Kona Mariculture Proposes Expansion, While Moi Operation Seeks O`ahu Permit

posted in: August 2014 | 0
Mariculture is on the move in Hawai`i. At least, that’s the hope of investors in two enterprises, one in Kona and one on O`ahu.
In the case of the Kona operation, Blue Ocean Mariculture LLC is proposing a 260 percent increase in the size of the open-ocean fish farm that grows out mostly kahala (Seriola rivoliana, or almaco jack) and a smaller amount of moi (Polydactylus sexfilis) in cages tethered to the ocean floor. At present, the operation consists of five pens with a total permitted volume of 24,000 cubic meters. The plan is to ratchet up to eight pens, each with a maximum volume of 8,000 cubic meters, for an increase in total volume of 38,000 cubic meters. This is intended to allow the company to increase production at its 90-acre site, due west of the Kona-Keahole airport, from the current 450 metric tons a year to around 1,100 metric tons by 2017.

Off the south coast of O`ahu, meanwhile, Randy Cates, who used to farm moi in cages off `Ewa Beach, is wanting now to grow them in 10 surface cages suspended in an area that was dredged in the 1970s to provide fill for the Honolulu airport’s reef runway. Cates is proposing to place the cages, with a total volume of 75,000 cubic meters, in the 75-acre, 50-foot-deep borrow pit just south of the runway. Cates is hoping that within two years of start-up, production will be 1.5 million pounds per year, or 750 tons – about three-fourths of the amount Blue Ocean expects to produce.

The Board of Land and Natural Resources must approve a Conservation District Use Permit (CDUP) for each of the proposals, since both involve the use of state submerged lands. On July 8, the Office of Environmental Quality Control published in its Notice the announcement of draft environmental assessments for both projects. The 30-day public comment period ends in early August.

* * *
Blue Ocean Mariculture:
Kona Kampachi

One of the pioneers in Hawai`i mariculture was Kona Blue Water Farms, under the leadership of Neil Sims. Sims began farming kahala (kanpachi in Japanese, also known as yellowtail) around a decade ago, when he obtained a permit allowing him to install up to eight cages of 3,000 cubic meters each in waters about a kilometer north and west of Keahole Point. The original CDUP was awarded in 2003.

In 2009, the permit was changed, at the company’s request, to allow just five cages, with the largest capacity of any given pen to be no more than 7,000 cubic meters. Total maximum capacity did not change.

In early 2010, Kona Blue sold its operations to Keahole Point Fish, a limited liability corporation whose sole member, according to state business records, is Blue Ocean Mariculture, LLC. In connection with the sale, the Land Board approved the transfer of the Kona Blue lease of 90 acres of state submerged lands. Lease terms, calling for payment of $2,100 a month or 1 percent of gross sales, whichever is larger, remained unchanged.

All was not well down on the farm, however. Around the start of 2006, Kona Blue had asked the supplier of its fish food, Skretting Canada, Inc. to develop a custom feed for its fish, including one feed that substituted poultry meal for some fishmeal. Kona Blue began to use the new preparation in early 2008. Not only did the feed have a lower fishmeal content – a benefit in terms of the environmental impact of farm-raised fish – but it also was apparently cheaper, saving Kona Blue about $150,000 a year in feed costs.

By October 2008, the company had complained to Skretting of slower growth in its fish, but, according to court records, Kona Blue later determined that “overstocking, strep infection, and skin flukes” caused the problems. That year, the company reported more than $6 million in fish sales to the DLNR. (Despite that, the company was not making money: for the same period, November 1, 2007, to October 31, 2008, it reported that the cost of goods sold was $8,883,506, for a net loss of around $2.8 million.)

For the next year, the feed with the poultry meal continued to be used. By the end of 2009, Skretting attorney Jeffrey C. Johnson told the court, “Kona Blue was successfully harvesting Seriola rivoliana at average weights over four and a half pounds, which was at or exceeding the farm’s historical harvest weights.”

