State officials continue to defend an environmental exemption granted to $40 million in Hawaii Superferry barges, ramps and other equipment at four ports, saying the work should be treated no differently than other recent harbor projects that were exempted.

Department of Transportation Director Barry Fukunaga said projects benefiting Young Brothers, Matson Navigation Co. and other harbor users have not drawn the same scrutiny, suggesting the new interisland ferry service is being singled out.

DOT records show other harbor projects to receive exemptions include shed demolition for Matson and Young Brothers; grading, paving and construction of an office for Sause Bros.; and installation of utilities and fences.

But state records also show a number of recent harbor projects for Matson, Young Brothers, American Hawaii Cruises and other users that did undergo environmental assessment. These include $6.5 million in improvements to allow two cruise ships to dock at the same time at Nawiliwili Harbor, and Matson's installation of a mooring dolphin at Kahului Harbor's Pier 1C at a cost of $980,000.

All the harbor-related environmental assessments reviewed by The Advertiser resulted in a finding of no significant impacts that allowed the construction to go forward.

In an appeal of a Maui court case, the Hawai'i Supreme Court ruled Aug. 23 that the DOT exemption for Hawaii Superferry-related projects at Kahului Harbor was improperly granted, and ordered the DOT to conduct an environmental assessment of the proposed work.

Fukunaga has claimed that no environmental assessment was required when Pasha Transport Lines introduced vehicle delivery service in Hawai'i, or when new cruise ships commenced interisland service, or when Matson and Young Brothers added larger ships to their fleets.

The director has since acknowledged that Pasha did not require construction of new harbor facilities, so there was no project for which to consider an environmental assessment. Matson and Young Brothers also did not require new facilities specifically for their larger ships, although previous work to expand port space for the companies was undertaken, and in those cases, exemptions were granted for work that includes demolition of existing sheds and paving to create more room.

LAW ALLOWS EXEMPTIONS

New or expanded service by cruise ships, cargo carriers and airlines generally is not subject to Hawai'i's environmental review law, except in situations involving construction of new facilities or expansion of existing facilities.

The law — Hawai'i Revised Statutes, Chapter 343 — requires an environmental review of projects using state or county lands or funds, but it also allows for exemptions.

To determine if a project is exempt, an agency must first show it fits into one of 10 exemption classes. But the law says it's not enough to simply match a proposed project with an exemption class. The agency must also do a cursory review of the project to determine whether it is likely to result in significant environmental impacts.

The review includes consulting with other agencies and affected parties, and if it is determined the project would not result in major "primary or secondary" impacts, the exemption can be granted.

However, if it is apparent there might be major impacts, then an environmental assessment must be done, or even a more comprehensive environmental impact statement.

In the case of the Superferry, Fukunaga determined that the barges, ramps and the other equipment fit into the exemption class for "construction or placement of minor structures accessory to existing facilities," according to his Feb. 23, 2005, exemption determination letter to the state Office of Environmental Quality Control.

Fukunaga also said the ferry structures were compatible with harbor activities.

The DOT consulted with the Hawaii Superferry, the OEQC and the Maui County departments of planning and public works to determine "the installation and result of the minor improvements noted will not produce or create any adverse air quality, noise or water quality impact."

The Sierra Club, Maui Tomorrow and the Kahului Harbor Coalition went to court on March 21, 2005, to oppose the exemption and force an environmental review, arguing the harbor improvements and their user, the Hawaii Superferry, would likely result in impacts such as increased traffic, the spread of invasive species, conflicts with recreational use of the harbor, and vessel collisions with humpback whales.

Maui Circuit Court Judge Joseph Cardoza dismissed the lawsuit on July 12, 2005, but in its Aug. 23 order, the Supreme Court reversed Cardoza's ruling and declared that the state erred in granting the exemption to the ferry-related projects.

A subsequent temporary restraining order granted Aug. 27 by Cardoza has kept the ferry from using Kahului Harbor.

In a follow-up 104-page opinion issued Aug. 31, the higher court said the exemption determination was "restricted to the harbor improvements and does not consider the secondary impacts that may result from the use of the Hawaii Superferry in conjunction with Kahului Harbor. ... Rather, DOT appears to studiously restrict its consideration of environmental impact to the physical harbor improvements themselves."

The court also said, "Stated simply, the record in this case shows that DOT did not consider whether its facilitation of the Hawaii Superferry Project will probably have minimal or no significant impacts, both primary and secondary on the environment."

Fukunaga said the Supreme Court is asking for something dramatically new. Instead of just a cursory review, the court now seems to be saying that all "minor" transportation projects must undergo extensive environmental assessment that includes an examination of user operations before an exemption can be granted, he said.

SECONDARY IMPACTS

The DOT is specifically concerned about a statement in the Supreme Court opinion that says: "The (DOT) exemption letter does not consider whether Superferry operation independent of the harbor will have any significant effect on the environment."

Fukunaga and Mike Formby, deputy director of harbors, said DOT has never before conducted a full assessment of a harbor user's operation in seeking an exemption.

"We don't own the Superferry, we don't run the Superferry, we don't know the specifics about all the details of the Superferry, but we are being told to consider secondary impacts 'independent' of harbor improvements," Fukunaga said.

Formby said in an e-mail to The Advertiser that prior to the Supreme Court opinion, the state Harbors Division "has not considered the secondary impact of vessels for exempt projects. In essence, this decision collapses the exempt, EA and EIS process and now makes us consider secondary impacts at the exemption stage when this was previously reserved for EAs and EISs."

In a separate interview, he said: "It introduces uncertainty into the whole process and every single case is going to be challenged."

While Formby agreed it may be appropriate to look at secondary impacts such as a potential increase in traffic and visitors related to Hawaii Superferry operations, he said issues such as the possibility of whale-strikes in the open ocean, well outside harbor boundaries, go far beyond what has been expected in previous reviews.

In any event, Fukunaga said, "it's a gray area. You can interpret it as you see it."

ARGUMENT 'MERITLESS'

Attorney Isaac Hall, representing the groups that initiated the court case, said DOT officials "are grasping at straws" in trying to discredit the court's opinion.

"We thought that argument was meritless and the Supreme Court also found it meritless," Hall said.

He pointed to a footnote in the decision that says: "It should be emphasized that ... the preliminary determination is only a cursory one, and falls far short of the requirements for preparing an (environmental assessment). ... In most cases the fact that an action to be declared exempt will probably have only minimal environmental effects should be obvious."

The court also questioned why the DOT, "purposely or not," ignored the language used by the Office of Environmental Quality Control in its sample exemption memorandum: "I declare that this project will probably have minimal or no significant effect on the environment and is therefore exempt from the preparation of an environmental assessment."

Instead, Fukunaga's Feb. 23, 2005, exemption letter says the harbor projects "will not produce or create any adverse air quality, noise or water quality impact."

The court said his statement "is oblique and does not indicate that secondary impacts were considered," which would invalidate the exemption determination.

Hall said one reason the DOT may have avoided using the phrase "significant effect" is another law, Hawai'i Administrative Rules, Title 11, Chapter 200, which sets rules for environmental impact statements.

The rules state: "In determining whether an action may have a significant effect on the environment, the agency shall consider every phase of a proposed action, the expected consequences, both primary and secondary, and the cumulative as well as the short-term and long-term effects of the action."

"If it's truly something that qualifies for a exemption, then the sample memo should work," Hall said. "If it doesn't qualify, the sample memo doesn't work.

"In this case the court made it clear that the project didn't qualify for an exemption. They never should have tried to get an exemption in the first place."

Reach Christie Wilson at cwilson@honoluluadvertiser.com.