Fisheries Committee on Nov. 17th, 2011

[Rosane Doré Lefebvre, NDP, Alfred-Pellan, QC]

That's all for now.

[The Vice-Chair, NDP, Fin Donnelly]

We're almost out of time, so I'll turn it over to Mr. Allen.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you very much, Mr. Chair.

Thank you to the gentlemen for being here today. It's been interesting, and a little bit on the different side of some of the issues from what we've heard, but that's always good.

I have a couple of questions.

Mr. Wright, I've been looking at table 3 of the cost estimates in the DFO report. There is quite a list of equipment going into the RAS system. You've indicated that for a facility of 2,000 metric tonnes you're estimating an order of magnitude of $14 million, but this table indicates $22.6 million. What are the major pieces of equipment that you're seeing you would get savings on, as opposed to what's published in this study?

[Dr. Andrew Wright]

It's not so much a matter of savings. It's the difference between it being estimated by committee without commercial quotes, versus commercial quotes, which is what we did.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Okay.

Have you done any sensitivities on some of your analysis to determine the profitability of this? The reason I ask is that I'm looking at different things. As you're very familiar with, the sensitivity table that was done in the report talked about water temperature, biomass density, and other types of things. Have you done any of those types of projections for the pilot project? What have your numbers shown?

[Dr. Andrew Wright]

We are doing that as we speak for our specific design, which we've just tabled.

What I would say to you is that the model developed by DFO, which you have sort of tabulated there in that report, is actually an excellent model in terms of being able to explore all those sensitivities. You just need to plug in the numbers to explore the sensitivities. So if you plug in $12 million for the capital cost, the outcome currently shown in that report—that closed containment was barely profitable, including depreciation, at $22 million—becomes quite profitable at $12 million.

Please don't get me wrong: that was an excellent piece of work in terms of the full package. There was a lot of work done by DFO to construct that model. What you feed into it is very useful, so pick your starting point and explore. We are going through that very exercise now for our project, and we'd be delighted to report on that in due course.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Did I hear you correctly? Did you say that from the operational cost standpoint you really didn't have a good feel for the labour numbers for the RAS system yet? Did I hear that correctly?

[Dr. Andrew Wright]

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—

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Sorry, but I'm starting to run out of time.

On your funding sources, you have assumed there's no financing in this, which is probably not the case in the long term when you talk about commercial operations. It is probably not a reasonable assumption that you will not have to finance. What are the funding sources for the pilot project? What assumptions would you make going forward about a level of financing that would be required for a commercial operation?

[Dr. Andrew Wright]

In our modelling and assessment work and the DFO work, financing was assumed to occur at commercial rates. That's all factored in.

On this particular project—and I'm not familiar with the deep numbers, because there's a team and I'm not the financial guy—I think we're supported about 60% by a federal program, 20% to 30% by American philanthropic support, and 10% by private Canadian philanthropic support. For instance, a substantive amount of my net worth has been donated into this program.

We're building a system in which the costs are accurately articulated and transparent: the hard costs, the costs to dig the hole to put the concrete in, the costs to run the thing, and the costs of the labour. At the end of this exercise, within a year we will know, and we will not be guessing about our decision-making going into the future. That is the key issue. The DFO study was an excellent first pass, but until you get real quotes and you've dug real holes, those numbers are all still extremely subjective.

[Mike Allen, Conservative, Tobique—Mactaquac, NB]

Thank you, Mr. Chair.

[The Vice-Chair, NDP, Fin Donnelly]

Thank you.

Mr. Hayes.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

Thank you very much, Mr. Chair. I appreciate it.

This question is for Mr. Lane. I'm looking at the work of your committee; it says that it's to protect wild salmon and other fisheries in B.C. You said in your opening comments that it's not about closing open-net technology. I could be mistaken, but I think you alluded to the possibility that open-net technology can actually be fixed or repaired.

I do want to understand this. Is it possible to fix or repair open-net technology? What might those costs be? I'm trying to do a comparative analysis here that says we can fix open-net technology, and we can address those concerns, at a certain cost. What is that cost in relationship to actually constructing the closed-pen technology? Can you enlighten me on that, please?

