‘Namgis Land-Based Atlantic Salmon Recirculating Aquaculture System Pilot Project

Final Report

Mama'omas Enterprises
AIMAP-2010-P31

Table of contents

• Executive Summary
• Introduction
• 1.0 Objectives
• 2.0 Deliverables
• 3.0 Methods and Materials
• • 3.1 Facility Design
  • 3.2 Site Selection and Permits
  • 3.3 Business Case
• 4.0 Results
  • 4.1 Facility Design
  • 4.2 Site Selection and Permits
  • 4.3 Business Case Analysis
• 5.0 Conclusions

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Executive Summary

There is a growing demand by the public and the aquaculture industry to move aquaculture on- land to eliminate the environmental and social concerns of the open net-pen salmon industry. The ‘Namgis First Nation and the project partners are building B.C.’s first land-based, full recirculating salmon farm for Atlantic salmon on eastern Vancouver Island near Port McNeill.

The ‘Namgis Land-Based Atlantic Salmon Recirculating Aquaculture System Pilot Project (the Project) is a commercial pilot facility aimed at demonstrating the technological and commercial viability of producing Atlantic salmon for table-food in a land-based closed containment recirculating aquaculture system.

Currently there is technological, biological, and economic uncertainty surrounding the viability of producing salmon in recirculating aquaculture systems (RAS). However, with the lack of social license to expand finfish aquaculture in British Columbia, due to concerns about the impact of open net-pen salmon aquaculture on wild salmon and the marine environment, increasing costs in areas that more strongly impact traditional open net-pen production, and the evolution of RAS technology, there is a general consensus emerging in recent reports that this new technology should be explored as a means to expand the aquaculture industry in B.C., taking advantage of a growing global market for sustainable seafood and creating jobs for B.C.’s First Nations and coastal communities.

The Project consists of four phases: Phase 1 Facility Design; Phase 2 Facility Construction; Phase 3 Training and Commissioning; and Phase 4 Proving the Business Case. Phase 1 will be completed March 31, 2011 and the activities included designing the facility, selecting a site, obtaining the appropriate permits, and revising the facility design.

Phase 1 produced the design of a 200mt facility for Atlantic salmon, selection of an appropriate site for the facility, determination of culture species, initiation of the permitting processes, and development of economic and biological models based on the facility design.

DFO AIMAP funding of $49,800 was used in Phase 1 to support the major components of designing the facility. Completed by JHL Consulting Inc., the design and subsequent engineering provides the details of the recirculating aquaculture production system incorporating biological and technical performance factors to ensure production levels and business viability.

With the completion of Phase 1, the Project is now ready to start construction on Canada’s first land-based, fully recirculating salmon farm. This facility will improve the competitiveness of Canada’s aquaculture industry by producing a value added product (through manipulation of temperature, salinity, etc.) that is grown with fewer environmental impacts.

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Introduction

The 'Namgis Land-Based Recirculating Salmon Aquaculture Pilot Project (the "Project") is a pilot plant facility aimed at demonstrating the technological and commercial viability of producing salmon in a land-based, closed containment, recirculating aquaculture facility. A further objective of the Project is to use the small-scale demonstration facility to optimise the design(s) for future large-scale commercial facilities. The Project facilities will be located in 'Namgis First Nation territory in the vicinity of Port McNeill/Alert Bay, near the northeastern tip of Vancouver Island.

The Project will be executed in four phases, as follows:

Phase 1:   Front End Engineering Design ("FEED"), Environmental, Permitting, and Marketing. (June 2010 to March 2011)
Phase 2:   Detailed Engineering/Procurement/Construction ("EPC") (Jan 2011 to Dec 2011)
Phase 3:   Commissioning and Training (Sep 2011 to Dec 2011)
Phase 4:   Operations and Proving Business Case (Dec 2011 to June 2013)

The current DFO AIMAP Agreement is for the Phase 1 work only. Application has been made for support for Phases 2 and 3.

This Project is a key component in the process because it will determine whether or not land-based RAS can be economically viable, will quantify the environmental and social benefits, and act as a model for future land based RAS farms in B.C. and Canada.

