SB2002

SECTION 1. The legislature finds that effective and efficient water resource management requires consistent, experienced, and independent leadership, especially considering the climate crisis. Proper stewardship of the State's water resources will benefit present and future generations by perpetuating the natural lifeblood and cultural lifeways of these islands and providing for essential uses such as the affordable housing needs of local residents. In 1978 the people of Hawaii established article XI, section 7, of the Hawaii State Constitution, mandating the legislature to "provide for a water resources agency" to uphold the State's "obligation to protect, control and regulate the use of Hawaii's water resources for the benefit of its people". Pursuant to this mandate, in 1987, the legislature promulgated the comprehensive state water code, Chapter 174C, Hawaii Revised Statutes, which established the commission on water resources management (commission) to administer and implement the state water code.

The legislature is concerned that impediments and threats to the independence of the commission has undermined its ability to fulfill its constitutional and statutory duties. Based on historical and recent experiences, the legislature finds that certain administrative structures of the commission create inherent conflicts and dependencies that impair its critical function of comprehensive water planning and management.

In the Waiahole water case, for example, the Hawaii Supreme Court expressed "serious misgivings" about the conflicts and political pressures influencing the commission which "did nothing to improve public confidence in government and the administration of justice in this state". These problems include the inherent conflict of interest that stems from the chairperson of the department of land and natural resources also presiding as the chairperson of the commission. The commission also lacks the ability to employ its own legal staff and, consequently, was left without the assistance of legal counsel in the momentous, precedent-setting Waiahole case when the department of the attorney general terminated its representation of the commission and opposed the commission's recommendations.

More recently, in the aftermath of the 2023 Maui wildfires, the commission has undergone further challenges that have undermined its effectiveness and eroded public confidence in the agency. These include controversies that arose due to the chairperson's exercise of unilateral authority over the commission in response to external political influences. In one highly publicized example, the chairperson summarily suspended legal protections of instream flows and removed the commission's deputy director, until community objects forced the administration to rescind those actions.

The legislature further finds that the basic governance and administrative structures of the commission do not adequately protect or ensure the commission's independence. For many years, these concerns have been acknowledged but no action has been taken. While identified reform measure have been recommended as solutions, none have been adopted.

In 1994, the review commission tasked with comprehensively reviewing the state water code recognized the "potential for significant conflicts" in the chairperson of the department of land natural resources also being designated by law as the chairperson of the commission. To provide the commission with "greater autonomy" and "accountability" and increase "administrative distance" from the department of land and natural resources, the review commission's final report recommended various amendments to the state water code. These recommendations included removing the commission from the department of land and natural resources and "attaching the commission to the [department] for administrative purposes only"; specifying that the chairperson of the board of land and natural resources shall "be ineligible to serve as chairperson of the [commission]"; and providing that the chief executive officer of the commission shall not be a deputy director of the department of land and natural resources, but an "executive director of the [commission], appointed by and answerable to the [commission]".

The legislature also finds that in a similar fashion, the Model Water Code, which guided the legislature's development of the state water code, recognizes the need to establish a water commission as "an independent board" and recommends model governance and administrative provisions to support such independence. These include provisions that members of the board "shall elect" their own chairperson, and that the board "shall employ an executive director as chief administrative officer" and "may employ a legal staff" to provide legal counsel, represent it in proceedings, and otherwise assist it in the administration of the water code.

The legislature additionally finds that as the fortieth anniversary of the establishment of the state water code and commission approaches, and the State confronts escalating challenges in the management of its freshwater resources, there is an urgent and overdue need to update the provisions for the leadership, governance, and administration of the commission so that it may be best positioned to fulfill its constitutionally and statutorily mandated responsibilities for the people of the State going forward in the twenty-first century.

Therefore, the legislature believes that clarification of these provisions, as well as other updates to provisions regarding penalties and emergency orders in the state water code are necessary to provide greater accountability and protection for the State's public trust water resources.

Accordingly, the purpose of this Act is to:

(1) Allow the commission on water resource management to retain independent legal counsel;

(2) Repeal the position of deputy to the chairperson of the commission on water resource management and establish the position of executive director of the commission on water resource management;

(3) Amend the composition and administrative structures of the commission on water resource management to provide for its separation from the department of land and natural resources;

(4) Add one member to the nominating committee for the commission on water resource management to be appointed by the chief executive officer of the Office of Hawaiian Affairs;

(5) Authorize entities to challenge an emergency order of the commission on water resource management under certain conditions; and

(6) Establish fines for certain water use offenses.

