A state law that gave Hawaii Superferry a lifeline last year set a "worrisome precedent" that places the interests of a single business ahead of the state's environmental, financial and public safety responsibilities, the state auditor found in a report released yesterday.

The law, which allowed Superferry to resume operations while an environmental impact statement is being prepared, undermines the environmental review process with a substitute process that was negotiated and tailored for Superferry, state auditor Marion Higa found.

While the law includes operating conditions to protect humpback whales and deter the spread of invasive species, the auditor contends that it suppresses other environmental safeguards by allowing Superferry to operate and use state harbors while the environmental review is conducted.

The auditor also questioned the value of $40 million in state harbor improvements for Superferry now that the company has chosen to outfit a second catamaran — and may retrofit the Alakai — to include on-board vehicle ramps that can be used as alternatives to the state's barge-and-ramp system.

"In a reversal of longstanding policy, the state provided harbor improvements for Hawaii Superferry Inc., which it selected and implemented based on company specifications and operational deadlines," Higa, the state auditor, concluded. "Later, lawmakers crafted custom-made legislation to keep the business in operation."

Today, the state Supreme Court is scheduled to hear arguments in a legal challenge to the law brought by environmentalists. The Sierra Club, Maui Tomorrow and the Kahului Harbor Coalition argue that the law is unconstitutional special legislation. The state maintains that state lawmakers and Gov. Linda Lingle properly exercised their authority and were acting in the public interest to preserve an alternative mode of transportation for the Islands.

The Supreme Court ruled in August 2007 that the state should not have exempted the Superferry project from environmental review, which led to legal challenges on Maui and public protests on Kaua'i that halted ferry service. Lingle called lawmakers into special session where they approved the law that allowed the ferry to resume service while an environmental review is completed. A draft is expected to be released next month.

Higa's audit was also required as part of the law, and she released the first phase in April, finding that the state may have compromised environmental policy because of pressure from Superferry executives who were concerned about financing for the project. The auditor found that the state was urged to bypass the review process because of a deadline set by Superferry executives in order to meet an agreement with Austal USA, the Alabama-based shipbuilder that built the two catamarans.

SECOND PHASE RELEASED

The second phase of the audit, released yesterday, examined whether the harbor improvements for Superferry are now obsolete because of the new on-board ramp on the second catamaran and explored what Higa described as the "questionable policymaking" of the Legislature and governor.

The audit found, as The Advertiser first reported earlier this year, that staff at the state Department of Transportation urged Superferry to install on-board ramps four years ago but were rebuffed by the company, which had cited weight, travel speed and load and unload time as concerns.

Superferry announced last summer that it would add an on-board ramp on the second catamaran and may eventually retrofit the Alakai to provide more operational flexibility at harbors. Superferry has postponed the introduction of the second catamaran, originally scheduled for passenger and cargo runs to the Big Island starting next year, because of the slowdown in the economy.

Brennon Morioka, the director of the state Department of Transportation, said in a written response to the audit that new ramps on Superferry would not render the state's barge-and-ramp system obsolete and described the finding as "an inaccurate conclusion." Superferry is repaying the state for the harbor improvements.

Morioka also claimed that Higa exceeded the scope of her audit and reminded her that the governor and the Legislature were seeking to "strike a balance between the public interest need for an alternative form of inter-island transportation and concerns for the environment."

Superferry, in a statement yesterday, described the state's barge-and-ramp system as "unequivocally" the most efficient way to load and offload the catamarans. New ramps, Superferry said, would provide flexibility in adverse weather and infrastructure situations.

"We acknowledge and applaud the efforts of the administration and the Legislature for working in the best interest of the people of Hawai'i to bring a much-needed and desired transportation alternative to the state," Superferry said in the statement. "The state made a wise investment to continue expanding the state's transportation options, which are limited, as we know well."

TIME LIMIT ON LAW

The auditor found that the law was designed to help Superferry even though for legal reasons it referred to a "large capacity ferry vessel" instead of Superferry by name. The law expires when the environmental impact statement is accepted by the state or by next summer. Higa said Superferry is the only company able to take advantage of the small window of time in the law, although — conceivably, as state attorneys have argued — another ferry operator could have tried to enter the market.

"While it is within the Legislature's authority to amend laws in response to judicial decisions, it is questionable policymaking to suspend current environmental laws for a 15-to-16-month period to enable 'large capacity ferry vessels' to operate under a temporary law," Higa found.

State Sen. J. Kalani English, D-6th (E. Maui, Moloka'i, Lana'i), one of only five senators to vote against the Superferry legislation, said the audit validates his opposition.

"I said I don't think that we met the constitutional test that says we have to pass general laws, that simply changing the name to make it generic doesn't meet constitutional muster," said English, who believes the state should never have exempted the project from environmental review. "That's why I voted no on this. They should have followed the law from the beginning."