The Project will introduce some refinements, which are unique to existing RAS operations and that will make the technology more attractive, including the following:

• pre harvest chilling process to improve product quality;
  
• use of temperature controls on separate production lines to enable more precise control of growth rates in order to maximize the distribution of time to harvest each crop and thereby be a more consistent supplier;
  
• brackish water rearing of Atlantic salmon (low fungal risk, potentially optimal growth, less costly than production in full seawater systems);
  
• facility is designed as a “commercial module” and incorporates elements of a much larger facility such as “large” (500 m3) tanks to enable testing of “commercial scale assumptions” such as large tank management and
  
• employment of very conservative rearing and water quality parameters to provide opportunity for maximum fish performance.

Project Phase I

The primary problem being addressed by this project is the economic viability of growing Atlantic salmon in a land-based RAS system. The AIMAP contribution was used to fund Phase 1, which laid the foundation for the project by determining design and project specifics to ensure sustainable production.

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1.0 Objectives

1) Design facility
      Selection of species
        i. best net returns
        ii. lowest risk

Determination of feed costs
   i. based on feed cost projections

Determination of optimal technical design parameters
       i. water quality
       ii. biological /production parameters and processes
       iii. technology preferences

Determination of preliminary design (Front End Engineering and Design- FEED) for the chosen location and species that satisfies technical specifications
       i. revise initial design to accommodate technical review

2) Site selection and permits
     Selection of facility location Based on:
       i. access to power
       ii. suitable area
       iii. room for expansion
       iv. close to labour markets and transport corridors
       v. flood risk
       vi. water supply quality and quantity
       vii. environmental risk

Obtain necessary permits and completion of required environmental assessments

3) Business case 

Development of operating and capital cost model and biological model for the preliminary design
       i. creation of budget
       ii. creation of biological model for Atlantic salmon

Determination of positive cash flow potential for the pilot facility
       i. completion of risk and sensitivity analysis

2.0 Deliverables

The Work Plan for the Phase 1 work includes the following key deliverables:

Facility Design

• Finalise the process design for the Project;
  
• Size the Project to ensure that revenues will cover operating costs on an ongoing basis;
  
• Do the preliminary aquaculture engineering for the facility;
  
• Select the species of salmon for the Project;
  
• Specify the equipment; and
  
• Complete the environmental assessment.

Site Selection and Permitting

• Select from one of two sites identified for the Project, which will also become the site for the commercial large-scale facility when it gets built; and
  
• Secure the permits and regulatory approvals for the Project.

Business Case

• Prepare capital and operating cost estimates for the Project (+/- 15%);
  
• Size the large-scale commercial facility and prepare capital and operating cost estimates for it (+/- 15%);
  
• Complete the marketing assessment; and
  
• Prepare and translate the final report for DFO AIMAP.

Following the completion of the Phase 1 work, the Recipient, in conjunction with its advisors, will decide on whether or not to proceed to the next phase of the Project, based on the rates of return implied by the capital and operating costs and the perceived level of risk for the Project.

3.0       Methods and Materials

3.1 Facility Design

Design (Front End Engineering and Design- FEED)
Following the technology review and market study by Sea Agra, JHL Consulting Inc. was contracted to update the first design to reflect the revised technical specifications and species selection.

Optimal Technical Design Parameters
JHL Consulting Inc. was contracted to develop the design based on the technical specifications to determine the appropriate high level scope and costs. A technical review and market study provided information to finalize design and operating specifications, species selection, and preferred technologies.

Species Selection
Atlantic salmon and Coho salmon were compared based on the following criteria:

• feed cost;
  
• market price;
  
• growth;
  
• maximum rearing density;
  
• egg or smolt availability;
  
• disease risk; and
  
• water treatment costs.

Feed Costs
Feed costs were determined based on projected list prices of “natural” diets from the major local feed distributers. A medium and long range wholesale price forecast was provided by one of the
feed suppliers

3.2 Site Selection and Permits

Site Selection
Several locations were reviewed for their suitability for the Project. All of these locations were on ‘Namgis First Nation’s land. The different locations were assessed for the following criteria:

• access to power;
  
• suitability of area;
  
• room for expansion;
  
• close to labour markets and transport corridors;
  
• flood risk;
  
• groundwater quality and quantity
  
• groundwater return capacity (capacity for effluent discharge to ground); and
  
• environmental risk.

