In re Application of Maui Electric Company, Limited.

• Court: Hawaii Supreme Court
• Decided: December 14, 2017
• Docket: SCWC-15-0000640
• Status: Published

Opinion

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Electronically Filed Supreme Court SCWC-15-0000640 14-DEC-2017 10:05 AM

IN THE SUPREME COURT OF THE STATE OF HAWAIʻI

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In re Application of MAUI ELECTRIC COMPANY, LIMITED, For Approval of the Amended and Restated Power Purchase Agreement With Hawaiian Commercial & Sugar Company.

SCWC-15-0000640

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS (CAAP-15-0000640; PUC DOCKET NO. 2015-0094)

DECEMBER 14, 2017

McKENNA, POLLACK, and WILSON, JJ., WITH RECKTENWALD, C.J., DISSENTING, WITH WHOM NAKAYAMA, J., JOINS

OPINION OF THE COURT BY POLLACK, J.

Article XI, section 9 of the Hawaiʻi Constitution

guarantees each person “the right to a clean and healthful

environment, as defined by laws relating to environmental

quality.” Article I, section 5 provides that “[n]o person shall

be deprived of life, liberty or property without due process of

law.” This case raises the issue of whether the protections of

the due process clause apply to the right to a clean and ***FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND PACIFIC REPORTER***

healthful environment as defined by laws related to

environmental quality. We hold that, under the circumstances of

this case, the petitioners asserted a protectable property

interest in a clean and healthful environment as defined by

environmental regulations; that the agency decision adversely

affected this interest; and that a due process hearing was

required given the importance of the interest, the risk of an

erroneous deprivation, and the governmental interests involved.

I. BACKGROUND

This case involves a power purchase agreement between

Maui Electric Company, Limited (“Maui Electric”), an electric

utility company,1 and Hawaiian Commercial & Sugar Company (HC&S),

a producer of electricity. Hawaii Revised Statutes (HRS) § 269-

16.22, relating to power purchase agreements, allows electric

utility companies to recover all power purchase costs from

customers subject to the approval of the Public Utilities

Commission (“Commission” or PUC).2

Maui Electric filed an application with the Commission

on March 31, 2015 (the “Application”), seeking approval of a

1 An “electric utility company” is a public utility as defined under Hawaii Revised Statutes § 269-1 “for the production, conveyance, transmission, delivery, or furnishing of electric power.” HRS § 269-16.22 (Supp. 2012); see also id. § 269-1 (Supp. 2013) (defining “public utility”). 2 The Commission is responsible for the regulation of public utilities in the State. HRS §§ 269-2, 269-6 (Supp. 2013).

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power purchase agreement between Maui Electric and HC&S (the

“Agreement”). The Application indicated that the Agreement

restated and amended an existing power purchase agreement

between Maui Electric and HC&S. Maui Electric sought the

Commission’s approval of the Agreement, a finding that the

energy charges to be incurred under the Agreement were just and

reasonable, a finding that the “purchased power arrangement”

under the Agreement was prudent and in the public interest, and

an authorization to charge consumers for the energy costs

through its existing energy cost adjustment clause.3

The existing agreement between the parties was

approved by the Commission in 1990 and was negotiated to

continue in effect through December 31, 1999, and on a year-to-

year basis thereafter subject to termination. The Application

noted that, if the Commission did not issue an order approving

the Agreement on or before September 30, 2015, the existing

agreement between the parties could be terminated by either

party.

Under the existing agreement, Maui Electric had been

purchasing energy produced by HC&S at its facility located in

Puʻunene, Maui (the “Puʻunene Plant”). The Puʻunene Plant

3 The Application also sought authorization to include the purchased energy charges in Maui Electric’s revenue requirements for ratemaking purposes; however, this request was subsequently withdrawn.

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consisted of a sugar processing operation with an internal

bagasse-fired power plant that also burned a number of other

fuels, including coal and petroleum.4 Under the Agreement, Maui

Electric would continue to purchase energy generated at the

Puʻunene Plant. According to Maui Electric, the Agreement would,

inter alia, amend the pricing structure and rates for energy

purchases under the existing agreement between Maui Electric and

HC&S; eliminate capacity payments Maui Electric was making to

HC&S under the existing agreement; eliminate Maui Electric’s

existing minimum purchase obligation; and extend the arrangement

between the parties from 2014 to 2017.

On April 17, 2015, Sierra Club timely filed a motion

to intervene5 or to participate without intervention6 in the

4 The Division of Consumer Advocacy’s Statement of Position provided the following:

The Consumer Advocate also recognizes that, even though Maui Electric refers to the [Puʻunene Plant] as an internal bagasse fired power plant, the unit burns a number of other fuels, including coal and petroleum. The Consumer Advocate also recognizes that continued reliance on older thermal units that burn fossil fuels is not consistent with the State’s goal of 100% renewable energy by 2045.

5 Pursuant to Hawaii Administrative Rules (HAR) § 6-61-55(a) (1992), “[a] person may make an application to intervene and become a party by filing a timely written motion in accordance with sections 6-61-15 to 6- 61-24, section 6-61-41, and section 6-61-57, stating the facts and reasons for the proposed intervention and the position and interest of the applicant.” 6 HAR § 6-61-56, titled “Participation without intervention,” provides in pertinent part as follows:

(continued . . .)

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proceedings concerning the Application in order to assist the

Commission in fully developing the facts and law regarding the

fuel mix at the Puʻunene Plant and other matters at issue in the

proceeding. Sierra Club sought intervention on behalf of itself

and its members who live in close proximity to the Puʻunene

Plant. In its motion, Sierra Club asserted a fundamental due

process right to participate in a hearing on the grounds that

the Agreement would impact Sierra Club’s members’ health,

aesthetic, and recreational interests. Sierra Club also

asserted its organizational interest in reducing Hawaii’s

dependence on imported fossil fuels and advancing a clean energy

grid.

Sierra Club argued that its members were concerned

that the Puʻunene Plant relied too heavily on coal in order to

meet its power obligations under the existing agreement and also

that its members were concerned “about the public health and

visibility impacts of burning coal.” Statistics provided by

(. . . continued)

The commission may permit participation without intervention. A person or entity in whose behalf an appearance is entered in this manner is not a party to the proceeding and may participate in the proceeding only to the degree ordered by the commission. The extent to which a participant may be involved in the proceeding shall be determined in the order granting participation or in the prehearing order.

HAR § 6-61-56(a) (1992).

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Sierra Club indicated that the fuel mix burned at the Puʻunene

Plant for energy generation from 2010 to 2012 was comprised of

approximately twenty-five per cent coal and petroleum. Sierra

Club asserted that members on an ongoing basis were forced to

close the windows of their homes and run air filters to protect

against harmful pollution. Sierra Club also noted that the

Department of Health sought to impose a fine of over one million

dollars on HC&S in the previous year as a result of more than

four hundred violations of the Clean Air Act.7 Sierra Club

asserted that the Puʻunene Plant was permitted to burn coal and

petroleum, operated without modern pollution controls, and

consistently violated limits set by the Clean Air Act. Sierra

Club also contended that there was an issue of how much energy

at the plant could be considered “renewable power” under HRS §

269-92(b)(4), which relates to standards that prescribe what

portions of the renewable portfolio standards may be met by

7 Included in the record was a “Notice and Finding of Violation” issued to HC&S by the Clean Air Branch of the Department of Health of the State of Hawaiʻi. Amongst the violations listed in the notice were violations of HAR § 11-60.1-32(b) concerning visible emissions. The Notice and Finding of Violation assessed an administrative penalty of $1,335,000.00. These alleged violations were not adjudicated in an agency proceeding as HC&S later agreed to a Consent Order settling all civil liability for the alleged violations in June 2016. Dep’t of Health v. Hawaiian Commercial & Sugar Co., 14-CA-EO-01 (June 7, 2016), http://health.hawaii.gov/cab/files/2016/06/2016_06_07__No._14-CA-EO-01-HCS- CO-signed-by-DDEH.pdf. In the Consent Order, HC&S agreed to a $600,000 fine; to relinquish certain equipment, related hardware, and supplies; and to maintain air quality monitoring equipment at local schools. Id.

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specific types of energy sources. Sierra Club maintained that

the proceedings would determine the future obligations of the

Puʻunene Plant to supply power to Maui Electric, “which is a de

facto determination [of] whether the plant will continue to burn

coal.”

Sierra Club attached the affidavits of two of their

members to the motion for intervention or participation. Clare

Apana, a Wailuku resident who is able to see the Puʻunene Plant’s

smokestack from her home, stated the following in her affidavit:

4. I have concerns about the coal burning at Puʻunene. I understand that burning coal results in emissions of dangerous air pollutants such as particulate matter, sulfur dioxide, nitrogen oxides, mercury, and other toxic pollutants. I know that these pollutants can cause or contribute to a wide range of health problems, including asthma, and respiratory and cardiovascular disease.

5. I have concerns about the impacts of the pollution from the plant on my health and the health of my family. On some days, because the pollution in the area causes hazy conditions, I cannot see the mountains from my house. On these days, I will turn on my air filters and close my windows to limit my exposure.

6. I understand that the Puʻunene plant supplies power to the Maui Electric Company . . . , and that the Commission is considering approving a new power purchase agreement with the plant. I am concerned that the plant burns more coal and produces more air pollution in order to meet its obligations to supply power [to Maui Electric].

7. If the Commission decided not to approve the new power purchase agreement, it might decrease coal-burning at Puʻunene, and therefore decrease some of my concerns about the pollution from the plant. I would feel more comfortable about seeing the plume from the plant if I knew that they were not burning coal, or if they were burning less coal at the plant. It would increase my enjoyment of the area and produce other benefits to my long-term health and well-being.

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The other affidavit attached to Sierra Club’s motion

was by Wailuku resident Christine Andrews, who also expressed

concerns regarding the coal burning at the Puʻunene Plant and the

potential impact of the coal burning on her long-term health.

The Andrews affidavit referenced violations of limits on

emissions by HC&S as follows:

I understand that the Department of Health issued the Puʻunene plant a Notice of Violation in 2014 and a million dollar fine regarding its emissions of opacity. I understand that opacity is a measure of particulate matter pollution. I have concerns about the impacts of the pollution from the plant on my health and the health of my family. I do not want to be exposed to levels of air pollution which exceed the levels permitted by law. I am especially concerned about my exposure to [the] plant’s particulate matter emissions (including the toxic substances that may be contained in particulate matter) because I know particulate matter can penetrate deep into the lungs and can lead to a range of respiratory problems.

Maui Electric filed a memorandum in opposition to

Sierra Club’s motion for intervention or participation

asserting, inter alia, that Sierra Club failed to establish a

right to participate in a hearing. Maui Electric’s memorandum

did not address Sierra Club’s assertion of a right to a due

process hearing and solely argued that Sierra Club failed to

establish a statutory right to participate in the proceeding.

The Commission denied Sierra Club’s motion to

intervene or to participate without considering Sierra Club’s

due process assertion. The Commission concluded that Sierra

Club did not have an interest distinct from the general public

and that “its interests in environmental issues and impacts

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could unreasonably broaden the issues already presented.” The

Commission further concluded that the questions and concerns of

Sierra Club “fall outside the narrow issues present in the

Application, which concern the pricing structure and purchase

obligations” of Maui Electric and HC&S. The Commission also

found that Sierra Club’s involvement in other energy proceedings

indicated that there were sufficient other means for Sierra Club

to protect its interests.

Sierra Club subsequently filed a motion with the

Commission requesting reconsideration of the order denying its

motion to intervene or participate in the proceeding. Sierra

Club again asserted a due process right to participate in a

contested case hearing related to the Application based on the

constitutionally-protected environmental rights of the

organization and its members. Sierra Club cited to Pele Defense

Fund v. Puna Geothermal Venture, 77 Hawaiʻi 64, 881 P.2d 1210

(1994), in support of its argument that a due process hearing

was constitutionally required. Sierra Club also asserted that

the “present proceeding” was required under HRS § 269-27.2(c).

In denying Sierra Club’s motion for reconsideration,

the Commission determined that Sierra Club failed to justify

intervention or participation in the proceeding. With regard to

Sierra Club’s due process argument, the Commission determined

that Pele Defense Fund was inapplicable. The Commission did not

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otherwise address Sierra Club’s assertion of a due process right

to participate in a hearing concerning its environmental rights.8

The Commission issued its final Decision and Order

concerning the Application on September 24, 2015. In its

Decision and Order, the Commission granted the Application to

approve the Agreement. Among its findings and conclusions, the

Commission observed that the Agreement is “anticipated to help

accomplish the State’s policy goals of reaching 100% renewable

energy by 2045 as well as increasing the State’s energy self-

sufficiency.” Additionally, the Commission approved Maui

Electric’s request to file confidentially fuel information

provided by HC&S, which includes the type of fuels burned by

HC&S. The PUC determined that the information was proprietary

and “if disclosed publicly could disadvantage and competitively

harm HC&S.”

Sierra Club appealed to the Intermediate Court of

Appeals (ICA) challenging the Commission’s order denying its

motion to intervene or participate in the proceedings and Sierra

Club’s motion for reconsideration. Both the Commission and Maui

Electric contested the jurisdiction of the ICA, arguing that the

8 The Division of Consumer Advocacy took no position with respect to Sierra Club’s motion for intervention or with regard to the motion for reconsideration. In its Statement of Position as to the Agreement, the Consumer Advocate recommended approval of the Agreement subject to various conditions.

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ICA lacked jurisdiction because the appeal did not arise from a

contested case. Maui Electric filed a motion to dismiss the

appeal, asserting that the appeal should be dismissed for lack

of jurisdiction because the motion to intervene was not a

contested case proceeding. Maui Electric asserted that Sierra

Club’s concern regarding “the public health and visibility

impacts of burning coal” did not rise to the level of property

within the meaning of the due process clause. Maui Electric

also argued that, as a factual matter, the Commission’s approval

of the Application would not increase the amount of electricity

generated using coal at the Puʻunene Plant.

In its statement of jurisdiction and memorandum in

opposition to Maui Electric’s motion to dismiss, Sierra Club

asserted that a hearing regarding the Application was required

pursuant to HRS § 269-27.2(d), HRS § 269-16(b), and by due

process to protect the right to a clean and healthful

environment.

The ICA granted Maui Electric’s motion to dismiss

Sierra Club’s appeal, concluding that the Commission was not

required to hold a hearing on the Application, and thus, the ICA

determined, Sierra Club was not “a person aggrieved in a

contested case proceeding” under HRS § 269-15.5. Accordingly,

the ICA concluded that it was without appellate jurisdiction to

consider Sierra Club’s appeal. The ICA relied on In re Tawhiri

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Power LLC, 126 Hawaiʻi 242, 245-46, 269 P.3d 777, 780-81 (App.

2012), in noting that appellate jurisdiction does not exist over

appeals based on a Commission order denying a motion to

intervene.9 Sierra Club subsequently filed an application for a

writ of certiorari to this court, which was granted.

II. DISCUSSION

A. Mootness

Maui Electric asserts that this case should be

dismissed in light of the recent closing of the Puʻunene Plant.

However, to the extent Sierra Club’s claim is moot, it falls

within the public interest exception to the mootness doctrine.

This court reviews three factors in analyzing the public

interest exception: “(1) the public or private nature of the

question presented, (2) the desirability of an authoritative

determination for future guidance of public officers, and (3)

the likelihood of future recurrence of the question.” Cty. of

Haw. v. Ala Loop Homeowners, 123 Hawaiʻi 391, 405, 235 P.3d 1103,

1117 (2010) (quoting Doe v. Doe, 116 Hawaiʻi 323, 327, 172 P.3d

1067, 1071 (2007)).

9 The ICA also cited to In re T-Mobile West Corp., No. CAAP-12- 0001117, 2013 WL 1501028 (App. Apr. 11, 2013) (order granting motion to dismiss appeal), and In re Coral Wireless, No. CAAP-12-0001119, 2013 WL 1729717 (App. Apr. 22, 2013) (order dismissing appeal).

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The issue in this case is whether, given the

circumstances presented, due process under the Hawaii

Constitution provides procedural protections to persons

asserting the constitutional right to a clean and healthful

environment. Resolution of the issue may affect similarly

situated parties who in the future seek to assert their right to

a clean and healthful environment in proceedings before agencies

and other governmental bodies. Ala Loop, 123 Hawaii at 405, 235

P.3d at 1117 (“[T]he ICA’s ruling that there is no private right

of action under chapter 205 ‘inject[ed] the requisite degree of

public concern’ in support of having the public interest

exception apply.” (quoting Doe, 116 Hawaii at 327, 172 P.2d at

1071)); Hamilton ex rel. Lethem v. Lethem, 119 Hawaii 1, 7, 193

P.3d 839, 845 (2008) (noting that “the public interest exception

has focused largely on political or legislative issues that

affect a significant number of Hawaii residents”); Kahoohanohano

v. State, 114 Hawaii 302, 333, 162 P.3d 696, 727 (2007) (holding

that the question in the case was of a public nature because the

outcome would affect all state and county employees); Doe, 116

Hawaii at 327, 172 P.3d at 1071 (constitutionality of a

grandparent visitation statute was of a public nature).

Resolution of the issue presented in this case is also

desirable because it will guide public officers, especially

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those working for agencies that exercise quasi-adjudicative

authority, as to the manner in which due process and the right

to a clean and healthful environment interact and as to the

procedural safeguards that may be applicable when these two

constitutional rights converge. See Ala Loop, 123 Hawaii at

405, 235 P.3d at 1117 (reasoning that “because the availability

of private enforcement is a potentially important consideration

for public officers to take into account in performing their own

duties under HRS chapter 205, public officials need guidance

with regard to whether private citizens have a private right of

action to enforce HRS chapter 205”); Kahoohanohano, 114 Hawaii

at 333—34, 162 P.3d at 727–28 (noting that “determination of the

matter would assist public officers in the future” because it

“will assist executive officers and legislators in making

budgetary decisions involving the benefits of public

employees”). Providing guidance in this area is desirable

because it will clarify to public officers that they have the

duty to properly consider and effectuate safeguards that the

Hawaii Constitution provides in the context of agency

proceedings. See Mauna Kea Anaina Hou v. Bd. of Land & Nat.

