:
If you recall, the last time I had the privilege to speak before you, we had just completed our technology report, “Technologies for Viable Salmon Aquaculture”. I encourage you to perhaps reread it. If you haven't and if you're new to the committee, I encourage you to perhaps consider reading it.
Since that time, we have also done a very preliminary comparison of the greenhouse gas emissions from closed containment and open ocean net-pen aquaculture procedures. Again, we would encourage you, in your own time, to read that.
Today I'm going to give you a synopsis of where we've come from, where we are, and where we're going. It draws upon the work in those two reports, as well as our work with the 'Namgis First Nation in Port McNeill, which is actually building the first RAS system in British Columbia.
I'm now turning to page 3 and some RAS design foundations.
For those who did read the report, you'll recall that as a foundation we were concerned primarily with the ecology of the environment, first and foremost, so we examined all technologies for salmon aquaculture--net pens, in-ocean technologies, and land-based technologies--from an array of two broad parameters: husbandry requirements of the fish and biological security requirements.
From that heuristic overview, we very quickly drilled into the fact that land-based full recirculation was the technology of choice for addressing our concerns. I press upon you to consider that the biosecurity issues that we were very concerned about have become truly pressing, because biosecurity truly equates to economic security for rural communities. That was graphically illustrated with the ISA outbreak in Chile, in which the entire workforce was laid off the moment the herds of fish were culled. That today seems very prevalent, particularly when you realize that closed containment, with each site being bio-isolated, ensures that your industry--plus your employment of the citizenry--is truly secure, because there is no vector by which disease can go from farm site to farm site. They are bio-isolated.
Moving on to page 4, where are we today? We've embarked with the 'Namgis nation and the SOS Marine Conservation Foundation upon building a farm—it is under the working partnership of K'udas—and we've looked at two things for you today that are of key importance.
The capital and the civil costs to build this system are coming in at between $6 million and $7 million. These are based on engineering drawings as we go into the construction phase, with PR Aqua being our design team. They have built fish farms all over the world.
The farm that we're building will produce approximately 400 tonnes of live-weight fish at 75 kilograms per m3 densities, and the system is designed with headroom to reach 500 tonnes of production per annum. That puts you, if you do a little bit of back-of-the-envelope math, at 1,000 tonnes of production every two years.
So 2,000 tonnes of production every two years would put you at a cost of about $14 million, which is very close to the $12 million we had estimated in the 2009-10 timeframe and substantially lower than the $22 million estimated by DFO. These now are hard estimates, which we're going to use going into production or into construction. It is also appropriate to note that of that $6 million to $7 million, the civil costs are actually disproportionately large, because we are developing the entire site to be able to rapidly expand with more production modules.
Our operating costs are also important to focus upon. Labour is currently our least well-defined utilization, because we simply haven't built and operated a farm. But energy was the key driver in many of the discussions. Our energy costs were initially estimated at nine kilowatt hours per kilogram of each fish produced. That estimate has fallen by exactly 50%.
We still have some way to go, because Atlantic Sapphire is a 1,000-metric-tonne, land-based salmon closed-containment system in Denmark that has just come on line, and they're reporting power consumptions of just two kilowatt hours per kilogram of fish produced. Although our current estimates are substantially smaller than what we initially estimated, they are still bigger than the best in class in the world.
Nonetheless, it's important to remember that at nine kilowatt hours, profitability was previously assured in our analysis. We are truly in a position where we can see, with scale, that the operating expenses can be truly commensurate with those of net-pen.
I will turn to page 5. I want to illuminate where some of those operating costs come from. This is a very busy chart, but standard, off-the-shelf RAS design is pretty much equivalent to thinking about a bathtub with the plug undone: you're pouring warm water into it to keep the fish there at a healthy culture temperature, and you're running a heater to heat that cold water as it comes in. The cost to do that would be literally $2 million a year by burning propane for 1,000 metric tonnes of production. This is what the industry today is assessing as being the non-viable break point.