Permits and Environmental Assessments
Investigation into, and applications for operational permits, were undertaken. See Table 3 for a detailed list of permits and assessments and their completion status.

3.3 Business Case

Operating and Cost Models and Biological Models for Production
A biological and financial model was developed to determine overall results of projected costs and revenues at the end of Phase 1 as well as for the overall project.

Cash Flow for Pilot Facility
A risk and sensitivity analyses of the financial results and overall pilot design was conducted to establish potential risk and variability in financial results.

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4.0       Results

4.1 Facility Design

Front End Engineering and Design- FEED
JHL Consulting Inc. developed a facility with modifications based on the updated technical specifications and the market study for 200mt/yr production based on two smolt introductions and 300mt/ yr based on three smolt introductions of only Atlantic salmon.

The market study developed by Sea Agra determined Atlantic salmon was a more desirable species to grow than Coho salmon, based on market trends for North America and a consumer survey. The research also determined the wholesale and premium price potentials would be
$2.76 and $0.7 US/kg HOG respectively for Atlantic salmon. As a result a decision was made to grow 200mt/yr or 300mt/yr of Atlantic salmon rather than 175mt/yr of both Coho and Atlantic salmon and the facility design was updated.

The technological review was conducted over a period of several months and focused on the review of over 50 key design and operating parameters including water quality, fish performance and husbandry, and technologies. For many aspects there was a wide range of opinions for which a middle of the road decision process was taken. However, in all aspects, the choice was weighted towards maximizing fish performance and minimizing risk (e.g. use of proven technologies, low densities, and conservative water quality parameters). Consequently, when these parameters are applied to the design and development process, they should result in a facility where fish performance is optimal and/or there is a degree of operational flexibility. This flexibility will result in a more expensive facility.

The technical review involved soliciting input from the following industry participants and suppliers:

• John Holder(aquaculture consultant) – JHL Consulting Inc;
  
• John Lawrie (aquaculture consultant)- John Lawrie Holding Inc ;
  
• Justin Henry (General Manager)- Target Marine Products;
  
• KC Hosler (engineer)- PRAqua;
  
• Neil Manchester(Operations Director)- Landcatch UK Ltd;
  
• Dr Steve Summerfelt (Director of Aquatic Systems Research)- Freshwater Institute, Virginia;
  
• Dr Sonja Saksida (CEO and researcher) - Centre for Aquatic Health Sciences;
  
• Ralph Shaw and Joe Collin (seafood sales and marketers)- Sea Agra Seafoods; and
  
• Jason Mann (Purchasing Manager) - Ewos Canada.

The technical design and operating parameters list includes incorporation of the following elements:

• flexibility to allow for equipment modification;
  
• conservative operating parameters to ensure maximum fish performance, variations in fish growth or market demand (further holding);
  
• risk minimization (only use proven equipment and processes);
  
• process controls to enable maximization of cohort harvest period (to maximize market price);
  
• biosecurity;
  
• harvest control (pre-harvest starve/ off flavor purging, pre-harvest chilling); and
  
• ability to provide a positive cash flow in the event that expansion to commercial size is not undertaken.

Species Selection
The species comparison involved soliciting input from a variety of sources including individuals and companies involved with salmon marketing, feed production, engineering and salmon production. The comparison was made on the basis of biological efficiency (growth and FCR), disease risk, markets, and biological requirements. These were evaluated in terms of their impact on economic viability (costs and revenues). The result of this analysis was that Atlantic salmon are slightly favoured compared to Coho for the following reasons.

Market Price: There is a very strong and consistent relationship between fish size and market price; larger fish return higher prices. In North America, maximum price usually levels around the 14-16 lb Head on Gutted (HOG) size. There is some seasonal variation (e.g. In North America, large >10 lb fish, tend to have the highest price in the fall when traditional producers have difficulty supplying) and some geographical variation. For example, many S.E. Asia markets will pay extremely high prices for big banquet fish (e.g. 16-20+ lbs). The European markets typically don’t pay premiums above 10-12 lbs. In all cases, a 10-12 lb fish will return significantly more than a 6.5 lb fish. Because Coho tend to mature before 6.4 lb (3.5 kg live), they are shut out of the normal and large salmon markets and price potential.

