Land Board Delays Action on Plan To Move Forward with Water Permits

posted in: Board Talk, May 2019, Water | 0

“Let me first say, what you’re doing is long overdue. It’s something we need to do and it’s taken a long time for us to get to this point,” Stanley Roehrig told Ian Hirokawa of the Department of Land and Natural Resources’ Land Division.

On March 22, Hirokawa presented Roehrig and his fellow members of the Board of Land and Natural Resources a novel method by which prospective water lessees of could, with relatively little work or expense, meet their statutory requirement to develop and implement a watershed management plan.

More than a year ago, the Land Board prompted the division to investigate 1) whether existing watershed management plans were sufficient to meet the plan requirement as described in the state’s water lease statute, Hawai‘i Revised Statutes Chapter 171-58(e), and 2) whether the small uses of water sought by some permittees could be exempt from the requirement to complete an environmental assessment or impact statement.

At the time, the board was in the process of approving a second suite of three one-year holdover permits allowed under Act 126 of the 2016 Legislature. That measure was intended to allow the nine entities that had been drawing water from state land for years under month-to-month revocable permits to continue to do so for up to three more, to give them time to secure a long-term lease from the Land Board. The act was believed by many to have been necessary in light of a Circuit Court decision invalidating Alexander & Baldwin, Inc.’s four revocable permits for water diversions in East Maui.

In December 2017, with time running out on that three-year grace period, the board heard from a number of the permittees — mainly small farmers from Ka‘u — that they had not made any significant progress in developing a watershed plan or complying with the state’s environmental review law, Chapter 343. And it was clear from the testimony that some of them simply did not understand the process they were expected to follow.

At the Land Board’s March meeting, it also became clear they weren’t alone. As one board member put it, 171-58 is “a difficult statute to deal with.”

Cost-Share

Developing a watershed management plan can cost a mint. Implementing one can cost even more. But the source of the water being sought by lease applicants needs to be protected, which is why the Legislature in 1990 included language in the water lease statute requiring new leases to “contain a covenant that requires the lessee and the [DLNR] to jointly develop and implement a watershed management plan.”

The statute also prohibits the board from approving any new lease of water rights without that covenant or a watershed management plan. And it requires the board to “prescribe the minimum content” of the plan.

In his March report to the Land Board, Hirokawa explained that few watershed management plans existed before 1990, but now there are many, including those implemented by DLNR’s Division of Forestry and Wildlife and public-private watershed partnerships statewide. That being the case, existing watershed management plans can be used to meet the requirement to develop a plan, he stated.

With regard to implementation, the Land Division proposed a cost-sharing scheme in which lessees would pay an annual watershed management fee based on the relative amount of available water they used.

For example, Kapapala Ranch is seeking to use about a tenth of a percent of the water available from the aquifer in Ka‘u. Annual management costs under the plan for the area have been estimated at about $1 million. A tenth of a percent of that equates to about $1,000, which is what the ranch would pay to the department every year under the division’s plan.

Management costs vary depending on the area, but the division proposed that lessees’ fees be prorated on the basis of a daily overall management cost of at least $2,500.

Hirokawa stressed to the board that his division was simply seeking the board’s approval of that approach, in concept. “This is not the way we’re going to do it necessarily. This doesn’t bind the board in any way into not looking at watershed management plans or other alternatives that can be done. It doesn’t even require the permittees to exercise this formula,” he said.

However, if the smaller water users on Kauai and Hawaii — East Kaua‘i Water Users’ Cooperative, Jeffrey Linder, Edmund C. Olson Trust, Kapapala Ranch, Kuahiwi Contractors, and Wood Valley — paid their implementation fees based on the formula, they could meet the requirements regarding the watershed plan, he said. Annual fees for those permittees would range between $824.31 and $3,267.83.

“This is not in any way a bill or assessment to the permittees, [but] it gives them an idea of how much they would pay under this scenario,” he said, referring to Exhibit A in his report to the board, which contained a spreadsheet showing how much each lease applicant would pay under the formula.

