In re Water Use Permit Applications

9 P.3d 409

94 Haw. 97

In the Matter of the WATER USE PERMIT APPLICATIONS, Petitions for Interim Instream Flow Standard Amendments, and Petitions for Water Reservations for the Waihole Ditch Combined Contested Case Hearing.

No. 21309.

Supreme Court of Hawai`i.

August 22, 2000.

Reconsideration Denied September 17, 2000.

As Amended November 29, 2000.

Gilbert D. Butson of Reinwald O'Connor & Playdon, on the briefs, for Appellee/Cross-Appellant Puu Makakilo.

Stephen K.C. Mau and Cheryl A. Nakamura of Rush, Moore, Craven, Sutton, Morry & Beh, on the briefs, for Appellee/Cross-Appellant The Robinson Estate.

Margery S. Bronster, Attorney General of Hawai`i, Heidi M. Rian, Haunani Burns and Marjorie Lau, Deputy Attorneys General, on the briefs, for Appellees/Cross-Appellants State of Hawai`i Department of Agriculture and Department of Land and Natural Resources.

Benjamin A. Kudo, Wesley M. Fujimoto and Stacy E. Uehara of Dwyer, Imanaka, Schraff, Kudo, Meyer & Fujimoto, on the briefs, for Applicant/Petitioner-Appellant Kamehameha Schools Bernice Pauahi Bishop Estate.

David Z. Arakawa, Corporation Counsel and Mark K. Morita, Randall K. Ishikawa, Duane W.H. Pang and Reid M. Yamashiro, Deputies Corporation Counsel, on the briefs, for Appellants City and County of Honolulu Planning Department and Board of Water Supply.

Michael W. Gibson, Douglas S. Appleton and Keith M. Yonamine of Ashford & Wriston, on the briefs, for Applicant-Appellee/Cross-Appellant The Estate of James Campbell.

Paul H. Achitoff and David L. Henkin of Earthjustice Legal Defense Fund for Petitioners/Appellants Waiāhole-Waikāne Community Association, Hakipu`u `Ohana and Ka Lhui Hawai`i and Alan T. Murakami and Carl C. Christensen of the Native Hawaiian Legal Corporation, on the briefs, for Petitioners/Appellants Waihole-Waikne Community Association and Hakipuu Ohana.

Gino L. Gabrio, Patrick W. Hanifin and Laurie A. Kuribayashi of Cades, Schutte, Fleming & Wright and Orlando R. Davidson and David L. Callies, on the briefs, for Appellee/Cross-Appellant Land Use Research Foundation.

Gary M. Slovin, Margaret Jenkins Leong and Lisa Bail of Goodsill, Anderson, Quinn & Stifel, on the briefs, for Applicant-Appellee/Cross-Appellant Dole Food Company, Inc./Castle & Cooke, Inc.

James T. Paul, Pamela W. Bunn and Jessica Trenholme of Paul, Johnson, Park & Niles for Intervenor/Appellant Hawaii's Thousand Friends.

Frank D. Padgett, on the briefs, for Appellant Commission on Water Resource Management.

James K. Mee of Pacific Legal Foundation and Cary T. Tanaka of Matsumoto, LaFountaine & Chow, on the briefs, for Appellee Hawai`i Farm Bureau.

Jon T. Yamamura and Kevin E. Moore of Carlsmith Ball, on the briefs, for Applicant/Appellee Nihonkai Lease Co., Ltd.

Lois J. Schiffer, Assistant Attorney General, Robert Klarquist and Andrew C. Mergen, Attorneys, Appellate Section Environment & Natural Resources Division, Department of Justice and Cheryl Connett and Paul M. Sullivan, Attorneys, Pacific Division, Naval Facilities Engineering Command, on the briefs, for Appellee United States Department of the Navy.

Alan M. Oshima of Oshima Chun Fong & Chung for Appellee/Cross-Appellant The Estate of James Campbell.

Naomi U. Kuwaye of Dwyer Imanaka Schraff Kudo Meyer and Fujimoto for Applicant/ Petitioner-Appellant Kamehameha Schools Bishop Estate.

MOON, C.J., LEVINSON, NAKAYAMA, RAMIL, JJ. and Circuit Judge IBARRA, in Place of KLEIN, J. Recused.

Opinion of the Court by NAKAYAMA, J.