Atlantic salmon also have a better flesh quality (firmer and higher oil content) and a more developed and diverse market. However, Coho do not carry the Atlantic farmed salmon stigma in the marketplace and develop a better colour.

Feed: Feed represents close to 50% of the cost of production and this cost is the result of the combined impacts of feed price and feed conversion ratio (FCR). The available information on feed conversion efficiency for Coho and Atlantic salmon raised to harvest size in tanks is minimal and varies considerably. However, when grown in saltwater, Atlantics appear to have a slightly better FCR (5%) than Coho when provided with the same feed.

Growth: Post-smolt Atlantics growth faster than Coho to market size.

Density: Atlantic salmon are more tolerant of crowding and therefore may utilize tank space better.

Technology and Science: More R&D has and is being directed towards nutrition, therapeutants, feed developments, etc for Atlantic salmon and the rate of improvements in knowledge and technology will tend to favor Atlantics.

Factors that favour Coho include resistance to fungus and ability to be reared in freshwater without problems; more sources of Coho eggs or smolts; and lower cost for smolts. Despite these factors, Atlantic salmon represents the highest potential economic benefits and consequently was chosen as the target species.

Feed Cost
Feed cost was determined to be $1.65/kg delivered. This is the list price for EWOS Nature Pacific grower diet with 60ppm Phaffia pigment.

Technical Design
The technical design was developed by JHL Consulting Inc. includes the following.

Culture Tanks
Eight commercial scale tanks, 118m3 -500m3 in volume, will be used to culture Atlantic salmon with water temperatures of 13oC and 15oC using maximum new water requirement of 1000 lpm (260 usgpm).

Water Treatment
Brackish groundwater (7ppt) pumped from a well onsite will be UV disinfected and aerated prior to entering the facility. Water from the culture operations will be treated to reduce or remove waste products including fish metabolic waste, waste feed, and breakdown products (e.g. ammonia, nitrite, suspended solids, dissolve solids, cBOD, etc.). Collected solid waste will be recycled either by a local compost facility or through silviculture uses. Treated effluents will either be discharged directly to ground or further treated to remove nitrates through the use of a constructed wetland prior to final discharge to ground.

The following is a summary of the water treatment technologies:

Drum Filter
The drum filter is a perforated rotary drum that removes solid waste. Effluent passes through the drum and solids are collected on 50 micron rotating screens. When the screens become plugged, the water level rises and a backwash system that cleans the filters is activated.

Foam Fractionator
A fractionator removes fine suspended particles and dissolved proteins from the water by injecting air bubbles at the bottom of the water column. Particles and proteins are collected on the surface of the bubbles as they rise through the water column. This creates foam at the surface which is skimmed off.

Gas exchange/Oxygenation
Stage 1 Aeration Column (CO2 Stripper): Water is broken into a fine spray to give it a high surface area. It then falls through an air/water contact chamber actively vented with an air blower which drives the CO2 (A waste product) out of the water and allows O2 to be absorbed. Oxygen concentrations can be increased to close to saturation levels at this stage.

Stage 2 Low Head Oxygenator: Oxygen is essential to maintaining growth and health of the fish. Water flows through contact chambers where pure oxygen is injected. The use of pure gas and prolonged contact time allows for oxygen concentrations to be increased beyond super-saturation.

Biofilter
Bio-film coated on a media, usually sand or plastic media is used to convert toxic ammonia, a product of fish metabolism, to nitrate in a process called de-nitrification.

Heating/Chilling System
In addition to the above technologies, the land-based RAS will employ a heating and chilling system. The ability to heat or cool separate production lines will allow for greater control of fish growth which will set this pilot project apart from other land-based RAS systems. One option being researched is to use a geothermal heat pump application for this system.