Hirokawa said that some permittees had already informed him that the fees in the exhibit were too high. He added, however, that the water users were free to discuss with his division the possibility of meeting their requirements with in-kind services or some other alternative.

‘Catch-22’

To board member Chris Yuen, the water lease statute itself was problematic.

“There’s a little bit of a Catch-22 in the whole discussion of the watershed management plan. … [I]f the implementation of the plan is a very expensive proposition, it influences what the lessee — who’s not the lessee until they win a bid at public auction — is going to bid on the property.”

He acknowledged that the board and department were assuming that the lease applicants would be the only bidders.

Yuen endorsed the idea that they be apprised of the potential lease costs. However, he noted that the watershed management fees under the formula eclipsed what the current permittees have been paying for the water itself. “This is the Catch-22 in the statute,” he said.

Hirokawa countered that the lessee’s contribution needs to be meaningful. The proposed base management cost of $2,500 a day would cover a single day of invasive plant removal by a small work crew. “It’s not much. It’s something,” he said.

Even so, Yuen said he was very concerned about the small ranchers and farmers on Hawai‘i island who won’t have the “fire power” to do things that are in the grasp of the Kaua‘i Island Utility Cooperative or Mahi Pono, which recently bought much of A&B’s land in Central Maui.

“As much as we can simplify things for that group of people, we have to try to work on that,” he said.

Sharon Suzuki, president of Hawaiian Electric Light Company, the Big Island electric utility, testified that the watershed fee for its hydropower plant on the Wailuku River could be around $240,000 under the proposed formula, which was about $40,000 more than what A&B’s East Maui Irrigation Co. would have to pay.

HELCO’s fee would be 11 times what the utility is paying for the water itself under its permit, she said. She added that all of the water used is returned to the river while pointing out that last year, the plant provided Hawaii island with 6 percent of its renewable energy.

She suggested that non-consumptive users should pay a lower rate, noting that the fee under the proposed formula would increase the plant’s maintenance costs by 78 percent.

She also asked that the watershed fee be considered as a portion of the total lease cost and that the board take into account the utility’s work with the Mauna Kea Watershed Alliance.

Board chair Suzanne Case said the issue of lower fees for non-consumptive uses was worth more discussion. She also commended Suzuki for reaching out to work with the watershed alliance because it was exactly the kind of thing that should be considered when calculating a watershed management fee.

Case said that explaining to water users the need to pay to keep the forests in good condition has never really been done before. “That’s why this is ground breaking. That’s why it’s complicated. And that’s why it’s a new cost. It’s always been an implicit cost but until we actually identify it, we can’t really see it for what it is,” she said.

Technical Difficulties

Board members and members of the public commended the Land Division for its attempt to resolve such a complicated problem. Even so, Roehrig pointed out that the board had received more than 45 written testimonies in opposition.

“The pilikia (problem) that we’re talking about today, it’s a technical thing,” Roehring told Hirokawa. Echoing testimony from Earthjustice, the Hawaiian Alliance for Progressive Action, and others, he argued that the Land Division needed to adopt administrative rules formalizing the methodology proposed if the division planned to apply it to all future water leases.

Adopting administrative rules is an extensive process that often takes more than a year to complete. The Land Division has to draft rules, get board approval to hold public hearings, hold public hearings, get final board approval, and the governor’s signature.

While the impetus for the division’s proposal was the board’s desire to shorten and simplify the lease process for the small water permittees, Roehrig preferred to take a cautious approach.

“If we want to speed up the process, we have to go slow and get it right. … All you have to do is look at [the court record for a water dispute in] Waiahole and Waikane. It goes on for pages and pages. So we don’t need a repeat performance and have the Supreme Court send it back,” he said.

A few testifiers also reminded the board that the law requires it to set minimum standards for the watershed management plans. Earthjustice attorney Leina‘ala Ley, who represents a community group on Kauai challenging interim instream flow standards proposed by the Commission on Water Resource Management, suggested that simply basing the lease plans on existing watershed plans was insufficient, especially since some of those plans are more than a decade old.

