CZMA’s Statewide Reach Defines Environmental Due Process: Agencies Must Hold Contested Case Hearings Before Renewing Revocable Permits; Environmental Courts May Modify Permits on HRS § 91‑14 Review

CZMA’s Statewide Reach Defines Environmental Due Process: Agencies Must Hold Contested Case Hearings Before Renewing Revocable Permits; Environmental Courts May Modify Permits on HRS § 91‑14 Review

Introduction

In Sierra Club v. Board of Land and Natural Resources, the Hawaiʻi Supreme Court resolved a high-stakes dispute over the State’s annual renewal of “temporary” revocable permits (RPs) authorizing Alexander & Baldwin, Inc. (A&B) and East Maui Irrigation Company, LLC (EMI) to divert millions of gallons per day of East Maui stream water for Central Maui uses. The Board of Land and Natural Resources (BLNR) denied Sierra Club’s timely request for a contested case hearing and then renewed the four RPs for 2021. The Environmental Court vacated the permits (stayed vacatur) and, to avoid disruption to essential water service, temporarily modified the diversion cap from 45 to 25 million gallons per day (mgd) pending a remand for a contested case hearing, also awarding Sierra Club fees under the private attorney general doctrine. The Intermediate Court of Appeals (ICA) largely reversed.

The Supreme Court, in an opinion by Devens, J., reversed the ICA and reinstated the Environmental Court’s orders. The Court announced three consequential holdings:

  • HRS Chapter 205A—the Coastal Zone Management Act (CZMA)—is a “law relating to environmental quality” that defines the constitutional right to a clean and healthful environment under article XI, section 9, even for inland actions; thus BLNR’s renewal of the East Maui RPs implicated Sierra Club’s protected property interest.
  • Due process required a contested case hearing before BLNR renewed the 2021 RPs given new evidence, changed conditions, and the risk of erroneous deprivation—public-comment meetings and an earlier bench trial on prior-year permits were insufficient.
  • After the wrongful denial of a contested case hearing, BLNR’s subsequent vote to renew the RPs constituted a “final decision and order” reviewable under HRS § 91‑14. The Environmental Court had jurisdiction and properly exercised statutory and equitable power to temporarily modify the RP conditions pending remand.

Summary of the Judgment

  • Property interest defined by CZMA: The Court held that Sierra Club’s constitutional right to a clean and healthful environment (Haw. Const. art. XI, § 9) was defined by HRS § 171‑55, HRS Chapter 343, and HRS Chapter 205A. The CZMA’s “coastal zone management area” encompasses “all lands of the State” (HRS § 205A‑1) and its objectives bind all agencies (HRS § 205A‑4(b)), including for inland activities like stream diversions that affect coastal ecosystems.
  • Contested case hearing required by due process: Applying the Sandy Beach balancing test, the Court found high risk of erroneous deprivation from using only public-comment procedures and relying on an earlier trial about different RP years. New evidence and changed conditions—including redefining “waste” to exclude system losses/evaporation and approving a 45 mgd cap despite lower actual-use data—warranted the more rigorous adversarial protections of a contested case hearing. The hearing had to occur before the RP renewal (Mauna Kea “cart before horse”).
  • HRS § 91‑14 jurisdiction and equitable power: BLNR’s denial of a hearing followed by its renewal of the RPs was a final agency action in a “contested case” sense (Kilakila; Hualalai), conferring Environmental Court appellate jurisdiction. The Environmental Court acted within HRS § 91‑14(g), (i), HRS § 604A‑2(b), and HRS § 603‑21.9 to temporarily modify the permits (reducing the diversion cap to 25 mgd) to prevent disruption while remanding for a hearing.
  • Attorney fees: Sierra Club satisfied the private attorney general criteria and remained the prevailing party. The fee awards were affirmed.

