The decision, handed down on Dec. 26, turned on timing. The court found that the predecessor company, Kukui (Molokai) Inc., was late in submitting a permit application, not only for the hotel but for other Molokai Ranch uses in west Molokai.

The decision may have broader implications of "use it or lose it" for other entities that have long had access to surface water.

The Office of Hawaiian Affairs called the decision a "substantial victory" that may bolster OHA's arguments in a contested case over access to the waters of Na Wai Eha in West Maui. Hearings in that case were held for two weeks in December and will resume this month.

Dan Orodenker of Molokai Properties said that the ruling actually helps that business's planning because it clarifies the situation.

The original application was filed with the state Commission on Water Resource Management in 1993.

"None of us were involved, and we are not sure exactly what happened. A lot has changed," Orodenker said.

Haunani Apoliona, chairwoman of OHA, said in a statement Wednesday that "OHA is hopeful this Supreme Court ruling will reinforce our position as it relates to the contested case before the state water commission for Maui County at Na Wai Eha."

OHA and Hui O Na Wai Eha are seeking to force the commission to establish in-stream flow standards for Iao, Waihee, Waiehu and Waikapu streams. The major users, Wailuku Water Co. and Hawaiian Commercial & Sugar Co., are, like Molokai Properties, old agricultural users.

Whether they can continue to have access to as much water as they have had will be determined by the case.

Orodenker said he was not sure how the decision in the Molokai case would apply to Na Wai Eha.

When potential users ask the commission for permits to withdraw water, they can justify them as existing or new uses. The law gives existing uses an advantage in dealing out water.

Jon Van Dyke, a University of Hawaii law professor who is representing the county in the Na Wai Eha case and who represented OHA in the Molokai contested case and later the appeal, said, "As a result of the court's ruling, the allocation of water permits on Molokai is back to square one, and it can be anticipated that another protracted contested case hearing will probably be held in the future to determine how much water Molokai Properties Ltd. is entitled to."

He added that since the court killed the original application, Molokai Properties will have to reapply. Its new application will be for a new use, in legal terms, even if some of the uses have a history.

The commission had approved Kukui (Molokai)'s request in 2001 for 936,000 gallons a day for existing uses and 82,000 gpd for new uses.

However, between the 1993 application and 2001, the Kaluakoi hotel and golf course closed. The golf course has since reopened, but the hotel has not.

The court ruled that the late application meant that Kukui (for a time owner of Molokai Ranch) had abandoned its existing uses, so it must apply for the water as new uses.

The court remanded the case to the commission. Since the old application is dead, the commission now has nothing to consider until Molokai Properties files a new application.

Orodenker said this will not delay the company's plans because they are already undergoing a complete review and an environmental impact statement in connection with plans to develop luxury housing at Laau Point.

As for abandonment, Orodenker said that over the past 15 years, some uses that Molokai Ranch has served have increased and some, like the closed hotel, have decreased.

The Molokai Irrigation System is managed under contract by the ranch, but the ranch serves as a public utility and serves other customers, like public schools, as well as its own needs.

In August, an opinion from the state Department of the Attorney General said that Molokai Ranch should stop using the state-owned irrigation system until a new contract can be awarded. But the state lawyers opined that the contract could not be renewed without an environmental impact statement.

This new approach was derived from another Supreme Court decision in the Hawaii Superferry case, which said that the state was wrong to waive environmental review for harbor improvements.

Molokai Ranch has served as the only water utility for central and western Molokai since the 1970s, and Orodenker said Wednesday that as a regulated utility it could not stop delivering water.

Since there is only one pipe, all the water issues come together, even if legally they are separable.

For example, the desire of the ranch for water to reopen the hotel is separate from its desire for both potable and nonpotable water for Laau Point.

It has not yet gotten its land use authorizations for that development. Until then, it cannot apply to the commission for water for the project.

OHA worked with the Department of Hawaiian Homelands, which administers the extensive homelands around Hoolehua, in the appeal of the commission's permit decision.

The Native Hawaiian Legal Corp. represented two Native Hawaiians, Judy Caparida and Georgina Kuahua.

Colette Machaco, the OHA trustee for Molokai and Lanai, said: "The water issues raised during the hearings will obviously have tremendous benefits for our beneficiaries on all future water claims."

OHA said the court decision made three important new points: