In the Matter of the Contested Case Hearing on Water Use, Well Construction, and Pump

Installation Permit Applications, Filed by Wai`ola O Molokai, Inc.

and Molokai Ranch, Ltd.Hawaii Supreme Court

Jan. 29, 2004

The entire island of Moloka`i was designated as a Water Management Area in 1992, which required all water users to register their water uses and to seek permission from the Commission on Water Resource Management (usually called the Water Commission) for any new uses of water.

OHATrusteesColetteMachadoAndHaunaniApoliona

Wai`ola O MolokaiThe developer’s

proposal was to put in a new well at Kamiloloa, about three miles from the existing Kualapu`u well fields.

Molokai RanchOwns 35-40% of the land on

Molokai (50,000 acres).

Sought 1.25 mgd from the new Kamiloloa well.

Water Commission awarded them 655,928 gpd.

Department of Hawaiian Home Lands – Molokai

25,383 acres

2.905 million gallons a day – water reservation

Aquifers – Sustainable Yields

Kualapu`u – 5 mgdKamiloloa -- 3 mgd[ These figures are

contested – no way to know for certain.]

Wai`ola O Molokai (2004)Important Water Rights Victory of Native Hawaiians on Molokai The decision extended the “public trust” protections that it had previously affirmed in the 2000 Waiahole Ditch Case to the water rights of the Native Hawaiian people and confirmed that the State's Water Commission was obliged to ensure that all its actions protected the rights of Native Hawaiians.

The Court’s ruling that reconfirms Native Hawaiians are in a special category: “We have consistently recognized the heightened duty of care owed to the native Hawaiians.”

Wai`ola O Molokai * OHA was one of four intervenors

in the case, joining to help protect the water rights of Molokai homesteaders.

* Department of Hawaiian Home Lands

* Native Hawaiians represented by Earthjustice

* Native Hawaiians represented by the Native Hawaiian Legal Corporation.

Wai`ola O Molokai The Hawaii Supreme Court remanded back to

the Water Commission for further proceedings a request that had been filed by the Molokai Ranch to develop a new well in central Molokai, ruling that the Commission’s decision had “violated DHHL’s reservation rights as guaranteed” by the Hawaii Constitution, the Hawaiian Homes Commission Act, and Hawaii’s Water Code.

“MR-Wai`ola had the burden of establishing …that the proposed use would not interfere with DHHL’s 2.905 reservation of water in the Kualapu`u aquifer system.”

Wai`ola O Molokai The Court ruled that the Commission had not

adequately evaluated whether the new well would interfere with the rights of the Department of Hawaiian Home Lands (DHHL) to develop water sources for its lands on Molokai in the future, and thus that the Commission had “clearly erred” in issuing a water permit to the Molokai Ranch.

The Court explained that the “reservation” of 2.905 million gallons a day of water that had previously been granted to DHHL was “a public trust purpose” and “an essential mechanism by which to effectuate the State’s public trust duty” and was thus “entitled to the full panoply of constitutional protections afforded the other public trust purposes enunciated by this court in Waiahole.”

Wai`ola O Molokai (2004)

“MR-Wai`ola was obligated to demonstrate affirmatively that the proposed well would not affect native Hawaiians’ rights.”

Wai`ola O Molokai The Court also said that the

Commission had “failed adequately to discharge its public trust duty to protect native Hawaiians’ traditional and customary gathering rights” by not allowing adequate cross-examination of the Ranch’s oceanography expert (Dr. Stephen Dollar) regarding the protection of the subsistence and gathering rights of the Native Hawaiians on Molokai.

Wai`ola O Molokai (2004) – Correlative Rights“Pursuant to HRS sec. 174C-49( c), MR-Wai`ola

may transport water outside the aquifer of origin.”* “Waiahole extended the ‘correlative rights rule,’

as enunciated in City Mill, to all groundwater resources in Hawaii…”

* “Inasmuch as the entire island of Molokai has been designated a WMA, the common law doctrine of correlative rights is inapplicable to the present matter.”

* The Commission FOF “establish the findings, as set forth in HRS sec. 174C-49( c), requisite to allowing MR-Wai`ola to transport and use groundwater outside the Kamiloloa aquifer system.”

Kukui (Molokai) Inc.In 1993, Kukui (Molokai), Inc. (KMI), which

owned and operated the resort in the western end of Molokai, submitted an application for 2.0 million gallons a day (mgd) of water.

The Water Commission staff determined that this application was incomplete, but the next year recommended that the Commission allocate 1.275 mgd to the applicant for “existing uses” of water.

A few months later, the staff lowered its recommendation to 1.183 mgd, based on better data, and the following year (1995) lowered its recommendation still further to 0.871 mgd.