Res., 136 Hawaii 376, 414, 363 P.3d 224, 262 (2015) (Pollack,

J., concurring) (a majority of the court holding that “an agency

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. . . must perform its statutory function in a manner that

fulfills the State’s affirmative constitutional obligations”).

Finally, given that agencies are “often in the

position of deciding issues that affect multiple stakeholders

and implicate constitutional rights and duties,” Mauna Kea

Anaina Hou, 136 Hawaii at 413–14, 363 P.3d at 261–62, it is

likely that the constitutional right to a clean and healthful

environment will be asserted or will arise under agency

proceedings in the future. Thus, the question that we resolve

in this case is likely to recur in the future. See Ala Loop,

123 Hawaii at 405–06, 235 P.3d at 1117–18 (reasoning that “given

the volume of land development activity in the State and the

frequency with which issues relating to chapter 205 have been

litigated, the question regarding whether a private party may

seek to enforce HRS chapter 205 is likely to recur in the

future”); Kaleikini v. Thielen, 124 Hawaii 1, 13, 237 P.3d 1067,

1079 (2010) (explaining that “the likelihood of future

recurrence of the question seems high inasmuch as it seems

probable that iwi will continue to be unearthed at future

construction projects”). Accordingly, this case satisfies the

three prongs of the public interest exception to the mootness

doctrine, and we proceed to address the merits of this case.

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B. Appellate Jurisdiction

Commission decisions are appealable to the ICA

pursuant to HRS § 269-15.5.10 “Only a person aggrieved in a

contested case proceeding . . . may appeal from the order, if

the order is final, or if preliminary, is of the nature defined

by section 91-14(a).” Id. Judicial review over an agency

appeal is authorized by HRS § 91-14 when the following

requirements have been met:

first, the proceeding that resulted in the unfavorable agency action must have been a contested case hearing . . . ; second, the agency’s action must represent a final decision or order, or a preliminary ruling such that deferral of review would deprive the claimant of adequate relief; third, the claimant must have followed the applicable agency rules and, therefore, have been involved in the contested case; and finally, the claimant’s legal interests must have been injured--i.e., the claimant must have standing to appeal.

Kilakila ʻO Haleakala v. Bd. of Land & Nat. Res., 131 Hawaiʻi

193, 200, 317 P.3d 27, 34 (2013) (quoting Kaleikini v. Thielen,

124 Hawaiʻi 1, 16-17, 237 P.3d 1067, 1082-83 (2010)).11 In other

10 HRS § 269-15.5 provides, inter alia, as follows:

An appeal from an order of the public utilities commission under this chapter shall lie, subject to chapter 602, in the manner provided for civil appeals from the circuit courts. Only a person aggrieved in a contested case proceeding provided for in this chapter may appeal from the order, if the order is final, or if preliminary, is of the nature defined by section 91-14(a).

HRS § 269-15.5 (2007). 11 HRS § 91-14(a) provides,

Any person aggrieved by a final decision and order in a contested case or by a preliminary ruling of the nature

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words, there are four requirements for judicial review over an

agency appeal: a contested case hearing, finality, compliance

with agency rule, and standing. As the decision was final and

Sierra Club complied with applicable agency rules, we consider

whether there was a contested case and whether Sierra Club has

standing to appeal.12

1. The Proceeding Was a Contested Case

A contested case hearing is one that is (1) “required

by law” and (2) determines “the rights, duties, and privileges

of specific parties.” Kilakila ʻO Haleakala, 131 Hawaiʻi at 200,

317 P.3d at 34 (quoting Kaleikini, 124 Hawaiʻi at 16–17, 237 P.3d

at 1082–83). Accordingly, we address whether a hearing was

that deferral of review pending entry of a subsequent final decision would deprive appellant of adequate relief is entitled to judicial review thereof under this chapter; but nothing in this section shall be deemed to prevent resort to other means of review, redress, relief, or trial de novo, including the right of trial by jury, provided by law. Notwithstanding any other provision of this chapter to the contrary, for the purposes of this section, the term “person aggrieved” shall include an agency that is a party to a contested case proceeding before that agency or another agency.

HRS § 91-14(a) (2012). 12 We note that the standing requirement to challenge an agency action is distinct from the procedural right to do so. As explained in County of Hawaii v. Ala Loop Homeowners, “[t]he private right of action inquiry focuses on the question of whether any private party can sue . . . while the standing inquiry focuses on whether a particular private party is an appropriate plaintiff.” 123 Hawaii 391, 406 n.20, 235 P.3d 1103, 1118 n.20 (2010).

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required by law and, if required, whether such a hearing would

have determined the rights, duties, and privileges of specific

parties.

“In order for an administrative agency hearing to be

‘required by law, it may be required by (1) agency rule, (2)

statute, or (3) constitutional due process.’” Id. (quoting

Kaleikini, 124 Hawaiʻi at 16–17, 237 P.3d at 1082–83). Sierra

Club asserts that a hearing was required in this matter under

HRS § 269-27.2(d);13 HRS § 269-16(b);14 and under the due process

clause of article I, section 5 of the Hawaiʻi Constitution.15

13 HRS § 269-27.2(d) (2007) provides the following in relevant part:

Upon application of a public utility that supplies electricity to the public, and notification of its customers, the commission, after an evidentiary hearing, may allow payments made by the public utility to nonfossil fuel producers for firm capacity and related revenue taxes to be recovered by the public utility through an interim increase in rates until the effective date of the rate change approved by the commission’s final decision in the public utility’s next general rate proceeding under section 269-16 . . . . 14 HRS § 269-16(b) (Supp. 2016) provides the following in relevant part:

No rate, fare, charge, classification, schedule, rule, or practice, other than one established pursuant to an automatic rate adjustment clause previously approved by the commission, shall be established, abandoned, modified, or departed from by any public utility, except after thirty days’ notice to the commission as prescribed in section 269-12(b), and prior approval by the commission for any increases in rates, fares, or charges. The commission, in its discretion and for good cause shown, may allow any rate, fare, charge, classification, schedule, rule, or practice to be established, abandoned, modified, or departed from upon notice less than that provided for in section 269-12(b). A contested case hearing shall be held

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a. HRS § 269-27.2(d)

Sierra Club has not established that a hearing was

required under HRS § 269-27.2(d). HRS § 269-27(d) provides that

the Commission may allow a public utility to impose an interim

increase in rates to recover payments made to “nonfossil fuel

producers for firm capacity[16] and related revenue taxes” after

an evidentiary hearing. HRS § 269-27(d) (emphasis added).17

Sierra Club has not argued that the Commission’s decision

in connection with any increase in rates, and the hearing shall be preceded by a public hearing as prescribed in section 269-12(c), at which the consumers or patrons of the public utility may present testimony to the commission concerning the increase.

15 Based upon the cases cited by Sierra Club referencing the Hawaiʻi Constitution, we assume that when Sierra Club references the requirements of “due process,” it is to invoke the due process protections of the Constitution of the State of Hawaiʻi. Article I, section 5 of the Hawaiʻi Constitution provides the following:

No person shall be deprived of life, liberty or property without due process of law, nor be denied the equal protection of the laws, nor be denied the enjoyment of the person’s civil rights or be discriminated against in the exercise thereof because of race, religion, sex or ancestry. 16 “‘Firm capacity’ means the scheduled amounts of capacity in kilowatts (kw) which a qualifying facility has a legally enforceable obligation to make available to an electric utility under utility dispatch within particular time periods, and which the electric utility agrees to accept.” HAR § 6-74-1 (1998). 17 See also S. Stand. Comm. Rep. No. 1959, in 1988 Senate Journal, at 861 (“Under current law and practice, electric utilities are not permitted to recover firm capacity payments actually being made to non-utility energy producers until the electric utility’s next rate case. This bill would provide the PUC the discretion to allow the electric utility to recover the firm capacity payments on an interim basis until the electric utility’s next rate case.”).

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authorized Maui Electric to impose an interim increase in rates

for the purpose of recovering payments for firm capacity, nor

has Sierra Club argued that Maui Electric ever sought permission

to do so. Indeed, the record indicates that one of the features

of the Agreement was to eliminate the capacity payments that

Maui Electric was paying to HC&S under the existing agreement.18

Accordingly, the requirement of a hearing provided for in HRS §

269-27(d) is not applicable to the Application in this case.

b. HRS § 269-16(b)

Sierra Club also failed to demonstrate that a hearing

was required under HRS § 269-16(b). HRS § 269-16(b) requires

the Commission to conduct a contested case hearing whenever a

utility seeks an increase in rates. This provision specifically

exempts fee adjustments “established pursuant to an automatic

rate adjustment clause previously approved by the commission.”19

HRS § 269-16(b). In this case, the Commission authorized Maui

Electric to recover charges for purchased energy under the

Agreement through Maui Electric’s existing energy cost

18 It is noted that the nonexistence of a “firm capacity” provision in an agreement is not dispositive of whether a public utility seeks to recover such payments through an increase in rates. 19 A “fuel adjustment clause” is defined as “a provision of a rate schedule which provides for increases or decreases or both, without prior hearing, in rates reflecting increases or decreases or both in costs incurred by an electric or gas utility for fuel and purchased energy due to changes in the unit cost of fuel and purchased energy.” HAR § 6-60-6.

