What the state can or cannot do with some 1.2 million acres of ceded lands is at stake in a lawsuit the U.S. Supreme Court yesterday agreed to hear on appeal.

The appeal was filed by state Attorney General Mark Bennett in a case that pits the state against the state Office of Hawaiian Affairs. In January, the state Supreme Court ruled that the state cannot sell or otherwise transfer ceded lands, once belonging to the Hawaiian government, which the U.S. has ceded to the state.

The state's argument is that the Admission Act of 1959 grants it the authority to manage the 1.4 million acres as it sees fit for the benefit of all Hawai'i residents.

But the argument of OHA and four Native Hawaiians who brought the 1994 lawsuit is that Congress' 1993 Apology Resolution and subsequent action by the state Legislature effectively bar the state from selling or transferring ceded lands to an outside entity until "unrelinquished claims" regarding compensation for the use of those lands are resolved.

The U.S. Supreme Court did not say when it would hear the case, although Bennett said he believes it will be sometime between January and March.

At the center of the case are plans by Gov. John Waihee's and Gov. Ben Cayetano's administrations in the early 1990s to sell about 1,500 acres of developable land in Lahaina and Kona to private interests in order to finance affordable housing projects for moderate- and lower-income families — regardless of whether they have Hawaiian blood.

Four Hawaiians — Pia Thomas Aluli, Jonathan Kamakawiwo'ole Osorio, Charles Ka'ai'ai and Keoki Kamaka Ki'ili — sued to block the sale.

OHA PRESSES ONWARD

Bill Meheula, their attorney, said the streets, water and sewer pipes and other infrastructure have been ready for a decade and the lands could likely have been sold by now if not for the injunction brought on by the lawsuit.

"It's admitted that Hawaiians have a claim to the ceded lands arising out of the overthrow," Meheula said.

The state Supreme Court decision backed the position of OHA and the four Hawaiians that the state not be allowed to sell any ceded lands until those claims are resolved, he said.

OHA Chairwoman Haunani Apoliona echoed Meheula's comments in a prepared statement: "We firmly stand behind the state Supreme Court's opinion, which says the state should keep the ceded land trust intact until Native Hawaiian claims to these lands are settled."

Apoliona added: "OHA will continue its tireless efforts to protect and defend the rights and entitlements of its beneficiaries, the Native Hawaiian (p)eople."

Bennett said the state should be allowed as much flexibility as possible in managing the ceded lands in order to meet its mandate to the beneficiaries of the trust — both Native Hawaiians and non-Hawaiians.

"Prudent management sometimes involves exchanging land, or transferring land, or theoretically even selling land or buying other land or other assets," he said. "So what the state wants to be able to do is to prudently and judiciously exercise the rights it was granted under the Admission Act."

In June, the attorneys general of 29 other states filed a brief with the U.S. Supreme Court backing Bennett's position. They worry about the precedent being set if a state is barred from selling or exchanging lands received from the U.S. government.

Bennett said he does not know of any plans by Gov. Linda Lingle's administration to sell the lands on Maui or the Big Island, or ceded lands anywhere else, noting that the state has been under a "self-imposed moratorium" pending the outcome of the litigation with OHA.

The 1.2 million acres represents about 29 percent of the state's nonsubmerged land base, Bennett said.

Ceded lands were once controlled by the Hawaiian monarchy but taken over by the U.S. when Hawai'i was annexed in 1898. The federal government turned over the land when Hawai'i became a state in 1959, with an agreement that it be used generally to benefit the public and specifically the Native Hawaiian people.

2002 DECISION KEY

In 2002, a state court ruled in favor of the state, saying it could sell the lands. That was the decision overturned in January by the state Supreme Court and that will be heard by the U.S. Supreme Court.

As required by the Admission Act, a portion of the revenue from leases of ceded lands is used to finance OHA.

The high court's decision to hear the state's case is not expected to have a bearing on ongoing negotiations between OHA and the state over how much the agency should receive for the use of ceded lands.

Earlier this year, a settlement proposal for the state to transfer three parcels of land valued at $187 million and $13 million to OHA, as well as a minimum of $15.1 million annually in ensuing years, was shot down by the Legislature.

But in the waning days of the session, legislators tacked onto the state budget a nonbinding proviso requiring the Lingle administration and OHA to resume negotiations on the 30-year-old dispute.

Opposition to the plan came largely from parties who said they did not trust OHA trustees to properly manage the assets for Native Hawaiians.