It is the diagram at the bottom of the page that should be used and it is the diagram that we will use in our farm. As that warm effluent flows out--and it comes from two sources, the air that is blown through to strip CO2 and the warm water effluent--we extract, with passive heat exchangers, the bulk of that energy. Then, on the residual, we use active heat pumps to reclaim the remaining heat.
That pushes our energy costs down by literally a factor of 10. That is based on a very detailed analysis, assuming the full weather analysis from -2 degrees in the middle of the winter to +20 degrees in the summer. The work is being cross-checked by professional heat engineers from a company called GENIVAR. Lo and behold, Atlantic Sapphire, the company in Denmark that has built the first salmon RAS, is taking exactly the same approach.
That takes me to the next slide and the production of greenhouse gas emissions. This is preliminary work, and I want to stress the word “preliminary”. In that, I would like to solicit your help later in the discussion here.
We are seeing a large amount of discussion in the public forum about how RAS systems are power hogs and can't possibly be considered because of their huge GHG footprint. We took the analysis methodology by Peter Tyedmers, who's an expert in this area, and focused that methodology for the environment of British Columbia.
We did a comparative analysis where we assumed the impact of smolts and feed production was identical. We assumed that once the fish were taken to harvest, they were identical from that point forth. We simply compared the actual core production of fish in land-based production and fish in open-net production. On the next page, you'll see a dramatic analysis with two pie charts.
Open-net pen production has the potential to be substantially worse than land-based farms. The difference in the work is focused at two levels. The original work by Peter Tyedmers assumed electricity based on fossil fuels in central Canada and assumed what I would call an archaic RAS system design. If you strip those two, or account for those two variables, then land-based and ocean-based become equivalent in greenhouse gas production--with it slightly in the favour of land-based farms.
But what has not ever been accurately accounted for is the benthic fouling methane off-gassing. We assumed in this work, and it is a big assumption--and this speaks to the forthcoming ask--that when benthic fouling occurs, we monitor for a sulfate production in the anaerobic layer that forms on the base of the ocean floor. That layer also forms methane. To date, there has been no accurate accounting of that. If you assume that just 70% of that biomass rots in the appropriate manner, you have this huge disparity between land-based and ocean-farmed production.
So on our request, turning to page 8, is that the Department of Fisheries and Oceans are currently looking at a full—
Our observation and request is that a full LCA is included that accounts for that effect, because it's important. As you turn to page 9, you'll see a huge number of industry opportunities and first-mover advantages for British Columbia. Specifically, if you can demonstrate that your new production method reduces greenhouse gases, there's a $25-per-tonne income stream that is available to help fuel the migration from ocean- to land-based technologies.
British Columbia is privileged with a huge number of first-mover advantages. Moving to my wrap-up on slide 10, those advantages are not permanent. Entrepreneurs closer to market will develop competitive solutions, and we are beginning to see this in Denmark with their first farm, Atlantic Sapphire, coming online this last summer. They built that farm for less than $10 million Canadian.
My point to you is that the opportunity here to secure a vibrant, economic, and secure aquaculture industry in British Columbia, serving the rural communities, is at risk if we don't catalyze the change in the current timeframe.
Thank you, Fin.
:
Thank you very much. I appreciate the chance to be called to give further information to the committee at this time.
I represent an organization called the T. Buck Suzuki Environmental Foundation. We've been in existence for more than 20 years. As an environmental group, we're based very much on people who work in the commercial fishing industry on fish boats or in fish plants. Our stated mandate is to work to protect wild salmon and other fisheries in the Province of British Columbia.
We're also active in a coalition of four organizations that have banded together and been working for 10 years on looking at impacts from open-net salmon farms. It's called the Coastal Alliance for Aquaculture Reform. We're not about closing down open-net farms; we're about finding solutions to the environmental problems.
We have always said that closed containment is the way to eliminate those environmental impacts specifically. The things that closed containment are able to do and are proven to have done.... The two top issues for the environmental community in British Columbia are the impact from sea lice and the impact from diseases that are generated and amplified on open-net salmon farms that are on salmon migration routes and can transfer to wild juvenile salmon. Those impacts have been well documented in scientific studies showing that the more sea lice you have on fish farms, the more you have on juvenile migration routes with wild juvenile salmon. We believe the same to be true as far as disease is concerned.
If you move salmon farms onto land in closed containment, you virtually eliminate that possibility of sea lice transfer and disease transfer. As a matter of fact, the proponents of closed containment technologies believe that you can operate a farm with no disease whatsoever and even without the use of antibiotics.
As Andy Wright mentioned, the waste from open-net fish farms floats to the bottom and can cause smothering of the ocean floor. That's eliminated entirely by having closed containment, where the water is circulated, filtered, and treated, and all solid waste is removed and can be used as a resource, as fertilizer. It can be used for a lot of different products.
There have been increasing incidents of marine mammals being killed by open-net salmon farm operators. There were 141 California sea lions shot just in the first three months of this year, according to Department of Fisheries and Oceans statistics. That, of course, is not a problem at all with closed containment. You're removing those fish—the target—from the open environment and that problem is virtually eliminated.
With those impacts being zero with closed containment, there still remain a few issues. I want to touch on three that have been brought up to the committee by the salmon farming industry in British Columbia.
The first is that it would take a huge footprint of land to move fish farms from open nets to closed containment. The second is that there's a huge water use. Thirdly, rural jobs where there are currently open-net fish farms would be lost, presumably to urban centres. All three, we believe, are incorrect statements. I'll go through them one by one.
First of all, as far as the huge land footprint is concerned, the spokesperson for the Canadian Aquaculture Industry Alliance, Ruth Salmon, spoke to you on November 1 and said that she believed that in New Brunswick, for example, it would take the equivalent of 18,000 football fields to house closed containment, as opposed to the current net-pen operations. That number is out by more than 200 times. It's actually 200 times less than that.
The amount of land required to move to closed containment actually is about identical to the amount of ocean being used by open-net pens right now. The structure of a net pen.... I'm sure you've seen it visually in some demonstrations. A building needed for closed containment to produce about the same amount of fish needs about the same space.
There's a bit of space around it, about equal to the amount of anchoring for a fish farm in the ocean. There would really be no different footprint on land than on ocean. The difference is simply that it's on private property, on land, and we have more than enough land in British Columbia. To house the same production on land would take about 140 hectares.
If you put that into perspective, agriculture is a huge economic boon in British Columbia, and there are four million hectares in our agriculture land reserve. This would be .001% of that required to have a viable and new economy through closed containment in British Columbia. Also, to put it in perspective, it's about the same space as the largest blueberry farm in the Fraser Valley in British Columbia--one farm.
With respect to water use, it takes a fair bit of water to run the system and to have multiple tanks in a commercial-scale facility, but this is not much different than the water needed for a major food-processing plant or a major fish-processing plant. We have a lot of water in British Columbia. The biggest uses of water are hydroelectricity and agriculture irrigation. This would be a small fraction of those uses. It's a matter of the source and the sustainability of that source.
Finally, I want to touch on the issue of rural communities and jobs moving from where open nets currently are. As a matter of fact, all of the proposals for closed containment operations are in rural communities. They're in the communities on our coast. Good possibilities would be Port Hardy, Campbell River, and even further up in northern Vancouver Island. It helps to be near a fish-processing plant. It's suited to rural communities and it's particularly good for first nations communities.
We believe that the current jobs in open-net operations could be immediately transferred to land-based closed containment. There would be two added bonuses.
First, there are more jobs created through closed containment. It takes more people to run a closed containment operation. This was verified in a Department of Fisheries and Oceans study which found that at least 50% more people are needed to run a closed containment farm. That's a boon for local rural economies.
Second, it's often forgotten that open-net fish farms aren't actually in communities. They're often an hour or so away by boat, in remote locations where somebody goes for a week or more, away from his family and away from his community. If closed containment were in the local community, they would be able to drive to work, just like for a regular job. This, we believe, would be a significant boost for rural economies and first nations in British Columbia and elsewhere in Canada.
Thank you.
:
I can speak to that directly. The current production method the industry uses is a batch process, whereby all your fish go into the ocean and two years later they all come out. With closed containment, if you are going to maximize your return on your capital, you have the luxury of being able to use and build your equipment so that when all the fish reach maximum size after two years--or in our case, one year, because they grow faster in warm water--then the equipment is running at maximum utility just at that point. But for most of the year, it's not running at maximum utility.
So to boost your return on your investment, when you stock the tanks with the little fry you deliberately overstock, so that when you hit the three-kilogram mark your tanks are full. Your equipment is running at maximum now for a much longer period of time, but because the tanks are full you have to take out a large percentage of the fish to allow the remaining fish to grow to full five-kilogram fish. This, then, allows your equipment to produce two harvests: three-kilogram fish and five-kilogram fish.
If you're really clever, you grade that to harvest three-, four- and five-kilogram fish, maximizing the utility out of the equipment. This is actually being demonstrated at the Freshwater Institute, which I believe you as a committee will be visiting shortly, where they have just harvested their first cohort of five-kilogram fish grown in closed containment, disease-free, vaccine-free, and chemical therapeutant-free fish, in a biosecure facility. Because the water quality is so much higher than the ocean quality, the flesh was firmer, and the condition factor of the fish showing good husbandry was superior to ocean-grown fish, too.
That's sort of a broad answer to your question, I think.
:
There are two questions there.
The first point is this. I also read that article in the Campbell River newspaper and walked away quite annoyed, because I felt that it was a very biased synopsis of the meeting. At that meeting, we had several projects from around the world present their designs for closed containment, the economic analysis behind their systems, and the performance they expected.
There was indeed a wide range. In China, the cost to produce the closed-containment system was unbelievably low, and they didn't care too much about the energy costs on those systems. Atlantic Sapphire, which, as I said, was built for less than $10 million, which was the break point.... A net pen costs you about $8 million for the same level of production, so let's be clear here, and the operating costs would be similar.
So Thue Holm, the CEO at Atlantic Sapphire, is at a point where he can compete, but he is also very astute. Although he uses the word “niche”, as you have identified, he's demanding and getting a premium in the marketplace because of that.
Now, I agree if the entire industry moves towards that, then you commoditize that.
One of the other facts that's failing to be monetized here is this one. Because we capture the waste stream, which is both liquid nutrient and solid waste, alongside each of these farms there is the potential to directly inject that into high-end vegetable production and to boost the bottom line. Today, our open-net pens are throwing away a huge amount of revenue by dumping that valuable waste stream into the ocean, and the amount of opportunity there was captured in our original work.
Our CEOs today are rewarded by maniacally focusing on a single product and optimizing for the production of that product. It's done on the back of cheap energy, essentially. Going forward into the future, the waste streams of one industrial activity have to become the feedstock of the next industrial activity. The nutrient flow off the back of these farms is phenomenal.
Today we spray water all over the fields with chemical fertilizer injected into it, but the fertilizer in these farms is already there. We can grow tomatoes and peppers, for instance, straight on the back of these farms. Again, it expands rural economies. Again, it expands economic diversification and, again, secures a broader infrastructure in our rural communities.
Your questions are very valid. Your concerns are very valid. But I think the very purpose of the project that we're doing is to spearhead the solutions around escaping those conundrums.
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If you look to our original work, you will see that we provided both analyses: with and without a revenue stream from those products.
The first phase of our project analysis does not account for a revenue stream from those waste products. We are counting on a premium in the marketplace, and that premium has been qualified directly with suppliers. Today if you go to Safeway, you will pay $20 a kilo for your salmon, which was purchased from the farm at $6 a kilo, if they're lucky. The middle ground is eaten up with multiple distributors.
