Castle & Cooke Homes Hawaii received final state approval Friday to move ahead with its planned $2.2 billion Koa Ridge community in Central Oahu and will not be required to adopt measures urged by two state agencies to mitigate the loss of prime farmland.

The state Land Use Commission agreed on a final order that reclassifies the bulk of the 768-acre project site between Mililani and Waipio from agricultural to urban use.

Friday’s order followed a preliminary approval granted last month that gave the general go-ahead for an initial phase of 3,500 homes, a hotel, medical campus, a school, parks and commercial space.

The final order imposes some conditions on the project largely pertaining to a future phase with 1,500 homes and one school. But the commission rejected a suggestion to make Castle & Cooke offset the loss of prime farmland by preserving an equal amount in perpetuity somewhere else on Oahu.

Two state agencies — the Department of Agriculture and Office of Planning — pushed for the preservation measure.

Harry Saunders, president of Castle & Cooke Hawaii, said the company was responsive in addressing impacts on agriculture, traffic and schools.

"Overall, it was a fair ruling," he said. "Obviously we’re pleased."

Robert Harris, director for the Sierra Club Hawaii Chapter, was disappointed. "There’s no protections for ag land," he said. "It’s essentially standard conditions. The commission accepted (Castle & Cooke’s proposal) relatively wholesale."

About 546 acres of Koa Ridge’s 768 acres consist of the top two soil grades regarded as prime farming soil. That represents close to 5 percent of such high-quality farmland on Oahu suitable for crops.

The property was used for many years to grow pineapple. Currently, Aloun Farms leases about 325 acres to raise vegetables and seed corn.

Castle & Cooke has committed to lease Aloun 667 acres in Wahiawa for a 10-year term with a five-year extension option. That land is owned by Dole Food Co., which like Castle & Cooke is owned by billionaire David Murdock.

Castle & Cooke also intends to submit an application to the LUC later this year to designate more than 546 acres on Oahu for protection as "important agricultural land" under a state law passed two years ago.

Regarding traffic, the LUC as part of Friday’s order is requiring that Castle & Cooke complete construction of an H-2 freeway interchange at Pineapple Road by 2017.

Castle & Cooke had projected completing the interchange in 2020.

The developer has committed to spend $50 million for road improvements, including new freeway interchange connections at Ka Uka Boulevard.

Improvements planned by the state Department of Transportation include an afternoon zipper lane, shoulder lane use and a direct connection linking H-2 to a planned park-and-ride rail station at Pearl Highlands.

DOT estimated that Koa Ridge would worsen congestion at the H-1 and H-2 interchange that already is grossly over capacity at peak commute periods. But the agency said Koa Ridge benefits would outweigh adverse traffic impacts.

A traffic analysis by Castle & Cooke said Koa Ridge would cause the morning commute to town to grow by about five minutes.

If county rezoning and various permits are obtained without undue delay, construction on the 576-acre first phase known as Koa Ridge Makai could begin next year.

Completion of the first homes could happen in late 2012 or early 2013, the developer said.

A 192-acre second phase will not be urbanized unless certain conditions related to access and infrastructure are satisfied under the commission’s order.

The conditioned approval of the second phase known as Castle & Cooke Waiawa was made because much of the infrastructure providing access and utilities to the site relies on uncertain plans for adjacent land owned by Kamehameha Schools.

Under Friday’s order, Castle & Cooke has 20 years to begin construction on road infrastructure to the second phase, and must have construction bonds and any cost-sharing agreements for the work in place.

Castle & Cooke also will have to supplement its traffic study for phase two.

Other more minor conditions also were set out in the order.

The order followed a series of public hearings that began in January and generated several hundred public comments on the project — some in support but most in opposition.

Castle & Cooke’s chief argument was that the land for Koa Ridge is within the city’s urban growth boundary, which designates where farming should be protected and urban growth directed.

The developer also touted benefits including the creation of jobs, a new medical facility operated by the Wahiawa Hospital Association and affordable housing.

Castle & Cooke projects Koa Ridge would generate 2,500 jobs within the community, or two jobs for every three homes.

At least 30 percent of homes, or 1,500 homes, would be affordable to low- and moderate-income households under present city guidelines.