[David Lane]

To answer your question, at the moment the jury is out as to whether net pens can be brought to a level of not having an impact on wild salmon in particular or on other parts of the environment. The fundamental issue there is disease transfer. There has not been enough research at all to determine the long-term impact of diseases that come from fish farms on wild fish stocks, wild salmon stocks. Until we know what that is, the question is to some extent unanswerable.

We know that some farms and series of farms are placed on particularly important wild salmon migration routes. In theory, you could say to move them off those routes as a first interim measure, and there are costs to that, of course. If it's found that disease is far more widespread or could spread much more easily than sea lice does, for example, then the problem we have on our hands is whether or not there is an appropriate place in the ocean to put net pens.

We're calling for more research into those issues of disease and sea lice and for a longer-term transition into closed containment. That may take some time, but we believe that it has to happen and that the research has to be done to determine the long-term impact on wild salmon stocks.

[Dr. Andrew Wright]

It might be appropriate to draw a comparison with the chicken industry, with the outbreak of avian flu, which meant that you very quickly had to bio-isolate flocks by keeping them indoors.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

That's a fair comparison.

Mr. Lane, I believe you mentioned that in your estimation open-net jobs could be transferred to closed-containment jobs. Mr. Wright stated that labour utilization is the least well-defined cost variable.

Gentlemen, there seems to be a little differentiation between your two lines of thought in terms of labour. It was touched on earlier. I'm trying to get a clear understanding of what the impact in terms of a labour shift would be if open-net technology closed and whether it would be equitable.

[Dr. Andrew Wright]

I can speak to that. I'm speaking as a mathematician. When I talk about undefined or less defined, we know quite well that it might be six versus seven employees per 10,000 metric tonnes of production. A net pen is less than four notionally. So there's definitely an increase in jobs. The question is whether you are able to squeeze that to six jobs or whether it is eight jobs. That's the kind of variation I'm thinking about.

[David Lane]

To be more precise, the DFO study estimate was that it took 18 full-time people to run a closed containment farm, versus 10 for a net pen. I thought the numbers would be closer together, actually, but when I've talked to anybody who's in the net-pen industry they've told me that, yes, it does take more to run a closed containment farm.

[Bryan Hayes, Conservative, Sault Ste. Marie, ON]

My final question is for Mr. Wright. I'm looking at your presentation. It speaks to next steps. You speak about the full life-cycle analysis over a 25-year production plan. Are you suggesting that we not move forward with promoting the development of closed containment aquaculture until we do a full life-cycle analysis over a 25-year period? Is that what you're suggesting?

[Dr. Andrew Wright]

No, not at all, sir. I'm suggesting that if you take the full academic work of Peter Tyedmers, which would suggest that you do a full LCA.... There's a list of all the attributes, from human toxicity potential to eutrophication, and if you account for all those effects and get into the work on what a net pen produces and what a closed containment farm produces and then, for a fair comparison, look at 25 years of operation--and that's theoretically, because you don't have to wait that time--it is very hard to imagine that closed containment is worse. Because closed containment offers you the opportunity to capture everything and process everything--waste included--appropriately.

In an open-net pen, everything gets flushed away. Well, I ask you, where is away? It's still our ecosystem. It's still the fisheries, the wild fisheries, the prawn beds, and the clam beds. There is no such place as away.

You can do the analysis. What I'm trying to do is to get people to think about physicist Richard Feynman's question: how do you get to the answer quickly to make the decision that you're making the right work...? If you think about it in those terms, you know what the answer from the LCA should be going in. Let's go and do that work. Let's do it accurately, but let's not get in the way of progress, because common sense tells us what the answer should be.

[Brian Hayes]

Thank you, Mr. Chairman.

[The Vice-Chair, NDP, Fin Donnelly]

Thank you. That concludes our second round.

I thank both of you, Mr. Lane and Mr. Wright, for your presentations and for your attendance today at the committee in providing the information, and I thank our members for their questions and comments.

I'd also like to thank our staff who helped out with the teleconference and the technical aspects of making this happen, with you on the west coast, gentlemen, and us here in Ottawa. We appreciate their help in making this happen and I guess keeping our footprint down and our tax dollars low, as well as getting this presentation made.

I certainly appreciate your time. I would like to thank everyone. We will adjourn this committee meeting.