Fisheries Committee on Nov. 1st, 2011

[Clare Backman]

I certainly do see the federal government looking carefully at open-pen applications going forward, but those that satisfy both the increased conditions of licence--which are extensive--under the new federal regulation, and at this point in time, the Canadian Environmental Assessment Act screening, which we've been subject to now since the middle of the 2000s. So yes, I do see that.

As I said at the end of my opening statement, I see a blend of these kinds of technologies moving forward. I don't think people are going to stop being interested in closed system product, but as I mentioned, the volume of that product coming forward for development is very small and will in no way meet the existing or growing demand from our major market, the United States, and the growing demand in Canada.

[Ruth Salmon]

To add to that, Mr. Donnelly, I think it's important to look at the big picture here. As I mentioned, our production is actually going in the wrong direction. Other countries are growing at an annual rate of 6%. There's a huge demand.

As we know, the traditional capture fisheries are not going to be increasing in volume. To feed the people and to meet that seafood demand in Canada, as well as internationally, it has to come from aquaculture. Canada has a huge potential for playing a role there. We aren't doing a very good job in comparison to our competitors, but we have that potential.

We have a strong regulatory system. We will continue to improve our sustainability, as Mr. Backman said, but we already are a responsible and sustainable industry. We could be doing more to play a role in food security, as well as employing coastal and rural Canadians.

I think that's the big picture we need to be looking at.

[The Chair, Conservative, Rodney Weston]

Thank you very much.

Mr. Leef.

[Ryan Leef, Conservative, Yukon, YT]

Thank you very much.

And welcome here today. I'm going to follow up on a bit of the marketing aspect. I think you did a great job covering what I was going to ask about the niche market. I was even going to talk about free-range chickens, but you got me there.

I see that B.C. farmed salmon exports were valued at about $354 million, which was a 3% increase over 2007. Some of that higher demand is stemming from lower exports by Chile to the U.S., which is a gap that we've filled.

Do we know if that trend is going to continue? Have we been able to capitalize on that gap to build our marketing so it continues upward, that is, even if Chile's stocks return, Chile may not catch up to us again?

[Daniel Stechey]

If I could jump in for a minute, I've been in Chile six times this year, and I can tell you as a fact that the industry there is booming.

With regard to one of the companies I work with down there, when I first met with them in November 2009, their principal business was making cages and feeders. This has nothing to do with my work down there; I just want to tell you a story. At the time the general manager told me he had 132 employees. When I met with him last month, he had over 300 employees making cages and feeders. That industry is rebounding in a major, major way, so they'll be back on the market.

They had a setback, but the good news is that they'll be back at a higher price point than they were before. Their costs have gone up, and, as Mr. Backman indicated, they are now moving to land-based closed-containment systems for smolt production. That is going to increase their costs. It reduces the risk, but it increases their cost of production. But they're coming back, there's no question.

[Ryan Leef, Conservative, Yukon, YT]

With that in mind, I heard Ms. Salmon talk about what we could do or where we could go.

Could you give us some ideas of what we could be doing? What could we do, as either government or industry, to help this industry in terms of jobs and support in the economy?

[Ruth Salmon]

That's an excellent question, and there are a number of issues in addressing that question.

One issue that our industry feels strongly about is that we're the only aquaculture producing country in the world that doesn't have national legislation. We don't have an aquaculture act. That's fairly significant because we are working under a fisheries act that, as you know very well, has focuses on conservation and protection. It doesn't really address what's required in a food production industry.

In fact, in talking to the DFO staff who were developing regulations in British Columbia over this past couple of years, we heard that they ran into major challenges trying to fit the regulations under legislation that wasn't appropriate for aquaculture. That's a significant thing.

What difference would that make? It wouldn't be a panacea, but it would provide a definition for aquaculture. It would clarify some things, as no federal legislation defines aquaculture. It would provide this government with a vision and, again, legislation that would protect the environment as well as attract new investment so we could create new jobs.

For the industry, that's probably the single most important thing right now. It would be a fairly low-cost initiative and it would have a significant impact on the industry.

[Clare Backman]

Another thing we can do as Canadians is promote the unique successes of some aspects of the existing conventional net pens. I'm going to give you an example in a moment, but the context here is that under the new regulatory regime, we are reporting lots and lots of information to the DFO, and the federal government is now making it transparent to the public, which is a good thing. It's a good thing because we're doing a very good job, though there could be more representation of it, which would help differentiate us from some of the other growing areas that aren't willing to release information transparently like this.

The example I'm going to give you is something that's close to my heart, because it's something I've been working on with my company. It concerns waste control. Fish have to go, when they're in the pens, and their waste tends to settle to the ocean floor. It's something that is reviewed under the CEAA, and it's something we monitor frequently to ensure that it's kept within allowable levels.

I'm going to give you a couple of numbers. Under the new regulation we are not allowed to exceed 4,500 micromoles of sulphide at a specific location close to the pens, and once we're finished harvesting we are not allowed to put fish back in until that level of sulphides has dropped to 1,300.

The good news story is that on our farms, among the companies on the west coast, we shoot for that low level as the maximum. We try very much to keep the level of waste below 1,300. Why? It's because then we have maximum flexibility to reuse that farm site as quickly as we can to get the maximum use out of it. That's a story that's little known. We cut into our profits, perhaps, but we're respecting the environment and maintaining our flexibility.

Those are the kinds of context pieces that could be developed under this umbrella of transparency that would put our industry in a very good position.

[Daniel Stechey]

Let me add one comment. You asked what the government could do to help this industry move ahead. I'm going to go at it with a little bit of a tangent, but it does involve aquaculture.

[Ryan Leef, Conservative, Yukon, YT]

It will not be chickens?