SECTION 2. Section 28-8.3, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (a) to read:

"(a) No department of the State other than the attorney general may employ or retain any attorney, by contract or otherwise, for the purpose of representing the State or the department in any litigation, rendering legal counsel to the department, or drafting legal documents for the department; provided that the foregoing provision shall not apply to the employment or retention of attorneys:

(1) By the public utilities commission, the labor and industrial relations appeals board, and the Hawaii labor relations board;

(2) By any court or judicial or legislative office of the State; provided that if the attorney general is requested to provide representation to a court or judicial office by the chief justice or the chief justice's designee, or to a legislative office by the speaker of the house of representatives and the president of the senate jointly, and the attorney general declines to provide [~~such~~] representation on the grounds of conflict of interest, the attorney general shall retain an attorney for the court, judicial, or legislative office, subject to approval by the court, judicial, or legislative office;

(3) By the legislative reference bureau;

(4) By any compilation commission that may be constituted from time to time;

(5) By the real estate commission for any action involving the real estate recovery fund;

(6) By the contractors license board for any action involving the contractors recovery fund;

(7) By the office of Hawaiian affairs;

(8) By the department of commerce and consumer affairs for the enforcement of violations of chapters 480 and 485A;

(9) As grand jury counsel;

(10) By the Hawaii health systems corporation, or its regional system boards, or any of their facilities;

(11) By the auditor;

(12) By the office of ombudsman;

(13) By the insurance division;

(14) By the [~~University~~] university of Hawaii;

(15) By the Kahoolawe island reserve commission;

(16) By the division of consumer advocacy;

(17) By the office of elections;

(18) By the campaign spending commission;

(19) By the Hawaii tourism authority, as provided in section 201B-2.5;

(20) By the division of financial institutions;

(21) By the office of information practices;

(22) By the school facilities authority;

(23) By the Mauna Kea stewardship and oversight authority; [or]

(24) By the commission on water resource management; or

[~~(24)~~] (25) By a department, if the attorney general, for reasons deemed by the attorney general to be good and sufficient, declines to employ or retain an attorney for a department; provided that the governor waives the provision of this section."

2. By amending subsection (c) to read:

"(c) Every attorney employed by any department on a full‑time basis, except an attorney employed by the public utilities commission, the labor and industrial relations appeals board, the Hawaii labor relations board, the office of Hawaiian affairs, the Hawaii health systems corporation or its regional system boards, the department of commerce and consumer affairs in prosecution of consumer complaints, insurance division, the division of consumer advocacy, the [~~University~~] university of Hawaii, the Hawaii tourism authority as provided in section 201B-2.5, the Mauna Kea stewardship and oversight authority, the commission on water resource management, the office of information practices, or as grand jury counsel, shall be a deputy attorney general."

SECTION 3. Section 84-18, Hawaii Revised Statutes, is amended by amending subsection (e) to read as follows:

"(e) Subject to the restrictions imposed in subsections (a) through (d), the following individuals shall not represent any person or business for a fee or other consideration regarding any legislative action or administrative action, as defined in section 97-1, for twelve months after termination from their respective positions:

(1) The governor;

(2) The lieutenant governor;

(3) The administrative director of the State;

(4) The attorney general;

(5) The comptroller;

(6) The chairperson of the board of agriculture and biosecurity;

(7) The director of corrections and rehabilitation;

(8) The director of finance;

(9) The director of business, economic development, and tourism;

(10) The director of commerce and consumer affairs;

(11) The adjutant general;

(12) The superintendent of education;

(13) The chairperson of the Hawaiian homes commission;

(14) The director of health;

(15) The director of human resources development;

(16) The director of human services;

(17) The director of labor and industrial relations;

(18) The chairperson of the board of land and natural resources;

(19) The director of law enforcement;

(20) The director of taxation;

(21) The director of transportation;

(22) The president of the [~~University~~] university of Hawaii;

(23) The executive administrator of the board of regents of the [~~University~~] university of Hawaii;

(24) The administrator of the office of Hawaiian affairs;

(25) The chief information officer;

(26) The executive director of the agribusiness development corporation;

(27) The executive director of the campaign spending commission;

(28) The executive director of the Hawaii community development authority;

(29) The executive director of the Hawaii housing finance and development corporation;

