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In re Contested Case Hearing on Water Use Permit Application Originally Filed By Kukui (Molokai), Inc.

Supreme Court of Hawaii

December 10, 2018

IN THE MATTER OF THE CONTESTED CASE HEARING ON THE WATER USE PERMIT APPLICATION ORIGINALLY FILED BY KUKUI (MOLOKAI), INC., NOW REFILED AS A NEW GROUND USE BY MOLOKAI PUBLIC UTILITIES, LLC.

          APPEAL FROM THE COMMISSION ON WATER RESOURCE MANAGEMENT (CASE NO. CHH-MO-97-01)

          Calvert G. Chipchase Christopher T. Goodin Trisha Akagi for applicant-appellant

          Camille Kalama David K. Kopper Sharla Ann Manley for appellees Judy Caparida and Georgina Kuahuia

          Ryan Kanaka‘ole Diane K. Taira Matthew S. Dvonch for appellee Department of Hawaiian Home Lands

          Sherry P. Broder for appellee Office of Hawaiian Affairs

          Caleb P. Rowe Kristin K. Tarnstrom for appellee County of Maui, Department of Water Supply

          RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, JJ., AND CIRCUIT JUDGE GARIBALDI, IN PLACE OF WILSON, J., RECUSED

          OPINION

          POLLACK, J.

         When this court first considered this case over a decade ago, we vacated the issuance of two water use permits and remanded the matter to the State of Hawai'i Commission on Water Resource Management (Commission) for further proceedings. On remand, parties indicating that they were the applicant's successors in interest submitted a letter to the Commission stating that they lacked the financial resources to continue to pursue the case. When these same parties filed a new water use application years later, the Commission initially treated it as a continuation of the remanded case before concluding that the letter had constituted a waiver of the applicants' right to continue the original proceedings. The applicants now challenge this conclusion, arguing that the letter was at best ambiguous as to their intention to relinquish the rights at issue. Because we hold that the Commission did not err in finding that the letter was a clear and unambiguous waiver of the right to proceed on the contested case, we affirm.

         I. FACTS AND PROCEDURAL HISTORY

         A. In Re Kukui (Molokai), Inc.

         On May 13, 1992, the Commission designated Moloka'i as a water management area.[1] The designation took effect on July 15, 1992, thereby triggering a one-year period during which all existing users of water from the area's aquifers were required to submit applications for existing water use permits, which if granted would entitle the permittee to continue utilizing the approved amount of water. See HRS § 174C-50(c) (1993). Approximately a year later, on June 8, 1993, the Commission accepted a joint existing water use permit application submitted by Moloka'i Irrigation System and Moloka'i Ranch that sought to pump water from Well No. 0901-01 (Well 17).[2] In 1993, however, ownership of the land overlying Well 17 was transferred to Kukui (Moloka'i), Inc. (Kukui).[3]

         In light of this transfer, Kukui submitted its own existing use application on December 15, 1993, seeking to divert 2 million gallons of water a day (gpd) from Well 17. Although the statutory one-year period for submitting existing use applications had expired, the Commission treated Kukui's application as timely, considering it an amendment to the existing use application submitted by Moloka'i Irrigation System and Moloka'i Ranch rather than as a new application.

         After several revisions, the Commission responded to Kukui's application on March 14, 1995, by authorizing an interim use permit of 871, 420 gpd and deferring final action until all existing uses could be established. Approximately a year later, the Commission reviewed a staff recommendation to amend the interim permit to increase Kukui's allowable withdrawal to 1.169 million gpd. The Commission rejected the recommendation and reaffirmed the March 14, 1995 interim existing use allocation of 871, 420 gpd. Kukui requested a contested case hearing challenging this decision.

         Prior to commencement of the contested case hearing, the Department of Hawaiian Home Lands (DHHL), the Office of Hawaiian Affairs (OHA), and individuals Sarah Sykes, Judy Caparida, and Georgina Kuahuia were granted permission to intervene. The hearing was held over the course of eight days beginning on November 23, 1998. The Commission issued its final "Findings of Fact, Conclusions of Law, and Decision and Order" on December 19, 2001 (2001 Order), awarding Kukui an existing use permit authorizing the withdrawal of 936, 000 gpd and a proposed new use permit authorizing the withdrawal of an additional 82, 000 gpd.