Kukui (Molokai) Inc.A formal contested case hearing began in 1998.

Challenging KMI’s application were * the Department of Hawaiian Home Lands

(represented by the Attorney General through Clayton Lee Crowell),

* individual intervenors Judy Caparida and Georgina Kuahuia (represented by the Native Hawaiian Legal Corporation through Alan Murakami), and

* individual intervenor Sarah Sykes (represented by Maui attorney Isaac Hall).

* the Office of Hawaiian Affairs’ (represented by Jon Van Dyke)

The contested case itself took place in November and December 1998, primarily in Moloka`i, but with several days of hearings in Honolulu.

Kukui (Molokai) Inc.The Hearing Officer (Peter Adler) issued

his Proposed Findings of Fact, Conclusions of Law, and Decision and Order on May 15, 2000.

The parties then filed written exceptions in July 2000.

The Water Commission heard oral arguments on these written exceptions on October 17, 2001, in Moloka`i, and it issued its Findings of Fact, Conclusions of Law, and Decision and Order on December 19, 2001.

Kukui (Molokai) Inc.The Water Commission allocated a total of

1.018 mgd to the applicant, 0.936 mgd for “existing uses” and 0.082 mgd for “new uses.”

This allocation was less than the applicant sought, but more than should have been allowed in light of the facts showing that KMI had never in fact utilized this much water and also the realization that this allocation will have a significant negative impact on the ability of the Department of Hawaiian Home Lands to deliver water to its homesteaders in Moloka`i.

EXISTING USE?Application 1991-92 COWRM Established

(12/5/93) (A-31) March ‘95) Golf 600,000 378,630 475,600 378,630 – bw Hotel 100,000 130,685 100,000 100,000 Backwash 100,274 ??

Condos 175,000 90,959 193,200 175,000 Kualapuu 75,890

Rsdnces 330,000 23,400 Papahaku 137,534 15,600 Moana Makani 3,288 1,800

Beach Park 26,027 Nursery 17,534 Molokai Ranch 49,315

System Loss 83,835 MIS 124,830 79,220 67,103 “Difference” __ 25,753 _______ 0Total 1,205,000 1,244,544 871,420 738,133

Kukui (Molokai) Inc.An appeal of the Contested Case involving

the application of Kukui (Molokai), Inc., for water from the Kualapu`u Aquifer in central Moloka`i.

This case is a companion case to one involving Wai`ola O Molokai and the Molokai Ranch from the adjacent Kamiloloa Aquifer.

Kukui (Molokai), Inc. has recently been purchased by the owners of the Molokai Ranch, so the issues in these two cases are closely intertwined.

Kukui (Molokai) Inc.In early 2001, the resort in west Moloka`i suspended

operations, and this property was put up for sale. Recently, it has been reported that the KMI property will be purchased by the Moloka`i Ranch.

The goal of the Office of Hawaiian Affairs throughout this litigation has been to ensure that the Water Commission recognizes and protects the water rights of the Native Hawaiian People, and that the rights of the Native Hawaiian People to water that has been recognized nationally in the case of Winters v. United States, 207 U.S. 564 (1908), is also recognized and applied by state agencies throughout the Hawaiian Islands.

I. Impact of KMI’s Request on the Rights of the Native Hawaiian PeopleA. The Winters Doctrine – land set aside by the federal government for natives is entitled to the water the natives need for agricultural and domestic uses. B. Relevant Hawai`i Statutes --Haw. Const. Art. XII, Sec. 7; Haw. Homes Comm. Act, sec. 221( c); * Water Code – HRS 174C-101(a)&(c); Water Code – HRS 174C-49(e)C. The DHHL Reservation (2.905 mgd) – designed to protect the rights of Native Hawaiians under Winters and the relevant Hawai`i statutes – constitutes an important right that must be protected.D. Traditional and Customary Rights – strong Native Hawaiian culture on Moloka`i requires protection of subsistence living – Native Hawaiian families obtain 38% of their food through traditional gathering activities.

II. How Much Water Is Available from the Kualapuu Aquifer?A. 5 mgd total? – Tom Nance testified that DHHL could not obtain its reservation from its existing wells; Bill Meyer testified that DHHL might not be able to obtain the reservation at all from the Kualapuu area.B. Where is the top of the “transition zone”? – it appears to be above the bottom of the DHHL well.C. Evidence of rising chloride levels. – provides strong evidence that the bottom of the DHHL well is already in the transition zone.D. Need for a new monitoring well. – an essential step, pursuant to the precautionary principle.

