SB2002 HD1

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 the State 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 resource management (commission) to administer and implement the state water code.

The legislature is concerned that impediments and threats to the independence of the commission have 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 In re Waiahole Ditch Contested Case Hearing, 94 Haw. 97, 9 P.3 409 (2000) (Waiahole 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 board and land and natural resources (chairperson), who serves as both the head of the department of land and natural resources and 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 August 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 objections 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 reform measures 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 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 that 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 establish a working group within the department of land and natural resources to evaluate and make recommendations regarding the governance and structure of the commission on water resource management to ensure that it effectively fulfills its constitutional public trust responsibilities while maintaining operational efficiency and implementation capacity.

SECTION 2. (a) There is established within the department of land and natural resources a working group to evaluate and make recommendations regarding the governance and structure of the commission on water resource management to ensure that it effectively fulfills its constitutional public trust responsibilities while maintaining operational efficiency and implementation capacity.

(b) The working group shall consist of the following voting members:

(1) The chairperson of the board of land and natural resources, or the chairperson's designee, who shall convene the working group;

(2) The first deputy to the chairperson of the commission on water resource management, or the first deputy's designee;

(3) The attorney general, or the attorney general's designee;

(4) The director of health, or the director's designee;

(5) Two members of the commission on water resource management; provided that the members do not constitute a quorum of the commission;

(6) A representative of the office of Hawaiian affairs;

(7) A representative of the department of Hawaiian home lands;

(8) A staff-level representative of the commission on water resource management;

(9) Two representatives from county water supply agencies; provided that one representative shall represent the Honolulu board of water supply and one representative shall represent a water supply agency from a neighbor island;

(10) A representative of a large landowner or agricultural water user;

(11) A representative from the development or housing sector; and

(12) A member of a community organization with a background in environmental advocacy.

(1) County planning and permitting agencies;

(2) Experts in engineering and hydrology;

(3) Cultural practitioners; and

(4) Labor representatives.

Participants who serve in an advisory capacity may provide input to the working group but shall not be eligible to vote.

(d) The working group shall:

(1) Evaluate whether the existing leadership structure of the commission on water resource management supports effective governance and implementation, including:

(A) Whether the chairperson of the board of land and natural resources should serve as chairperson of the commission on water resource management;

(B) The expectations, workload, and support necessary for the chairperson and members of the commission on water resource management to perform their duties effectively; and

(C) Whether compensation or other structural supports for members of the commission on water resource management are necessary to enable them to perform their duties effectively;

(2) Assess the appropriate administrative relationship between the commission on water resource management and department of land and natural resources;

(3) Evaluate the need for:

(A) The commission on water resource management to be able to retain independent legal counsel; and

(B) Dedicated executive leadership for the commission on water resource management, such as the hiring of an executive director;

(4) Identify targeted statutory amendments to improve the accountability, efficiency, and clarity of authority of the commission of water resource management; and

(5) Develop recommendations for implementation of any changes, including any necessary transition plans, to ensure the continuity of operations of the commission on water resource management.

The working group shall focus on governance and structural issues and shall not duplicate or replace existing permitting or regulatory processes of the commission on water resource management.

(e) The working group shall submit to the legislature:

(1) An interim report no later than twenty days prior to the convening of the regular session of 2027; and

(2) A final report no later than two years after the convening of the working group, including any findings, recommendations, and proposed legislation.

(f) The working group shall cease to exist on January 1, 2028.

SECTION 3. This Act shall take effect on July 1, 3000.

THE SENATE	S.B. NO.	2002
THIRTY-THIRD LEGISLATURE, 2026		S.D. 2
STATE OF HAWAII		H.D. 1