HAWICA: Water Commission Needs To Conduct Contested Case When Amending In-stream Flow Standards

by Robert Thomas, www.InverseCondemnation.com

Guess what? The Water Commission got it wrong again. The Hawaii Intermediate Court of Appeals held in this unpublished memorandum order that the Commission must hold a "contested case" hearing upon demand when the Commission sets "interim in-stream flow standards" under the Water Code (in other words, how much water should be allocated to whom and where for particular streams).

The dispute in this appeal was whether the process to establish those standards is about setting policy -- meaning the Commission need only hold a legislative-type public hearing -- or determined particular parties' rights -- in which case a trial-like contested case is required. The ICA concluded it was the latter.  There are three instances when an agency must hold an adjudicatory hearing: when required by the agency's own rules, when required by a statute, or when required by due process because the party asking for a contested case has some "property interest" that could be affected by the agency's decision.

Here, there isn't a rule or a statute requiring the Commission to conduct a trial to set interim in-stream flows, so the court analyzed whether the parties demanding a contested case had some constitutional rights at stake. Referencing a recent Hawaii Supreme Court decision from the same petition which the ICA characterized as holding that "the Commission's decisions setting or amending the IIFS can affect constitutionally protected property interests," the ICA concluded that the ability to "live, work, and play" in the areas of the streams at issue, and the native Hawaiian rights that stem therefrom, are a property interest protected by the Due Process Clause. These rights are "new property" entitlements (see Board of Regents v. Roth, 408 U.S. 564 (1972))  because they have a statutory basis in the Water Code. Because setting in-stream flows might affect these rights, the Commission needed to hold an adjudicatory hearing if asked.

Thought 1: Water rights in Hawaii are supposed to be about the "public trust" as well as private rights. But decisions like these mean that for the public to have its voice heard when the Commission establishes stream flows, it must do so in the context of an adjudicatory hearing under the Administrative Procedures Act. Which means you aren't testifying unless you are a percipient or expert witness. You have no stake in the outcome unless you formally intervene in a timely fashion and establish that you have some material stake in the outcome. You can't contact the agency members ex parte. The material the Commission can consider is limited to the (admittedly very expansive) rules of evidence. We're not sure how these limitations can be squared with the public's right to participate in setting stream flows which, after all, are supposed to be for public benefit. Implicit in these type of decisions are that certain private rights are more important than the public's general rights. Which may not be a bad thing.

Thought 2: The Hawaii Supreme Court has a very strong body of decisional law concluding that all sorts of expectations are constitutionally-protected property. This case adheres to that line of cases, so is not really surprising. 

Disclosure: we represent one of the many parties to this appeal, but did not take a position on these issues.

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