III. What Is the Extent of KMI’s “Existing Use”?

In re Permit Applications for Koolaupoko Ground Water Management Area (Oahu) (Dec. Ruling No. DEC-OA94-G4, April 5, 1995):

“Therefore, we conclude that the term ‘existing use’ as used in the Water Code, HRS chapter 174C for purpose of water use permits refers to those uses as of the date of a particular area is designated as a water management area under HRS 174C, Part IV.”

IV. How Should the Claims of Terrestrial Water Users Be Balanced Against the Value of Having Fresh Water in the Coastal Areaas and Nearshore Waters?A. The value of natural ecosystems

1. To support native life forms – and support traditional subsistence gathering rights.

2. Erosion control/Reduce fires3. Promote health of coastal area

B. Ecosystems around the world are being restored:1. Everglades, Florida2. Owens Valley, California3. Waiahole Valley, O`ahu

C. Transfers of water should be limited -- Precautionary Principle – always err on the side of caution when scientific information is inadequate.

Kukui (Molokai) Inc.--The Issues. A. That KMI’s application was flawed because it

combined requests for both “existing” and “new” uses of water, and that these uses should be considered separately in separate proceedings.

B. That KMI had not established actual usage and current need for the amount of water it was requesting, particularly with regard to the condominium units it had constructed, its golf course, and its residential units.

C. That the hearing officer had failed to recognize the danger to the Kualapuu Aquifer from increased pumpage.

D. That KMI had failed to comply with the Safe Drinking Water Act.

Kukui (Molokai) Inc.--The Issues. E. That the hearing officer had misunderstood and

misapplied the correlative rights doctrine, by allowing water obtained through that doctrine to be transferred to distant locations.

F. That the hearing officer had misinterpreted and misapplied the 2.905 mgd water reservation that had previously been allocated to the Department of Hawaiian Home Lands, and had not recognized that it should be treated as an “existing use” that serves to limit allocations of water to other claimants. This ruling is particularly disturbing, because it fails to recognized the application of the Winters doctrine to Native Hawaiians. This issue is also raised in the Wai`ola case now pending before the Hawai`i Supreme Court.

Kukui (Molokai) Inc.OHA’s brief addressed the rights of

the Native Hawaiian People under the Winters doctrine and Hawai`i statutes in some detail, and explained why the Water Commission erred in awarding 1.018 million gallons a day of water to Kukui (Molokai), Inc., because this award interferes with the ability of the Department of Hawaiian Home Lands to access the water it needs for homestead developments.

Kukui (Molokai) Inc.OHA’s brief also addressed the public

trust doctrine and the precautionary principles in some detail, drawing upon the Court’s decision in the Waiahole Ditch case and explain how they apply to this dispute.

Finally, the brief discussed the correlative rights doctrine, and the impact of the closure of the resort and golf course in West Molokai, which are the primary users of the disputed water.

The Winters Doctrine. OHA has always put particular emphasis on ensuring

that the Water Commission recognizes the unique rights of the Native Hawaiian People to water, which stems from the Winters case.

That case involved a group of white investors and farmers who in 1900 constructed dams to divert the Milk River in north-central Montana to provide irrigation water to settlers who had acquired property under the federal homestead and desert land use acts.

Their action was lawful under the homestead acts, but it significantly reduced the amount of water reaching the 1,000,000-acre Fort Belknap Indian Reservation (which had been created in 1888 by a treaty between the United States and the Gros Ventre and Assiniboine Indians), producing the effect that the water reaching the Native Americans was no longer adequate for irrigation, livestock, or domestic use.

The Winters Doctrine. After the United States brought suit on behalf of the

Natives to prevent the upstream diversion, the U.S. Supreme Court held that the federal government had acquired on behalf of the Native groups an appropriation of sufficient water to fulfill the purposes of establishing the Reservation.

Because the Reservation was established prior to the activities of the upstream diverters, the rights of the Natives were superior and the white settlers were enjoined from diverting any substantial quantities of water from the Milk River.

The Court held that the fact that the Natives had not begun to use substantial quantities of water until after the white settlers had perfected their title to the lands under U.S. homestead and desert land laws was immaterial, because of the superior treaty rights of the Natives.

The Winters Doctrine. The Court quoted the standard canon of interpretation for agreements with Natives that “ambiguities occurring will be resolved from the standpoint of the Indians.” 207 U.S. at 576. It then said it was necessary to interpret the treaty to achieve its goals, namely to enable the Indians “to become a pastoral and civilized people,” id., by raising horses and growing grass, grain and vegetables. Id. at 566. This goal could be achieved only if the Natives had access to large amounts of water from the Milk River, and their rights had to be viewed as superior to any later upstream settlers. In reaching this conclusion, the Court was aware of the substantial economic losses that would accrue to the upstream white community, but viewed these losses as immaterial.

