In re ‘ Ao Ground Water Management Area

In re ‘ Ao Ground Water Management Area High Level Source Water Use Permit Applications, 128 Hawai’I 228 (2012) (holding a state agency’s denial of an application to amend in-stream flow standards was improper because the agency failed to consider the effect of the denial on native practices and the feasibility of protecting such practices, while also improperly placing the burden of showing stream loss on parties to the proceeding; considering solely aquatic instream use; speculating with regard to a factory’s change of ownership; and factoring cost into its analysis of alternative use).

The Waihe’e River, Waiehu stream, ‘ ao stream, and Waikap stream collectively comprise the system known as N Wai ‘Eh.  None of these four streams have consistent surface flows; they remain dry at least part of the year.  Together, parties Hui O N Wai ‘Eh and Maui Tomorrow Foundation, Inc. (“Hui/MTF”) petitioned the Commission of Water Resource Management (the “Commission”), a state agency, to amend instream flow standards (“IFS”) for each of N Wai ‘Eh’s four waterways.  IFS dictate the amount of water that must remain in a stream.  IFS assessments take into consideration many different factors including fish and wildlife habitat, recreation, aesthetics, navigation, water quality, and traditional Hawaiian rights.  Various other entities were parties to the proceeding including Hawaiian Commercial & Sugar Company (“HC”).

The Commission considered amending the IFS for N Wai ‘Eh.  Although the Commission made several findings of fact that N Wai ‘Eh was a historical and cultural center for native Hawaiians, the Commission only increased the IFS for the Waihe’e River and Waiehu stream.  The Commission did not increase the IFS for the ‘ ao and Waikap streams. The Commission also removed restrictions prohibiting new diversions on the ‘ ao and Waikap streams.

In reaching its decision, the Commission relied on the US Geological Survey’s (“USGS”) data on current instream flow.  The Commission also relied on a hydrologist’s calculations that purported to represent the irrigation requirements of N Wai ‘Eh’s nearby fields.  The Commission also considered the instream flow necessary to maintain a healthy fish population and the streams’ water loss due to evaporation and seepage.  The Commission required HC, along with other parties to the proceeding, to establish how much water the streams lost as a result of evaporation and seepage.

Finally, the Commission considered the availability of alternate water sources in the N Wai ‘Eh area.  First, the Commission took judicial notice of reports that a nearby pineapple factory was in the process of changing ownership and the new owners, unlike the previous owners, would not make use of wastewater to irrigate its fields.  Second, the Commission considered the yield of HC ‘s Well No. 7.  HC testified that using Well No. 7 was costly, would reduce aquifer recharge, increase the salinity of the well’s water.  Thus, Well No. 7 was not a viable alternative source of water.  The Commission reasoned increasing the IFS for the ‘ ao and Waikap streams would remove available water supply.  Given their lack of alternative sources, both the pineapple factory and HC depended on that supply.  Thus, the Commission concluded it would not increase the IFS for these two streams and would allow new diversions from the streams as well.

Hui/MTF appealed the decision to the Supreme Court of Hawaii (“Court”).  First, the Court addressed whether it had jurisdiction to hear the appeal.  The Court noted state law allows judicial review of an agency hearing if a party’s due process rights are implicated.  A party’s due process rights are implicated if his or her property interests are at stake.  The Court held the hearing to amend the IFS implicated native Hawaiians’ property rights because it affected their right to exercise traditional and customary irrigation methods. Native Hawaiians possess a property right to these methods.  State law clearly codified this right.  Also, in addition to the property rights at issue, the complexity and significance of IFS required judicial review.  Thus, the court held it had jurisdiction over the appeal.

Second, the Court reviewed the factual findings of the Commission concerning N Wai ‘Eh’s historical and cultural significance.  The Court held, despite the factual findings, the Commission failed to consider two factors: the effects the revised IFS would have on native Hawaiian practices and the feasibility of protecting such practices.  Case law required the Commission to take these additional factors into consideration.  The Commission’s failure to consider these factors was particularly apparent with regard to kalo cultivation and fishing and hunting rights.

Next, the Court held the Commission’s reliance on USGS data proper because the Commission only used that data as an initial starting point in its analysis.  The Commission only used one of the USGS figures, and adapted that figure throughout its analysis.  Further, the Commission properly used USGS data in estimating how much water the streams lost.  The Commission correctly used this information to determine the stream flow necessary to support a habitat for fish.  The Court also held the Commission’s use of the hydrologist’s calculations was not in error.  The Court held that the Commission’s use of these calculations was proper because the Commission was not required to calculate precise figures when adjudicating IFS.  The Commission only needed to estimate instream and offstream demands.

The Court also explained the statutory scheme required the Commission to weigh instream uses against non-instream uses.  Loss of water through evaporation and seepage decreases the value of diverting water, a non-instream use.  Thus, the Commission properly considered losses sustained by the N Wai ‘Eh system.  However, the Commission erred in placing the burden of proof regarding these losses on the parties to the IFS proceeding, including HC.  The Commission itself should have estimated the losses.  Also, the Commission merely focused on the fact that the streams possessed a limited ability to sustain aquatic life, an instream use.  The Commission neither examined other non-instream uses, nor explained why it proceeded with such a limited analysis.  Thus, the Court did not properly balance instream uses against non-instream uses.

The Court next examined the Commission’s judicial notice of the pineapple factory’s ownership status.  The Court held the Commission improperly considered the ownership of the pineapple factory. While taking judicial notice of the change of ownership itself was not improper, the Commission went on to predict the impact of that change on the water supply—improper due to evidentiary rules and its speculative nature.

Finally, the Court held the Commission properly considered HC’s alternative source, Well No. 7.  Like it did for the analysis of the system loss, state law required the Commission to balance the instream values with the importance of the non-instream uses when considering alternative sources.  Allowing a user to divert from the stream when that user has access to an alternative source diminishes the importance of diverting for a non-instream use.  However, the court held the Commission did not simply balance the instream values against the noninstream values.  The Commission considered the cost to HC as the determinative factor in concluding Well No. 7 was not an alternative source to diverting N Wai ‘Eh water.  Also, the Commission did not consider recycled wastewater to be a sufficient alternate source.  The Court held this was in error because the wastewater was enough to provide a significant contribution to N Wai ‘Eh users’ needs.

Accordingly, the Court vacated the Commission’s findings of fact, conclusions of law, decision, and order and remanded the matter to the Commission for further proceedings.