Hawaii’s dairy industry in January suffered what could be described as a colossal instance of spilled milk.

Two ambitious efforts to reverse Hawaii’s dwindling supply of locally produced milk — one involving a Hawaii island dairy struggling to expand and the other a company looking to establish a model dairy operation on Kauai — lost tens of millions of dollars and years of work.

So, should fresh-milk lovers cry over the situation, resigned to the likelihood dairy farming is destined to go the way of Hawaii’s extinct sugar cane plantations? Or is there still hope for a resurgence in local milk production?

Hawaii has one surviving major dairy, Cloverleaf Dairy, with about 700 cows on Hawaii island. That’s down from 88 dairies and 32,000 cows in 1982 when 100 percent of Hawaii’s milk was homegrown.

The state Department of Agriculture and University of Hawaii have supported efforts to help reverse the decline. But the recent developments aren’t encouraging.

Ulupono Initiative, an investment firm that aborted its plan to establish Hawaii Dairy Farms on Kauai with 2,000 cows fed mainly on pasture grass, blamed state regulations for its downfall.

“During discussions with various state agencies, it became clear to HDF there is no reasonable regulatory path forward for the dairy operation despite its best efforts to go above and beyond environmental compliance requirements,” the company, formed by eBay founder and billionaire Pierre Omidyar, said in a Jan. 31 statement.

The statement continued, “Our proposal for the dairy farm was based on best management practices proven from around the world to create a more environmentally sustainable model of dairy farm that utilized active pasture management to minimize runoff and use grass as a low-cost source of feed. But rather than incentivizing local food production to meet our state’s food goals, Hawaii’s environmental regulations seem to unfairly place dairies and other similar animal agriculture operations in the same category as wastewater treatment plants.”

State Department of Health and Department of Agriculture officials disagree. They said Hawaii Dairy Farms picked a questionable site for operations. The officials also point out that Big Island Dairy’s site was a major factor in its failure.

The big issue for the two companies was wastewater, and it presented a unique challenge compared with past Hawaii dairy operations.

All dairies have to deal with a lot of cow poop. Ulupono estimated its cows would produce 91 pounds of manure a day per animal on average, or 182,000 pounds for 2,000 animals daily.

So much waste isn’t necessarily a problem, Health Department officials said, because fields not overcrowded with cows can absorb manure without running afoul of environmental regulations. But waste collected in milking barns and confined yards presents a challenge.

Hawaii’s bygone dairies typically washed waste into evaporation ponds and disposed of leftover solids, according to Matthew Kurano, an environmental health specialist with the Health Department’s Clean Water Branch.

Big Island Dairy and Hawaii Dairy Farms had a different design, which was to use collected wastewater as fertilizer for grass or corn grown in fields to feed the cows. This setup cuts out fertilizer and feed costs — two expenses that helped drive many Hawaii dairies out of business in recent decades.

Using liquid effluent for field irrigation is an environmentally acceptable practice. But holding liquid waste in uncovered ponds poses a spill risk that can threaten ground and surface water if exceptionally heavy rain floods the ponds.

That’s what happened to Big Island Dairy. Residents in Ookala below the farm complained that the company was fouling streams and near-shore waters because of effluent pond spills.

Big Island Dairy was established in 2012 with the acquisition of a roughly 900-cow farm called Island Dairy, and the firm led by Steve Whitesides of Idaho-based Whitesides Dairy expanded to about 3,000 cows and spent $10 million on a new milking facility in 2017.

The Health Department confirmed one spill into a gulch in 2017, after which a community group and a food safety organization alleged federal Clean Water Act violations in a lawsuit.

The Center for Food Safety claimed the dairy spilled 8.8 million gallons of wastewater last year, including 5.9 million gallons during Hurricane Lane in August. The dairy agreed to shut down by April 30 and pay $450,000 in legal costs to plaintiffs.

Bruce Anderson, Health Department director, said Big Island Dairy was based on an Idaho model that didn’t work on an island hillside with streams and gulches leading to a town and the ocean.

“Locating a dairy is critical,” he said. “They experienced almost 200 inches of rain this last year. You don’t get that in Idaho. For a dairy, that’s a problem.”

At Hawaii Diary Farms a similar risk was apparent to state officials after Ulupono announced its $17.5 million project slated for former sugar cane land in 2013.

Grant Tomita, a milk industry specialist with the Agriculture Department, recalled visiting the farm site in Mahaulepu Valley and commenting to a dairy manager that a big ditch running through the property seemed like a wastewater runoff hazard.

“He just kind of blew it off,” Tomita recalled.

The dairy’s 578-acre site also raised concerns from environmental groups, residents living below the land and even tourism industry representatives.

Anderson said he believes that Hawaii Dairy Farms could have gotten the regulatory approvals it needed.

Company representatives have a different view, and said the Health Department under different leadership in 2016 expressed skepticism that it could approve the company’s environmental report. As a result of that uncertainty, Hawaii Dairy Farms withdrew the roughly 1,100-page report and was faced with starting the whole environmental review process over.

The company said its site was flat enough to alleviate runoff concerns and that its effluent pond design had extra safety features.

The effluent pond was to be lined with a membrane and big enough to hold 2.1 million gallons of wastewater. The report said such a pond could hold effluent from 2,000 cows over 17 consecutive days without irrigation withdrawals plus 10 inches of rain from a 25-year storm event. Additionally, an emergency spillway would lead to a backup containment area big enough for 1.1 million gallons.

Hawaii Dairy Farms allegedly started construction related to irrigation without a permit for stormwater runoff, which prompted community group Friends of Maha ‘ulepu to file a lawsuit in 2015 claiming a Clean Water Act violation. That case was settled in 2017 with the company agreeing not to do any unpermitted work.

Anderson said it’s definitely harder to establish a large dairy in Hawaii nowadays because less suitable farmland is available, and it is often closer to communities with concerns over issues including wastewater, odor and flies. Still, he said his department supports fresh local milk production and believes it has a future in Hawaii.

“We do support the dairy industry and would like to see it grow in Hawaii,” he said. “I think it’s a shame that we haven’t been able to maintain a viable industry here.”

Tomita is also optimistic that the industry can still rebound. “Opportunities are there,” he said.

Ulupono said it currently has no plans to invest in another dairy operation.