Fisheries Committee on Feb. 27th, 2012

[Dr. Myron Roth]

There are sites out there that do run a closed system profitably, but it really depends. It's very situation-specific. I think that if you tried to compete head to head with the salmon coming out of net pens, you would not be profitable. There are other situations where it may be profitable, and it may be profitable for a company to have salmon come out of a closed containment system to access a market niche.

I do think we should move forward with closed containment, because we want to keep up with the technology, but we also want to ensure that the industry is flexible. There are also other species, like sturgeon, for example. You can develop sturgeon in closed containment, and the value of the products is so great that it would be profitable. You can do it in such a way that would allow you to address conservation efforts and develop a good sector.

I think there's room for both types of systems. The bottom line is when you're developing closed containment aquaculture systems.... As I said earlier, salmon farmers use recirculating aquaculture systems for growing smolts, so they are constantly investing in the technology, and a lot that we know comes from that. The question is whether you can do it cost-effectively to grow market-size salmon, because the situation changes quite a bit when you move from a couple of hundred tonnes to several thousand tonnes. Right now in B.C. the cost of production is already very high, so if you were to move to closed containment you would exacerbate that problem.

[The Chair, Conservative, Rodney Weston]

Thank you very much.

Mr. Sopuck.

[Robert Sopuck, Conservative, Dauphin—Swan River—Marquette, MB]

Thank you very much.

Dr. Roth, what is your opinion regarding the effect of open net aquaculture on wild salmon stocks off the coast of B.C.?

[Dr. Myron Roth]

I don't believe that aquaculture is having a demonstrable impact on salmon stocks. The reason I say that is because when you look at salmon stock numbers they seem to fluctuate up and down as a coast-wide phenomenon. They're not directly linked to salmon farms being present or not being present.

The system is so complicated to understand in terms of what we're doing from fishing, from inputs to the environment from a lot of other industrial sources, from global warming and what we understand about the natural rhythms of salmon. To turn around and ascribe salmon aquaculture as being the driving cause for declines in salmon stocks I think is being way too simplistic.

I do think we need to be vigilant. I do think we need to study it. But I also think that salmon aquaculture and wild fish populations can coexist here on the west coast.

[Robert Sopuck, Conservative, Dauphin—Swan River—Marquette, MB]

Thanks. I strongly agree with that.

Again, I found it ironic that recently one of our witnesses was the representative of a grocery chain and they were refusing to sell farmed salmon. To my simple mind it seems that all they're doing is increasing pressure on the wild stocks unnecessarily. I find that reprehensible, given that the conclusion they drew was based on dubious science at best. That's just a comment.

In terms of the benthic environment, Mr. MacAulay asked you some questions about that. How quickly does the benthic environment recover from being under a net pen? I know there has to be some change, but they do rotate these net pens from site to site. How long does it take for a site to return to the original condition once a net pen is removed?

[Dr. Myron Roth]

Well, that again is a very site-specific question. It depends on the hydrography of the site and how the site was used—whether it was a large site or a small site. It could be a couple of months; it could be many months. What is done in B.C. is that if they fallow a site they have to make sure they meet environmental standards for various measures they make of the sediments.

I can't give you a specific number, but it's one of those things where you can develop some proxy measures and basically ensure you're not exceeding certain thresholds. That's the way we deal with it in B.C. We try not to say that a site has to be fallowed for a certain period of time; we look at a performance-based metric.

[Robert Sopuck, Conservative, Dauphin—Swan River—Marquette, MB]

But in your view, it sounds like it's a matter of months, as opposed to years, that a site will recover.

[Dr. Myron Roth]

I believe so.

[Robert Sopuck, Conservative, Dauphin—Swan River—Marquette, MB]

Okay, that's good.

[Dr. Myron Roth]

Again, it really depends on the site. There probably have been some sites where you can measure changes for many months. It depends on the site, and the best way to deal with it is to have a performance measure.

[Robert Sopuck, Conservative, Dauphin—Swan River—Marquette, MB]

One thing we discussed at length in our committee early on was the potential migration of rural jobs away from B.C. should closed containment be mandated.

Closed containment systems can largely be constructed not quite anywhere, but in a much larger geographical area. Would a mandate for closed containment have a significant impact on rural jobs in B.C. where people are currently employed in net-pen aquaculture?

