A Maui company whose snorkel tour boat sank off Molokini is facing $672,618 in fines, the largest-ever penalty proposed by the state in a coral damage case.

Marine biologists with the state Division of Aquatic Resources estimate that 661 to 871 coral colonies were killed or injured by the Sept. 29, 2006, sinking and the subsequent salvage of the 32-foot Kai Anela by owner Maui Snorkel Charters Inc. of Kihei.

Damage to the Molokini Marine Life Conservation District covered an area totaling 2,067 square feet, with more than half the destruction caused by direct impact by the boat's aluminum hull. State biologists said it will take more than 80 years for the coral bed to recover.

The Board of Land and Natural Resources is scheduled to take up the case at its meeting today.

Jeffrey Strahn, one of the owners of Maui Snorkel Charters, which does business as Maui Dive Shop, said yesterday he would not comment until the case is resolved.

The sinking of the Kai Anela also endangered the lives of the 15 people aboard, who had to jump into choppy seas without life preservers, according a report filed by the Division of Aquatic Resources, part of the Department of Land and Natural Resources.

The Coast Guard is conducting a separate investigation into possible safety violations, according to Coast Guard Lt. John Titchen.

Dan Polhemus, administrator of the Division of Aquatic Resources, called Molokini "possibly our most intact and pristine reef on Maui."

Other areas around the island, particularly off West Maui, have lost 50 percent of their reefs in the last 10 years because of invasive algae and sedimentation, Polhemus said, and Molokini serves as a baseline for what a healthy reef should look like.

"We take any sort of damage to this marine life conservation district very seriously. This is some of the last of our best," he said.

ROPE TANGLED

The crescent-shaped Molokini, about 2 1/2 miles off south Maui, is one of the state's premier snorkeling and scuba diving sites. An estimated 1,000 people a day visit Molokini, drawn by its abundant coral beds, exceptionally clear water and "tame" fish.

Forty-one tour companies hold state-issued commercial use permits for the Molokini Marine Life Conservation District.

The trouble aboard the Kai Anela began around 11 a.m. Sept. 29, 2006, as the captain and a crew member struggled to secure the dual-engine vessel to one of 26 submerged moorings at the snorkeling spot, the DLNR report said. The boat's port engine ground to a halt when a bow rope became entangled in the impeller, which draws water up into the engine.

The report noted it was the captain's first solo voyage after only three days of training, and neither he nor the crewman had mechanical knowledge of the vessel. The captain contacted a company mechanic on shore, who didn't seem to grasp the seriousness of the situation and thought the captain was overreacting, according to DLNR investigators.

The mechanic ignored the captain's request for a tow and insisted the problem could be fixed over the phone, the report said. Efforts to loosen the rope opened the engine compartment to flooding, and within minutes the boat was listing and water pouring in over the rails.

DLNR investigators said life preservers were not distributed to passengers before the boat sank. Instead, the captain and crew member "shoved" boogie boards, ring buoys and other items that had floated to the surface toward passengers who were treading water.

Two of the passengers swam to Molokini and were climbing up the steep rocks before the Kai Anela crew yelled at them to stay away from the crater wall because of the dangerous sea conditions.

A Blue Water Rafting tour boat came over to assist and a Coast Guard rescue boat from the Ma'alaea Station was soon on the scene. No one was injured, but a pregnant woman and a passenger who complained of shortness of breath were checked by an ambulance crew on the Maui shore.

The Kai Anela was partially suspended below the surface, and investigators believe someone from the company, without guidance, put a hole in the hull to bring it to rest on the ocean floor, according to the report.

DRAGGED ACROSS CORAL

The first effort to raise the Kai Anela was on Oct. 1, 2006. The salvage master, who was not on site, ordered the vessel dragged away from the crater in an apparent attempt to prevent it from breaking up, investigators said.

The tour boat was then partially raised but there was not sufficient flotation, the report said. When the vessel tilted, the flotation devices slipped out of place and the Kai Anela sank again to the bottom.

The Coast Guard closed Molokini for the day, costing other tour operators substantial revenues, the report said.

On Oct. 6, 2006, the Kai Anela was successfully floated and towed to the Kihei Boat Harbor. The vessel was repaired and is back in service.

The Division of Aquatic Resources staff is recommending that the BLNR revoke Maui Snorkel Charters' commercial use permit, which has an estimated yearly net value of $687,000, the report said. If the permit is revoked, the company would have to wait a year to apply for a new one.

The board also is being asked to consider administrative fines of up to $672,618, which include $10,618 in investigative costs.

MANY MISTAKES ALLEGED

The report said the substantial penalty is warranted based on the magnitude of damage and the environmental and economic importance of Molokini as one of the state's few marine life conservation districts. Other factors include the company's "careless and potentially negligent actions" throughout the sinking and salvage operations.

"Decisions made during the incident cast doubt on MSC's ability to responsibly and safely conduct their commercial operations at Molokini. While the Kai Anela was equipped with federally required emergency flotation devices, they were never distributed to the passengers, despite ample evidence the vessel was in distress," investigators said, adding that it appeared the devices were not readily accessible.

Company officials were "extremely fortunate" no one died or was seriously injured, the report said.

Polhemus said the proposed penalties are the largest the state has sought for coral damage caused by marine activity.

The BLNR levied a $4 million fine against Kaua'i landowner Jimmy Pflueger, whose illegal grading was blamed for a mudslide that smothered reefs off Pila'a in November 2001. Polhemus noted that that case involved activities that took place on land.

Reach Christie Wilson at cwilson@honoluluadvertiser.com.