Yuen also noted that the existing plans would likely cover most, but not all, of the elements of the lease-related plans. “I think the statute implies we finalize the plan after the lease. We may have 90 percent of the expectations in hand before the auction is held, but there may be things that are unique to the particular lessee,’ he said. If the applicant was a rancher, for example, he said the watershed plan might call for cattle to be kept out of the forest reserve or for access to the reserve by the state’s forestry division to be maintained.

Exemption

In his report to the board, Hirokawa stated that many permittees appeared to use very little water in relation to the volume available from the source watershed or aquifer. In those instances, an exemption from the need to prepare an environmental assessment or impact statement may be appropriate, he said, citing an administrative rule that allows exemptions for “operations, repairs or maintenance of existing structures, facilities, equipment, or topographical features, involving negligible or no expansion or change of use beyond that previously existing.”

He added that the department’s exemption list includes one for leases of state land, again “involving negligible or no expansion or change of use beyond that previously existing.”

The department received many form letters opposing this approach, all saying: “While I understand that the board may reasonably be looking for a way to ease the cost burden of environmental review on the smaller diverters, even small diversions must be considered to understand the cumulative impact on the watershed. No lessee should be automatically exempted from preparing and EA or EIS based on the amount of their water use. A better solution would be for the DLNR to request funding from the legislature to assist smaller users under a certain threshold.”

Board members Yuen and Sam Gon, as well as Native Hawaiian Legal Corporation attorney Alan Murakami said they thought the current legal framework regarding exemptions was sufficient and the board didn’t need to take any further action.

But whether or not the board took action, Earthjustice’s Ley argued that the exemptions the division said might apply to the small water users, in fact, did not.

“This proposal is kind of shoe-horning water leases into existing exemptions that weren’t designed for water leases, so you’re skipping a few steps. When you have an exemption under Chapter 343, it goes to the [state environmental] council and the council allows for public comment,” she said.

The DLNR exemption for lease of state land was “simply not designed to address taking water from the stream,” she said.

“While this board may have good intentions … again, it’s setting policy. It has future implications. If you use this inapplicable exemption, it can be used again in the future,” she said, adding that if the board wanted an exemption specifically for people taking small amounts of water, “that could be a specific new exemption.”

Yuen countered that the Ka‘u farmers and ranchers don’t divert any streams, but take groundwater from an aquifer that has a sustainable yield of 118 mgd. Altogether, those permittees use less than 1 mgd, much of which goes back into the ground, he said.

He said under his reading of Chapter 343, their uses qualified as land uses, not a water use.

“I disagree. It’s taking water from public land,” Ley replied.

“The exemption says existing facilities or existing land uses can be exempted. … We are trying to see what we can do for farmers and ranchers in Kau … We are not talking about people taking water out of a stream,” Yuen said.

Ley said she appreciated Yuen’s point, but still believed his proposed application of the exemption would be “over-broad.”

Final Vote

In the end, the board approved a motion by Roehrig to defer taking action on the Land Division’s proposal.

However, the board directed the department to seek advice from the Department of the Attorney General (AG) as to whether and to what extent the board could employ the cost-sharing scheme without promulgating administrative rules. Whether or not rules are required, the board asked staff to return soon to the board with a request to approve minimum requirements for water lease-related watershed management plans and identify the existing plans upon which the former ones might be based.

Roehrig initially made a motion calling for the department to go directly to rule-making, but backed off at Case’s urging.

Case asked that the AG analysis come first, just in case rules aren’t required. “The whole point of this process is to get public input. It is a huge amount of work to do rule-making and it’s time consuming,” she said, adding that if it turns out rules are necessary, “I’m fine with that.”

Board member Keone Downing, disappointed that the motion lacked any kind of time frame, was the sole no vote. He had asked how long it would take the AG to provide its opinion, but could not get a definitive answer.

As of press time, the state Legislature was still in session and facing a request by Gov. David Ige to resurrect a bill that would extend the holdover period another seven years.

(For more background on this issue, see “Board Directs Land Division To Help Permittees, DHHL Meet Water Needs,” from our April 2018 issue, available at www.environment-hawaii.org.)

Teresa Dawson


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