[Dr. Myron Roth]

That's difficult to answer. You can build these sites in rural regions, but I suspect you would have to do whatever it takes to reduce your costs by locating them closer to distribution centres and places like that. In theory, I believe it would reduce local jobs, but quite frankly I think it's a bit of a moot point. I just don't think there's the capital to build these sites in rural areas at this time.

[Robert Sopuck, Conservative, Dauphin—Swan River—Marquette, MB]

I represent a constituency in prairie Canada where land is much cheaper than in B.C. In Manitoba, where I'm from, the electricity rates are the lowest in Canada, and as we saw last year, we have water everywhere. I would argue that closed containment aquaculture could be moved. Where I am, we're fairly close to Chicago, Minneapolis, and very large markets. If closed containment were mandated, I would see a real effect on rural jobs in coastal B.C. communities, as these facilities would be built where I described.

Can you make a quick comment on that?

[Dr. Myron Roth]

It's possible. I don't know what businesses would do if they were faced with having to invest tens of millions of dollars. As you say, they could put them in a place where the land and the services are cheap, but they would have to increase their transportation costs. Reducing transportation costs is one of the things that would demonstrably improve the performance of a recirculating aquaculture system, I think.

I just don't know. It's one of those things where you can say hypothetically this is the way it would go, but you can't predict what industry's going to do when it starts investing that level of dollars.

[Robert Sopuck, Conservative, Dauphin—Swan River—Marquette, MB]

Thank you very much. My time is up.

[The Chair, Conservative, Rodney Weston]

Thank you very much.

Ms. Doré Lefebvre.

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

Thank you, Mr. Chair.

And thank you to Mr. Roth for being with us today.

After the presentation you just made, I have many questions to ask. You mentioned repeatedly that closed containment aquaculture is rather expensive. You said that a group of people figured that the production cost of salmon in closed containment would be $23 a kilogram. Does that cost apply just to the first year or would it stay the same in the long term, year after year. Will it go down if this kind of system becomes the standard? What was the basis of this costing exercise?

[Dr. Myron Roth]

The number is the cost of the capital. To operate the system and to produce the fish, you would have to add about another $7 to $10 per kilogram. So you have the cost of building the site, then you have the cost of operating it for the year it takes to grow those smolts. When you put it all together, you probably have an operating cost of over $30 a kilo for the first year, including capital to build it.

I think another way of looking at it would be to look at the cost of operating the system versus the cost of operating a traditional net pen. If you got it for free the numbers we have would indicate that just to operate the system is about $7.50 a kilo, whereas the cost to operate a net pen is around $4.50 a kilo. So somewhere you have to make the difference of about $3 a kilo through the fish you're selling. That doesn't take into account the capital cost to build the site, and the capital cost is going to be close to $10 million.

Does that answer your question?

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

Yes, but do you think the number is going to decrease if it's a new norm to have aquaculture in closed containment, or is it still going to be high?

[Dr. Myron Roth]

I think the number would go down with economies of scale. There's no doubt about it. But the numbers we have right now are hypothetical. They're not based on actual systems. So where they're budgeting a couple of hundred tonnes of production, to get a realistic number you would have to have a couple of thousand tonnes of production if you wanted to compare apples to apples with the current systems.

Yes, I do think the number would come down, and I do think you could amortize it over time. The problem is trying to get that initial capital to build the site. What we do know from some extensive work that was done by the Department of Fisheries and Oceans is that the profit margins are very thin and they're very susceptible to market forces out of their control. So if the interest rates change or the currency exchange rate changes, it could have a significant negative impact on the business model.

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

How much time would amortization take?

[Dr. Myron Roth]

I can't really answer that because it really depends on what the site costs. It could be several years, but that's true of any business. So there is no simple answer to that question.

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

In your introduction, you said that, for the aquaculture industry in B.C., closed containment aquaculture provided growth opportunities.

Did you notice that this was the case in recent years?

[Dr. Myron Roth]

Yes, there has been interest for closed containment salmon aquaculture in B.C., but it's not really taken off because of the cost. We did have some very significant interest from one of our very large salmon farming companies in the province, but because of the current economic climate right now it has put the project on hold because it just doesn't have the finances to push it through.

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

Suppose closed containment aquaculture becomes the standard in the industry. First of all, is that realistic? If it is, do you think the transition could be made in five or ten years, for example? Do you think this would be possible over the long term?