WAILUKU, Maui — Litigants in the 5-year-old legal battle over how much water should be taken from Central Maui's four largest streams said they may have taken a significant step last week toward victory.

A top state official Thursday proposed putting about half of the up to 70 million gallons of water now diverted each day from streams to mostly sugar plantations and the county water system back into its natural environment.

Earthjustice attorney Isaac Moriwake announced Saturday that state Commission on Water Resource Management hearings officer and Commissioner Dr. Lawrence Miike issued a 210-page "proposed decision" that would restore 34.5 million gallons a day to Na Wai Eha, or "The Four Waters."

The decision — if it holds up to a vote among the rest of the seven-person commission — would completely alter the Waihe'e River and Waiehu, 'Iao and Waikapu streams, which make up Na Wai Eha.

Earthjustice filed the petition to the commission on behalf of the community groups Hui o Na Wai Eha and Maui Tomorrow, supported by Maui County and the state Office of Hawaiian Affairs.

If the decision stands, it could also translate into further agricultural and financial troubles for the state's last sugar producer, Hawaiian Commercial & Sugar Co.

Miike's proposed decision would continue to give HC&S up to 21.59 million gallons a day; Wailuku Water Co. 2.02 mgd; and the county 12.2 mgd. Nine million gallons of the county's water would be dedicated to A&B's pro- posed $30 million water treatment plant in Wai'ale, which would serve Central and South Maui customers.

HC&S, which is a division of Alexander & Baldwin Inc., announced last month that it lost $13 million in 2008 and expects to lose more this year as the company continues to struggle with three years of severe drought conditions that continue to produce lower sugar yields.

Moriwake said he expects the Commission on Water Resource Management to have a final decision by the end of 2009.

HC&S Plantation Manager Chris Benjamin said that "any substantial reduction in the amount of irrigation water available to HC&S or resulting increase in operating costs will seriously jeopardize the plantation's viability, particularly given today's extremely difficult operating and financial environment for the plantation."