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adjustment clause.20 There is nothing in the record indicating

that Maui Electric’s energy cost adjustment clause was not

previously approved by the Commission or that the Commission’s

decision revised the existing adjustment clause. Additionally,

the record does not suggest that the use of the fuel adjustment

clause in this case would cover anything other than increases or

decreases in the unit cost of purchased energy determined by the

last rate case proceeding for the utility. See HAR § 6-60-6(3).

Accordingly, Sierra Club has not established that a ratemaking

hearing was required under HRS § 269-16(b) before the Commission

could approve Maui Electric’s request to recover the purchased

energy costs through its existing energy cost adjustment clause.

c. Due Process

i. Property Interests

We next consider whether Sierra Club was entitled to a

hearing pursuant to the Hawaiʻi Constitution’s due process

protections. We have long recognized that “[c]onstitutional due

process protections mandate a hearing whenever the claimant

seeks to protect a ‘property interest,’ in other words, a

benefit to which the claimant is legitimately entitled.” Pele

Def. Fund v. Puna Geothermal Venture, 77 Hawaiʻi 64, 68, 881 P.2d

20 The Agreement defined “Energy Cost Adjustment Clause” as, “The provision in Maui Electric’s rate schedules that allows Maui Electric to pass through to its customers Maui Electric’s cost of fuel and purchased power.”

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1210, 1214 (1994). We apply a two-step analysis to claims of a

due process right to a hearing: “(1) is the particular interest

which claimant seeks to protect by a hearing ‘property’ within

the meaning of the due process clauses of the federal and state

constitutions, and (2) if the interest is ‘property,’ what

specific procedures are required to protect it.” Sandy Beach

Def. Fund v. City Council of Honolulu, 70 Haw. 361, 376, 773

P.2d 250, 260 (1989) (citing Aguiar v. Haw. Hous. Auth., 55 Haw.

478, 495, 522 P.2d 1255, 1266 (1974)). Accordingly, in order

for procedural due process protections to apply, Sierra Club

“must possess an interest which qualifies as ‘property’ within

the meaning of the constitution.” Id. “These interests--

property interests--may take many forms” because courts have

long recognized that “property interests protected by procedural

due process extend well beyond actual ownership of real estate,

chattels, or money.” Bd. of Regents v. Roth, 408 U.S. 564, 571-

72, 576 (1972). A property interest does not need to be

“tangible” to be protected by the due process clause. Rather, a

protected property interest exists in a benefit--tangible or

otherwise--to which a party has “a legitimate claim of

entitlement.” Sandy Beach Def. Fund, 70 Haw. at 377; 773 P.2d

at 260 (quoting Roth, 408 U.S. at 577); see also Alejado v. City

& Cty. of Honolulu, 89 Hawaiʻi 221, 227, 971 P.2d 310, 316 (App.

1998). We have thus recognized protected property interests in

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a range of intangible entitlements, including driving

privileges, Kernan v. Tanaka, 75 Haw. 1, 22, 856 P.2d 1207, 1218

(1993), and the continued practice of medicine at a publicly

funded hospital, Silver v. Castle Mem’l Hosp., 53 Haw. 475, 486,

497 P.2d 564, 572 (1972).

The legitimate claims of entitlement that constitute

property interests are not created by the due process clause

itself. Instead, “they are created and their dimensions are

defined by existing rules or understanding that stem from an

independent source such as state law--rules or understanding

that secure certain benefits and that support claims of

entitlement to those benefits.” In re ʻĪao Ground Water Mgmt.

Area High-Level Source Water Use Permit Applications, 128 Hawaiʻi

228, 241, 287 P.3d 129, 142 (2012) [hereinafter ʻĪao] (quoting

Int’l Broth. of Painters & Allied Trades v. Befitel, 104 Hawaiʻi

275, 283, 88 P.3d 647, 655 (2004)).

In ʻĪao, for example, we held that Native Hawaiian

water rights constituted “‘property interests’ for the purpose

of due process analysis.” Id. at 241-44, 287 P.3d at 142-45.

The ʻĪao court rejected the argument that Native Hawaiian

practices are similar to general “‘aesthetic and environmental

interests’ which the court has held to be insufficient to

establish a property interest” because those affected had a

genuine interest in the water at issue and there was independent

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legal authority to support the asserted property interest. Id.

at 242, 287 P.3d at 143.

Similar to the Native Hawaiian water rights asserted

in ʻĪao, Sierra Club’s asserted property interest is defined by

State constitutional and statutory law. “The right to a clean

and healthful environment” is a substantive right guaranteed to

each person by article XI, section 9 of the Hawaiʻi Constitution:

Each person has the right to a clean and healthful environment, as defined by laws relating to environmental quality, including control of pollution and conservation, protection and enhancement of natural resources.

Haw. Const. art. XI, § 9; see also Cty. of Haw. v. Ala Loop

Homeowners, 123 Hawaiʻi 391, 409, 417, 235 P.3d 1103, 1121, 1127

(2010) (recognizing a substantive right to a clean and healthful

environment). Article XI, section 9 is self-executing, and it

“establishes the right to a clean and healthful environment, ‘as

defined by laws relating to environmental quality.’”21 Ala Loop,

123 Hawaiʻi at 417, 235 P.3d at 1127. This substantive right is

a legitimate entitlement stemming from and shaped by independent

21 In addition to the substantive right to a clean and healthful environment, article XI, section 9 also includes a private right of enforcement of the right to a clean and healthful environment. See Haw. Const. art. XI, § 9 (“Any person may enforce this right against any party, public or private, through appropriate legal proceedings, subject to reasonable limitations and regulation as provided by law.”); Ala Loop, 123 Hawaiʻi at 409, 235 P.3d at 1121 (distinguishing between the substantive right and procedural component of article XI, section 9).

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sources of state law, and is thus a property interest protected

by due process.

Although a person’s right to a clean and healthful

environment is vested pursuant to article XI, section 9, the

right is defined by existing law relating to environmental

quality. A committee report from the 1978 Constitutional

Convention explained that the right would be defined by

environmental statutes, rules, and ordinances to lend

flexibility to the definition of the right over time:

Your Committee believes that a clean and healthful environment is an important right of every citizen and that this right deserves constitutional protection. The definition of this right would be accomplished by relying on the large body of statutes, administrative rules and ordinances relating to environmental quality. Defining the right in terms of present laws imposes no new legal duties on parties, a point of fairness important to parties which have invested or are investing large sums of money to comply with present laws.

Developing a body of case law defining the content of the right could involve confusion and inconsistencies. On the other hand, legislatures, county councils and administrative agencies can adopt, modify or repeal environmental laws or regulation laws [sic] in light of the latest scientific evidence and federal requirements and opportunities. Thus, the right can be reshaped and redefined through statute, ordinance and administrative rule-making procedures and not inflexibly fixed.

Ala Loop, 123 Hawaii at 409 n.24, 235 P.3d at 1121 n.24

(emphases added) (quoting Stand. Comm. Rep. No. 77, in 1

Proceedings of the Constitutional Convention of Hawaiʻi 1978, at

689). Accordingly, the parameters of the property interest

asserted by Sierra Club under article XI, section 9 is defined

in reference to laws related to environmental quality. See id.

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Sierra Club has asserted a right to a clean and

healthful environment in this case as defined by HRS Chapter

269, which includes the duties and operation of the Commission

in regulating public utilities. Thus, we next consider whether

Chapter 269 is a law relating to environmental quality within

the meaning of article XI, section 9. HRS § 269-6 pertains to

the general powers and duties of the Commission and prescribes

that the Commission “shall consider the need to reduce the

State’s reliance on fossil fuels through energy efficiency and

increased renewable energy generation.” HRS § 269-6(b) (Supp.

2013).22 This statutory provision also provides that in its

decision-making, the Commission “shall explicitly consider” the

effect of the State’s reliance on fossil fuels on the level of

“greenhouse gas emissions.” Id. Indeed, dating back as far as

1977, when the legislature adopted HRS § 269-27.2 concerning the

22 HRS § 269-6(b) provides the following:

The public utilities commission shall consider the need to reduce the State’s reliance on fossil fuels through energy efficiency and increased renewable energy generation in exercising its authority and duties under this chapter. In making determinations of the reasonableness of the costs of utility system capital improvements and operations, the commission shall explicitly consider, quantitatively or qualitatively, the effect of the State’s reliance on fossil fuels on price volatility, export of funds for fuel imports, fuel supply reliability risk, and greenhouse gas emissions. The commission may determine that short-term costs or direct costs that are higher than alternatives relying more heavily on fossil fuels are reasonable, considering the impacts resulting from the use of fossil fuels.

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utilization of electricity generated from nonfossil fuels, the

legislature has repeatedly communicated its intent that the

Commission is to reduce the State’s dependence on fossil fuels

and utilize renewable energy sources. This intent is manifest

in the legislative history of Chapter 269, which unequivocally

demonstrates an established State policy of prioritizing the

utilization of renewable energy sources to reduce pollution in

addition to securing the potential economic benefits and

enhanced reliability of the State’s energy supply.

