Pila'a owns2 a 383-acre parcel of rural land, (Property), located on the north shore of Kaua'i. Pila'a purchased the Property from Pflueger Properties, a limited partnership, on January 23, 2001.3
The Property is situated on a hillside sloping down to Pila'a beach, bay, and reef, which lie within the State Land Use Conservation District (Conservation District). It is "a level to gently sloping plateau extending from Kuhio Highway and Koolau Road toward the ocean. The plateau is broken by four gulches which extend to the shoreline. The plateau above and between the gulches naturally drains water and sediment along natural contours that form distinct geographic drainage areas." A thin strip of Conservation District land,4 175 to 250 feet wide, runsalong the seaward edge of the Property. Pila'a Beach is a white sand beach approximately fifty to a hundred feet wide and is bisected by Pila'a Stream.
Pila'a Bay contains a well-developed fringing reef. Wave action over the reef flushes the inner reef area, creating an environment favorable to marine life. Prior to November 26, 2001, the reef was one of the "few remaining high value coral reef flats in the state that had largely escaped encroachment from development and stress from improper land practices" and is "an extremely valuable resource" with a wide range of reef habitats, abundant marine life, and diverse and almost fourteen percent coral cover.
Unpermitted work on the Property, including land and stream alterations, dates back to the early-to-mid 1990s.
On November 26, 2001, a rainstorm caused a portion of the Property to slump cross Pila'a Beach, enter Pila'a Bay, and cover Pila'a reef. The source of the sediment was outside the Conservation District.
On January 28, 2002, pursuant to HRS ch. 183C, the DLNR issued a Notice and Order (the First Notice and Order) to Pflueger Properties for "illegal work conducted within the Conservation District at Pila'a[,] Kilauea, Kauai, Hawaii." The First Notice and Order continued,
We have determined that:
1) The subject property, identified as tax map key 5-1-004:008 is in the Conservation District and is classified as Limited Subzone;
2) The following uses were conducted on the subject premises: grading, grubbing, cutting, and culvert construction;3) These uses were not authorized by the Department of Land and Natural Resources.
YOU ARE HEREBY ORDERED TO CEASE any further activity on the subject premises. Should you fail to cease such illegal activity immediately, you will be subject to fines up to $2,000 per day pursuant to Chapter 13-5, [Hawaii Administrative Rules (HAR)], in addition to administrative costs incurred by the Department and damages to State land.
On June 20, 2002, following a June 13, 2002 site inspection, the DLNR issued a second Notice and Order (the Second Notice and Order) to Pflueger Properties, James Pflueger, Trustee, for "Illegal Activity in the Conservation District; Tax Map Key: 5-1-004:008," ordering Pflueger to submit a remedial Best Management Practices Plan for the affected conservation areas.5 Some time thereafter, but before August 22, 2002, a planwas submitted and remedial work implemented immediately thereafter.
On August 22, 2003, a public meeting was held before the Board, during which the DLNR presented a report that analyzed the environmental impacts of the sediment flow onto Pila'a beach, bay, and reef; discussed the nature and extent of the damage to natural resources; and recommended penalties of $12,000 for failing to obtain approvals for road construction, grading, filling, and storm drain construction in six instances within the conservation district, $38,500 for administrative costs, and $5,830,000 for damage to Pila'a beach, bay, and reef. Before the close of the meeting, Pila'a requested a contested case hearing.6 Seven days later, counsel for James Pflueger, Pflueger Properties, and Pila'a 400, LLC, supplemented this request, by giving notice that they
contest the specific facts and issues presented by the DLNR Staff Report (and its appendices) that includes but is not limited to, the following:
• the statutory legal authority
• the responsible parties
• the scope and extent of the alleged damage to the reef flat and near-shore marine environment at Pila'a
• the amount of alleged damage that was directly caused by the Petitioners' grading activities as opposed to other causal factors
• the specific dates(s) when the alleged damage occurred
• evidence regarding assessment of the damages to the reef flat and near-shore marine environment and the alleged causes
• the amount of penalties proposed by the DLNR staff
• the statutory authority for and the method used by the DLNR to calculate penalties for the alleged damage to the reef flat and near-shore marine environment
• all factual and legal issues addressed in the DLNR staff report dated August 22, 2003
• DLNR staff recommendation items nos. 2, 4, 5, 6, 7, 8 and 9 as described in the DLNR staff report and
• any and all finds [sic] of fact and conclusions of law that may arise during the course of the contested case proceeding.
