When the Legislature created the Agribusiness Development Corp. (ADC) in the mid-1990s to help lead the transition to diversified farming, it gave the agency — administratively attached to state Agriculture Department — broad powers, including the ability to buy and hold land and water resources.

To max out flexibility in securing opportunities tied to retooling former plantation lands and water systems, the state exempts the ADC from state land use law, Public Utilities Commission regulations and civil service laws. Last week, the ADC’s assertion that it’s also exempt from Clean Water Act oversight was rightly shot down in federal court.

The act, which took shape in the early 1970s, bans the dumping of pollutants directly into surface waters. Under the law, a National Pollutant Discharge Elimination System (NPDES) permit is needed to dispose of the wastewater in ocean waters.

Prior to August 2015, the agribusiness corporation had maintained a NPDES permit to daily discharge millions of gallons of untreated ag water into near-shore waters off Kauai’s west side, edging Barking Sands Beach and Kekaha (MacArthur) Beach Park.

Then, rather than renew the permit, which brings regulatory pollution monitoring and public reporting, the ADC claimed it was eligible to discharge permit- free under a 2008 federal rule that allows NPDES exemption in cases where water transfer “conveys or connects” waters without subjecting them to various uses or adding pollutants.

In ADC’s case, waters funnel to the ocean by way of a century-old 40-mile ditch system — originally built for a Kekaha Sugar Company mill. And over the years, water testing had found pollutants, including pesticide-related chemicals like chlorpyrifos and glyphosate, raising environmental red flags.

Kudos to community groups who took action upon spotting potential for spikes in health-and-safety risks in the absence of environmental law enforcement. In 2016, Earthjustice, on behalf of Na Kia‘i Kai, Surfrider Foundation and the Pesticide Action Network, sued ADC for violating the federal Clean Water Act by polluting waters.

Tuesday’s ruling by U.S. District Judge Derrick Watson found that the ADC fell short in meeting permit-free requirements and directed it to obtain the NPDES permit — or stop discharging through the plantation-era system it operates on a 7,000-acre plain for agribusinesses and industrial operations tenants.

The permit would likely be monitored by the state Department of Health, which serves as a stand-in for the U.S. Environmental Protection Agency. In doing so, the DOH, which did not oppose ADC’s permit-free move, should and can begin making up for that glaring mistake by imposing stricter limits on pollution levels in waters near the beaches — both popular for recreation, such as surfing and fishing.

Also, the court case should prod stepped-up overall scrutiny of the corporation. Last year, with the backing of Scott Enright, then-director of the Hawaii Department of Agriculture, the ADC balked at proposed state legislation that included an audit, contending it was too busy to deal with such an inspection.

This year, a bill that tethers performance and financial audits to ADC funding passed into law. Good. More transparency is in order. Prior to this year, the corporation, which isn’t required to submit financial statements, had failed to meet a requirement to submit basic annual reports to the Legislature.

As the corporation plays a leading role in the shaping of Hawaii’s ag future, it also must safeguard the environmental health of farm lands and related waterways. Further, with the audits due before the 2021 legislative session starts, the ADC must be more upfront about its decision-making and management of taxpayer dollars.