(30) The president and chief executive officer of the Hawaii tourism authority;

(31) The executive officer of the public utilities commission;

(32) The state auditor;

(33) The director of the legislative reference bureau;

(34) The ombudsman;

(35) The permanent employees of the legislature, other than persons employed in clerical, secretarial, or similar positions;

(36) The administrative director of the courts;

(37) The executive director of the state ethics commission;

(38) The executive officer of the state land use commission;

(39) The executive director of the natural energy laboratory of Hawaii authority;

(40) The executive director of the Hawaii public housing authority; and

(41) The [~~first deputy to the chairperson~~] executive director of the commission on water resource management;

provided that this subsection shall not apply to any person who has held one of the positions listed above only on an interim or acting basis and for a period of less than one hundred eighty‑one days."

SECTION 4. Section 174C-5, Hawaii Revised Statutes, is amended to read as follows:

"§174C-5 General powers and duties. The general administration of the state water code shall rest with the commission on water resource management. In addition to its other powers and duties, the commission:

(1) Shall carry out topographic surveys, research, and investigations into all aspects of water use and water quality;

(2) Shall designate water management areas for regulation under this chapter where the commission, after the research and investigations mentioned in paragraph (1), shall consult with the appropriate county council and county water agency, and after public hearing and published notice, finds that the water resources of the areas are being threatened by existing or proposed withdrawals of water;

(3) Shall establish an instream use protection program designed to protect, enhance, and reestablish, where practicable, beneficial instream uses of water in the State;

(4) May contract and cooperate with the various agencies of the federal government and with state and local administrative and governmental agencies or private persons;

(5) May enter, after obtaining the consent of the property owner, at all reasonable times upon any property other than dwelling places for the purposes of conducting investigations and studies or enforcing any of the provisions of this code, being liable, however, for actual damage done. If consent cannot be obtained, reasonable notice shall be given prior to entry;

(6) Shall cooperate with federal agencies, other state agencies, county or other local governmental organizations, and all other public and private agencies created for the purpose of utilizing and conserving the waters of the State, and assist these organizations and agencies in coordinating the use of their facilities and participate in the exchange of ideas, knowledge, and data with these organizations and agencies. For this purpose the commission shall maintain an advisory staff of experts;

(7) Shall prepare, publish, and issue printed pamphlets and bulletins as the commission deems necessary for the dissemination of information to the public concerning its activities;

(8) May appoint and remove agents, including hearings officers and consultants, necessary to carry out the purposes of this chapter, who may be engaged by the commission without regard to the requirements of chapter 76 and section 78-1;

(9) May hire employees in accordance with chapter 76;

(10) May appoint and dismiss attorneys as may be necessary, who shall be exempt from chapter 76;

[~~(10)~~] (11) May acquire, lease, and dispose of real and personal property as may be necessary in the performance of its functions, including the acquisition of real property for the purpose of conserving and protecting water and water related resources as provided in section 174C-14;

[~~(11)~~] (12) Shall identify, by continuing study, those areas of the State where salt water intrusion is a threat to fresh water resources and report its findings to the appropriate county mayor and council and the public;

[~~(12)~~] (13) Shall provide coordination, cooperation, or approval necessary to the effectuation of any plan or project of the federal government in connection with or concerning the waters of the State. The commission shall approve or disapprove any federal plans or projects on behalf of the State. No other agency or department of the State shall assume the duties delegated to the commission under this paragraph; except that the department of health shall continue to exercise the powers vested in it with respect to water quality, and except that the department of business, economic development, and tourism shall continue to carry out its duties and responsibilities under chapter 205A;

[~~(13)~~] (14) Shall plan and coordinate programs for the development, conservation, protection, control, and regulation of water resources, based upon the best available information, and in cooperation with federal agencies, other state agencies, county or other local governmental organizations, and other public and private agencies created for the utilization and conservation of water;

[~~(14)~~] (15) Shall catalog and maintain an inventory of all water uses and water resources; and

[~~(15)~~] (16) Shall determine appurtenant water rights, including but not limited to the quantification of the amount of water and the specification of the water course or the means of access and delivery entitled to by that right, which determination shall be valid for purposes of this chapter."