Waste Disposal
Solid Wastes: Collected solid waste will be recycled either through a local compost facility or through silviculture application and used as a direct soil amendment.

A Geotube© may be used for additional collections of fine suspended solids from effluents. A Geotube© is a long porous bag designed to contain waste, while the water and water vapour drains through small pores causing the contents of the tube to desiccate.

Effluents: Treated effluents will either be discharged directly to ground or further treated to remove nitrates through use of a constructed wetland prior to final discharge to ground. The preliminary assessment of groundwater supply, direction of flow and effluent absorption indicated the sediments are highly porous with a water-table well below the surface and therefore capable of absorption of the maximum discharge of the facility.

4.2 Site Selection and Permits

Site Selection
Based on the assessments of various locations on ‘Namgis First Nation’s land, a site close to Highway 19 and adjacent to the Nimpkish River was selected. This location offers the following advantages:

• abundant high quality groundwater with moderate salinity;
  
• level ground ;
  
• three-phase power service;
  
• close proximity to support resources in Port McNeill and Alert Bay;
  
• room for expansion;
  
• next to a major transport corridor (Island Highway);
  
• close proximity to several fish processing plants; and
  
• low development costs.

Permits and Environmental Assessments
A provincial Aquaculture Licence has been obtained. The Provincial Ministry of Environment confirmed that based on the proposed extraction rates a groundwater extraction permit was not required. However, due to the current changes in government permitting processes, no further progress has been made in determining whether other assessments or permits will be required. Funding from Indian and Northern Affairs Canada (INAC) may require a Canadian Environmental Assessment Act (CEAA) screening process to be completed as a condition of funding.

4.3 Business Case Analysis

Operating and Capital Cost Model and Biological Model
Detailed budgets and biological models were produced in Phase 1 and are available upon request.

Pilot Facility Cash Flow and Risk Analysis
All the major operating cost areas were reviewed with respect to impacts on net cash flow from variations in costs or system efficiencies. In this respect, the facility is still able to maintain a positive cash flow despite individual variations in input costs. The largest area of sensitivity was feed cost and feed conversion ratio (FCR). Given that the “base” FCR value is already conservative (regularly achieved in net-pen operations), the risk of higher FCR is relatively low. Feed cost is the area of greatest risk but affects all salmon farms and therefore would not change the relative competitiveness of the operation.

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5.0         Conclusions

The Phase 1 activities have resulted in the establishment of the following;

• Suitable location;
  
• Identification of Atlantic salmon as culture species;
  
• Provincial Aquaculture Licence;
  
• Detailed facility design;
  
• List of optimized operating and performance specifications;
  
• Financial operational concepts that have the potential to generate positive revenues; and
  
• Requirements for a commercial scale facility.

The facility design report was completed by JHL Consulting Inc. and the market study by Sea Agra, both funded by DFO AIMAP and completed in Phase 1. These reports provided the information that determined the technical requirements of the culture system, operating parameters, and equipment specifics. From this information the system design was refined and the business case proved in theory, thereby demonstrating that the land-based RAS is a viable method to culture Atlantic salmon in B.C.

Because the Project is using off-the-shelf technologies, determining optimum operating parameters was an essential first step to ensure the right technology was selected. Also, because this will be the first Atlantic salmon market production RAS in Canada, it was essential that these technologies support the long term goals of economic, environmental, and social sustainability. Phase 1 has identified the potential for these benefits and Phases 2-4 will construct the facility and confirm the potential. This will pave the way for development of commercial scaled facilities.

The marketing survey funded by DFO AIMAP provided essential information on species to culture, sales price and product requirements in the market place. The production of salmon in a land based RAS systems provides the opportunity for a high degree of control over production processes including harvesting. This in turns provides the opportunity to increase value and competitiveness through improvements in production consistency and optimization (volume, size and quality) and improved shelf life.

Information provided through the Phase 1 is the basis upon which the Project will now move into Phase 2 - construction of Canada’s first land-based, fully recirculating salmon farm. Once constructed and proven, the facility will act as a model for future facilities by providing serving as a commercial level source of technical, biological and economic information. Consequently, the project has the potential to significantly catalyze the development of this alternative BC salmon production industry.