Opponents of the $5.26 billion Oahu rail project won a clear victory Friday as the Hawaii Supreme Court ruled that a state agency violated its rules by approving the rail project before an archaeological survey was completed for the 20-mile rail route.

In a unanimous ruling, the court found that rules governing the State Historic Preservation Division "do not permit the SHPD to concur in the rail Project" until the city finishes the survey to determine whether there are Native Hawaiian burials or other archaeological resources in the path of the rail line.

The city has been surveying the rail route in sections, and still has not completed the portion of the route in urban Hono­lulu where experts agree that burials are most likely to be found.

The ruling also found that the special management area permit the city issued for the rail project is invalid. The decision sends the case back to Circuit Court for further proceedings.

The lawsuit was filed by Paulette Kaanohiokalani Kaleikini, represented by David Kimo Frankel and Ashley Obrey of the Native Hawaiian Legal Corp.

Frankel told reporters that if the city continues with construction or "ground-altering activity" before the archaeological survey is finished, Native Hawaiian Legal Corp. will file new court motions to shut the project down.

The ruling makes it clear that "the city has not been complying with the law," Frankel said. "Now that they know that, and now that the Supreme Court has said so, one would expect the city to stop. The city will have to stop if it is going to comply with the law in good faith."

Before the city can resume construction, Frankel said the city must complete the archaeological inventory survey, develop a plan for handling any burials that are discovered and win the approval of the Oahu Island Burial Council for that plan. The city also needs to obtain a new special management area permit, he said.

Daniel Grabauskas, executive director of the Hono­lulu Authority for Rapid Transportation, said HART may suspend rail construction activities that involve moving earth or digging, but will continue activities such as pouring concrete columns at sites where the foundations have already been dug.

"I certainly want to be respectful of the court’s ruling and respectful of the decision that’s been rendered. If there is some ground-disturbing activities that we had planned for that could be forgone, we may want to do that as a show of good faith to the court, but where there’s not ground-disturbing activities, we’re certainly going to continue," he said.

Grabauskas called the ruling "a temporary setback" for the project but added, "I make no bones about the fact that to the degree that delays result from this ruling, delays will cost money."

The HART staff still needs to review the ruling with its lawyers, and Grabauskas said he will discuss the details of the case with the HART board Thursday at the next board meeting.

"I hope that we’ll have an opportunity for our attorneys to talk to the plaintiff’s attorneys and understand what it is that they’d like to see at this point, and then ultimately it’s our board of directors at HART that will take and digest all that information and make any kind of decision," he said.

Grabauskas said he does not know yet how much the delays might cost the city because that will depend on how much construction must be curtailed. He said the city is studying its construction contracts to determine whether they contain language that protects the city from delay claims by contractors if the project is stopped by a lawsuit.

The city has already agreed to pay $15 million to settle delay claims by construction contractor Kiewit Infrastructure West Co., and city officials are negotiating with Kiewit to resolve additional claims.

Rail opponent Cliff Slater said he expects the case will now go back to Circuit Court, where Judge Gary Chang will issue an injunction to stop construction until the archaeological survey is done. That will trigger new and expensive delay claims from the project’s contractors, he predicted.

"They can’t say we didn’t warn them," Slater said. "We were saying from the get-go that this (survey) had to be done."

Slater was not involved in the Kaleikini suit filed in state court, but he is part of a group of rail opponents who filed a separate suit in federal court to try to stop the project. Arguments in that second suit were heard Tuesday in federal court, and a ruling in that case is expected later this year.

Friday’s state Supreme Court ruling could also have political implications. Former Gov. Ben Caye­tano, who is running for mayor, said he believes the ruling "vindicates what we have been saying all along" about problems with rail.

"Beyond that, I don’t see how the voters would consider putting the same people in charge who messed this up in the first place," said Caye­tano, who is part of the group that filed the federal suit. "So, while it’s probably speculation to say how it would affect the election, it’s not going to hurt us."

Cayetano has promised to end the project if he is elected mayor.

Construction work began this year on the first rail segment from East Kapolei to Pearl Highlands, and a contract was awarded last year to Kiewit to build a second segment from Pearl Highlands to Aloha Stadium.

Grabauskas said all work on the archaeological survey is finished for those first two sections of guideway.

Survey work is still being done on the remaining two segments, and that work is scheduled to be completed in the first quarter of next year, Grabauskas said. He said the city may add crews or take other steps to accelerate that work in the wake of Friday’s ruling.

For the rail project segment from Aloha Stadium to Middle Street, five survey trenches have been excavated, and 35 more still need to be dug, he said. For the final segment from Middle Street to Ala Moana Center, 59 survey trenches have been completed, and 173 trenches still need to be excavated.

Kaleikini’s suit argued state rules don’t allow construction to begin until the legally required survey is completed to document historic properties or burial sites that might be affected by the rail line.

According to Kaleikini’s suit, the failure to complete the survey "jeopardized the integrity of Native Hawaiian burial sites" by foreclosing options such as not building rail, or changing the rail route to avoid burials.

The city and state countered that the city was complying with state law by completing the archaeological survey on each rail segment before construction began on that segment.

Circuit Judge Chang rejected Kaleikini’s claims last year, but the Supreme Court on Friday reversed the decision. The Supreme Court concluded it is "undisputed" that the rail project has a high likelihood of affecting burials or other archaeological resources in portions of Kakaako, which is in the final segment of the project.

The Supreme Court noted that SHPD’s rules "establish a sequential process under which an archaeological survey must precede the SHPD’s concurrence in a project." That’s because the SHPD review process is designed to identify significant or sensitive sites and then develop and execute plans to handle the impacts on the sites, the court ruled.

The court also concluded the rules define the "project area" for rail to mean the entire rail route, which "does not permit the SHPD to consider the rail project in four separate phases for the purposes of historic preservation review."

In a news conference after the ruling, Frankel said the Native Hawaiian Legal Corp. has been trying for years to persuade SHPD to require that developers complete all of the required archaeological inventory surveys before the agency allows any development to proceed.

Instead, the agency has chose to "expedite" construction by allowing work to begin before the surveys are finished, and followed that pattern with the rail project, he said.

SHPD is part of the Department of Land and Natural Resources. A DLNR spokes­woman said the department would not comment on the ruling Friday.

Kaleikini said she was pleased with the ruling, and said she doubts the rail project will be successful because burials will be discovered along the route. "I doubt it’s gonna make it," she said.

Kaleikini said she believes the city planned to delay the survey until the project was too far along to stop and then seek permission to move burials that were discovered along the rail route.

"We knew this would happen, so that’s why we raised this lawsuit," she said.

APPEAL FILED BY PAULETTE KAANOHIOKALANI KALEIKINI