Analysis

Precedents Cited and Their Influence

  • Sandy Beach Defense Fund v. City Council, 70 Haw. 361 (1989): Supplies Hawaiʻi’s due process framework (akin to Mathews v. Eldridge)—weighing private interest, risk of erroneous deprivation, and governmental burdens. The Court used this balancing to require a contested case hearing before RP renewal.
  • Mauna Kea Anaina Hou v. BLNR, 136 Hawaiʻi 376 (2015): Holding that approving a permit before conducting a contested case hearing violates due process (“cart before the horse”). Applied directly: BLNR had to hold the hearing before renewing the RPs.
  • Kilakila ʻO Haleakalā v. BLNR, 131 Hawaiʻi 193 (2013): Establishes that when an agency denies a requested contested case but nonetheless issues the permit, the action is a reviewable “final decision and order” under HRS § 91‑14. The Court followed Kilakila to uphold Environmental Court jurisdiction.
  • Community Ass’ns of Hualalai v. Leeward Planning Comm’n, 150 Hawaiʻi 241 (2021) and In re Application of MECO, 141 Hawaiʻi 249 (2017): Confirm the four jurisdictional requirements for judicial review (contested case, finality, compliance with rules, standing) and a functional approach to “contested case.” The Court found all four satisfied.
  • Flores v. BLNR, 143 Hawaiʻi 114 (2018): Reiterates the two-step analysis for due process claims: (1) existence of a protected interest; (2) what procedures are due. The Court’s property-interest step was met via article XI, § 9 as defined by HRS 171‑55, 343, and 205A.
  • DJ v. CJ, 147 Hawaiʻi 2 (2020): Emphasizes cross-examination as a critical truth-testing device. The Court highlighted this to show why a contested case hearing affords protections not available in public-comment meetings.
  • Carmichael v. BLNR, 150 Hawaiʻi 547 (2022): Addresses revocable permits and mootness exceptions. The Court endorsed the ICA’s mootness analysis (capable of repetition yet evading review; public interest) although no party pressed mootness here.
  • Maui Tomorrow v. BLNR, 110 Hawaiʻi 234 (2006): Background on earlier BLNR proceedings and contested case posture regarding long-term leases over East Maui diversions.
  • U.S. Fish & Wildlife Serv. v. Sierra Club, Inc., 592 U.S. 261 (2021): The Court cited the concept of agency action that “consummates” decision-making—used to confirm finality of BLNR’s RP renewal after denying a contested case.
  • Sierra Club v. Dept. of Transportation (Superferry II), 120 Hawaiʻi 181 (2009) and In re Water Use Permit Applications (Waiāhole II), 96 Hawaiʻi 27 (2001): Applied to uphold fee awards under the private attorney general doctrine.

Legal Reasoning

1) Property interest: CZMA’s statewide, mauka‑to‑makai reach defines article XI, § 9

Article XI, section 9 guarantees each person the right to a “clean and healthful environment” as defined by laws relating to environmental quality. The Court held that HRS Chapter 205A is such a defining law and binds BLNR’s inland permitting because:

  • Text: HRS § 205A‑4(b) binds “all agencies” within their authority. HRS § 205A‑1 defines the “coastal zone management area” as “all lands of the State” and waters to the extent of State jurisdiction.
  • Legislative history (1993 amendment): The Legislature removed the forest-reserve exclusion to address unique island conditions where inland activities (e.g., in forest reserves) cause coastal erosion, nonpoint pollution, and siltation—expressly adopting a mauka‑to‑makai approach.
  • Policy objectives: HRS § 205A‑2(c)(4)(A), (D), (E) requires effective regulation of stream diversions and maintenance of coastal water quality, acknowledging competing needs.

Because BLNR’s RPs authorize inland stream diversions with coastal effects, CZMA applies and helps define Sierra Club’s protected property interest, alongside HRS § 171‑55 (BLNR’s “best interests of the State” conditions on revocable permits) and HRS Chapter 343 (HEPA).

2) Procedures due: a pre‑decision contested case hearing

Applying Sandy Beach, the Court held that due process required a contested case hearing before renewal of the 2021 RPs:

  • Private interest: Sierra Club’s constitutional environmental right is substantial, particularly given the magnitude and duration of the diversions and two decades of serial “temporary” renewals that functioned as a de facto lease.
  • Risk of erroneous deprivation; value of added safeguards:
    • Public-comment meetings are not adversarial and do not permit cross-examination or evidentiary testing.
    • New evidence and changed conditions for 2021 were significant: a newly proposed 45 mgd cap despite lower actual-use data; a new permit condition redefining “waste” to exclude system losses and evaporation; and agency science indicating priority restoration needs.
    • A prior bench trial concerning 2019–2020 RPs could not substitute for an adversarial hearing tailored to the 2021 RPs’ record and conditions.
  • Governmental burdens: While contested case hearings impose costs, hearing officers have ample tools (HAR § 13‑1‑32(h)) to streamline proceedings—limiting cumulative evidence and managing witness examinations. These manageable burdens do not outweigh the added protections given the stakes and changed record.

Under Mauna Kea, the hearing must precede the permit decision; BLNR “put the cart before the horse” by denying the hearing and then renewing the RPs.