         DHHL, OHA, Caparida, and Kuahuia (collectively, the Interveners) appealed from the 2001 Order. During the pendency of the appeal, Kaluakoi Land LLC (Kaluakoi Land), a wholly-owned subsidiary of Molokai Properties Limited (Molokai Properties), acquired the assets of Kukui and was substituted as a party for Kukui.

         On appeal, this court held that, because Kukui's request for an existing use permit should have been treated as a new existing use application rather than an amendment to the original application, it was untimely, thus rendering the existing use permit void. In the Matter of the Contested Case Hearing on the Water Use Permit Application Filed by Kukui (Molokai), Inc., 116 Hawai'i 481, 501, 174 P.3d 320, 340 (2007) (hereafter In Re Kukui (Molokai), Inc.). Accordingly, the existing water uses at issue were "presumed abandoned," we concluded, and Kaluakoi Land was required to apply for a new use permit under HRS § 174C-51 if it sought to "'revive' these expired uses."[4] Id. This court further held that the Commission had erred in granting Kukui the additional proposed new use permit because the Commission had, inter alia, failed to apply the requisite level of scrutiny and impermissibly shifted the burden of demonstrating that the use would interfere with constitutional public trust purposes onto the interveners. Id. at 506-08, 174 P.3d at 345-47. We therefore vacated the Commission's 2001 Order and remanded the case for further proceedings consistent with the opinion.

         B. Remand Before the Commission

         On remand, the Commission issued a "Minute Order Setting Status Conference" on February 25, 2008, to which Kaluakoi Land did not respond.[5] In its place, Molokai Properties filed a joint Status Conference Statement with its wholly-owned subsidiaries Kaluakoi Water LLC (Kaluakoi Water)[6] and Molokai Public Utilities, Inc. (MPU).[7] The Interveners also filed a Joint Status Conference Statement. The Commission held the status conference on March 3, 2008, to discuss the hearing on remand. On March 10, 2008, the Commission directed the Interveners to submit "memoranda regarding their respective position[s] on the scope of the hearing on remand" by May 2, 2008. In addition, the Commission directed MPU, Molokai Properties, and Kaluakoi Water to (1) file a separate pleading identifying Kukui's successor-in-interest that would be the applicant on the amended permit application[8] and (2) respond to the Interveners' memoranda regarding the scope of the hearing by June 16, 2008.

         On March 24, 2008, however, Molokai Properties announced its intention to shut down operations via a press release and an internal memorandum circulated to its employees. When the Interveners submitted a joint "Memorandum Regarding

          Scope of Hearing on Remand" on May 2, 2008, it was accompanied by a "Joint Motion to Dismiss in Part Moloka'i Properties, Limited's Application for Water Use Permit" (Motion to Dismiss) which sought to dismiss the application based on Molokai Properties' upcoming cessation of operations. Neither Molokai Properties, MPU, nor Kaluakoi Water filed any response to the Interveners' memorandum or to the Motion to Dismiss.

         On May 27, 2008, Molokai Properties informed the Commission by letter that MPU "[did] not intend to continue to pursue this case on remand" (May 27 letter) . Molokai Properties disclosed that it had been operating MPU at a loss for years and was shutting down its operations due to insolvency. The letter stated in relevant part as follows:

This letter is to inform you that Molokai Public Utilities (MPU) does not intend to continue to pursue this case on remand. As has been discussed with staff and the [Public Utilities Commission], MPU has been operating at a significant loss for several years and is essentially insolvent.
As a result of this insolvency, we do not have the resources to pursue this very expensive remand proceeding. . . . We are actively seeking a new owner for MPU that will have the resources to continue operation and hopefully, they will be capable of resolving this matter. However, as previously stated, we cannot actively pursue this matter before the Commission.

         In a second letter dated May 30, 2008 (May 30 letter), Molokai Properties informed the Public Utilities Commission (PUC) that MPU would cease providing water utilities to West Moloka'i by the end of August 2008. MPU further stated that it did not have the funds to make a reapplication for a permit to operate Well 17 and that there would "probably" be an unavoidable ...


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