SECTION 5. Section 174C-6, Hawaii Revised Statutes, is amended to read as follows:

"§174C-6 [~~Deputy to the chairperson~~] Executive director of the commission on water resource management. (a) There shall be [~~a first deputy to the chairperson~~] an executive director of the commission on water resource management [~~("deputy for water resource management") who shall be in addition to any other first deputy to the chairperson as the chairperson of the board of land and natural resources. The deputy~~], who shall have experience in the area of water resources and shall be appointed by [~~the chairperson with the approval of a majority of~~] the commission[.] and serve at the pleasure of the commission.

(b) The duties of the [~~deputy~~] executive director for water resource management shall be to administer and implement, under the direction of the commission, the state water code [~~and all~~], the rules, and other directives [~~promulgated in accordance therewith~~] adopted by the commission. Nothing in this [~~provision~~] section shall be construed as limiting the authority of the commission as to matters regarding water resources.

(c) The position of [~~deputy~~] executive director for water resource management [~~is not~~] shall not be subject to chapter 76.

(d) The salary of the [~~deputy~~] executive director for water resource management shall be [~~as provided in section 26-53 for first deputies or first assistants to the head of any department.~~] set by the commission and the executive director shall be included in any benefit program generally applicable to the officers and employees of the State.

(e) The commission shall develop and document annual goals and performance measures for the executive director that authorize the commission to annually evaluate the executive director's work to ensure compliance by the commission with statutory and constitutional requirements and achievement of its statutory and constitutional purposes.

(f) The commission shall evaluate and document the evaluation of the executive director's performance annually, or more frequently upon the request of at least four members of the commission, based on annual goals, performance measures, and other relevant criteria."

SECTION 6. Section 174C-7, Hawaii Revised Statutes, is amended to read as follows:

"§174C-7 Commission on water resource management. (a) There is established [~~within the department~~] a commission on water resource management consisting of seven members which shall have exclusive jurisdiction and final authority in all matters relating to implementation and administration of the state water code, except as otherwise specifically provided in this chapter. The commission shall be attached to the department of land and natural resources for administrative purposes only.

(b) Five members shall be appointed by the governor subject to confirmation by the senate in the manner prescribed in subsection [~~(d).~~] (e). Each member shall have substantial experience in the area of water resource management; provided that at least one member shall have substantial experience or expertise in traditional Hawaiian water resource management techniques and in traditional Hawaiian riparian usage [~~such as~~] including those preserved by section 174C-101. Each of the members shall be eligible to serve as the chairperson of the commission upon election by a majority of the commission members.

(c) The chairperson of the board of land and natural resources [~~shall be the chairperson of the commission. The~~] and the director of health or the director's designee shall serve as [an] ex officio[[],[]] voting [~~member.~~] members, but shall not be eligible to serve as chairperson of the commission.

[~~(c)~~] (d) The members of the commission shall serve without compensation but shall be reimbursed for expenses, including travel expenses, necessary for the performance of their duties.

[~~(d)~~] (e) In appointing a member to the commission, the governor shall select from a list submitted by a nominating committee. The nominating committee shall be composed of [~~four~~] five individuals chosen as follows: two persons appointed by the governor; one person appointed by the president of the senate; [~~and~~] one person appointed by the speaker of the house[.]; and one person appointed by the chief executive officer of the office of Hawaiian affairs. The committee shall solicit applications and send to the governor the names of at least three individuals for each open position.

[~~(e)~~] (f) Except as otherwise provided in this chapter, the commission shall be subject to sections 26-34, 26-35, and 26-36."

SECTION 7. Section 174C-9, Hawaii Revised Statutes, is amended to read as follows:

"[[]§174C-9[]] Proceedings before the commission concerning water resources. (a) All proceedings before the commission concerning the enforcement or application of any provision of this chapter or any rule adopted pursuant thereto, or the issuance, modification, or revocation of any permit or license under this code by the commission, shall be conducted in accordance with chapter 91. Hearings regarding particular water resources shall be conducted on the island where those water resources are located.

(b) Any party to whom an emergency order is directed may challenge that order but shall immediately comply with the order pending disposition of the party's challenge. The commission shall give precedence to a hearing on the challenge over all other pending matters."

SECTION 8. Section 174C-15, Hawaii Revised Statutes, is amended to read as follows:

"§174C-15 Penalties and common law remedies. (a) The commission may enforce its rules and orders adopted pursuant to this chapter by suit for injunction or for damages or both.

