Underwater tour competition creates waves : The lucrative Honolulu tourist business draws interest from a rival submarine company. Federal authorities worry about safety.

Passengers clad in short-sleeve shirts, shorts and thongs pressed their faces to the portholes of the submarine as it glided 100 feet beneath the surface.

What they saw was a reef swarming with marine species. Moray eels skimmed over the deck of a sunken ship and peered from cubbyholes stern to prow. Shimmering schools of colorful pennant fish, triggerfish and butterfly fish grazed on coral surrounding the wreckage of the World War II tanker that has helped restore a marine ecosystem devastated by overfishing, sea walls and polluted runoff from Waikiki Beach.

Since 1989, Atlantis Submarines Hawaii has controlled the lucrative business of ferrying tourists beneath the waves in 48-passenger submersibles.

At last count, nearly 1 million people had paid up to $79 each for a 45-minute spin around an artificial reef built by Atlantis about a mile off shore.

And that has sparked the interest of Submarines Hawaii, which hopes to enter the tourist trade here next year with two submersibles of its own.

In what has escalated into a submarine war, the challenger insists on conducting its tours through the same 5.8-acre reef site it took Atlantis two years and about $2 million to build.

Atlantis officials have tried to torpedo the rival plan. But their state permit to operate at the site is non-exclusive, meaning the reef Atlantis built is open to all comers.

Now federal authorities have dived into the dispute, which they fear could result in underwater collisions.

The Coast Guard is threatening to impose what would amount to the nation’s first formal regulations for commercial submarines.

“They (Submarines Hawaii) want to take over our asset and claim it as their own,” said Atlantis spokesman Terry O’Halloran. “All we’re saying is stay out of our site--go someplace else.”

Responded David Goya of Submarines Hawaii: “They have a monopoly and want to lock us out. . . . Our investors will persevere.”

Coast Guard officials say they are worried that Atlantis’ three operating submarines are already too many for this watery world where trade winds can churn the silty bottom and shrink visibility from 100 feet to 10 feet in a matter of minutes.

Although maritime law traditionally has allowed free access to the sea, the Coast Guard has declared a one-year moratorium on the site as a precaution. No more than three submarines may ply the reef waters until the agency can come up with “new rules of the road,” Coast Guard Cmdr. Rick Simonson said.

Also, a task force has been formed to try to work out a two-company, three-submersible compromise amenable to both firms. Preliminary meetings have not been cordial.

“Gee, if they can’t get along on the surface, what will they be like under water?” Simonson asked. “We just don’t want a collision out there or people getting hurt.”

From Goya’s standpoint, Atlantis has been unfair in trying to control a “product for which there is more demand than capacity.”

“We think there are safety systems that could be put in place that would allow us to operate safely at Waikiki,” he said.

O’Halloran disagreed. “It’s just too risky to have two submersible companies in the same place.”

To Aldona Sendzikas, curator of the USS Bowfin Submarine Museum at Honolulu, it all seems reminiscent of the dilemma faced by Western nations at the turn of the century, when the advent of submarine fleets changed the rules of warfare on the high seas.

“At that time, they were new and untested and there were no rules for operating them,” she said. “The difference is that it’s a commercial submarine issue now.”

Commercial indeed. Business is so good that Atlantis, which employs 200 people and operates four submarines in Hawaii, is preparing to bring a new 64-passenger vessel on line at Waikiki next month. The 102-foot-long, battery-powered vessel will be the largest passenger submarine in the world.

Pressing ahead to get in the water at Waikiki, Submarines Hawaii--with the financial backing of Robert’s Hawaii Tours--is putting the finishing touches on two $4-million models under construction in Seattle. They are also scheduled to arrive in Honolulu next month.

But in the meantime, O’Halloran said, “we own the reef.”