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In her second report on the state's actions relating to the Hawaii Superferry, state Auditor Marion Higa says a state law passed to allow the ferry to operate while environmental studies are done may have undermined the state's environmental laws.

She also says the $38.5 million spent on harbor improvements "has proved to be problematic," and the ferry landing barges may end up useless.

In her first audit, released in April, Higa said Hawaii Superferry managers drove state officials to make decisions by asserting a fictitious deadline. The new report, released Wednesday, provides more details and warns that the final bill for those decisions has not been rendered.

"Delays resulting from an extensive and intrusive review by the attorney general of our audit work compelled us to issue the report in two parts," the report says.

Higa said that a deputy attorney general was sent to sit in on all auditor reviews with state employees, "and that is not ordinary."

Officially, the report is a performance audit of the Lingle administration's "actions exempting certain harbor improvements to facilitate large-capacity ferry vessels from the requirements of the Hawaii environmental impact statement law." And it concludes that Act 2 was so narrowly written that only one business, Hawaii Superferry, could have been affected.

Act 2, passed last year at the urging of Gov. Linda Lingle after a court decision tied up the ferry, is allowing it to operate pending completion of an environmental impact statement covering both cumulative and secondary impacts. The Sierra Club, Maui Tomorrow and Kahului Harbor Coalition are challenging its constitutionality, and the Hawaii Supreme Court will hear oral arguments this morning on that appeal.

Higa said she was not aware of that and didn't time release of her report because of it. "We got it out as fast as we could," she said.

Irene Bowie of Maui Tomorrow said Thursday that the auditor had confirmed her organization's view that Act 2 was written to benefit one company. "We are gratified" that Higa's findings support so many of the contentions of Maui Tomorrow, she said.

"It is telling that Superferry never responded to an invitation for an interview" with the auditor's office, Bowie said.

According to the audit, the technical staff at the Harbors Division wanted the Alakai to have an onboard loading ramp, which Hawaii Superferry refused to agree to, objecting to the cost and the reduction in speed and increase in fuel costs.

In a letter commenting on the draft audit, Department of Transportation Director Brennon Morioka said ramps were also problematic, given Hawaii's ocean conditions, and that the eventual solution - loading barges - was a compromise.

At first, DOT said it was "continuing to ask the tough questions to Superferry. Based on lessons learned, we have some definite concerns about Superferry's operational plan or lack thereof."

Two months later, in December 2004, after a meeting at the Office of the Governor (apparently with her chief of staff, Bob Awana, although it is not stated whether Lingle was present), the questioning stopped. The audit says economic development considerations were put ahead of environmental concerns. It was years before DOT received Superferry's operational plan.

Ordered to accommodate the ferry the way its owners wanted it built, the Harbors Division scuttled its policy of not providing operational equipment on its piers, which had been the responsibility of pier users, the audit report says.

Although Morioka acknowledged the state has not provided "ramps" to other vessel operators, he said the department "routinely" undertakes special improvements on behalf of vessel operators, such as pier-side sheds and hardening of cargo yards.

Having taken on the task of providing loading equipment, the division staff preferred permanent arrangements (including a "notch" in Pier 2 at Kahului Harbor), according to the report, but because of time constraints, the only way the state could accommodate the ferry was to use landing barges at Honolulu and Kahului. (A ramp was built at Nawiliwili, although the ferry does not call there yet.) A third barge was ordered for use by a second ferry at Kawaihae.

At Kahului, surge in the harbor was too much for the barge moorings, and last winter damage to the pier and barge totaled more than $3.4 million. "The (Transportation) department, Hawaii Superferry Inc. and Healy Tibbitts (the barge builder) are engaged in a dispute over who is responsible for the problems encountered with the Kahului barge's mooring system," the audit says.

Morioka disputed the cost of the damage at Kahului. He also said ramps were not a better solution because they would have taken so much space at cramped harbors.

But, the auditor found, the surge damaging the barge was just part of a "cascade" of problems arising from the choice of using barges.

To reduce the surge damage, a tug pushes the barge snug against the pier during loading and unloading. The state is paying for the tug, more than $350,000 so far, although the ultimate responsibility for this expense is unsettled.

Superferry is putting a ramp on its second barge and is considering refitting the Alakai with one. That could make the barges unnecessary.

Since they were built in China, federal law prohibits the barges from being used to carry freight between American ports. The audit concludes the state would have difficulty selling them.

Morioka said the ramps will not wholly replace the need for barges, so that system will not become obsolete.

And he said a new mooring system, awaiting approval from the Army Corps of Engineers, will work better at Pier 2.

Hawaii Superferry released a statement commenting on the audit.

It said:

* The draft of the environmental impact statement should be ready next month.

* The Alakai has made more than 650 voyages "with great awareness and concern for our environment."

* "Eight months of operations have proven the barge and ramp systems are unequivocally the most efficient system to on and offload the ship and quickly disperse traffic. . . . We, as well as our customers, have found that the current barge loading system is easy to use, fast and convenient. . . . Adding a ramp to the vessel, in combination with the barges, will provide additional flexibility to better serve our customers in adverse weather and infrastructure situations but has obvious limitations due to size."

* "The state made a wise investment to continue expanding the state's transportation options. . . . User fees . . . offset the state's $38.5 million investment and provide an ongoing revenue source for the state's investment. In less than a year, $2.5 million has been returned to the state from fees and taxes paid by the company and people riding the Superferry."

* Harry Eagar can be reached at heagar@mauinews.com.