The case involved multiple appeals from a December 19, 2001 final decision and order of the Commission on Water Resource Management ("Commission") approving Kukui (Moloka‘i), Inc.'s ("KMI's") application for water use permits. On appeal, intervenors Department of Hawaiian Home Lands ("DHHL"), Office of Hawaiian Affairs, and others generally allege multiple violations of the Commission's public trust duties under the Hawaii Constitution, the State Water Code (HRS Chpater 174C), and the public trust doctrine (the Court cites frequently to the seminal Waiahole water cases).
On May 13, 1992, the Commission designated the island of Moloka‘i as a Water Management Area, which brought water use applications under the jurisdiction of HRS Chapter 174C and the Commission. Under its rules, the Commission reserved 2.905 million gallons per day of ground water from state lands in the Kualapuu aquifer system for use on Hawaiian home lands on Molokai. HAR § 13-171-63.
The Department of Hawaiian Home Lands (“DHHL”) argued against the granting of a water use permit to KMI, because it would impact their reservation, which they viewed as a distinct or existing "use.” The Supreme Court disagreed. The Court held that a 'reservation' of water does not constitute an 'existing legal use'; instead, a reservation of water resources "constitutes a public trust purpose[,] . . . entitled to the full panoply of constitutional protections afforded the other public trust purposes." A public trust analysis requires the Commission to balance various interests of the applicant and the public to water resources.
The Court gave an excellent summary of the public trust doctrine as follows (citations omitted):
"Under the public trust [doctrine] and the Code, permit applicants have the burden of justifying their proposed uses in light of protected public rights in the resource." The Water Code requires, inter alia, that the applicant prove that the proposed use of water is a "reasonable-beneficial use" and is "consistent with public interest." "Reasonable-beneficial use" is defined as "the use of water in such a quantity as is necessary for economic and efficient utilization, for a purpose, and in a manner which is both reasonable and consistent with the state and county land use plans and public interest."Based on the above, the Court found a basis for vacating and remanding KMI’s permit for the following reasons, inter alia:
Furthermore, besides advocating the social and economic utility of their proposed uses, permit applicants must also demonstrate the absence of practicable mitigating measures, including the use of alternative water sources. Such a requirement is intrinsic to the public trust, the statutory instream use protection scheme, and the definition of 'reasonable-beneficial' use, and is an essential part of any balancing between competing interests.
In addition, "applicants must still demonstrate their actual needs and, within the constraints of available knowledge, the propriety of draining water from public streams to satisfy those needs.”
The Water Commission, on the other hand, is duty-bound to place the burden on the applicant to justify the proposed water use in light of the trust purposes and "weigh competing public and private water uses on a case-by-case basis[,]" requiring a higher level of scrutiny for private commercial water usage. Moreover . . . the Water Commission's findings must reasonably explain and justify its conclusions and rulings. Finally, the Commission must not relegate itself to the role of a mere "umpire passively calling balls and strikes for adversaries appearing before it," but
instead must take the initiative in considering, protecting, and advancing public rights in the resource at every stage of the planning and decisionmaking process. . . . Specifically, the public trust compels the state duly to consider the cumulative impact of existing and proposed diversions on trust purposes and to implement reasonable measures to mitigate this impact, including using alternative resources. . . . In sum, the state may compromise public rights in the resource pursuant only to a decision made with a level of openness, diligence, and foresight commensurate with the high priority these rights command under the laws of our state.
In light of the foregoing, this court must take a "close look" at the Water Commission's action to determine if it complies with the Water Code and the public trust doctrine.
- KMI failed to demonstrate the absence of practicable alternatives in its application.
- Inasmuch as the entire island of Molokai has been designated a water management area; the common law doctrine of correlative rights is inapplicable to the present matter. Therefore, the Commission erred when it relied on common law notions of correlative rights. The Commission should have relied on the criteria under its governing statute; i.e., HRS Chapter 174C.
- The Commission failed to consider whether and to what extent the closure of the hotel and golf course would have on KMI's proposed uses when it made its proposed use allocation decision.
- The burden is on the applicant, not the intervenors, to show protection of native Hawaiians' traditional and customary gathering rights. Therefore, the Commission's conclusion that "no evidence was presented" to suggest that the rights of native Hawaiians would be adversely affected erroneously shifted the burden of proof to the intervenors.
This opinion adds one more piece to the complex field of water law in Hawaii and is a must read for practitioners.