On September 2, 2003, the DLNR sent a letter to "James Pflueger, Pflueger Properties," describing the events at the August 22, 2003 Board hearing and stating that the Board found:
1. The landowner (James Pflueger) violated the provisions of Chapter 183C Hawaii Revised Statutes, and Chapter 13-5, Hawaii Administrative Rules (HAR), by failing to obtain the appropriate approvals for road construction, grading, filling, and storm drain construction in four (4) instances within the conservation district and is fined a penalty of $8,000;
2. The Landowner (James Pflueger) shall be assessed $38,500 for administrative costs associated with the subject violations to be paid within sixty (60) days of the BLNR's action;
3. Mr. Pflueger shall implement a remediation plan for the Conservation District land areas, subject to detailed plan review by the DLNR as each project element is implemented. Mr. Pflueger shall provide the DLNR with engineering progress reports after thefirst, second, and third year of the Board's decision on this matter to ensure that the remediation work is being implemented and is effective. The DLNR may require modifications to the remediation work if it determines that the measures are not timely or effective;
4. That in the event of failure of the Landowner (James Pflueger) to comply with any conditions, he shall be fined an additional $2000 per day until the order is complied with; and
5. That in the event of failure of the Landowner (James Pflueger) to comply with any order herein, the matter shall be turned over to the Attorney General for disposition, including all administrative costs.
The letter also acknowledged Pflueger's request for a contested case hearing regarding "other items included in the recommendation to the Board." Pila'a paid the $8,000 fine and $38,500 in costs. A Notice of Contested Case Hearing was published on October 3, 2003 and received by Pila'a. It provided,
The Board of Land and Natural Resources (BLNR) State of Hawaii, will conduct a contested case hearing on DLNR File No. KA-04-02 regarding an enforcement action involving the alleged damages to State land(s) and natural resources due to excessive sedimentation at Pilaa, District of Hanalei, Island of Kauai, seaward of TMK: 5-1-4:8 (por.). The hearing will be held pursuant to Chapters 91 and 183C, Hawaii Revised Statutes, and Chapters 13-1 and 13-5, Hawaii Administrative Rules (HAR).
A contested case hearing began on July 20, 2004 before Michael W. Gibson, Esq., the appointed Hearing Officer (Hearing Officer), who conducted a site visit, took testimony, received exhibits, and heard arguments during several days of hearings. Hearing Officer entered his Proposed Findings of Fact, Conclusions of Law, and Recommendation on December 22, 2004, which recommended that Pila'a should be assessed a penalty of $2,315,000 and administrative costs in the amount of $69,996.93.7 Both parties filed exceptions.
The Board heard oral arguments on March 29, 2005, and issued its Findings of Fact, Conclusions of Law, and Decision and Order on June 30, 2005 (Board Order), which concluded that Pila'a should be assessed $3,963,000 in damages to be paid to the State of Hawai'i special land and development fund as well as $69,996.93 for DLNR's administrative costs.8 The Boarddetermined that
2. The violation was placement of any solid material on land in the form of dumping or allowing to be put on conservation land (including submerged land) of a large unknown amount of dirt and sediment. The "illegal activity" that was conducted on conservation land (including submerged land) was dumping or allowing to be dumped a large unknown quantity of dirt and mud without a permit as required by HAR §§ 13-5-24 and 13-5-30(b). 9
(Footnote added.) The Board found that Pila'a conducted "massive and unauthorized grading, filling, and other site work on the Property." The...