HRS § 269-6(b) was permissive when first enacted in

2007: “The public utilities commission may consider the need for

increased renewable energy use in exercising its authority and

duties under this chapter.” 2007 Haw. Sess. Laws Act 177, § 2

at 346. The 2007 act noted that “[p]rogressive energy policy-

making at the state level [was] one of the most important issues

on the [2007] legislative agenda.” Id. § 1 at 345-46. One of

the purposes of the 2007 legislation was to authorize the

Commission “to consider the need for increased renewable energy

use in exercising its authority and duties” under Chapter 269.

Id. This addition to Chapter 269 was unsurprising given the

legislature’s establishment of renewable portfolio standards in

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2001.23 The renewable portfolio standards clarify what qualifies

as renewable energy.24 In further clarifying what qualified as

renewable energy in 2004, the legislature found that “the State

should be a strategic partner with the private sector in

developing these renewable energy resources, and that the

State’s willingness and intent to provide relevant and

meaningful support for this endeavor should be embedded into

public policy.” 2004 Haw. Sess. Laws Act 95, § 1 at 384.

In 2011, the legislature amended HRS § 269-6(b) to

make it mandatory for the Commission when exercising its duties

to recognize the “need” to reduce reliance on fossil fuels and

to “explicitly consider” the levels and effect of greenhouse gas

emissions:

(b) The public utilities commission [may] shall consider the need [for] to reduce the State’s reliance on fossil fuels through energy efficiency and increased renewable energy [use] generation in exercising its authority and duties under this chapter. In making determinations of the reasonableness of the costs of utility system capital improvements and operations, the commission shall explicitly consider, quantitatively or qualitatively, the effect of the State’s reliance on fossil fuels on price volatility, export of funds for fuel imports, fuel supply reliability risk, and greenhouse gas emissions. The commission may determine that short term costs or direct costs that are higher than alternatives relying more heavily on fossil fuels are reasonable, considering the impacts resulting from the use of fossil fuels.

23 Act 272 (June 25, 2001) (adopting renewable portfolio standards and noting the “intent of the legislature to recognize the economic, environmental, and fuel diversity benefits of renewable energy resources”). 24 See HRS §§ 269-91, 269-92.

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2011 Haw. Sess. Laws Act 109, § 1 at 287-88 (repealed statutory

material bracketed and stricken, and new statutory material

underscored). The House Committee on Energy and Environmental

Protection made the following finding with respect to the 2011

amendment:

Your Committee finds that Hawaii is dangerously reliant on imported fossil fuel, which subjects the State and residents to greater oil and gas price volatility, increased air pollution, and potentially harmful climate change due to the release of harmful greenhouse gases. Your Committee further finds that these adverse conditions carry with them hidden costs that are not always considered by the Public Utilities Commission when the Commission makes decisions regarding utility system capital improvements and operations. This measure will assist in reducing the State’s reliance on fossil fuels by requiring the Commission to factor in the hidden and long-term costs of the State’s detrimental reliance on fossil fuels when exercising its statutory authority.

H. Stand. Comm. Rep. No. 1004, in 2011 House Journal, at 1332

(emphases added). Thus, a primary purpose of the amended law

was to require the Commission to consider the hidden and long-

term costs of reliance on fossil fuels, which subjects the State

and its residents to “increased air pollution” and “potentially

harmful climate change due to the release of harmful greenhouse

gases.” Id.

HRS § 269-6(b)’s requirement to reduce reliance on

fossil fuels and to consider greenhouse gas emissions applies to

the fulfillment of all of the Commission’s duties. See HRS §

269-6(b). Chapter 269 also includes HRS § 269-27.2, concerning

the utilization of electricity generated from nonfossil fuels,

and Part V, prescribing renewable portfolio standards. These

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regulations would appear to be precisely the type of “laws

relating to environmental quality” that article XI, section 9

references.

The dissent presents three interrelated arguments that

Sierra Club does not possess a protected interest in a clean and

healthful environment as defined by HRS Chapter 269.25 First,

the dissent contends that HRS § 269-6, HRS § 269-27.2, and Part

V of HRS Chapter 269 do not “provide Sierra Club’s Members or

others with a protected property interest.” Dissent at 13.

Second, the dissent argues that article XI, section 9 of the

Hawaii Constitution does not create a property interest.

Dissent at 15. Lastly, the dissent contends that HRS Chapter

269 does not describe property interests and appears to reason,

therefore, that the chapter cannot define the contours of the

property interest created by article XI, section 9. Dissent at

13, 16.

The dissent’s initial argument that HRS Chapter 269

does not “provide” anyone “with a protected property interest”

misapprehends the source of Sierra Club’s protected interest in 25 Notwithstanding the dissent’s claim that article XI, section 9 does not create a protected interest, the dissent also suggests that the private declaratory action that article XI, section 9 authorizes is the exclusive procedural mechanism for protecting the interest the provision creates. Dissent at 17-18. The procedural measures our Constitution affords to protect against the wrongful deprivation of an interest are a wholly separate question from whether a protected interest exists in the first instance. We therefore address this contention infra when considering the procedural protections Sierra Club is due.

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a clean and healthful environment. It is not necessary for HRS

Chapter 269 to create a property interest because article XI,

section 9 has already done so, as explained next with regard to

the dissent’s second contention.

The dissent’s second argument that article XI,

section 9 of the Hawaii Constitution does not create a protected

property interest is plainly contradicted by the history of our

Constitution and this court’s own precedent. The Standing

Committee Report from the 1978 Constitutional Convention

specifically observed that “a clean and healthful environment is

an important right of every citizen and that this right deserves

constitutional protection.” Stand. Comm. Rep. No. 77, in 1

Proceedings of the Constitutional Convention of Hawaii of 1978,

at 689 (emphasis added). And the resolution adopting the

amendment stated that the provision “gives each person the right

to a clean and healthful environment as defined by law.” Res.

30, in 1 Proceedings of the Constitutional Convention of Hawaii

of 1978, at 543-44. Indeed, we expressly recognized in Ala Loop

that article XI, section 9 “recognizes a substantive right.”

123 Hawaii at 409, 235 P.3d at 1121 (emphasis added).

The dissent, in contending that section 9 does not

create a protected property interest, also appears to

differentiate substantive rights from property interests by

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arguing that Ala Loop “did not indicate that plaintiffs had a

property interest.” Dissent at 15. The distinction is

unfounded. As stated, a property interest exists wherever there

is a “legitimate claim of entitlement” that “stem[s] from an

independent source such as state law--rules or understandings

that secure certain benefits.” Īao, 128 Hawaii at 241, 287 P.3d

at 142 (quoting Int’l Broth. of Painters, 104 Hawaii at 283, 88

P.3d at 655). Thus, where a source of state law--such as

article XI, section 9--grants any party a substantive right to a

benefit--such as a clean and healthful environment--that party

gains a legitimate entitlement to that benefit as defined by

state law, and a property interest protected by due process is

created. In other words, the substantive component of article

XI, section 9 that we recognized in Ala Loop is a protectable

property interest under our precedents.26

Lastly, the dissent contends that “[u]nlike the

statutes in Īao which described Native Hawaiians’ entitlement to

water,” HRS Chapter 269 does not “describe[] . . . property

interests” that “establish the content of the substantive right

to a clean and healthful environment.” Dissent at 16. Article

26 Indeed, by acknowledging that article XI, section 9 provides Sierra Club with the procedural right to bring a private declaratory action to enforce HRS Chapter 269, Dissent at 17-18, the dissent also implicitly acknowledges that there is a substantive right--and thus a property interest- -that would be vindicated through such a private action.

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XI, section 9, however, expressly defines the contours of “a

clean and healthful environment” through “laws relating to

environmental quality, including control of pollution and

conservation, protection and enhancement of natural resources.”

That is, the property interest created by article XI, section 9

is shaped by all state laws relating to environmental quality.

See Stand. Comm. Rep. No. 77, in 1 Proceedings of the

Constitutional Convention of Hawaii of 1978, at 689 (“The

definition of this right [to a clean and healthful environment]

would be accomplished by relying on the large body of statutes,

administrative rules and ordinances relating to environmental

quality.”). Article XI, section 9 thus guarantees to “[e]ach

person” an individual, private right to share in the benefit of

environmental laws--regardless of whether the regulation

describes a “tangible property interest.”27

Additionally, the dissent mischaracterizes the

property rights at issue in Īao as being specifically provided

for by statute. Dissent at 16. However, the provisions of the

water code relating to Native Hawaiian water rights that we

considered were styled as savings clauses, stating that the

27 It is noted that such environmental laws may be enacted pursuant to article IX, section 8, which empowers the State to pass environmental regulations “to promote and maintain a healthful environment.”