3) Jurisdiction and remedial powers on HRS § 91‑14 review

The ICA majority concluded the Environmental Court lacked jurisdiction because BLNR’s renewal occurred outside a formal contested case. The Supreme Court rejected that formalism for a functional approach:

  • Final decision and order: Denying the contested case and then renewing the permits “consummated” the proceeding, leaving nothing more to do. Following Kilakila and Hualalai, such action is a reviewable “final decision and order” under HRS § 91‑14.
  • Contested case requirement satisfied functionally: Even without a formal contested case, the proceeding was one “in which the rights, duties, or privileges of specific parties” (A&B/EMI) were determined. Sierra Club timely sought a hearing; BLNR’s denial followed by renewal triggers § 91‑14 review.
  • Equitable authority to modify permits pending remand: The Environmental Court could “reverse or modify” under HRS § 91‑14(g), reserve jurisdiction and ensure compliance under § 91‑14(i), and exercise general equity powers under HRS § 604A‑2(b) and HRS § 603‑21.9. To avoid “unintended consequences and chaos,” it prudently reduced the diversion cap to 25 mgd (averaged monthly) while ordering a prompt contested case hearing.

4) Attorney fees: private attorney general doctrine

  • Societal importance: The case vindicated core constitutional due process rights in environmental governance and clarified the CZMA’s statewide application to inland water diversions.
  • Necessity and burden: No public entity undertook this enforcement; Sierra Club bore substantial litigation burdens to rectify unlawful procedures governing essential water resources.
  • Beneficiaries: The public at large benefits from more accurate, transparent, and legally compliant water management and coastal protection.

Accordingly, Sierra Club remained the prevailing party and fees were affirmed.

Impact

  • Statewide reach of the CZMA reaffirmed: Agencies must apply HRS Chapter 205A’s objectives and policies to inland actions that affect coastal resources—codifying the Legislature’s mauka‑to‑makai intent. This extends beyond water to any upland permitting with coastal implications.
  • Due process floor for environmental decisions: When article XI, § 9 interests are implicated and a timely hearing is requested, agencies must provide a pre‑decision contested case hearing, especially where the record shows new evidence or changed conditions.
  • Functional finality and access to review: Wrongful denial of a contested case followed by agency approval produces a reviewable “final decision and order,” preventing agencies from evading appellate review by avoiding formal contested cases.
  • Robust remedial toolkit for Environmental Courts: HRS § 91‑14(g), (i), HRS § 604A‑2(b), and HRS § 603‑21.9 authorize equitable interim measures (e.g., temporary permit modifications) to prevent disruption and protect public interests while agencies cure procedural defects on remand.
  • Guidance for recurring “temporary” permits: Serial renewals that function as years‑long de facto leases demand meaningful process; agencies should anticipate contested case requests and build robust, tested records accordingly.
  • Fee‑shifting encourages public-interest enforcement: Confirming private attorney general awards will support community participation and ensure agency compliance with constitutional and statutory mandates.

Complex Concepts Simplified

  • Contested case hearing: A formal, trial‑like administrative proceeding where parties present sworn testimony and evidence, and cross‑examine witnesses. It produces findings of fact and conclusions of law, ensuring decisions rest on a tested record.
  • Public meeting vs. contested case: Public meetings allow general comment but do not permit adversarial testing (no cross‑examination or formal evidentiary rules). They are not an adequate substitute when due process requires a contested case.
  • “Mauka‑to‑makai” (mountain to sea): Hawaiʻi’s recognition that upland activities affect downstream/coastal ecosystems. The CZMA incorporates this by covering “all lands of the State.”
  • Final decision and order: An agency action that completes the decision-making process, leaving nothing further to be decided. Even after a wrongful denial of a hearing, a subsequent approval is final and reviewable.
  • Private attorney general doctrine: A court may award fees to a party whose suit enforces important public policies, where private enforcement was necessary and the decision benefits many people.
  • HRS § 91‑14(g) remedies: On agency appeals, courts may affirm, remand, reverse, or modify agency decisions when rights are prejudiced—for example, because of unlawful procedures or arbitrary action.

Conclusion

The Hawaiʻi Supreme Court’s decision squarely reorients environmental due process and administrative review around the plain text and purpose of the CZMA: “all lands of the State” and the realities of mauka‑to‑makai interdependence. Agencies may not shortcut contested case procedures where article XI, § 9 interests are implicated, particularly amid new evidence and evolving permit conditions. When a requested hearing is wrongly denied, courts retain jurisdiction to review the final agency action and to craft equitable interim remedies that both protect the public and maintain continuity of essential services.

By reaffirming the CZMA’s binding reach, clarifying functional finality under HRS § 91‑14, endorsing proactive equitable management by the Environmental Court, and upholding fee awards that empower public-interest enforcement, the Court set a durable framework for lawful, transparent, and scientifically grounded management of Hawaiʻi’s water and coastal resources. The decision will influence not only water diversion cases but any inland activity with coastal consequences, ensuring that environmental governance proceeds on a full and fairly tested record.

Case Details

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