But after Blue Ocean took over operations, it did not experience the same success rate. In November 2011, not quite a year after completing purchase of the operation, it sued Skretting in federal court. Skretting, it claimed, had reduced fishmeal content even further, replacing it with protein sources that contained less of the amino acid taurine than previous formulations and making the fish more vulnerable to infections. Skretting denied the charge, stating that the diet remained constant until Blue Ocean requested that the feed return to the formulation that did not include the poultry meal in July 2011. According to Blue Ocean, the feed with reduced fishmeal content “resulted in poor eating and slowed growth” and “increased susceptibility to bacterial infections, poor reaction to routine treatments, and abnormally high daily mortalities.”

A month later, Blue Ocean switched feed providers. It claimed that “the health of the fish improved quickly and dramatically, [and] mortalities dropped.”

Litigation continued through most of 2013. Last September, Magistrate Kevin S.C. Chang issued an order on various claims made by the two parties that set the terms for a negotiated settlement. Among other things, Chang found that even though Blue Ocean principal Todd Madsen, with years of experience in mariculture operations, was a sophisticated purchaser who should have read the fine-print disclaimer on Skretting product sheets having to do with variability of results from using the feed, the disclaimer was not “conspicuous.” He also determined that regardless of any harm that Blue Ocean may have experienced from the millions of dollars of poultry-based feed it had purchased, it still owed Skretting around $35,000 for the high-fishmeal feed the company delivered after mid-2011.

Following Chang’s order, attorneys and principals for the two companies as well as insurance managers reached a settlement filed under seal with the court, and the case was dismissed.

Over the last four years, the draft EA states, Blue Ocean has experienced a feed conversion ratio of 2.3 to 1 – in other words, it takes 2.3 units of fishmeal and fish oil produced from wild-caught fish to produce 1 unit of farmed fish. As to the use of antibiotics, a practice that is often controversial, the draft EA states that they will be used as needed, under the supervision of the U.S. Fish and Wildlife Service. However, antibiotics have not been administered to the fish since February 2011, and Blue Ocean says it “does not expect an increase in antibiotic treatment frequency under the Proposed Action.”

Hydrogen peroxide, on the other hand, “is used extensively” at the farm site to control parasites on the fish. As the draft EA describes the practice, the fish are “crowded within a volume enclosed by non-permeable tarps for 30 minutes… To mitigate the risks of environmental impact, Blue Ocean continues the tarping treatment for an extra 15 minutes to reduce the amount of unreacted hydrogen peroxide released into the environment when the tarps are removed.”

* * *
Moi, Again

Randy Cates, who started up the state’s first caged-moi farm in 2001, is hoping the second time is the charm. His first enterprise ended in failure after he sold 51 percent of the business to a subsidiary of Steve Case’s Grove Farm, which was planning to expand the operation substantially. Unable to make that pencil out, Grove Farm took the company into bankruptcy in 2010. It ceased operation in 2011.

Now Cates is back with a new company (not yet registered, as of press time), Mamala Bay Seafood, LLC. According to the draft EA, prepared by former state Aquaculture Development Program administrator John Corbin, a Norwegian company will build the 114-foot-diameter cages, which will be suspended from stable rings at the sea surface that will also support a narrow platform from which workers can access the fish. A 72-foot-long feed barge will be permanently moored at the site as well.

The site proposed is around six miles east of the 28 acres of submerged lands that Cates leased from the state for the first moi mariculture operation. Grove Farm retained the lease after bankruptcy, paying the state $1,708 a year (minimum rent). Only in June was the lease finally terminated, with the Board of Land and Natural Resources agreeing to allow Grove Farm to leave in place four 10-ton concrete ballasts on the ocean floor, around 100 feet below the sea surface.

The former site is now available, but was not considered when the DEA was being prepared for Cates’ new operation. In any case, it would be too small to accommodate the scale of production. What’s more, the reef runway site is much closer to Cates’ shore-side operations at Ke`ehi Lagoon.

Cates is anticipating production of 1.5 million pounds of fish a year, with a value of $6.3 million. Production at the `Ewa Beach site was reported at between 3,000 and 6,000 pounds a week, or 156,000 to 312,000 pounds a year.

Most of the area Cates wants to lease (around 60 acres) is controlled by the state Department of Transportation under an executive order, although generally, commercial leases of airport lands requires approval by the Land Board. The DLNR controls the remainder.

Virtually all of the area makai of the reef runway has been designated in rules of the DLNR’s Division of Boating and Ocean Recreation as a zone for use by recreational (not commercial) thrill-craft. If Cates is to be assigned a lease for the area he desires, the DLNR would need to withdraw the area from the thrill-craft zone.

In fact, Cates is seeking to ban craft of every kind from the area he proposes to lease. However, he says in the DEA, this probably will not inconvenience many people; monitoring of the area turned up very few users over a period of time and surveys indicated that most of those polled thought the area was a restricted-traffic zone since the attacks of September 11, 2001.

The targeted density of fish is 10 kilograms per cubic meter. This, according to the DEA, is low with respect to densities elsewhere: “Ocean cage operations in other parts of the world can commonly reach densities of 50 kg/m3, depending on the site.” (Information on the densities at the Blue Ocean Mariculture operation were not included in its draft EA.)

The feed conversion ratio – pounds of feed delivered to the fish divided by pounds of fish produced – is around 2 to 1. This, the DEA says, “is generally considered acceptable for culture of a new marine fish species.” The feed is to be purchased initially from Skretting, Inc., whose fishmeal components are “sourced from sustainably managed fisheries,” per the DEA.

There is no discussion in the draft EA of how Cates intends to capitalize his business. In his earlier operation, he received loans totaling around $3.8 million from the National Marine Fisheries Service. By the time Grove Farms took the fish farm into bankruptcy, very little had been paid down on the principal, according to Sam Chi, with the National Oceanic and Atmospheric Administration’s Office of General Counsel.

However, another company owned by Steve Case, Visionary, LLC, had co-signed for the loans. “At the end of the bankruptcy,” Chi told Environment Hawai`i, “Visionary picked up the tab. It’s still paying down the principal, but the federal government hasn’t lost a dime on them.”

– Patricia Tummons

* * *
Groups Fight Expansion
Into Federal Waters

While commercial-scale mariculture in state waters appears to be ramping up, the use of federal waters for such purposes was, as of press time, still being litigated.

In August 2011, KAHEA: the Hawaiian-Environmental Alliance and Food & Water Watch (FWW) sued the National Marine Fisheries Service over the agency’s issuance a month earlier of a one-year Special Coral Reef Ecosystem Fishing Permit. The permit allowed Kona Blue Water Farms to deploy an experimental fish cage – called a CuPod – and raise and harvest some 2,000 kahala in federal waters off Kawaihae Harbor on the island of Hawai`i. It was the first aquaculture operation ever permitted in federal waters.

The groups, concerned about the precedent being set, argued that NMFS lacked authority to issue such a permit because aquaculture is not considered fishing under the Magnuson-Stevens Act or the Western Pacific Fishery Ecosystem Plan, both of which guide NMFS actions. Also, they argued, a full environmental impact statement – rather than an environmental assessment – should have been prepared for the project, and anything short of an EIS would be a violation of the National Environmental Policy Act (NEPA).

NMFS countered that because the project’s scope was so limited, there would be no significant environmental impacts. Therefore, it argued, an EIS was not necessary.

In late April 2012, U.S. District Judge Susan Oki Mollway found in favor of NMFS. By then, Kona Blue had finished its experiment and the permit was terminated. As a result, Mollway also found that the claim that NMFS had violated NEPA was moot.

KAHEA and Food & Water Watch appealed to the 9th U.S. Circuit Court of Appeals, which supported the lower court’s ruling – except on the matter of mootness. The appeals court found that the permit was the kind of action that could be repeated while avoiding legal review. It remanded that matter back to the District Court.

Both sides filed briefs for summary judgment. KAHEA and FWW have asked the court to order NMFS “not to issue any further Special Permits for the propagation or rearing of aquatic organisms, or the harvesting of such organisms, unless it is accompanied by an EIS that evaluates the likely impacts from this permitting process in terms of growth of such facilities in Hawai`i and the concomitant environmental, socioeconomic, and cultural effects, including FAD [fish aggregating device] effects on the ecosystem and on fishermen that encounter the facility and that typically fish in and around nearby FADs.”

On July 7, Mollway heard oral arguments, but by mid-July she had not issued any decision.

In the midst of the litigation, NMFS issued a second one-year experimental fishing permit to Kampachi Farms, LLC, a new company formed by Neil Sims, who sold Kona Blue Water Farms to Blue Ocean Mariculture, LLC.

The permit, which basically allows the work undertaken in the first permit to continue, expires in October. According to Kampachi Farms’ website, the experiment was expected to conclude by May.

In its comments on the permit, FWW again argued that a full EIS should be done. Because the draft EA for the project stated that it was likely that the cage would serve as a fish aggregating device, “impacts of this to commercial fishermen and recreational users are highly uncertain and controversial, and will likely harm public safety. They are thus ‘significant’ and mandate an EIS,” wrote FWW senior staff attorney Zachary Corrigan.

Corrigan continued that the cage could become untethered and cause a safety hazard.

“While the Draft EA briefly mentions that it is a distinct possibility, it fails to mention that the Beta Trial [the first permitted project] suffered a loss of both of its cages on its first attempt. … The company was forced to sink one cage. The other one … was lost and reported as a navigational hazard,” he wrote.

He also claimed that, based on his analysis of records obtained via a Freedom of Information Act request, far more fish had escaped the CuPod in the first trial than had been reported.

“Farming of carnivorous finfish in open waters presents issues with disease transfer between wild and farmed fish populations; depletion of wild-fish populations to feed farmed fish; pollution from fish wastes and excess feed; fish escapes that can alter and weaken wild fish populations through intermixing or competition for food, habitat, and mates; as well as social and economic effects on coastal communities, fishermen, and indigenous peoples,” he wrote.

NMFS attorney Fred Tucher said at a recent Western Pacific Fishery Management Council meeting that KAHEA and FWW tried to add the new permit to the ongoing federal case, but were unsuccessful. They have also submitted a Freedom of Information Act request for documents regarding the permit, he said.

“They may sue us. I don’t know. The second action is pretty much completed. I can’t anticipate what they’re going to do at this point,” Tucher said.

One of KAHEA’s and FWW’s concerns is the proliferation of offshore fish farms throughout the region without an adequate assessment of potential impacts. While no commercial-scale projects are being proposed for federal waters around Hawai`i, NMFS is working to change that.

The National Oceanic and Atmospheric Administration (NOAA), NMFS’ parent agency, aims to increase aquaculture production in the United States from about a half million metric tons a year to 1.5 million metic tons a year by 2025, according to the agency’s 2007 Marine Aquaculture 10-year plan. What’s more, NOAA has determined that cage culture can be done sustainably, said James Morris of NOAA’s National Centers for Coastal Ocean Science at a panel discussion on aquaculture at last month’s Hawai`i Conservation Conference.

“We just need to be really smart about how we do it and when we do it,” he said.

NMFS’ Pacific Islands Regional Office has recently established a working group, consisting of a few dozen representatives of government agencies and industry, to establish a standardized permitting process and monitoring protocol in hopes of facilitating aquaculture growth in Hawai`i.

“The United States imports 90 percent of its seafood, mostly from China and other Asian countries. … We have a $10-12 billion seafood trade deficit in this country. To me it’s really a no-brainer to want aquaculture in the U.S. and Hawai`i,” PIRO’s Alan Everson said at the conference.

Until the permitting process changes, Kampachi Farms, at least, is unlikely to grow its kahala commercially in Hawai`i, said Gavin Key, a researcher for the company. Kampachi Farms’ decision to establish its commercial facility in waters off Mexico was “almost entirely due to permitting issues,” he said. Hawai`i is, however, “a fantastic place to do research,” he added.

– Teresa Dawson


Volume 25, Number 2 August 2014


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