TABLE OF CONTENTS I. BACKGROUND ..................................................... 423 A. INTRODUCTION ................................................... 423 B. PROCEDURAL HISTORY ............................................. 423 C. FINAL DECISION ................................................. 425 II. STANDARD OF REVIEW ............................................ 430 III. DISCUSSION.................................................... 431 A. PROCEDURAL DUE PROCESS.......................................... 431 1. Dual Status of the Commission Chairperson.............................. 432 2. Improper Influence by the Attorney General and Governor................ 435 B. PUBLIC TRUST DOCTRINE........................................... 439 1. History and Development................................................ 439 2. Relationship to the State Water Code................................... 442 3. State Water Resources Trust............................................ 445 a. Scope of the Trust................................................... 445 b. Substance of the Trust............................................... 447 i. Purposes of the Trust.............................................. 448 ii. Powers and Duties of the State Under the Trust.................... 450 c. Standard of Review under the Trust................................... 455 C. INTERPRETATION OF THE STATE WATER CODE.......................... 456 1. Basic Principles of Statutory Construction............................. 456 2. Water Code Declaration of Policy....................................... 457 D. INSTREAM FLOW STANDARDS......................................... 458 1. Overview of the Statutory Framework for Instream Use Protection........ 459 2. Procedural Objections to the WIIFS Amendment........................... 462 3. Substantive Objections to Instream Allocations......................... 464 4. Interim Standard for Waikne Stream.................................... 469 E. INTERIM BALANCING OF INSTREAM AND OFFSTREAM USES................ 470 F. WATER USE PERMITS............................................... 472 1. Permit Applicants' Burden of Proof..................................... 472 2. Diversified Agriculture, Generally, and the Allocation of 2,500 Gallons per Acre per Day....................................................... 474 3. Campbell Estate's Permits.............................................. 476 a. Field Nos. 146, 166 (ICI Seeds)...................................... 476 b. Field Nos. 115, 116, 145, 161 (Gentry/Cozzens)....................... 476 c. Alternative Ground Water Sources..................................... 476 4. PMI's Permit........................................................... 477 a. "Existing Use"....................................................... 477 b. "Agricultural Use"................................................... 479 c. Distinctive Treatment of "Nonagricultural Uses"...................... 480 d. Application of the Commission's Standards............................ 483 5. 12-Month Moving Average................................................ 483 G. USE OF KAHANA SURFACE WATER TO COMPENSATE FOR DITCH "SYSTEM LOSSES"............................................... 484 H. KSBE'S POINTS OF ERROR.......................................... 485 1. Zoning Requirement..................................................... 485 2. Unified Regulation of the Ditch System................................. 486 3. "Ali`i Rights"......................................................... 487 4. Correlative Rights..................................................... 488 5. KSBE's Takings Claim................................................... 492 6. Ankersmit's Testimony.................................................. 495 I. REQUIREMENT TO FUND STUDIES..................................... 495 J. DOA/DLNR'S MISCELLANEOUS OBJECTIONS............................. 498 K. THE CITY'S MISCELLANEOUS OBJECTIONS............................. 499 IV. CONCLUSION..................................................... 501

The present appeal arises from an extended dispute over the water distributed by the Waihole Ditch System, a major irrigation infrastructure on the island of O`ahu supplying the island's leeward side with water diverted from its windward side. In 1995, this dispute culminated in a contested case hearing of heretofore unprecedented size, duration, and complexity before appellee Commission on Water Resource Management (the Commission). At the hearing, the Commission considered petitions to amend the interim instream flow standards for windward streams affected by the ditch, water use permit applications for various leeward offstream purposes, and water reservation petitions for both instream and offstream uses. The Commission issued its final findings of fact (FOFs), conclusions of law (COLs), decision and order (D & O) (collectively, final decision or decision) on December 24, 1997.

Parties on appeal include: the Commission; appellee/cross-appellant Estate of James Campbell (Campbell Estate); appellants City and County of Honolulu Planning Department and Board of Water Supply (collectively, the City); appellees/cross-appellants Department of Agriculture (DOA) and Department of Land and Natural Resources (DLNR), State of Hawai`i (collectively, DOA/DLNR); appellee/cross-appellant Dole Food Company, Inc./Castle & Cooke, Inc. (Castle); appellee Hawaii Farm Bureau (HFB); appellant Hawaii's Thousand Friends (HTF); appellant Kamehameha Schools Bernice Pauahi Bishop Estate (KSBE); appellee/cross appellant Land Use Research Foundation (LURF); appellee Nihonkai Lease Co., Inc. (Nihonkai); appellee/cross-appellant Pu`u Makakilo, Inc. (PMI); appellee/cross-appellant Robinson Estate (Robinson); appellants Waihole-Waikne Community Association, Hakipu`u `Ohana, and Ka Lhui Hawai`i (collectively, WWCA); and appellee United States Department of the Navy (USN). We have carefully reviewed their arguments in light of the entire breadth of this state's legal mandates and practical demands. For the reasons fully explained below, we affirm in part and vacate in part the Commission's decision and remand for further proceedings consistent with this opinion.

I. BACKGROUND

A. INTRODUCTION

The Waihole Ditch System collects fresh surface water and dike-impounded ground water¹ from the Ko`olau mountain range on the windward side of the island of...