We've secured direct-to-marketplace contracts. That margin, the difference between $20 to the consumer and $6 at the farm gate, is shared between the end supplier and.... Why would we want to pay a bunch of middlemen the bulk of our profit for our endeavours?
So the Sobeys stores of the world and the Whole Foods of the world are coming to the table with contracts that say that if we guarantee a thousand tonnes of production per annum, they'll take it off our hands at much higher prices, because they're still making more money than they would have when they bought commodity salmon.
That's our vehicle to get started. I agree with you that in the long term we have the potential to commoditize, but the fish quality is higher. This has been demonstrated, and you'll see this on your visit to Freshwater. It's a premium product that is measurably premium; it's not premium because it has been labelled something nice, but because consumers and chefs have tested it. It always comes back that the closed containment fish is optimally exercised, it is grown in clean water, and so on. I pay a premium for grass-fed organic steak, and it's a massive premium. I will do the same for the fish that I feed my family.
:
I can answer that in part, Joyce, and it's nice to see you again.
The first part is that we absolutely calculated the volumes. For every tonne of fish that is produced, approximately a quarter of a tonne of solid wastes is produced. I can't give you a number off the top of my head, but a substantive level of nitrates and phosphates goes into the liquid waste stream. We have not costed those. You are correct: it is an end-of-pipe sewage issue. It's as simple as that.
What we have costed, on the land-based side, is what we could do with that waste to turn it into a value-added product. For every tonne of solid waste that is produced, you can produce about 500 to 1,000 kilowatt hours of energy. That is well documented for anaerobic decomposition.
We looked at energy with this as a source, and it would account for about 5% of the energy costs of the farm. It's quite modest, but nonetheless, you could burn it to heat a co-located greenhouse very comfortably.
Then, the liquid nitrate stream is very important, because it is very dense in nitrates. The opportunity to grow fruits and vegetables is there.
We costed it from the opportunity side. We did not put a price on the end-of-tailpipe, and it's a very valid point that you make. Again, if that were to occur, it would again make closed containment even more favourable.
:
Thank you very much, Mr. Chair.
This is more a question for Mr. Lane, but I would like to hear Dr. Wright's opinion as well, if possible.
Concerning open-net production, there are many potential impacts, particularly on the environment. There is a lot of concern. For example, there is an added risk of disease for wild salmon and there is the presence of pollutants like pesticides, antibiotics and food preservatives.
Last Tuesday, we heard representatives of the aquaculture industry, namely Cooke Aquaculture, which is presently facing 11 charges concerning the use, in the Bay of Fundy, of a pesticide which is illegal in Canada. In this case, the pesticide was used to prevent sea lice. It was devastating. Evidence proved that this pesticide had a negative impact on the nervous system of lobsters, causing paralysis and even death of thousands of lobsters.
With open-net facilities, is it possible to use more biological tools to prevent this kind of disease? Is it possible to do without those pesticides which destroy other forms of life in the ocean?
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I would be delighted to. I've actually walked Peter through our discussions and we have spent time going over his paper. I wouldn't say they're discrepancies. I think it's an area of focus.
Our electricity in British Columbia is largely fossil fuel-free: it comes from hydro dams. The work that Peter Tyedmers did was specifically focused on central Canada, where the energy is predominantly coal-powered, so that was a huge discrepancy straight out of the gate.
The other area that he did not account for.... It's not really a case of accounting for, as we both accounted for it similarly, but we're doing it now in the context of British Columbia. That makes a very important difference. Our numbers are pretty much the same in terms of utilization of various factors, whether it be tugs to move barges of feed or whether it be trucks. We all come out as a wash there. It's just the hydro component that makes a big difference.
The other factor that was not and has not yet been accurately accounted for--and I want to stress that it's not accurately being accounted for--is that we have no data on how much of the benthic fouling does methane off-gases. That is really important. If we argue from a societal perspective, we should be making decisions from a scientific, fact-based perspective, where we get the details and make the right decision. We don't yet have the data to clarify.
What I can tell you is that if you don't account for methane off-gassing, net pens and land-based farms are equivalent in their GHG footprint. If there is even just 10% of off-gassing from the benthic fouling, there is a revenue stream from the Pacific Carbon Trust to be had to facilitate the transition from net pens to closed containment. I think that's a very exciting opportunity. We just need to be able to audit the exact improvement.
:
Let me be very clear. The land-based farms are significantly lower in GHGs and energy consumption.
Net-pen farms are not free. They run generators to run the lighting systems that illuminate the nets for photoperiod manipulation. They run generators to blow feed into the nets, and they run generators to support the services of the residential areas on the farms. They're all diesel-powered, low-efficiency generators in the middle of nowhere.
We, on the land-based side, will be using hydro, which is GHG-free. Only 5% of electricity in British Columbia is produced from fossil fuel. It is 95% dam hydro power. When you do a fair, accurate audit of a closed-containment farm in British Columbia versus a net-pen farm in the Broughton Archipelago, using the comparative analysis work that we showed, the farms have identical...with 200 metric tonnes in the favour of land-based, not including methane production. If you include methane production from the ocean floor, then the net-pen becomes appropriately worse, by the amount that you would apportion to being methane off-gas.
Let me be very clear. Using modern technology with a modern design, land-based farms have a lower footprint, period. How much lower needs to be accurately assessed.
I want to make a comment in this debate about the impact of the waste from salmon production on benthic organisms. It's certainly not my understanding that the impact on the benthic is a net positive just because there are more prawns. In fact, the industry has done a very good job of reducing the waste falling onto the benthic.
That was big, and it was due to a provincial regulation requiring that. That regulation was needed because some of the areas were being permanently damaged. There was essentially no life on the seabed floor in places where there was too much waste falling in areas that didn't have a strong current. This is something the industry has been working to manage over the last 10 years. They've been cooperating with the regulations of the provincial governments. That's just a note that this should not be dismissed as one of the costs, one of the prices, and one of the risk factors of net-pen salmon farming.
I'm interested in what you see as a potential transition towards land-based farming that would include the current investors and the companies producing salmon through open-net pen. I think that the British Columbians who have those 6,000 jobs, the business community, and certainly all of us who are interested in the economy of British Columbia are not looking to put out of business companies that are doing their best to manage, mitigate, and limit negative impacts.
At the same time, there are some factors that aren't priced in yet, and it looks as though an industry is developing that is going to show a real positive alternative.
Dr. Wright, you were saying that we need to get on this to have first-mover advantage, so how far behind are we now? What are you suggesting the government do to assist with the transition to a lower-risk means of raising our salmon in a way that can still be economically viable? How does one do that without subsidizing individual businesses? Also, have you thought to the next step about what you would be advising provincial and federal governments to have in terms of a regime in order to have a win-win transition?
:
I would say that we believe we have a very good number, because we've produced a bio-plan and determined the number of people needed to support that bio-plan.
Unlike in the case of engineering energy, for instance, where you can compute how many pumps you need to shift so many cubic metres of water per second, and it's a very accurate calculation, until you've actually run a farm and tripped over the fact that twice a week you have to sweep this place out, for instance.... The probability of unexpected activity is high. We do have a very good appreciation of what we think our labour will be, but until we've gone through that exercise we won't know, whereas you can compute precisely how much energy you're going to need because you know the amount of water and the pumps, etc.
I was putting out a note of caution there, but we have actually very carefully costed what we believe it will be. We believe we'll be in a profitable situation.
The question is, how profitable? That's the argument. Also, how susceptible will our premium pricing be to commodity variation in the marketplace? You have the price at the top wandering up and down. At the moment, the current price at Seattle, fresh on board, head on, gutted, is $2.9 per pound. That historically has peaked above $5. There is a highly volatile market on the commodity side.
Luckily, since we have gone to electricity on land, our electricity costs are very stable. They're not linked to propane, which follows oil in price.
So these are all variables we have to consider. The DFO model did a really good job of providing a tool through which you can enter numbers to explore all that. So I'm really confident that we'll be—