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water code was not intended to abridge rights already in

existence.28 The water rights were derived from other sources of

law, including traditional practices and article XII, section 7

of our Constitution, which guarantees “all rights, customarily

and traditionally exercised for subsistence, cultural and

religious purposes and possessed by ahupuaa tenants who are

descendants of native Hawaiians.” See ʻĪao, 128 Hawaiʻi at 263,

287 P.3d at 164 (Acoba, J., concurring). Thus, the statutes at

issue in Īao specifically preserved “all rights” guaranteed by

article XII, section 7, while in this case HRS Chapter 269

defines the contours of the “right” of “each person . . . to a

clean and healthful environment” that article XI, section 9

guarantees. Both statutes clarify the content of rights

guaranteed by the respective constitutional provisions, which

are protectable interests under the due process clause.

We therefore conclude that HRS Chapter 269 is a law

relating to environmental quality that defines the right to a

clean and healthful environment under article XI, section 9 by

providing that express consideration be given to reduction of

greenhouse gas emissions in the decision-making of the

28 See HRS § 174C–101(c)-(d) (2012) (“Traditional and customary rights . . . shall not be abridged or denied by this chapter. . . . The appurtenant water rights . . . shall not be diminished or extinguished . . . under this chapter.” (emphases added)).

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Commission. Accordingly, we hold that Sierra Club has

established a legitimate claim of entitlement to a clean and

healthful environment under article XI, section 9 and HRS

Chapter 269.

We note that this right is not a freestanding interest

in general aesthetic and environmental values. See Sandy Beach

Def. Fund, 70 Haw. at 376-77, 773 P.2d at 260-61. The

challengers in Sandy Beach Defense Fund did not identify any

source granting them a substantive legal right to enforcement of

environmental laws. Rather, the asserted “property interests”

were unilateral expectations of aesthetic value, including

claims that a person who lived in close proximity to a proposed

development would lose her view of the ocean and decrease the

value of her property. Id. at 367, 773 P.2d at 255. In

contrast, Sierra Club’s right to a clean and healthful

environment is provided for in article XI, section 9 of the

Hawaiʻi Constitution and defined by HRS Chapter 269. It is not a

unilateral expectation on the part of Sierra Club, but rather a

right guaranteed by the Constitution and statutes of this state.

ii. Hearing Procedures

Having determined that Sierra Club has established a

protectable “property” interest, we next consider what

procedures due process requires in this case given the

demonstrated property interest in a clean and healthful

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environment as defined by HRS Chapter 269. In determining the

procedures required to comply with constitutional due process,

we consider the following factors: “(1) the private interest

which will be affected; (2) the risk of an erroneous deprivation

of such interest through the procedures actually used, and the

probable value, if any, of additional or alternative procedural

safeguards; and (3) the governmental interest, including the

burden that additional procedural safeguards would entail.”

Sandy Beach Def. Fund v. City Council of City & Cty. of

Honolulu, 70 Haw. 361, 378, 773 P.2d 250, 261 (1989); see also

Mauna Kea Anaina Hou v. Bd. of Land & Nat. Res., 136 Hawaiʻi 376,

410, 363 P.3d 224, 258 (2015) (Pollack, J., concurring). We

have held that, “as a matter of constitutional due process, an

agency hearing is . . . required where the issuance of a permit

implicating an applicant’s property rights adversely affects the

constitutionally protected rights of other interested persons

who have followed the agency’s rules governing participation in

contested cases.” Pele Def. Fund v. Puna Geothermal Venture, 77

Hawaiʻi 64, 68, 881 P.2d 1210, 1214 (1994). In other words, the

court in Pele Defense Fund concluded that when the requirements

of standing were met and the agency’s rules were followed, an

agency hearing was required when the challenged State action

“adversely affects the constitutionally protected rights” of

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others. Id. (citing other subsections of the opinion addressing

the requirements of standing and compliance with agency rules).

As discussed, the private interest to be affected in

this case is the right to a clean and healthful environment,

which is a substantive right guaranteed by the Hawaiʻi

Constitution. See Cty. of Haw. v. Ala Loop Homeowners, 123

Hawaiʻi 391, 409, 417, 235 P.3d 1103, 1121, 1127 (2010).29 This

right to a clean and healthful environment includes the right

that explicit consideration be given to reduction of greenhouse

gas emissions in Commission decision-making, as provided for in

HRS Chapter 269. In this case, Maui Electric sought approval of

a power purchase agreement with an energy producer that relies

on the burning of coal and petroleum in its operations and has

been charged with violation of the State’s visible emissions

standards.30 The approval of Maui Electric’s Application not

only involved the approval of a newly negotiated power-purchase

agreement, but it also extended Maui Electric’s reliance on HC&S

for an additional three years. The Commission was statutorily

29 Thus, contrary to the dissent’s characterization, Dissent at 8, the protectable interest in this case for the purpose of constitutional due process is not the abstract aesthetic and environmental interests of Sierra Club’s members; it is the right to a clean and healthful environment guaranteed by article XI, section 9 of the Hawaii Constitution and particularized by HRS Chapter 269. This decision does not encompass all general environmental and aesthetic interests. 30 See supra notes 4 and 7.

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required to consider the hidden and long-term costs of the

continued reliance on energy produced at the Puʻunene Plant,

including the potential for increased air pollution as a result

of greenhouse gas emissions. The Commission was requested in

the Application to consider the reasonableness of the energy

charges and determine whether the arrangement between Maui

Electric and HC&S was prudent and in the public interest. A

review of the Agreement would involve a consideration of the

level of emissions, and axiomatic in this analysis is the

implied consideration of potential risks to health, as

contemplated by the legislature when it amended HRS § 269-6(b)

in 2011, see supra. Indeed, the consideration of whether energy

charges are reasonable or whether a business arrangement is

prudent would necessarily include an evaluation of the hidden

and long-term costs of the activities of the Puʻunene Plant. The

Commission’s determinations of these matters would bear upon the

level of emissions generated by the Puʻunene Plant, thus

affecting Sierra Club’s members’ right to a clean and healthful

environment as defined by HRS Chapter 269.

Given the issues raised by Maui Electric’s

Application, the proceedings directly affected the right to a

clean and healthful environment of Sierra Club’s members as

defined by HRS Chapter 269. This is evident, not only from the

issues raised in the Application, but also from the findings and

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conclusions of the Commission in its Decision and Order,

granting the Application for approval of the Agreement. For

example, the Commission specifically concluded that the

Agreement--under which Maui Electric would continue to purchase

energy generated at a plant that burned fuels that included coal

and petroleum--was “anticipated to help accomplish the State’s

policy goals of reaching 100% renewable energy by 2045 as well

as increasing the State’s energy self-sufficiency.”31

Additionally, in filing its quarterly report setting forth the

type of energy purchased, the associated payment, and the type

of fuel burned by HC&S, the Commission allowed Maui Electric to

keep the fuel information confidential.32 Therefore, the

Commission’s Decision and Order specifically involved

determinations related to the State’s renewable energy goals as

31 The Commission did not provide a rationale for this conclusion, which is contrary to the Consumer Advocate’s position that “continued reliance on older thermal units that burn fossil fuels is not consistent with the State’s goal of 100% renewable energy by 2045.” See supra note 4. 32 The Commission in its Decision and Order indicated that Maui Electric failed to provide an explanation as to why this information should be confidential but noted that Maui Electric previously took the position that such information is HC&S’s “confidential and proprietary information, which, if disclosed publicly, could disadvantage and competitively harm” HC&S. Neither the Commission nor Maui Electric explained why this information--which was previously not treated as confidential, proprietary information by Maui Electric--should be treated as such under the Agreement. See, e.g., Motion to Seal of Maui Electric Company, Limited Dkt. No. 2011- 0092, Exhibit F at 19 (Sept. 6, 2013) (disclosing HC&S’s energy generation by source percentage while redacting other information designated as confidential pursuant to a protective order). In its motion to intervene or to participate without intervention, Sierra Club provided this information for the years 2010 to 2012 as a basis for its motion.

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set out in HRS Chapter 269, and, by extension, the Commission’s

decision also involved a determination of Sierra Club’s members’

interest in a clean and healthful environment as defined by HRS

Accordingly, the Commission’s approval of the

Agreement under the terms of its Decision and Order adversely

affected the private interests of Sierra Club’s members. The

risks of an erroneous deprivation are high in this case absent

the protections provided by a contested case hearing,

particularly in light of the potential long-term impact on the

air quality in the area, the denial of Sierra Club’s motion for

intervention or participation in the proceeding, and the absence

of other proceedings in which Sierra Club could have a

meaningful opportunity to be heard concerning HC&S’s performance

of the Agreement. Additionally, given that the Commission is

already statutorily required to consider the long-term effects

of its decisions, it would not unduly burden the Commission to

afford Sierra Club a contested case hearing under the

circumstances of this case. See Mauna Kea, 136 Hawaiʻi at 390,

363 P.3d at 238 (concluding that due process required a hearing

“[g]iven the substantial interest of Native Hawaiians in

pursuing their cultural practices on Mauna Kea, the risk of an

erroneous deprivation absent the protections provided by a

contested case hearing, and the lack of undue burden on the

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government in affording Appellants a contested case hearing”).

In its order denying Sierra Club’s motion for intervention or

participation, the Commission noted that it allowed Sierra Club

to participate in other energy proceedings, which further

indicates that affording Sierra Club a hearing regarding the

Application’s adverse effect on its members’ right to a clean

and healthful environment would not unduly burden the

Commission.

