Developers of the Hokuli'a luxury home project on the Big Island apparently are closer to a settlement with community and environmental activists who sued to halt the project, several sources have said.

Big Island Circuit Judge Ronald Ibarra stopped Hokuli'a during construction in 2003 after ruling that the developers should have sought approval from the state Land Use Commission to build the $1 billion housing and golf course project on agricultural land. The developers have appealed the ruling to the state Supreme Court.

Several sources, speaking on condition of anonymity because they did not want to jeopardize the talks, said the two sides have moved closer to a settlement and could approach the courts to try to end the controversy. Ibarra would have to agree to hear the settlement, and the Supreme Court would have to send the case back to the Big Island court for review.

Settlement talks have dissolved before, and the developers and activists involved would not comment publicly about the potential resolution of a case that has caused divisions in Kona. But no one interviewed dismissed the idea that a settlement was close.

John DeFries, with 1250 Oceanside Partners, the developers, said it was not the appropriate time to discuss the talks. "I understand what the process requires, and it's inconceivable right now that there could possibly be a settlement," DeFries said.

Jack Kelly, of Protect Keopuka Ohana, one of the plaintiffs in the suit, said there is a lot of activity surrounding Hokuli'a.

"There's really no way to be close without being there. We've been close lots of times," Kelly said. "We're looking at what's best for our community and agricultural lands statewide."

Two bills moving through the state Legislature would allow Hokuli'a to proceed and would recognize the legality of other housing developments already built on agricultural land. The state Senate version would give counties more authority over what kind of housing is allowed on marginal agricultural land.

Some of the lawmakers involved have said the bills are not solely meant to rescue Hokuli'a from the courts, but would clarify land-use policy on thousands of acres of agricultural land statewide.

State Sen. Russell Kokubun, D-2nd (S. Hilo, Puna, Ka'u), chairman of the Senate Water, Land and Agriculture Committee, and state Senate Majority Leader Colleen Hanabusa, D-21st (Nanakuli, Makaha), chairwoman of the Senate Judiciary and Hawaiian Affairs Committee, both said yesterday they would likely move ahead with the Senate bill even if there is a Hokuli'a settlement.

"The bill was never just a Hokuli'a bill," Hanabusa said. "The bill recognized that there are other projects that are in jeopardy."

Hokuli'a is designed for more than 1,500 acres along the ocean near Kealakekua Bay. The private housing and golf community, marketed as a getaway for the wealthy, received Big Island approval but was successfully challenged in court as inappropriate for agricultural land. The developers have spent an estimated $300 million on the stalled project, which also includes a bypass road meant to reduce traffic congestion in West Hawai'i.

Ninety-six people who already purchased lots at Hokuli'a filed a separate $265 million federal court lawsuit against the county in October because the county refused to issue permits for the project after Ibarra's ruling. The lot owners also named the judge in their suit and claimed his ruling was unconstitutional.

Jeff Mikulina, director of the Sierra Club Hawai'i chapter, said he hopes a potential settlement would convince the Legislature not to rush into any substantial changes to the state's land-use law. He said lawmakers acted carefully last session when they approved a study on rural land and a process to identify important agricultural lands, and that they should give those plans time to work.

"We think that will take the pressure off and reduce some of the hysteria that surrounds this desire to change our land-use law," Mikulina said of a settlement.

Reach Derrick DePledge at ddepledge@honoluluadvertiser.com.