in the 1980s and became WWC in 2005, formed to "own and operate the agricultural water systems" previously run by the sugar companies. According to community testimony before the Commission, restoration of Na Wai ‘Eha mauka to makai⁴ stream flow is "critical to the perpetuation and practice of Hawaiian culture."

2. Water systems and stream flow data

A United States Geological Survey ("USGS") shows 1984-2005 data on the Na Wai ‘Eha water systems. It summarizes Na Wai ‘Eha stream flows through flow-duration curves measured by Qx.⁵ According to the study, the streams’ mean base flow, or the amount of ground water discharge sustained in the streams between precipitation events, is generally between the Q60 and Q80 range. Because Na Wai ‘Eha’s ground and surface waters⁶ are interconnected, its base flows vary based on ground water levels. The USGS concluded the Q70 discharge could generally "be an appropriate estimate of mean base flow" for Hawai‘i streams. The median flow, on the other hand, is at Q50 and, according to the Commission, is "reflective of typical flow conditions."

We summarized the USGS study’s findings regarding the surface waters of Na Wai ‘Eha in a previous case involving Na Wai ‘Eha IIFS and ground waters:

The Waihe‘e River is the principal water source in Na Wai ‘Eha; it is about 26,585 feet long, and its watershed covers 4,500 acres. From 1984–2005, [USGS] data shows streamflow upstream of all diversions as follows: the Q50 flow was 34 [million gallons per day, or mgd], the Q70 flow was 29 mgd, the Q90 flow was 24 mgd, and the Q100 flow was 14 mgd. …

The Waiehu Stream is formed by the confluence of North

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