The dissent states that “it appears that Ala Loop

would give Sierra Club the ability to bring a separate

declaratory judgment action alleging that the PUC failed to

comply with its statutory duties under HRS § 269-6” and thus

Sierra Club would not be deprived of any recourse if it does not

have a constitutional right to intervene. Dissent at 17-18.

The dissent maintains that this is a “more nuanced approach” to

defining article XI, section 9, which would avoid an “all or

nothing” interpretation of the provision. Dissent at 18. But

it is the “nuanced” approach of the dissent that takes the

uncompromising position that the exclusive procedural mechanism

for protecting an interest derived from article XI, section 9 is

the private declaratory action that the provision authorizes.

Dissent at 17-18. The dissent’s contention is not supported by

the wording of article XI, section 9, which contains no such

exclusivity language, nor by the due process clause of our

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Constitution, whose protections are not restricted by the right

to pursue a declaratory action.

By way of analogy, in Brown v. Thompson, the State

impounded two unattended boats and disposed of them after

determining that they were derelict. 91 Hawaii 1, 5-7, 979 P.2d

586, 590-92 (1999). Just as here, there was no dispute that the

owner of the boat had the procedural right to bring a private

action for declaratory relief. (Indeed, Brown originated as

just such an action, though it was filed after the boat’s

disposition occurred. Id. at 7, 979 P.2d at 592.) We

nonetheless held that the disposition of an impounded vessel was

an interest protected by due process under article I, section 5

of the Hawaii Constitution, and the owner should have been

afforded a hearing prior to deprivation. Id. at 12-13, 979

P.2d at 597-98. As in this case, the declaratory action in

Brown simply provided one procedural route through which the

owner could vindicate his protected interest. The ability to

seek declaratory relief did not diminish the right to due

process protection of the interest, nor did it preclude other

procedural protections.

Similarly, the importance of not restricting the due

process protection to the exclusivity approach advocated by the

dissent is manifest in this case. A belated post-decision civil

action for declaratory relief is not a replacement for

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participation in a hearing before the PUC, and it does not

eliminate the risk of wrongful deprivation.33 Short of the

“extraordinary remedy” of a preliminary injunction, Morgan v.

Planning Dep’t, Cty. of Kauai, 104 Hawaii 173, 188, 86 P.3d 982,

997 (2004), an administrative decision may go into effect during

the pendency of a suit for declaratory relief. This is of

particular concern in the context of environmental regulations,

where the damage caused by a violation is not easily reversed.

And requiring relitigation of agency decisions is inefficient

and imposes an increased burden on the State in contrast to

resolving the challenge in the initial decision-making process.

Brown, 91 Hawaii at 12, 979 P.2d at 597 (concluding that “the

additional safeguard of a hearing would not significantly

increase the burden on the state”); see also Sandy Beach Def.

33 The dissent contends that by holding that due process provides for participation in a hearing, we are making “a policy argument” and supplanting “the legislature’s role by making our own policy decisions.” Dissent at 17 n.9 (quoting Konno v. Cty. of Haw., 85 Hawaii 61, 75, 937 P.2d 397, 411 (1997)). The dissent incorrectly conflates the substantive right granted by article XI, section 9, which is intended to be established through environmental legislation, with the procedures by which that right is enforced. The minimum procedural protections that must be afforded before a party may be deprived of an interest protected by due process are a matter of constitutional law derived from our interpretation of article I, section 5-- not policy judgments. “Our ultimate authority is the Constitution; and the courts, not the legislature, are the ultimate interpreters of the Constitution.” State v. Bani, 97 Hawaii 285, 291 n.4, 36 P.3d 1255, 1261 n.4 (2001) (quoting State v. Nakata, 76 Hawaii 360, 370, 878 P.2d 699, 709 (1994)); see also State v. Quitog, 85 Hawaii 128, 130 n.3, 938 P.2d 559, 561 n.3 (1997) (recognizing the Hawaii Supreme Court as “the ultimate judicial tribunal with final, unreviewable authority to interpret and enforce the Hawaii Constitution” (quoting State v. Arceo, 84 Hawaii 1, 28, 928 P.2d 843, 870 (1996))).

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Fund, 70 Haw. at 378, 773 P.2d at 261 (stating that evaluation

of whether procedures are required by due process requires

weighing the risk of an erroneous deprivation and the probable

value of alternative procedural safeguards against the burden on

the State). Constitutional due process calls for a far more

flexible measure of protection than the one-size-fits-all

approach advocated by the dissent. See Sandy Beach Def. Fund,

70 Haw. at 378, 773 P.2d at 261 (“Due process is not a fixed

concept requiring a specific procedural course in every

situation. ‘[D]ue process is flexible and calls for such

procedural protections as the particular situation demands.’”

(quoting Morrissey v. Brewer, 408 U.S. 471, 481 (1972)

(alteration in original))).

We also do not agree with Maui Electric, the

Commission, and the dissent’s assertion that only those living

adjacent to the Puʻunene Plant would be able to demonstrate a

protectable property interest in this case. Dissent at 10.

While proximity to the property at issue may be relevant, there

is no requirement in our law that a person must be living

adjacent to physical property in order to be adversely affected

by the use of that property. Instead, we consider whether a

protected property right has been adversely affected. See Pele

Def. Fund, 77 Hawaiʻi at 68, 881 P.2d at 1214; Life of the Land

v. Land Use Comm’n, 63 Haw. 166, 176–77, 623 P.2d 431, 441

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(1981) (holding environmental organization “and its members have

a ‘stake’ in the outcome of the alleged controversy adequate to

invoke judicial intervention, even though they are neither

owners nor adjoining owners of land” because article XI, section

9 recognizes environmental interests “as personal and special

interests or ‘rights’” (emphasis added)).

The United States Supreme Court discussed the issue of

interstate air pollution in a recent decision:

Pollutants generated by upwind sources are often transported by air currents, sometimes over hundreds of miles, to downwind States. As the pollution travels out of state, upwind States are relieved of the associated costs. Those costs are borne instead by the downwind States, whose ability to achieve and maintain satisfactory air quality is hampered by the steady stream of infiltrating pollution.

E.P.A. v. EME Homer City Generation, L.P., 134 S. Ct. 1584, 1592

(2014). Indeed, it is commonly understood that “[a]ir pollution

is transient” and is “heedless” of even “state boundaries.” Id.

Accordingly, those who are adversely affected by greenhouse gas

emissions produced by the burning of fossil fuels may not

necessarily be limited to those who live in the areas

immediately adjacent to the source of the emissions.34

34 As stated earlier, HC&S agreed to a Consent Order for alleged emissions violations at the Puʻunene Plant, which included a requirement that HC&S monitor the air quality at local schools. See supra note 7. It is noted that three of the five proposed schools for air monitoring are located between nine and eleven miles from the Puʻunene Plant. See Dep’t of Health v. Hawaiian Commercial & Sugar Co., 14-CA-EO-01 (June 7, 2016), available at http://health.hawaii.gov/cab/files/2016/06/2016_06_07__No._14-CA-EO-01-HCS- CO-signed-by-DDEH.pdf. A map of the County of Maui is available through the County of Maui website. Land Permit Map Viewer, County of Maui Hawaii,

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By extension, the fact that HC&S was already burning

fossil fuels does not mean that the continued burning of fossil

fuel--and subsequent release of additional emissions into the

air--is not sufficient to demonstrate an adverse effect on the

right to a clean and healthful environment.35 The fact that

there was a preexisting agreement between Maui Electric and HC&S

does not exempt Maui Electric’s Application from the State’s

established policies regarding greenhouse gas emissions and

renewable energy as set out in HRS Chapter 269. Indeed, many of

Chapter 269’s safeguards did not exist at the time that the pre-

existing agreement was initially reviewed by the Commission in

1990. However, regardless of whether there was an existing

agreement pursuant to which Maui Electric and HC&S could have

continued to operate, Maui Electric sought the Commission’s

approval of a newly negotiated agreement that was subject to all

the requirements of HRS Chapter 269. As discussed, the

consideration of whether energy charges are reasonable or a

http://www.co.maui.hi.us/80/Land-Permit-Map-Viewer (last visited Dec. 9, 2016). 35 Relatedly, Maui Electric’s assertion that its Application only concerns the “business terms” of the Agreement and would have little to no impact on how the energy is generated is unsupported by the record. For example, the Commission’s Decision and Order notes that the decrease in regularly scheduled energy from HC&S may result in the reactivation of Maui Electric’s older power plants that run on fossil fuels.