(b) Any person who [~~violates any~~]:

(1) Violates any provision of this chapter[~~, or any~~];

(2) Violates any rule adopted pursuant to this chapter[~~, may~~];

(3) Violates any order of the commission;

(4) Fails to obtain a permit when a permit is required pursuant to this chapter;

(5) Fails to comply with permit conditions; or

(6) Fails to comply with standardized water audit requirements pursuant to Act 169, Session Laws of Hawaii 2016,

shall be subject to a fine imposed by the commission. [~~Such~~] The fine shall not be less than $250 and shall not exceed [~~$5,000. For a continuing offense, each day during which the offense is committed is a separate violation.~~] $60,000 per violation. Each day that a violation exists or continues to exist shall constitute a separate offense. Penalties for continuing violations shall be assessed from the earliest known date of the violation. The earliest known date of a violation shall be determined by the commission by a preponderance of the evidence; provided that if the earliest known date cannot be determined by a preponderance of evidence, penalties for continuing violations shall be assessed from the earliest date the commission is made aware of the violation.

(1) The nature, circumstances, extent, gravity, and history of the violation and of any prior violations;

(2) The economic benefit to the violator, or anticipated by the violator, resulting from the violation;

(3) The potential or actual harm to water resources, other water users, or the environment;

(4) The violator's good faith efforts to comply;

(5) The violator's degree of culpability; and

(6) Any other matters as justice may require.

[~~(c)~~] (d) No provision of this chapter shall bar the right of any injured person to seek other legal or equitable relief against a violator of this chapter.

[~~(d)~~] (e) Except as otherwise provided by law, the commission or its authorized representative by proper delegation [~~may~~] shall set, charge, and collect administrative fines [or]; may bring legal action to recover administrative fees and costs as documented by receipts or affidavit, including attorneys' fees and costs; [or] and may bring legal action to recover administrative fines, fees, and costs, including attorneys' fees and costs, or payment for damages resulting from a violation of this chapter or any rule adopted pursuant to this chapter."

SECTION 9. Section 174C-62, Hawaii Revised Statutes, is amended to read as follows:

"[[]§174C-62[]] Declaration of water shortage. (a) The commission shall formulate a statewide plan for implementation during periods of water shortage. As a part of the plan, the commission shall adopt a reasonable system of permit classification according to source of water supply, method of extraction or diversion, use of water, or a combination thereof.

(b) The commission, by rule, may declare that a water shortage exists within all or part of an area, whether within or outside of a water management area, when insufficient water is available to meet the requirements of the permit system or when conditions [~~are such as to~~] require a temporary reduction in total water use within the area to protect water resources from serious harm. The commission shall publish a set of criteria for determining when a water shortage exists[.], including but not limited to impacts and effects of the climate crisis.

(c) In accordance with the plan adopted under subsection (a), the commission may impose [~~such~~] restrictions on one or more classes of permits and outside of management areas on well and stream diversion owners and operators as may be necessary to protect the water resources of the area from serious harm and to restore them to their previous water quantity or chloride level condition.

(d) A declaration of water shortage and any measures adopted pursuant thereto may be rescinded by rule by the commission.

(e) When a water shortage is declared, the commission shall cause a notice [~~thereof~~] of the water shortage to be published in a prominent place in a newspaper of general circulation throughout the area[.] and on the commission's website. The notice shall be published each day for the first week of the shortage and once a week [~~thereafter~~] for four months, followed by monthly publications until the declaration is rescinded. Publication of [~~such~~] the notice shall serve as notice to all water users in the area of the condition of water shortage.

(f) The commission shall cause each permittee in the area to be notified by regular and electronic mail of any change in the conditions of the permittee's permit, any suspension [~~thereof,~~] of the permittee's permit, or of any other restriction on the use of water for the duration of the water shortage.

(g) If an emergency condition arises due to a water shortage within any area, whether within or outside of a water management area, and if the commission finds that the restrictions imposed under subsection (c) are not sufficient to protect the public health, safety, or welfare, or the health of animals, fish, or aquatic life, or a public water supply, or recreational, municipal, agricultural, or other reasonable uses, the commission may issue orders reciting the existence of [~~such~~] an emergency and requiring that such actions as the commission deems necessary to meet the emergency be taken, including but not limited to apportioning, rotating, limiting, or prohibiting the use of the water resources of the area. Any party to whom an emergency order is directed may challenge [~~such an~~] the order but shall immediately comply with the order, pending disposition of the party's challenge. The commission shall give precedence to a hearing on [~~such~~] the challenge over all other pending matters."

SECTION 10. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 11. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 12. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	2002
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII