Several state lawmakers are calling for an investigation into how the Legislature found itself in the "awkward" position of salvaging the Hawaii Superferry and $40 million in state-funded harbor projects.

With the Legislature considering possible action to keep the $250 million enterprise afloat, the lawmakers said now might not be the best time to press for answers, but they also have plenty of questions about actions by the Lingle administration that triggered 2 1/2 years of litigation resulting in last week's injunction barring ferry sailings to Maui until an environmental assessment of the harbor projects is done.

Without further legal or legislative intervention, the Hawaii Superferry will not sail.

"Right now we don't want to look for blame or finger-pointing. We need to take the long view of what's the best thing to do on this on a policy basis," said House Majority Leader Kirk Caldwell, D-24th (Manoa). "We're angry that we've been put into this very awkward position of doing piecemeal legislation to help one business survive, although it's one business you could argue that could impact transportation for all the islands."

The Lingle administration insists the right decision was made in granting the ferry-related harbor projects an exemption from environmental review, even though the Hawai'i Supreme Court ruled in August it was improper and ordered the DOT to conduct an assessment.

"Despite what has occurred to date, I do not believe we were incorrect in either the process or application of the exemption determination, as it was consistent with the manner in which we have made and based decisions on such matters," DOT Director Barry Fukunaga said in an e-mail to The Advertiser.

Fukunaga was DOT deputy director of harbors when he granted the exemption in February 2005. Gov. Linda Lingle did not play a role in the decision-making process, according to Fukunaga and Lingle spokesman Russell Pang.

Sen. Mike Gabbard, D-19th (Makakilo), and Rep. Marcus Oshiro, D-39th (Wahiawa), said the Legislature should convene an investigative panel to dig deeper into the administration's actions surrounding the Superferry.

Oshiro said it would be "patently absurd and negligent" for a DOT official to consider the exemption without consulting Attorney General Mark Bennett. As the administration's chief legal counsel, Bennett should have stepped into the decision-making, considering what was at stake, Oshiro said.

"At some point we'll need an explanation of this decision to go ahead without an environmental assessment and allow the Superferry to operate knowing that there was a pending appeal at the Supreme Court," he said.

"I can't imagine legal counsel not advising one's client that they might want to err on the side of caution while awaiting a final decision by the court."

Lingle, at a news conference on Friday, said she is trying to work collaboratively with House and Senate leaders. The governor said she is not aware of any legal advice on the Superferry from Bennett in her files. She also said she has resisted responding to lawmakers who have been critical of her administration's decision-making process.

"There are always going to be a couple of legislators in either house who just feel more comfortable in an attack mode," the governor said. "But that kind of attitude is not going to solve this problem."

NO PROBLEM EXPECTED

Caldwell admits much of the hand-wringing is coming in hindsight. Some of the critics of the administration's handling of the Superferry signed on to a 2004 concurrent resolution encouraging the DOT, the Public Utilities Commission, the federal Maritime Administration and other agencies to expedite processing of permit approvals and other support for the new interisland ferry service.

Caldwell was vice chairman of the House Transportation Committee, headed by state Rep. Joseph Souki, D-8th (Wailuku, Waihe'e, Waiehu), in 2004 when the panel heard DOT's $40 million request for barges, ramps and other facilities to accommodate the 350-foot ferry at Kahului, Kawaihae, Honolulu and Nawiliwili harbors.

"We heard a request for a new form of transportation. Nowhere did anyone even hint there might be a problem with a required environmental assessment," Caldwell said.

The state's environmental protection policy, 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.

There are 10 exemption classes, but the law says it is not enough to simply match a proposed project with an exemption class. The agency proposing the work also must do a cursory consultation with other agencies and affected parties to determine if the project is likely to have significant environmental impacts.

If it is determined the project would not result in major "primary or secondary" impacts, the exemption can be granted. Secondary impacts would include activities that would be facilitated by the project.

In this case, the Superferry operations would be a secondary impact of the $40 million in harbor improvements.

If it appears there might be major impacts, then an environmental assessment must be done, or even a more comprehensive environmental impact statement.

Fukunaga determined that the ferry-related projects fit into the exemption class for "construction or placement of minor structures accessory to existing facilities," according to his February 2005 exemption determination letter to the state Office of Environmental Quality Control.

The DOT consulted with the Superferry, the OEQC, and county planning and public works departments before determining "the installation and result of the minor improvements noted will not produce or create any adverse air quality, noise or water quality impact," the letter said.

Fukunaga said the projects also were reviewed by the DOT's Statewide Planning Office and the Harbors Division's Construction Engineering and Planning staff, who normally undertake determination on the applicable environmental review process for harbor development projects.

He said he did not discuss the exemption with Lingle, her then-chief of staff Bob Awana, or Bennett, although Fukunaga said he did brief then-DOT Director Rod Haraga on the matter.

"I made the final decision on the application of the exemption based on our deliberations and consultations with our staff and those external agencies consulted," he said in his e-mail.

Caldwell said he would be surprised if the DOT didn't consult with other administration officials, in particular the attorney general, before awarding an exemption to a $40 million state project done on behalf of a high-stakes enterprise like the Superferry.