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business arrangement is prudent would necessarily involve an

evaluation of the hidden and long-term costs of the activities

of the Puʻunene Plant, including consideration of the potential

for harmful greenhouse gas emissions. The Commission’s

assertion that “environmental preferences and concerns as to air

quality” “are beyond the scope of Chapter 269” are directly

contradicted by Chapter 269,36 the legislative history of Chapter

269,37 and the Commission’s own Decision and Order in this case.38

We conclude that, under the circumstances of this

case, the protected property interest in a clean and healthful

environment asserted by Sierra Club necessitated a hearing by

the Commission to consider the impacts of approving the

Agreement on Sierra Club’s members’ right to a clean and

36 As discussed, under HRS Chapter 269, the Commission has an affirmative duty “to reduce the State’s reliance on fossil fuels through energy efficiency and increased renewable energy generation.” HRS § 269- 6(b). In doing so, the Commission must “explicitly consider” the effect of the State’s reliance on fossil fuels on the level of “greenhouse gas emissions.” Id. 37 As discussed, the legislative history of HRS Chapter 269 overwhelmingly demonstrates an established State policy of prioritizing the utilization of renewable energy sources to reduce greenhouse gas emissions in addition to the potential economic benefits and enhanced reliability of the State’s energy supply. See supra. 38 In its Decision and Order, the Commission specifically cites the State’s energy policy objectives and renewable energy goals, discusses the compelling need to reduce reliance on Maui Electric’s older plants that rely on fossil fuels, and notes that HC&S also may need to resort to burning fossil fuels to meet its obligations under the Agreement. Accordingly, the Commission required Maui Electric to report quarterly with information regarding the reactivation of Maui Electric’s older power plants and the type of fuel burned by HC&S to meet its obligations under the agreement.

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healthful environment, including the release of harmful

greenhouse gases by the Puʻunene Plant that would result from the

Agreement, whether the cost of the energy under the Agreement

was reasonable in light of the potential for harmful emissions,

and whether the terms of the Agreement were prudent in light of

the potential hidden and long-term consequences of the

Agreement.39

“We observe that procedural due process requires that

a person have an ‘opportunity to be heard at a meaningful time

and in a meaningful manner.’” Freitas v. Admin. Dir. of Courts,

108 Hawaiʻi 31, 44, 116 P.3d 673, 686 (2005) (quoting Farmer v.

Admin. Dir. of the Courts, 94 Hawaiʻi 232, 238, 11 P.3d 457, 463

(2000)). This includes the right to submit evidence and

argument on the issues--in this case the relevant issue being

the impact of the Agreement on the asserted property interest.

See Application of Haw. Elec. Light Co., 67 Hawaiʻi 425, 430, 690

P.2d 274, 278 (1984). Although the parties have the right to

39 Thus, the ICA erred in concluding that the Commission was not required by law to hold a hearing on Maui Electric’s Application. Accordingly, In re Tawhiri Power LLC, 126 Hawaiʻi 242, 269 P.3d 777 (App. 2012), is not applicable to this case.

The dissent asserts that our opinion may have unintended consequences elsewhere, such as in other situations where the legislature has mandated consideration of specific factors by executive agencies when implementing a statute. Dissent at 14. However, it is not the mandated consideration by executive agencies that creates a property interest; instead, it is the constitutional guarantee set forth in article XI, section 9 and particularized by HRS Chapter 269 that defines the protectable property interest to a clean and healthful environment.

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present evidence, cross-examine opposing evidence, and submit

rebuttal evidence, “considerations of relevancy, materiality,

and repetition” limit the presentation of evidence in contested

case proceedings. See id.; see also HRS § 91-10(1) (2012);

Korean Buddhist Dae Won Sa Temple of Haw. v. Sullivan, 87 Hawaiʻi

217, 236, 953 P.2d 1315, 1334 (1998); Cazimero v. Kohala Sugar

Co., 54 Haw. 479, 483, 510 P.2d 89, 92 (1973). Accordingly, the

Commission has the authority to set limitations in conducting

the proceedings so long as the procedures sufficiently afford an

opportunity to be heard at a meaningful time and in a meaningful

manner on the issue of the Agreement’s impact on the asserted

property interest.

2. Standing

“Establishing that a contested case took place does

not end the inquiry into justiciability.” Pele Def. Fund v.

Puna Geothermal Venture, 77 Hawaiʻi 64, 69, 881 P.2d 1210, 1215

(1994). Sierra Club must also show that it is “entitled to

request a review of the agency determination.” Id. (quoting

Mahuiki v. Planning Comm’n, 65 Haw. 506, 513, 654 P.2d 874, 879

(1982)). In order to establish standing, a plaintiff must have

suffered an actual or threatened injury; the injury must be

fairly traceable to the defendant’s actions; and a favorable

decision would likely provide relief for the plaintiff’s injury.

Sierra Club v. Dep’t of Transp., 115 Hawaiʻi 299, 319, 167 P.3d

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292, 312 (2007). Environmental plaintiffs must meet this three-

part standing test but need not assert an injury that is

different in kind from an injury to the public generally. Id.

at 320, 167 P.3d at 313. We “will recognize harms to

plaintiffs’ environmental interests as injuries that may provide

the basis for standing.” Id. This lower standard that is

applied when environmental rights are asserted has long been

established in our law. See Application of Hawaiian Elec. Co.,

56 Haw. 260, 264–65 n.1, 535 P.2d 1102, 1105–06 n.1 (1975)

(“Aesthetic and environmental well-being, like economic well-

being, are important ingredients of the quality of life in our

society, and the fact that particular environmental interests

are shared by the many rather than the few does not make them

less deserving of legal protection through the judicial

process.” (quoting United States v. Students Challenging

Regulatory Agency Procedures (SCRAP), 412 U.S. 669, 685

(1973))).

Further, we recognize that “where the interests at

stake are in the realm of environmental concerns[,] ‘we have not

been inclined to foreclose challenges to administrative

determinations through restrictive applications of standing

requirements.’” Kilakila ʻO Haleakala v. Bd. of Land & Nat.

Res., 131 Hawaiʻi 193, 204, 317 P.3d 27, 38 (2013) (alteration in

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original) (quoting Citizens for Prot. of N. Kohala Coastline v.

Cty. of Haw., 91 Hawaiʻi 94, 100, 979 P.2d 1120, 1126 (1999)).

“[T]he injury prong of the standing inquiry requires

an assertion of a judicially cognizable injury, that is, a harm

to some legally protected interest.” Sierra Club v. Dep’t of

Transp., 115 Hawaiʻi at 321, 167 P.3d at 314. As discussed,

Sierra Club has established that its members possess a right to

a clean and healthful environment under article XI, section 9 of

the Hawaiʻi Constitution, which includes, under HRS Chapter 269,

that explicit consideration be given to the reduction of the

State’s reliance on fossil fuels and the effects of greenhouse

gas emissions in the decision-making of the Commission.

Accordingly, we consider whether the affidavits of Sierra Club’s

members assert harm to legally protected interests in a clean

and healthful environment.

The Apana and Andrews affidavits demonstrate a

threatened injury to the right to a clean and healthful

environment from the effect of greenhouse gas emissions. Both

affidavits explain the potential health effects of burning coal

and the potential impacts of the operations of the Puʻunene Plant

on Apana and Andrews’s health. The Apana affidavit states that

the Commission’s decision could impact the level of coal burning

at the Puʻunene Plant, affecting Apana’s “long-term health and

well-being.” The Andrews affidavit states that “the Department

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of Health issued the Puʻunene plant a Notice of Violation in 2014

and a million dollar fine regarding its emissions of opacity.”40

Andrews discloses in her Affidavit that due to her concerns

about air pollution, she closes the windows at her home and runs

air filters inside her house when emissions levels are high.

The Andrews affidavit further expressed concern that HC&S “burns

more coal and produced more air pollution in order to meet its

obligations” to Maui Electric and that the Commission’s decision

with regard to the Application could impact her “long-term

health and well-being.”

Accordingly, a threatened injury to Sierra Club’s

members that is fairly traceable to the operations of HC&S was

sufficiently established to satisfy standing. See Mottl v.

Miyahara, 95 Hawaiʻi 381, 394, 23 P.3d 716, 729 (2001)

(“[A]lthough difficult to quantify, deterioration of air quality

and odor nuisance are ‘distinct and palpable’ injuries.”

(quoting Akinaka v. Disciplinary Bd. of Haw. Supreme Ct., 91

Hawaiʻi 51, 55, 979 P.2d 1077, 1081 (1999)); see also Kilakila ʻO

Haleakala, 131 Hawaiʻi at 205, 317 P.3d at 39 (concluding that

the organization dedicated to the protection of the sacredness

of the summit of Haleakalā had standing to pursue a HRS § 91-14

40 The Andrews affidavit indicates that “opacity is a measure of particular matter pollution.”

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appeal based on the threatened injury to its Native Hawaiian

traditional and customary practices and its aesthetic and

environmental interests in the summit area).

III. CONCLUSION

For the reasons discussed above, a due process hearing

was required to protect the asserted property right to a clean

and healthful environment guaranteed by article XI, section 9

and defined by HRS Chapter 269. Accordingly, the ICA erred in

determining that no appellate jurisdiction existed over Sierra

Club’s appeal. The ICA’s January 20, 2016 “Order Granting Maui

Electric Company, Ltd’s November 9, 2015 Motion to Dismiss

Appeal for Lack of Appellate Jurisdiction” is vacated, and the

case is remanded to the ICA for further proceedings.

Kylie W. Wager and /s/ Sabrina S. McKenna Isaac H. Moriwake for petitioner /s/ Richard W. Pollack

Randall C. Whattoff, /s/ Michael D. Wilson James E. Abraham, and Rebecca D. Matsushima for respondent Maui Electric Company, Ltd.

Mark J. Kaetsu and Thomas C. Gorak for respondent Public Utilities Commission