The chairman of the Senate Committee on Water, Land and Agriculture on Wednesday shelved a bill that would allow Alexander & Baldwin to hold on to the rights of millions of gallons of water that it diverts from East Maui streams even as the company plans to close its water-intensive sugar plantation on Maui in the coming months and lay off more than 650 workers.

“Obviously, we got a huge amount of opposition from taro farmers, Native Hawaiians and Maui residents who were asking for the streams to be restored,” said Sen. Mike Gabbard, the committee’s chairman, after the hearing on Senate Bill 3001.

A House version of the bill, House Bill 2501, is still alive and needs to be heard by the House Finance Committee to cross over to the Senate. Gabbard (D, Kapolei-Makakilo) said he may be open to considering the House bill.

Opponents of the bill, including advocates for Native Hawaiian taro farmers and environmentalists, hailed the move as a significant victory in their efforts to derail the legislation.

The bill “was poor public policy and would have unraveled our water code,” Marti Townsend, executive director of the Hawaii Sierra Club, said after the hearing.

In January, Maui Circuit Judge Rhonda Nishimura declared four temporary permits that have allowed A&B to divert water from streams that run through state lands invalid. The month-to-month revocable permits are supposed to be held on a temporary basis, but since 2001 the Board of Land and Natural Resources has been renewing the permits or maintaining them on a “holdover basis” while it resolved legal challenges.

Nishimura said that allowing A&B to hold on to the permits for more than a decade defied the meaning of the word “temporary.”

Shortly after Nishimura’s ruling, lawmakers introduced two bills, backed by A&B, that would overturn the judge’s decision and allow the company to hold on to its water permits while legal challenges to obtaining long-term leases for the water are resolved.

A&B has been entangled in a contentious legal battle with taro farmers and environmentalists over the diversion of stream water for more than a decade, entailing both court cases and an ongoing contested case before the Land Board.

Gabbard said that A&B should be pursuing nonlegislative routes to solving the water disputes.

The County of Maui, with the support of A&B and the Board of Land and Natural Resources, is currently appealing Nishimura’s ruling.

Gabbard said that for now A&B should be filing a motion to stay the court decision and should be demonstrating its actual water needs.

Attorneys for local taro farmers have argued that the company has been diverting more water than it needs. Furthermore, those needs are sure to change as the company shuts down its Hawaiian Commercial & Sugar Co. subsidiary and its 36,000-acre sugar plantation and tries to convert their use to diversified agriculture.

Gabbard said A&B should also begin conducting an environmental impact statement in preparation for obtaining a long-term lease.

“I am not opposed to taking another look at the issue if it crosses over to the Senate and if A&B shows good faith as it relates to these other nonlegislative routes,” he said.

The legislation allowing companies to hold on to their water rights as long-term leases are sought would not only affect A&B. Ten other companies, farmers and developers have also been allowed to tap water on state lands under temporary permits, some of which date back to the 1990s.

The temporary permits have allowed companies to circumvent more stringent requirements for obtaining long-term leases, including completing environmental assessments; consulting with the Department of Hawaiian Home Lands to see whether beneficiaries need the water for customary practices; and, in some cases, obtaining a conservation district use permit. Long-term leases also come with competitive bidding requirements.

Meredith Ching, a senior vice president for A&B, said in a statement that Gabbard’s decision to defer SB 3001 was “extremely disappointing.”

It “leaves a number of permittees who depend on state lands and waters in limbo, as a result of the recent Circuit Court ruling,” Ching wrote. “These are permit holders who are farmers, nonprofits, utilities, etc. — as well as HC&S — who are now operating under a cloud of uncertainty.”

Ching said she hopes that “many misconceptions can be clarified” about the House measure.

The company has said that the legislation is meant to ensure that it can continue providing water to 36,000 Upcountry Maui residents and farmers and allow the company to transition to diversified agriculture.

Ching said that “in the short term” A&B is looking into pursuing a stay to the court ruling.

“A stay, however, is not a substitute for the relief this bill would provide,” she said.