Hawaii's Massive Molasses Spill Could End a Sweet Export Trade

The spill of 233,000 gallons of molasses into Honolulu Harbor could halt one of the last sugar export routes from Hawaii to the mainland. A leak in a pipeline owned by Matson (MATX), the state’s largest cargo shipper, led to the deaths of more than 26,000 fish and other marine animals (pdf) since its discovery on Sept. 9.

After Matson determines how much it will cost to repair the pipeline system, the company will decide whether the molasses-shipping operation still makes economic sense. “This is not a material part of our business as far as its revenue generation,” Matson President and Chief Executive Matt Cox said in an interview. “We’re not ready to take the risk of this happening again.”

Photograph by Eugene Tanner/AP PhotoDead marine life collected by the Pacific Environmental Corporation in Keehi Lagoon, Honolulu, on Sept. 12, 2013Earlier this week the company said it would assume the cost of the cleanup, including testing and other expenses for collecting dead sea life, and that could very well be the end of line for the sweet pipeline. “If it is determined that the system cannot be operated safely or in an environmentally responsible manner, and that repairing and replacing the system would be impractical, we will discontinue our molasses operations,” Cox said in a news release (pdf).

The molasses is produced by the Hawaiian Commercial & Sugar (HC&S) in Maui. Matson transfers it by barge to Honolulu for shipping to California. HC&S, owned by real estate and agriculture company Alexander & Baldwin (ALEX), is the largest and one of the last sugar producers in the state, with most of its molasses used to feed local livestock. The rest is shipped to California and sold to consumers.

Matson traces its history to 1882, when Captain William Matson sailed his schooner from San Francisco to Hilo with 300 tons of food, general merchandise, and plantation supplies. Today the company has a fleet of 18 ships across the Pacific, serving markets in China, Guam, Hawaii, and the U.S. West Coast. Most of its business is in transporting automobiles and other goods into Hawaii.

Cox said it’s too soon to estimate the company’s liability. Federal and state officials could fine the company over the water pollution, which suffocated fish and drew fears that the wildlife carnage could attract sharks closer to shore. The company may also face lawsuits. “We’d note that while the company maintains certain casualty insurance policies it deems appropriate, it is unclear whether this incident falls under the company’s environmental coverage,” BB&T Capital Markets (BBT) analyst Kevin Sterling noted last week.