[Daniel Stechey]

It will not be chickens.

Throughout this country we have a crying need to create economic development for aboriginal communities. If there is one industry that works in rural aboriginal communities where there is the resource base to develop an industry, it's aquaculture. Be it with thin fish, be it with shellfish, be it coastal, be it inland, there's a tremendous opportunity there. They do not have the capacity to engage in aquaculture, and that's something that needs to be addressed. This is a huge opportunity that this country is missing.

[Ryan Leef, Conservative, Yukon, YT]

I appreciate that.

Thank you very much.

[The Chair, Conservative, Rodney Weston]

Mr. MacAulay.

[Lawrence MacAulay, Liberal, Cardigan, PE]

Thank you very much, Mr. Chair, and welcome.

Mr. Stechey, you indicated that you have been in Chile a number of times and that aquaculture is expanding there, including the closed containment land-based units.

Why would they be expanding, when you look at the cost? Are they short of water, or why would they do this? Is it a precaution, or do they want to be sure they have the technology? What is the reason?

[Daniel Stechey]

Ruth commented earlier that one of the reasons for going to closed containment is to reduce risk. I think it was Ruth who made that comment. That's what it really is all about.

First of all, I want to be very clear. In Chile, where they are going to closed containment, it's for smolt production. It's not for production of market fish. It's for production of 100-gram fish during the freshwater stage of the life cycle to transfer into the ocean.

I should just add one thing on top of that. We have talked about smolt production a couple of times and we have talked about brood stock production. In my opinion, there is no technological limitation to closed containment aquaculture. We can grow fish anywhere, in any place on this planet, including in the middle of the desert. We can recirculate as much water as we want.

But aquaculture is a business, and at the end of the day we're growing fish to make money. When you do that, you have to look at the unit cost of what you're producing. When you're growing a smolt and you put it out, let's say for argument's sake, at a price of $2, more or less, that's $20 a kilo. Compare that with the market price of a large salmon.

You can pay for a lot of technology at that kind of market price. When you have brood stock worth hundreds of dollars a fish, you can pay for a lot of technology. When you're selling a commodity, the closed containment recipe is just not there.

[Lawrence MacAulay, Liberal, Cardigan, PE]

Basically, you've been in your business for 27 years, and then you were at DFO for four years. One of the things you do is to indicate whether these businesses can be competitive or not. I guess you've answered that, anyway. You just don't see any way.

When you could making a profit of some 50% plus, I just do not understand someone going to 4%—if everything is going well. It's only because we need the technology. Is that correct? Is it that we don't want to be behind the rest of the world?

[Daniel Stechey]

Let me put it this way, if I understood your question correctly, Mr. MacAulay. There are probably three reasons why we would go to closed containment. Number one is that the industry is regulated to do so. That happened in Denmark, for instance, with the trout industry. The trout industry was able to take an entire stream, divert it through a farm, and then put it back in the stream bed, essentially taking 100 to 200 metres of the stream bed out of a natural environment.

[Lawrence MacAulay, Liberal, Cardigan, PE]

But for salmon...?

[Daniel Stechey]

That was for trout. Eventually the government said, “Whoa, if this is going to continue, you need to develop recirculating technologies.” The industry did that.

Another reason you would want to do it—coming back to the comments by Ruth and Clare—is that you reduce risk that way, or there is another strategic advantage to doing it.

Reducing the risk makes perfect sense. That's what Chile is all about. They were growing their smolts predominantly in lake cages—floating cages in relatively small lakes with a very high number of farms—and the disease issue just got ahead of them. They came to realize that they could not continue doing that. Now they're moving onto land, as has been done in Europe and North America.

[Lawrence MacAulay, Liberal, Cardigan, PE]

But can they be competitive?

[Daniel Stechey]

In smolt production, they can be, absolutely.

[Lawrence MacAulay, Liberal, Cardigan, PE]

But that's the only place that this can be competitive.

[Daniel Stechey]

Every smolt, practically, that is produced in Canada is done in closed containment systems today. It's the difference between producing a small fish that's worth $20 per kilo, in round numbers, versus producing a market-sized fish that's worth 20% of that.

[Lawrence MacAulay, Liberal, Cardigan, PE]

Also, why is the closed containment or RAS system, as they call it, less expensive than one that would circulate the water from the sea and put it back into the sea?

[Daniel Stechey]

I wish there were a simple answer to that question.

Ruth mentioned the CSAS study. I was one of the authors of that study. In the chapter I wrote we looked at 10 different systems. The costs were extreme.

But I think the real issue that needs to be addressed with closed containment is the following. Let's come back to chickens for a moment, or hogs. Actually, I'll bring hogs to the table. For argument's sake, let's say that you wanted to start a hog farm. Barring any market factors and things like that, honestly, we could all get into a bus and go to look at five or ten hog farms. We'd see the same thing, more or less, five or ten times, and you could then go home and build your own farm. There's a lot of standardization in the industry.

I would argue that if you wanted to build a salmon cage farm, you could do the same thing. You could go and look at five or ten cage operations. You'd see the same thing ten times and could go back and build your own. You'd know what to do.

If I took you to five or ten land-based closed containment aquaculture facilities, you'd see ten or fifteen different designs, I guarantee it. There is no standardization in that industry, and the costs are all over the place.

About a month ago there was an innovation workshop in British Columbia on closed containment. There were seven or eight presentations on different RAS or recirculating aquaculture systems, for which the capital costs ranged from just under $6,000 per tonne of production per year to $25,000 per tonne of production per year. There is huge variability; there is no standardization in that part of the sector yet. We'll get there, but we haven't evolved and matured to the point that everybody agrees that these are the most efficient technologies to move forward with.