"If there was no legal opinion, that's not good either," he said.

Harbor projects on behalf of Matson Navigation Co., Young Brothers, American Hawaii Cruises and other users that did undergo environmental assessment 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.

"Before the DOT finalized the (environmental assessment) exemption, they examined the relevant facts," said Lingle spokesman Pang. "Among those relevant facts were the already vast commercial uses of the harbor, the fact that all activities and equipment were appropriate for a commercial harbor and consistent with current uses, and the fact that the activities were to be conducted at an existing pier facility and were consistent with the purpose and reason for which the pier and the harbor were originally developed."

LEGAL BATTLES

The Sierra Club, Maui Tomorrow and the Kahului Harbor Coalition filed court documents March 21, 2005, opposing the exemption and trying to force an environmental review. They argued the harbor improvements and their user, Hawaii Superferry, would likely have wide-ranging impacts such as increased traffic, the spread of invasive species, conflicts with recreational use of the harbor, depletion of Native Hawaiian subsistence resources, and vessel collisions with humpback whales.

Maui Circuit Judge Joseph Cardoza dismissed the complaint on July 12, 2005, ruling the groups did not have standing in the case. The state also argued the court should defer to the DOT's judgment since proper procedures were followed in determining the harbor projects qualified for an exemption, and Cardoza agreed the exemption was in compliance with Chapter 343.

Cardoza is the same judge who last week approved a permanent injunction prohibiting the DOT from allowing the ferry to use the Kahului port facilities.

The Sierra Club and the other two plaintiffs filed an appeal of Cardoza's ruling in the Hawai'i Supreme Court on July 25, 2005.

A related lawsuit filed August 2005 in U.S. District Court in Honolulu questioned whether a federal environmental review should have been triggered by a $140 million loan guarantee granted to the company by the U.S. Maritime Administration for construction of two vessels. Judge Helen Gillmor dismissed the complaint in September 2005 and no appeal was filed.

At the time Hawaii Superferry wrapped up its financing and made other decisions in late 2005 that propelled the project forward, there was no pending legal action or other roadblocks, except for the appeal of Cardoza's July ruling favoring the state and the company.

Two years later, on Aug. 23, 2007, the Hawai'i Supreme Court took up the appeal, not only reversing Cardoza's rulings but deciding the question at the root of the case: whether the DOT exemption of the $40 million in ferry-related harbor projects was correct.

In a decision delivered with unprecedented speed on the same day the Supreme Court heard oral arguments, the five justices unanimously stated the exemption violated Chapter 343, and ordered the DOT to conduct an environmental assessment.

"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," said a full opinion issued by the court Aug. 31.

11TH-HOUR STANDARD

The DOT and Lingle have criticized the court decision and continue to stand by the exemption.

"The state followed the law and the same procedures that had been applied in previous harbor improvements," Pang said. "Circuit Court Judge Joseph Cardoza agreed that an (assessment) was not needed."

Fukunaga said it appeared the court was asking agencies for something new.

"The Supreme Court ruled that we erred because we failed to take into consideration the secondary impact of the vessel in its operation," he said in his e-mail. "We have not previously applied this standard, as the review was not on a high-speed ferry vessel that the state acquired or operates but on the harbor improvements that we were undertaking."

But the court said that even if the potential ferry impacts were removed from the discussion, the harbor projects alone would not have qualified for an exemption.

The Supreme Court decision came five days before the announced start of Superferry service on Aug. 28.

In the wake of the ruling, Superferry announced it was pushing up its launch date to Aug. 26 and offered $5 fares between Honolulu, Maui and Kaua'i.

The ferry completed voyages to Maui and Kaua'i on Aug. 26. The vessel returned to Maui on the morning of Aug. 27, but later in the day, Cardoza issued a temporary restraining order barring further visits until the conclusion of a hearing to determine whether the ferry could operate during the environmental assessment process.

Protesters on Kaua'i prevented the ferry from making a second call at Nawiliwili, and further sailings have been suspended indefinitely due to safety concerns.

Cardoza heard four weeks of testimony during the hearing, which ended Tuesday when the judge ruled that Chapter 343 clearly requires an environmental review before a project can proceed. He granted the request by the Sierra Club, Maui Tomorrow and the Kahului Harbor Coalition for a permanent injunction to keep the ferry tied up at dock until the state conducts an assessment that will include a look at potential impacts of the Superferry operation.

As of Friday, the company had not appealed the injunction to the state's Intermediate Court of Appeals.

The DOT selected Belt Collins to conduct the $1 million assessment.

Hawaii Superferry President and CEO John Garibaldi has said investors are not going to wait indefinitely for the ultimate outcome of the study if the ferry cannot sail in the meantime.

Superferry's chief financier John Lehman last week told the Press-Register in Mobile, Ala., where shipbuilder Austal is located, that the vessel is in high demand because there are few like it anywhere else in the world. He said it could easily find work outside Hawai'i as a military transport or civilian ferry.

Reach Christie Wilson at cwilson@honoluluadvertiser.com.