The Winters Doctrine. The parallels between the Native Hawaiian

homesteaders on Molokai and the natives at the Fort Belknap Reservation in Montana, are obvious.

In both cases, the natives had originally controlled the land and water in a much larger area.

Most of the native lands were in both cases ceded to the United States, and the United States reserved specific lands for use by the natives.

The clear intention of Congress in both cases was to enable and encourage the creation of stable agriculturally-based communities.

The Hawaiian Homes Commission Act, 1920, 42 Stat. 108 (1921), was aimed at “rehabilitating the Hawaiian race” by returning them to the lands. H.R. Rep. No. 67-236, at 1 (1921).

The Winters Doctrine. Just as the U.S. Supreme Court concluded that the

1888 treaty with the Gros Ventre and Assiniboine Indians must be interpreted to achieve its goals (i.e., to allow the Natives to use their lands to graze and grow crops), state agencies such as the Water Commission must also conclude that the Hawaiian Homes Commission Act and the other statutes relevant to water disputes must be interpreted to ensure that they achieve their goals – to permit the “rehabilitation” of the native Hawaiians by allowing them to engage in successful agricultural activities, which of course requires adequate water.

The Native Hawaiian homesteaders are entitled to waters in sufficient quantities for their agricultural, aquacultural, livestock, and domestic needs.

The Winters Doctrine. The Winters “federal-reserved-water-rights” doctrine

has been followed in many other cases, including Arizona v. California, 373 U.S. 546, 601 (1963), decree entered, 376 U.S. 340 (1964), modified, 460 U.S. 605 (1983)(which ringingly reaffirmed Winters and explicitly protected the rights of Natives on five reservations near the Colorado River), and Cappaert v. United States, 426 U.S. 128 (1976)(where the Court held that lands set aside for natives by the United States are protected from subsequent water diversions, whether the diversion is by surface water or groundwater). Because most of the lands assigned to the Department of Hawaiian Home Lands were -- like most of those assigned to North American Natives -- marginal, arid, and in need of irrigation, these lands can only be utilized if it is recognized that the Native Hawaiian homesteaders are entitled as a matter of right to the water their lands need.

The Winters Doctrine. Hawai`i’s Constitution and laws recognize and

protect the rights of Native Hawaiians to water, but these written protections will become meaningless unless state agencies apply these doctrines in disputes over water. Article XII, Section 2, of Hawaii’s Constitution recognizes the importance of protecting DHHL trust assets, including water, and Article XII, Section 7 provides broad protection to all the subsistence and traditional rights of Native Hawaiians.

The water rights of Native Hawaiian homesteaders on the lands of the Department of Hawaiian Home Lands are also protected first in Section 221(c) of the Hawaiian Homes Commission Act, 1920, 42 Stat. 108, as amended, and in the Water Code, HRS §174C-101(a) and §174C-49(e).

The Winters Doctrine. But despite these strong protections, the Water

Commission concluded in Conclusion of Law 27 in its recent KMI decision that the reservation it had previously given to the Department of Hawaiian Home Lands is not an “existing legal use” and hence cannot serve to block the allocation of water to other users, and the remainder of the opinion ignores the DHHL reservation, thus indicating that reservations are not even to be considered when reviewing applications for water by other parties.

This conclusion is in direct violation of governing law. The rights to water of the Department of Hawaiian

Home Lands, just like the Native Hawaiian traditional and customary rights, do have a priority status, and in that sense the Hawaiian community does have a veto power over water developments.

Wai`ola O Molokai (2004)“In essence, the 1991

amendments to HHCA sec. 220, HRS sec. 174C-49(a)(7), and HRS sec. 174C-101(a) comprise the state law equivalent to the Winters doctrine for purposes of homesteaders on Hawaiian homelands. Thus, the Winters doctrine is inapplicable to the present matter.”

Kukui (Molokai) Inc.– attorney for the Commission. The long delay between the hearing officer’s report and the oral

argument before the Commission was attributable in part to the resignation of the attorney for the Commission and the failure to appoint a replacement.

The attorney finally appointed was Yvonne Izu, a new Deputy Attorney General, who had previously served as counsel for Wai`ola o Moloka`i (the Moloka`i Ranch) in the still-pending Wai`ola case.

Once it became clear that the Moloka`i Ranch was in the process of purchasing the KMI property, the impropriety of this appointment became obvious.

Although DHHL has some awkwardness in challenging this appointment, because it is also represented by a Deputy Attorney General, the other intervenors feel it is necessary to challenge the conflict presented by this appointment.